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BUSINESS IN BRIEF 2/8

 Infrastructure projects awaiting new Japanese ODA; CPI for August to inch up 0.2%; FDI tourism zone licenses revoked; HCM City remittances reach US$2.4 billion ahead of peak season; Auto imports hit three-year highs

Infrastructure projects awaiting new Japanese ODA

The Japan International Cooperation Agency (JICA) plans to send a delegation to Vietnam from August 5-15 to appraise the Tien Sa seaport expansion project (phase II) in Danang city.

This is one of the new projects to be evaluated after Japan announced resumption of its official development assistance (ODA) for Vietnam in July.

In phase II, Tien Sa port has a total investment of between US$100-120 million and it is capable of receiving container ships of up to 70,000DWT and cruise ships of 100,000GRT.

“We do hope the project will get the nod from Japan as the port has been overloaded from its 20% growth annually over the years,” said the project manage net unit.

Tien Sa seaport need upgrading to receive large container ships

The Ministry of Transport (MoT) signed a memorandum of understanding with JICA in December 2013 to support a feasibility study and capital appraisal.

It asked the Ministry of Planning and Investment to include the project in the priority list of projects seeking Japanese ODA in the 2014 fiscal year.

In the list are also three other projects to build an Intelligent Transport System (ITS) for the expressway network in the north (JPY6.8 billion), 100 dilapidated bridges along highways (JPY30 billion), and a 2.7km road section (JPY10 billion) linking East-West Revenue and HCM City-Trung Luong expressway.

The MoT is working with relevant agencies to increase the transparency in loan management; it is also hastening key transport infrastructure projects using Japanese ODA.

The three Japanese ODA-funded projects in Hanoi, namely the Noi Bai Air Terminal No2, Nhat Tan bridge, and an access road linking Nhat Tan bridge and Noi Bai terminal, will be completed late this year as scheduled, according to MoT Minister Dinh La Thang.

The MoT has proposed a list of 29 transport infrastructure projects seeking Japanese ODA for 2014-16 with a total investment of JPY470 billion (US$6 billion). Most of these projects are focused on urban transport, seaport, expressway, airport and railway construction.

CPI for August to inch up 0.2%

Despite the two petrol price hikes, the consumer price index (CPI) for July rose 0.23% over June, and the CPI for August is forecast to edge up 0.2% compared to July.

Market observers say inflation is expected to inch up on the back of an inadequate supply of food and foodstuffs to meet demand during the rainy season.

In August the capital city of Hanoi plans to increase the cost of health services, but experts hope the move is not expected to have any consequential impact on the CPI.

Power Logics Vina factory inaugurated in Vinh Phuc

Power Logics Vina Co. Ltd, a wholly Korean invested company, held a ceremony recently to inaugurate its factory in the northern province of Vinh Phuc.

Covering 2.3ha in the Khai Quang Industrial zone, the factory provides protection circuit modules (PCMs), smart modules (SMs) and camera modules (CMs) to Samsung Mobile, with a monthly capacity of 4.8 million products. It has created 500 jobs for local people.

The province is encouraging the development of support industries to assist domestic and foreign businesses.

Vinh Phuc province is one of the leading localities across the country in attracting foreign direct investment (FDI) in the first six month of this year.

They granted investment licenses to 39 projects including 18 FDI projects totaling US$182.1 million.

Most projects were focused on support industries and highly competitive hi-tech products.

FDI tourism zone licenses revoked

The central province of Phu Yen has revoked licenses of two foreign direct investment (FDI) tourism projects worth US$50 million for delays in implementation.

Invested by Varella Ltd Company, the US$37.5 million Hon Nua island eco-tourism zone project was licensed in March 2008, and the US$11 million Tuy Hoa coastal hotel and resort zone project was approved in October 2009.

The Department of Planning and Investment had extended the deadline to December last year, but the two projects still have not been implemented.

The province revoked the investment deposit of the Hon Nua island eco-tourism zone project worth US$124,807 and added it to the State Budget.

This year, Phu Yen Province has revoked five projects with total registered capital of VND1.58 trillion (US$74.51 million) for delays in implementation, mostly due to disagreement in site clearance compensation.

Last year, the province nullified nine projects with total registered capital of VND1.24 trillion (US$58.29 million), mostly tourism, real estate, mineral and hydro-power projects.  

HCM City remittances reach US$2.4 billion ahead of peak season

Overseas remittances to HCM City in the first seven months reached US$2.42 billion, representing a year-on-year increase of 5.2%.

Head of the State Bank of Vietnam's City branch Nguyen Hoang Minh said in July around US$170 million was sent back to the City.

Minh said the increase is a positive sign because the peak remittance season hasn't begun yet.

In the first six months, the remittance volume through the banking system in HCM City was mainly from Europe and the US.

Market observers in the City said that recipients of overseas remittances are getting less interested in securities, deposits and gold due to the low profit of 0.25 to 1% annually, which is a result of the Government's policy in the last two years to discourage people from hoarding the dollar.

To ensure a substantial recovery, recipients are likely to invest in the property market which the Government's housing packages are designed to support.

In 2013, about US$4.8 billion was transferred to Vietnam through HCM City. Of this, 72% went into production and business, 21% into the real estate market and the remainder was sent to support relatives.

Last year, Vietnam was among the top 10 remittance recipients with US$11 billion, and it is likely to stay robust this year, according to the World Bank's Migration and Development Brief released in April.

Ways to improve VN business climate

Vietnam should further improve its business environment, including simplifying administrative procedures and cutting business costs, or it lags behind other countries, local and foreign experts suggested.

Addressing a seminar in Hanoi on July 31, Olin McGill from the United States Agency for International Development (USAID) hailed the Vietnamese government’s resolution 19/2014, showing its great effort to improve the country’s business environment.

This is an influential reform package aimed at making the business climate better and increasing the economy’s competitive capacity, he said.

McGill, a consultant for the USAID-funded Governance for Inclusive Growth (GIG) Programme in Vietnam, quoted a recent World Bank report as saying Vietnam ranks 99/189 in terms of Ease of doing business index.

With such a position, the country’s per capita income should be US$7,545, much higher than its current US$1,400, he said.

Another area McGill suggested Vietnam should focus on is simplifying income tax compliance procedures. He pointed out the fact that each enterprise in Vietnam currently spends on average 872 hours a year completing and complying with tax procedures, while the average figure worldwide is only around 300 hours.

Furthermore, he said, cross-border trade is rife with shortcomings resulting in waste of at least 15% of Vietnam’s total trade turnover.

Dr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management (CIEM), in turn said his institute is working closely with the business community seeking common measures to help Vietnam overcome challenges in improving its business environment and sharpening the competitive edge.

Currently we are targeting for Vietnam to rank among the top six ASEAN members having good competitive index within the next few years, he said.

Vietnamese agencies are required to trim administrative procedures and business costs in three key areas of cross-border trade, tax and electricity access, as suggested by the World Bank.

At the seminar, the General Department of Taxation, Vietnam Customs and Electricity of Vietnam (EVN) vowed to improve the three indices from now till 2015.

To make the reform a great success, CIEM and USAID/GIG representatives said they will work closely with trading associations to map out a practical plan of action.

Japanese food producers eye HCM City market

Many Japanese food businesses consider Ho Chi Minh City a lucrative city to invest in, according to Osato Kazuhiko, director of the Japan External Trade Organization (JETRO).

Kazuhiko told a recent seminar in HCM City that the city is an attractive destination for Japanese food producers thanks to its large number of consumers and increased per capita incomes.

JETRO Executive Director Yasuzumi Hirotaka in HCM City echoed Kazuhido’s view, saying it is high time to introduce Japanese food into the Vietnamese market.

He said Japanese enterprises are currently strengthening cooperation with Vietnamese partners in the field of food processing, aiming to enhance the value of Vietnamese agricultural products through transferring its agricultural development experience.

Remarkably, a number of entrepreneurial food companies from the Republic of Korea and Thailand have also announced plans to expand their operations in HCM City.

Auto imports hit three-year highs

Vietnam imported 6,000 automobiles worth US$117 million in June 2014, reaching record highs for the past three years, according to the General Office of Statistics (GSO).

The number of imported completely built units (CBU) increased month on month in the first half of the year and even rose 1.5 times over the first six-month period last year.

Automobile imports had declined sharply in both volume and value since June 2011 and the downward trend had lasted till the beginning of 2014.

In July 2014, an estimated 6,000 cars were shipped to Vietnam at a total value of US$122 million.

Overall, Vietnam has imported more than 31,000 units in the past seven months valued at US$667 million, up nearly 60% in volume and over 78% in value compared to a year ago.

Vietnam-Cambodia border trade reaches over US$650 mil

Vietnam’s total import-export turnover through border gates with Cambodia were estimated at US$650 million in the first seven months of the year, according to the southern Tay Ninh province’s Department of Industry and Trade.  

Of the figure, over US$350 million came from exports and US$300 million from imports. The provincial businesses mainly exported instant noodles, plastics, washing power, cosmetics, and construction items to Cambodia while importing cassavas, soya bean, cows and cashew nuts.

To facilitate trade exchange between businesses and local residents, the province formulated a project to upgrade routes to border gates with total investment capital of over VND1,000 billion.

Electronics firms see light at the end of the tunnel

Companies operating in the electronics industry have tremendous opportunities to carve out their own specific niche in the global marketplace and thrive, said economists at a seminar in HCM City on July 30.

“Five years after making the decision to open its retail market in line with World Trade Organization (WTO) commitments, the electronics industry is finally seeing light at the end of the tunnel, said Pham Ngoc Hung, Vice Chairman of HCM City Union of Business Associations (HUBA).

The increased economic prospects for global integration are brought about by free trade agreements under negotiation, most particularly the Trans-Pacific Partnership (TPP), he shared.

Vietnamese companies, especially electrical and electronics firms, should not take anything for granted, however, and should make every effort to meet or exceed international standards for technical safety, and certificate of origin (C/O), he said.

Echoing Hung’s view, Stanley Ong, Assistant Vice President at TUV SUD ASEAN added that many countries around the globe are actively turning to more environmentally friendly sustainable development, and Vietnamese companies should seize the opportunity to play a global leadership role in the development.

“The electronics sector should invest heavily in research and development to ensure their products comply with the strictest of international standards applying the latest in scientific and technological advancements,” Ong said.

Finally yet most importantly, Vietnamese electronics firms should fully develop a marketing strategy touting the environmentally friendly attributes of their products and certificate of origin (C/O), specifically targeting stimulating exports to the demanding markets, Ong said.

Economists at the seminar were in general agreement that such a marketing strategy would help electronics firms increase their product value, improve competition and win consumer trust along with instilling confidence in the quality Made-in-Vietnam brand in the global marketplace.

Farmers unwilling to sell sugarcane to refineries

Farmer in the Mekong Delta are not willing to sell their sugarcane to local refineries due to low buying prices and the different practices of sugarcane delivery.

The Hau Giang Department of Agriculture and Rural Development estimated farmers in the province have grown sugarcane on around 16,000 hectares in this year’s crop and have already found mills for their products.

Can Tho Sugar Company, which has agreed to consume the cane grown by farmers in Hau Giang Province, said the firm will buy a kilogram of cane at VND830 for the average commercial cane sugar (CCS) rate of 10% with delivery at the company’s mill.

However, grower Nguyen Van Dua in Phung Hiep District in Hau Giang Province said farmers would not benefit from selling to the company due to a low buying price and the cost of transport to the firm. In previous crops, farmers sold to traders right at their fields.

Nguyen The Tu, head of the Agriculture and Rural Development division of Phung Hiep District in Hau Giang Province, calculated the production cost is VND760 per kilogram of sugarcane for this year’s crop and farmers will not earn profits if they have to transport their sugarcane to the company at a price of only VND830 per kilo.

Tran Van Tam, head of the Agriculture and Rural Development division of My Tu District in Soc Trang Province, said Long My Phat Sugar Company has agreed to purchase sugarcane produced on 700 out of 2,400 hectares in the locality.

Tam said Long My Phat will buy a kilogram of sugarcane at only VND700 at growers’ fields, which is lower than their production cost.

Agriculture authorities said farmers in Hau Giang, Soc Trang and other provinces in the Mekong Delta start to harvest their sugarcane of the 2014-2015 crop in the middle of September this year.

Statistics of the Vietnam Sugar Association showed farmers yielded 1.58 million tons of sugarcane in the 2013-2014 crop from more than 289,000 hectares.

Commercial banks offer e-tax service

By the end of this year, account holders at five commercial banks in 18 cities and provinces across Viet Nam will be able to pay their taxes online.

Tax offices will forward online tax declarations that they receive to banks, which will transfer money from taxpayers' accounts to the State budget, said Pham Quang Toan, head of the department's Information Technology division.

A pilot run of the online tax payment facility for taxpayers in Ha Noi, Bac Ninh and Vinh Phuc with accounts at the Joint Stock Commercial Bank for Investment and Development of Viet Nam (BIDV) has already been carried out, he said.

So far, 250 enterprises have paid their taxes online.

The number of enterprises using e-tax declarations has increased sharply in Viet Nam, from 362 enterprises in 2009 to 350,000 enterprises last year. This month, the general department under the Ministry of Finance signed an agreement with four commercial banks to facilitate online tax payments. Under the agreement, the department and the banks –Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank), Viet Nam Joint Stock Commercial Bank for Industry and Trade (VietinBank), Viet Nam Bank for Agriculture and Rural Development (Agribank) and Military Commercial Joint Stock Bank (MBBank) – will set up a system to transmit online tax payments, using digital signatures for security verification.

The service will first be available to 5,000 taxpayers in areas including Quang Ninh, Hai Phong and Nam Dinh in the north, Nghe An, Quang Binh and Da Nang in the centre and Binh Duong, Dong Nai and HCM City in the south.

Aimed at both enterprises and individuals, it will later be expanded to all 63 cities and provinces in the country, according to Bui Van Nam, general director of the taxation department.

Vice General Director of Vietinbank Nguyen Van Du said the bank and the taxation department were working together on preparations, holding training courses for bank staff and tax officers and ensuring that the banks' accounting systems were compatible with the payment system of the taxation department.

Consumption of goods, services up

The General Statistics Office (GSO) yesterday reported that the total retail sale of goods and services in the first seven months achieved a year-on-year increase of 11.4 per cent to US$78.8 billion.

Excluding inflation, the growth was 6.15 per cent since early this year against the growth rate at 5.1 per cent in the first quarter, 5.5 per cent in the first four months and 6 per cent in the first five months. It was 5.7 per cent in the first half of the year.

During the first seven months of this year, the total retail sale of goods accounted for 75 per cent of the total to reach $59.15 billion, 10.1 per cent higher than the same period last year.

Sales of accommodation and restaurant services had a year-on-year increase of 12.8 per cent to $9.62 billion and other services gained $9.22 billion, 18.3 per cent higher than same period last year.

GSO economic expert Vu Manh Ha said, however, that the real purchasing power still grew slowly, as the consumer price index increased only 1.62 per cent during the first seven months – the lowest level since 2006.

The growth rate of retail sales of goods and services each month showed a downward trend during the first seven months, the office said. The rate increased 2.3 per cent in February against January, 2 per cent in March against February and 1.4 per cent in April against May. It rose 0.7 per cent in July against June.

However, the domestic retail market shows great potential in the future, according to property consulting and service provider CBRE Viet Nam.

Looking ahead, the retail market could expect more activities and new entrants in Viet Nam in general and Ha Noi in particular.

According to a recent report by CBRE, Viet Nam ranked second among ten top markets for Asian retailers in 2014. Another survey conducted by CBRE also showed that Ha Noi and HCM City are among top 10 cities in Asia Pacific where retailers intend to open stores in 2014.

On the legal side, Viet Nam will completely open the market to foreign retailers by January 2015 under WTO obligations. In addition, under the ASEAN Trade in Goods Agreement, Viet Nam has reduced import duties from ASEAN to zero on 10,000 tariff lines.

While this support is expected to serve as a good foundation for more international retailers and goods to enter Viet Nam, local retailers may struggle with competition from foreign retailers with modern, tried and tested international concepts.

New forum to help local support industry

The HCM City Export Processing and Industrial Zone Authority (HEPZA) last week signed a cooperation agreement with the Japan External Trade Organisation (JETRO) to establish the Viet Nam-Japan Support Industry Forum (VIETPANSIF).

Hirotaka Yasuzumi, executive director of JETRO office in HCM City, said the forum would organise meetings, seminars, conference and training courses on quality control and human resource development.

These events will also help support industry enterprises seek new customers and promote their brands; to share experience in production and business; and to transfer technologies and improve human resources quality.

According to a survey conducted by JETRO, in 2012 local suppliers met 28 per cent of the demand of Japanese-invested enterprises in Viet Nam. The figure rose to 32 per cent last year.

These figures, however, were low compared to other regional countries such as Thailand (52.7 per cent) and Indonesia (40.8 per cent).

Therefore, the VIETPANSIF will work to connect enterprises and make policy recommendations related to the support industry, he said, adding that the forum's executive board plans to organise an event every quarter of the year to this purpose.

According to HEPZA, as of late 2013, there were 371 local support industry enterprises, accounting for 47.4 per cent of local enterprises in export processing zones and industrial parks in HCM City.

These local support industry enterprises turn out products to support manufacturers in the engineering, textile and garment, and packaging industries.

Vu Van Hoa, head of HEPZA, said the forum would help promote the development of the support industry in Viet Nam and Viet Nam-Japan economic ties.

New Land Law improves framework

Though the new Land Law has not completely satisfied all involved parties, it ensures more transparent and equitable treatment for land users, property consultancy CBRE said in a report.

"It generally helps to improve the legal framework as well as simplify complex and lengthy procedures," Pham Ngoc Thien Thanh, a senior CBRE analyst, explained.

"Some notable changes address issues of landed property and land recovery – an origin of dispute in the last decade, including land ownership, land recovery, land use rights, and land price."

The new law, ratified last November and coming into force on July 1 of this year, supersedes the 2003 Land Law and has a number of improvements that place local and foreign investors on an equal footing in terms of land acquisition and prices.

It was passed after a consultation process that generated over six million responses from the public.

Land ownership still remains with the Vietnamese people and is represented and managed by the State. However, foreign investors are now able to undertake transactions involving land on an equal basis with domestic investors.

Under the new Law, overseas Vietnamese and foreign-invested enterprises can be allotted land for investment projects for the construction of houses for sale or for a combination of sale and lease. Those who leased land with a full one-off rental payment prior to the effective date of this law may continue using the land with a levy.

"By enabling land allocation to foreign investors, a more competitive business environment is expected, which will help to ensure more efficient land usage," Thanh said.

However, while proposed amendments to the Housing Law will allow foreign investors, particularly overseas Vietnamese, to buy and own houses, the Land Law does not mention benefits for foreign individuals, she said.

Unlike the 2003 Land Law, which had very broad terms such as "economic development purposes", the new law provides more detailed definitions in terms of taking back agricultural lands allotted for commercial projects.

"It is expected that this will help redistribute land to more efficient and financially capable investors, especially for pending ‘golden' sites which have been cleared where there has been no further construction activity," Thanh said.

The law retains the definition for late projects as investment projects inactive for 12 consecutive months, or where the land use schedule is 24 months behind the schedule stated in the project documents.

"The government will be more active in redressing unequal land distribution," Thanh said.

But the law states that in the case of a breach developers will be given a 24-month period to remedy the situation instead of 12 as was the case earlier.

"This will narrow the scope of land recovery by the government, which will consequently affect primary land supply," Thanh said.

After the 24-month grace period land and assets will be withdrawn without any compensation except for force majeure events while under the old law the State had to compensate for investments made in the land, according to the report.

"What the government plans to do with recovered projects or who they will be transferred to still remains in doubt. Finding better investors who have a strong financial position as well as proven track records and commitment may not be an easy task," Thanh said.

According to a study by the World Bank in 2011 tiled Compulsory Land Acquisition and Voluntary land Conversion in Viet Nam, investors' opinions were solicited during various meetings held by the Government.

Problems reached a peak between 2002 and 2004 prior to the passing of the 2003 Land Law.

The Ministry of Natural Resources and Environment received more than 30,000 petitions related to land disputes, complaints, and denouncements between 2003 and 2006. Most of the issues raised were related to land administration procedures – especially land access and the land rights of enterprises.

Problems with land administration procedures eased for a while but have increased again since 2007.

According to the Government Inspectorate of Viet Nam, there were 700,000 lawsuits and complains related to land disputes in the last three years.

Seventy per cent of the suits related to the value of land compensation, financial support and resettlement, according to CBRE figures.

Vinatex to up investment in domestic fashion industry

The Viet Nam National Textile and Garment Group (Vinatex), has restructured its domestic business strategy to further invest in domestic production by expanding sales and distribution and developing the fashion industry.

The group's member companies including Viet Tien Garment, Garment 10 and Nha Be Garment have sought a firm foothold in the local market. By doing so, the group has set a target of increasing total revenue in the local market by 30 per cent.

Tran Viet, head of the marketing department of Vinatex, said the local garment market had good potential as local consumption for clothing and fashion accessories ranked after food and foodstuff.

According to statistics by Vinatex, each Vietnamese consumer spends between VND150,000 and VND500,000 (US$7-24) on clothes and fashion accessories every month accounting for 18 per cent of his or her monthly consumption.

Le Tien Truong, General Director of Vinatex, said although Vietnamese consumers have tightened their spending on clothing and fashion accessories, the domestic textile and garment sector still shows handsome growth. This means the local garment makers have made efforts to expand sales distribution.

To reach their targets, Vinatex has constantly invested in upgrading technology and manufacturing the best and diversified products. In the first half of this year, the group's revenue already reached VND911 trillion ($43.38 billion) or an increase of 10 per cent over the same period last year.

Than Duc Viet, Deputy General Director of Garment 10, said that his company always paid a lot of attention to technology investments and cut production costs to supply domestic products at competitive prices.

Expanding the distribution network is one of the solutions to ensure Vinatex products get closer to local consumers. The group now has more than 4,000 shopsin the country. However, General Director Truong said domestic products have sought a firm foothold in medium and high-end segments only, while locally-made products are not capable of competing with cheap imported ones.

Phan Chi Dung, Director of Light Industry in the Department of the Ministry of Industry and Trade, said Vietnamese garment companies have to make more efforts to compete with imported ones on home turf.

Dung said local companies have to pay a lot of attention to developing the retail network in the whole country.

Garment companies need to work out policies to further invest in designing centres and applying new technology to produce high quality and specialised products.

Le Tien Truong said that to seek a firm foothold in the local market, garment companies have to enhance their localisation ratio to 60 per cent by 2015. Vinatex has set a target of boosting raw materials and establishing a comprehensive supply chain to minimise production cost.

TTC Group inks co-operation deals

Thanh Thanh Cong (TTC) Group yesterday signed strategic agreements with Pepsico Viet Nam, Singapore-based ED&F Man Asia Pte Ltd, and Pegas Touristik Group for co-operation in the sugar, tourism, and hotel industries and promote export of ethanol products.

It will provide services in the tourism and hotel sector to Russia-based Pegas Touristik, which plans to send around 250,000 Russian tourists to Viet Nam this year.

By tying up with ED&F Man Asia Pte Ltd, TTC hopes to boost exports of ethanol products, including fuel and industrial and food grade ethanol.

TTC Investment Joint Stock Company, an arm of TTC Group, will supply sugar to Pepsico and the two will also join hands to develop new sugar products and promote consumption of each other's products.

TTC is active in many sectors, including real estate, energy, import-export of farm produce, and financial investment, and has 20 subsidiaries and affiliates.

Speaking at a ceremony to mark the 35th anniversary of TTC Company and the third anniversary of TTC Group yesterday, Dang Van Thanh, the latter's chairman, said the group earned a revenue of more than VND6.5 trillion (US$305.7 million) in the first half of the year, a year-on-year increase of 14 per cent.

The sugar and sugarcane sector contributed 83 per cent of its revenues, he added.

Vinamilk, VinGroup to pay millions in cash dividends

Dairy giant Vinamilk (VNM) and property developer VinGroup (VIC) will spend trillions of dong paying dividends during the next two months.

Vinamilk plans to use more than VND1.66 trillion (US$79 million) to pay investors their first dividend of 20 per cent.

August 15 is the deadline for shareholders to register to participate in the payout, which will be made on September 5.

At the annual shareholders' meeting in April, the company pledged to pay no less than 50 per cent of total net profits this year in dividends.

The dairy producer has set a net profit target of VND6 trillion ($284 million) for the whole year, a decrease of 8.3 per cent year-on-year.

It plans to make the second payout on July 5, 2015.

Recently, Vinamilk's shareholders were upbeat on the news that the company planned a stock split to raise charter capital. Vinamilk will issue nearly 166.7 million shares, equivalent to nearly VND1.67 trillion ($79 million), to pay shareholders bonus shares at the rate of 20 per cent.

Apart from bonus shares, shareholders will enjoy cash dividend rate of 48 per cent for the business year of 2013.

Vinamilk's current charter capital is almost VND8.34 trillion ($395 million).

Despite this news, the company's shares declined 0.7 per cent yesterday to close the session at VND135,000 ($6.4).

In addition to Vinamilk, another member of the top 30 shares by market value and liquidity on the HCM City Stock Exchange, VinGroup (VIC) is expected to pay its shareholders a cash dividend at the rate of 21.49 per cent in August, equivalent to nearly VND2 trillion ($95 million).

VinGroup's accumulative profit by the end of 2013 reached VND7.728 trillion ($366 million). Shareholders must register to participate in the payout by August 8 and the payment will be made on August 20.

Last week, the group began construction of the exclusive Vinhomes Tan Cang urban complex in HCM City, which will cost up to VND30 trillion ($1.42 billion). VIC shares lost 1.4 per cent yesterday to end at VND72,000 ($3.41) a share.

SBV looks at boosting non-collateral loans

The State Bank of Viet Nam has told local branches of foreign banks and rating agencies to improve their capacity of assessing creditworthiness so as to increase non-collateral loans.

The move was made keeping in mind Viet Nam's 12 per cent credit growth in 2014 which is likely to rest on the second half. Banks are struggling to increase lending, which is indicated through a low credit growth of only 2.3 per cent in the first six months.

In the document No 5342/NHNN-TTGSNH dated July 24, the central bank urged commercial banks to employ solutions to help enterprises access more capital to finance production.

SBV wants to see banks actively approach and help companies that are hungry for capital, support them in finalising loan applications, and expand lending for major projects in priority sectors. Priority sectors are agricultural and rural areas, exports, small- and medium-sized enterprises and auxilliary industries.

The central bank has also urged the Credit Information Centre (CIC), corporate rating agencies, and internal creditworthiness bodies at credit institutions to build up a comprehensive and consistent creditworthiness assessment system.

The SBV said that a better creditworthiness rating system will simplify paperwork of loan applications, and improve the capacity of lending enterprises without assets as collaterals.

The efforts to boost non-collateral loans leave bad debts in question.

The bad debt ratio in Vietnamese commercial banks rose in the first half of the year to 4.84 per cent in late June 2014 from 3.61 per cent in late 2013. The SBV reported last week that total bad debts stood at VND240 trillion (US$11.3 billion).

Economists said that the escalating ratio required banks to set up provision funds, which in turn negatively impacted their ability to increase lending activities.

They also largely attributed the increase in bad debts to slow lending growth in the banking system, gloomy performance of corporate financing in the context of the slow paced economic recovery and settlements by the central bank-run Viet Nam Asset Management Company (VAMC) that are below expectations.

According to the Ha Noi Statistics Office, total outstanding loans in July of Ha Noi-based credit institutions are estimated to inch up 0.5 per cent to nearly VND927 trillion ($43.52 billion).

The city's credit institutions are also estimated to mobilise a total VND1,205.6 trillion ($56.6 billion), up 2.8 per cent as compared to June, and up 14.4 per cent year-on-year.

In the same document, the central bank told commercial banks to restructure in-house finance leasing companies pursuant to the master project toward 2015.

Phu Quoc Island attracts 22 new investment projects

The island district of Phu Quoc in t he southern province of Kien Giang has attracted 22 new investment projects totalling 33.4 trillion VND (1.57 billion USD) so far this year, bringing the total number of projects operating in the district to 194.

The figures were reported at a conference on investment promotion for the island held by the Steering Committee for the Southwestern Region on July 28 in the Mekong Delta city of Can Tho.

In particular, after the Prime Minister gave the green light to a Vietnam-Singapore Industrial Park in Phu Quoc, Kien Giang authorities have set up an advisory team for investment attraction and development on the island.

Chairman of Kien Giang provincial People’s Committee Le Van Thi reported on the progress of key projects in Phu Quoc, with more than 70 percent of the workload completed on the 51.5 km South-North axis road worth almost 2.5 trillion VND. For the 99.5-km road running around the island, one third of the total investment of 3 trillion VND has been disbursed so far, while projects on supplying clean water, building breakwater dykes and upgrading the An Thoi fishing port are keeping with schedule.

According to deputy head of the Steering Committee Nguyen Phong Quang, the committee and Kien Giang authorities will continue investment promotion activities through meetings with domestic and foreign investors and addressing difficulties facing investors in deploying their projects in Phu Quoc.

Phu Quoc Island, dubbed the Pearl Island in the southern sea, is a tourist hub in the southern province of Kien Giang.-

Toy companies regroup to gain market share

Several Vietnamese companies have made plans to produce more creative children's toys to gain a larger share of the domestic market in the lead up to the Mid-Autumn Festival, according to an article published in the English language news website dtinews.vn on July 28.

For years, the market for lanterns and toys for children has been dominated by Chinese producers because of their diverse designs and low prices. Vietnamese people, however, are increasingly concerned about the risks of buying Chinese products, especially for children, after numerous reports of the toxic chemicals used in the production of many Chinese toys.

Vietnamese toy makers have been taking advantage of this consumer trend by redesigning many of their products and sourcing their materials domestically.

“We’ve planned to produce anywhere from 600,000 to 700,000 lanterns for the Mid-Autumn Festival. That is twice what we made last year,” Huynh Van Khanh, Director of Ky Thuat Moi Package Company was quoted as saying.

Khanh added that the theme for this year's product line will be the East Sea, islands and archipelagos and the fishermen who sail those waters. These patriotically-themed toys will also celebrate figures from Vietnamese history, such as Saint Giong, King Ngo Quyen and the Trung Sisters.

“In order to reduce dependence on Chinese materials, we’ve invested in finding Vietnamese sources for lantern parts. We could not find a local producer of music chips, so we still have to order these from a Taiwanese partner. But we asked them to use Vietnamese children's music that is copyrighted in the country,” he emphasised.

Lam Thuy Nguyen Hong, Director of Gia Long Fine Arts Company, which is locally famous for the brand KIBU, said they are also using local materials in producing lanterns to keep better quality control. They also plan on doubling their production this year, as well as launching 40 new models of lanterns.

Hong said that, even though there is a rising trend among Vietnamese consumers to buy domestic products, there is still a high demand for low cost items with diverse and creative designs.

The people of Phu Binh, a traditional craft village that produces lanterns in Ho Chi Minh City, are busy keeping up with the increased number of orders from traders for the upcoming festival.

Chinese companies are not unaware of the trend, and many Chinese producers have started to copy Vietnamese product lines.

“We’ve registered for copyrights for all of our products, so any fake products would be an infringement on intellectual property rights. Last year, we sued one company, who ended up have to pay hundreds of millions of VND in compensation,” Hong added.

Second wave of mergers and acquisitions begins: paper

Experts have claimed a second wave of mergers and acquisitions (M&A) has begun in Vietnam, the Vietnam Economic News reported, citing experts as saying that the second one is stronger both in terms of numbers and value of the transactions.

Specifically, the second wave of M&A in Vietnam occurs in the 2014-2018 period. The organisation board of Vietnam Mergers and Acquisitions Forum 2014 said it was expected that the value of successful M&A transactions in this period would reach 20 billion USD, increasing by 5 billion USD compared with the first wave of M&A in the 2008-2013 period.

Major M&A transactions will take place in areas of banking, production of consumer goods, real estate, information and technology, transport and logistics.

According to editor-in-chief of the Vietnam Investment Review and Head of the organisation board of the Vietnam M&A Forum 2014 Nguyen Anh Tuan, the second wave of M&A took shape based on the recovery of Vietnam’s economy.

GDP growth rate in the first half of this year was 5.18 percent compared with the 4.9 percent increase of the same period last year. Inflation rate was controlled at low levels and the macro-economy has become more stable.

The state management agencies are paying special attention to M&A activity. The legal framework for this trend is becoming more complete as a wide range of important laws relating to business and investment will be revised such as the Investment Law, the Enterprise Law, the Housing Law, the Real Estate Law and the Law on Securities.

Particularly, according to Senior Managing Director of RECOF Corporation Masataka Yoshida, the second wave of M&A was shaped by the accelerated equitisation of state-owned enterprises (SOEs) policy of the Government.

Under the equitisation project approved by the Prime Minister, the Government planned to equitise 432 SOEs in the 2014-2015 period. The Vietnamese Government will continue to check and add more SOEs that need equitised.

The large scale SOEs like Vietnam Airlines, MobiFone and big corporations in the cement and garment, textile industries expected to be equitised in the 2014-2018 period will be important for the development of M&A transactions.

However, it will be not easy to take advantage of this wave as Vietnam still lacks the legal documents that rule M&A transactions. At present, the regulations on M&A are only scattered in the Enterprise Law, the Investment Law, the Competition Law and the civil code. In another aspect, investors said Vietnamese enterprises remained unclear in their financial information, making it difficult for investors in negotiation process.

To successfully take advantage of the second wave, the legal documents on M&A need to be consistent. There should also be a management or monitoring agency on law execution of M&A and is responsible for providing consistent professionalism skills relating to M&A activities.

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

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