Outlook sends shares tumbling

Investors continued to opt out of the market yesterday, watching stocks fall on both national stock exchanges.

The benchmark VN-Index on the HCM City Stock Exchange lost another 0.47 per cent to close the session at 412.55 points, led by blue chips.

The VN30 Index tracking the top 30 shares by market capitalisation and liquidity was also down 0.45 per cent to 489.76 points.

Decliners outnumbered advancers by 142-72 overall.

Trading was still sluggish with just 27.6 million shares, worth VND426.3 billion (US$11.2 million), exchanged.

Only four codes exceeded more than 1 million shares traded, of which Tan Tao Industry Investment Corp (ITA), with over 1.7 million shares traded, was the most active, but closed flat at VND6,700 ($0.32)

"Investors maintain a pessimistic outlook on the market," said HCM City-based independent analyst Pham Viet Hung, noting more and more companies were reporting poor corporate earnings and disappointing investors.

By the end of July, 65 companies had posted losses in the second quarter, led by businesses operating in the fields of construction and real estate (19 firms), and securities and mining (7 firms).

On the Ha Noi Stock Exchange, attractive prices helped to lift trading volume. Over 31.6 million shares worth more than VND481.6 billion ($22.9 million) changed hands yesterday, doubling Tuesday's trading value.

However, the benchmark HNX-Index still fell another 0.71 per cent to finish yesterday at 68.70 points, with losers overwhelming gainers by 127-73.

The HNX30 Index also dropped 1.19 per cent to close at 129.35 points.

VNDirect Securities (VND) was the most active code on the Ha Noi market with more than 4 million shares changing hands, but still fell 1.8 per cent to finish at VND10,700 ($0.52).

Foreign investors concluded yesterday as net sellers on both exchanges, unloading combined shares worth VND11 billion ($524,000).

FIEs expand investment while fresh FDI funds tumble

Foreign-invested enterprises (FIEs) further expanded their investments in Vietnam in the year to date, offsetting a sharp fall in the flow of fresh foreign direct investment (FDI) in the period, said the Foreign Investment Agency.

In the January-July period, up to 231 operational FIEs registered an additional US$2.83 billion, an increase of 5.2% year on year, while fresh FDI capital in the period totaled only US$5.2 billion, plunging over 44%. The aggregate FDI in the seven months totaled US$8.3 billion, still a fall of 33% from the year-earlier period, according to the agency under the Ministry of Planning and Investment.

Experts said the strong flow of FDI into operational projects is a bright spot in the picture of the country’s FDI attraction. It is noted that the Ministry of Planning and Investment aware of difficulties in competing for FDI with other countries have repeatedly said it this year shifts focus to FDI capital from operational projects as well as the rate of FDI disbursement rather than fresh FDI projects.

In the year to date, the total FDI disbursement has amounted to US$6.25 billion, almost the same with the amount in the year-ago period.

Most of the new FDI projects in January-July are of small and medium sizes. Of the 584 projects licensed in the period, there is only one with registered capital of over US$1 billion in the real estate sector.

There are up to 111 projects with registered capital of less than US$100,000 each, mostly in areas of business consultancy, trading and software production.

Japan is the biggest foreign investor in Vietnam this year, with US$4.29 billion committed in fresh and operational projects. Or over 53% of the total amount.

VWS unveils US$1-billion green waste treatment plant

Vietnam Waste Solutions Co. (VWS) has unveiled the design of a green waste treatment plant it plans to construct in Long An Province.

The plant, which requires investment of US$700 million to US$1 billion, will be implemented within 20 years, said David Duong, general director of VWS. When in place, the facility can handle 40,000 tons of waste discharged daily from Southern provinces.

VWS has spent US$7-8 million on conducting a geological survey and feasibility study as well as designing a set of construction works with the help of U.S. environment specialists.

During the first phase, the firm will pump US$100 million into the project and it will call for further investment into on-going works.

Covering 1,760 hectares, the garbage treatment plant is surrounded by trees and canals. It has an environment training center nearby and consists of standard landfills and a hi-tech sewage treatment facility, a compost fertilizer factory and a garbage-to-power plant with a closed system.

Duong said his company will collaborate with the authorities of Southern provinces to build garbage transfer stations in order to deliver huge amounts of waste to the facility for treatment.

The waste treatment complex can handle different types of waste from hazardous waste, medical waste, industrial waste, electronic waste and sludge to wastewater. It aims to meet the waste treatment demands of HCMC, Long An and the Southern Economic Zone.

VWS is set to complete an environmental impact assessment report by October and a feasibility study two months later, paving the way for the plant’s timely operation by the end of next year.

When the waste treatment facility is up and running, it will create jobs for 8,000-10,000 people.

Traders want to hike fuel price despite global downtrend

The price of finished petrol products in Singapore has continuously fallen since July 20 when the domestic fuel price was adjusted up, but fuel trading firms still plan to increase the price again.

Speaking to the Daily over the weekend, Le Thanh Man, sales manager of Dong Thap Petroleum Trading Company (Petimex), said that the firm would send a proposal of increasing the retail fuel price by VND400-500 per liter as it is still incurring losses despite the recent fuel price increase.

According to Bloomberg, the price of finished petrol products in Singapore has dropped continuously over the past few days. Specifically, after surging to US$118.15 per barrel on July 20, the price fell to US$114.75 on July 23 and US$113 on July 26.

Last month, the Ministry of Finance allowed fuel trading firms to set the price within the price range as regulated in the Government’s Decree 84/2009/ND-CP. Since then, traders have made two price adjustments, with one increase and one cut.

However, traders appear to be indecisive as to when to increase the price as their business scales are not the same.

With the price increase on July 20, Man said that small trading firms are waiting for a move of Petrolimex to adjust the retail price. Petrolimex accounts for a big market share of some 70%, and thus if selling fuel at a higher price, small firms will lose customers while if selling at a lower price, they do not have enough fuel to sell.

According to Man, small trading firms are at a disadvantage due to the higher purchasing price and thus higher tax. “We buy fuel with a small volume and have to pay a higher premium, and therefore the price is not as good as that of a large volume,” he said.

Given the more expensive import, the tax sum per unit is also higher, he explained.

However, the firm will have to find ways to attract customers to cover the price differential, he added.

Le Thi Anh Man, deputy general director of Saigon Petro, echoed the view, saying that despite not having a price advantage, small firms will try to find niche markets, reduce some stages in distribution and improve the service quality to attract customers.

Besides, to ensure fairness, trading firms said the Ministry of Finance should apply a fixed tax rate instead of basing the tax calculation on the import value to remove the tax differential between small and large imports.

Opportunity knocks for enterprising tenants

Ho Chi Minh City office tenants are being urged to take advantage of  low rents and incentives to upgrade their accommodation before the window of opportunity closes.

After office rents peaked in 2007, they have continuously decreased due to oversupply and the global financial crisis one year later. However, financial woes have seen the construction of some office projects in the second city put on hold or delayed, leading to a smaller supply of quality downtown space.

Grade A office rent in the central business district (CBD) has started to harden and remained quite stable over the last quarter, at average $32-33 per square metre per month. According to Colliers International, Grade A buildings, with exception of Bitexco Financial Tower which remains in the lease-up phase, has a generally stable occupancy rate at 97 per cent in the second quarter.
The 68-storey tower is reporting occupancy of 60 per cent following a significant take-up of office space in the first half of the year, with a number of deals in the pipeline which could push this rate significantly higher. It is currently offering monthly rents ranging from $30-55 per square metre (exclusive of VAT and service charges).

Bitexco Financial Tower developers are also advising potential tenants to act fast if they want to secure a space in this prestigious building.

“The ‘wait and see’ period is over, and the window of opportunity is closing,” said William Badger, director of marketing for Bitexco Group. “We’ve recently seen potential tenants lose out on space by waiting too long. So tenants need to act fast if they want to secure space that best fits their needs.”

The tower’s tenant list now includes such blue-chip tenants as Samsung, Ernst & Young, Allen & Overy, Toyota Financial Services, Adidas, Hoffman LaRoche, Mastercard and Sotheby’s International Realty, with this list likely to grow in the next few months.

Colliers International records that a ‘flight to quality’ is starting to take hold with new Grade A buildings like Bitexco Financial Tower welcoming new businesses to Vietnam and established companies looking to upgrade their accommodation.

Stephen Wyatt, country manager of Knight Frank Vietnam, added: “With limited development activity in the Grade A office market in the past two years, existing supply is slowly being occupied.”

In a report released early last year, CBRE forecast new Grade A and B office supply in the southern hub could climb to 390,000 square metres this year. However, it has revised supply for this year to 165,000sqm due to delays in construction.

In particular, while the market had expected to see around 84,000sqm of new Grade A office space come online in the CBD this year, stalled construction on a number of key projects means the actual figure will only be around 8,000sqm.

“With so many buildings running late or slowing down we are seeing a “temporary bottoming out” of the office rental market in Ho Chi Minh City,” said Marc Townsend, managing director of CBRE.
Wyatt echoed Townsend’s comment, saying: “With occupancy levels increasing and very little Grade A space available, landlords will find themselves in a stronger negotiating position and we will start to see less incentives and increased rentals being achieved.”

Agents have taken note, and are quickly encouraging their clients that time is of the essence. “We are advising multinational companies that have a capex budget to relocate and to take advantage of historically low rents,” said Townsend.

Savills also stated that although the average rent was expected to decrease further in 2012, it predicted the average rent would increase by approximately 15 per cent in 2013 and 12 per cent in 2014.

“The first stage of Savills two-stage forecasting model has showed that demand for office spaces in Ho Chi Minh City will remain and consistently increase in 2013-2014. Therefore, with the balance of net new demand and vacant spaces in the next two years, the second stage of the forecasting model showed that Ho Chi Minh City’s office market will be better in 2013 and 2014,” said Truong An Duong, head of research at Savills Ho Chi Minh City.

Foreign groups deepen Vietnam distribution market roots

More foreign firms are establishing wholly owned sales agents in Vietnam.

Japan’s Canon has underscored the trend in the footsteps of Lotte, Shiseido, Aeon and Sojitz.

Canon Marketing Vietnam (CMV), Canon’s new sales company, would handle a range of Canon products and take over the import activity belonging to Le Bao Minh, Canon’s authorised distributor in Vietnam, said Noriji Yoshida, general director of CMV.

Canon operates four manufacturing plants in Vietnam and some printer product models manufactured by Canon in Vietnam are sold locally.

With the establishment of its sales company in Vietnam, Canon had set up revenue targets to hit $500 million by 2016 and take the top market position in all major products in Vietnam, said Yoshida.

“Demand in Vietnam is expected to increase while demand within the consumer product segment is expected to grow to an even greater extent. Also, within the camera market in Vietnam, there is believed to be a “gray market” that is several times larger than the official market. With the establishment of the new marketing company, we aim to tackle this segment,” stated CMV.

At the beginning of this year, two other Japan-based companies of Sojitz and Kokubu acquired a majority stake of Huong Thuy JSC, a Vietnamese retailer, which providing food and beverage to around 40,000 stores nationwide.

Sojitz added more 25.99 per cent stake of Huong Thuy to raise its total stake by 51 per cent, while Kokubu acquired another 19 per cent stake.

Sojitz has planned to increase Huong Thuy’s revenue from ¥4 billion in 2011 to ¥20 billion in 2016 (around $260 million) by combining Huong Thuy’s distribution system and food processing technology of Kokubu.

Ho Chi Minh City Department of Planning and Investment has just announced to receive the application of Lotte Vietnam Shopping, an affiliate of Korea-based Lotte, to be a 100 per cent foreign funded company.

According to the application, Lotte Vietnam would buy the remaining 20 per cent, valued at $13 million, from Vietnam-based Minh Van Co. The application is under consideration.

Moreover, Aeon group from Japan also received the investment certification to build up a $100 million shopping centre in Ho Chi Minh City and $95 million shopping centre in Binh Duong.

VNPT dials in a new future

According to Circular 10/2012/TT-BTTTT just issued by Ministry of Information and Communications (MIC) that will take effect from August 31, 2012, VNPT must restructure its capital contributions in VinaPhone and MobiFone.

According to this circular, a company which holds more than 20 per cent of a telecom company’s stakes will not be allowed to own more than 20 per cent of stakes in another telecom company.
At present, VNPT holds 100 per cent stakes of Vinaphone and Mobiphone.

Under Decision 929/QD-TTg, the MIC will assess the organisational measures then design restructuring plans for state-owned enterprises to be submitted to the prime minister for approval within 2012’s third quarter.

The government will own more than 75 per cent of charter capital of state-owned corporations and groups which operate in telecom network infrastructure supplying. The restructuring of telecom corporations and groups such as VNPT and Vietnam Multimedia Corporation (VTC) was of prime importance, MIC Minister Nguyen Bac Son said.

VNPT appointed Nguyen Van Hai, former director of VASC Software and Media Company, as new director of Vietnam Data Communication Company (VDC). This move was considered as the first step for the new VDC operating model’s human resource preparation.

Additionally, Vietnam Telecom International (VTI) has officially been renamed as VNPT-International (VNPT-I). VNPT used to propose an advanced operating model based on re-arrangement of its members’ operating models.

Specifically, VNPT expected to establish VNPT-Networks based on re-organisation of Vietnam Telecom National and part of VTI, set up VNPT-Media from re-arrangement of Vietnam Data Communication Company (VDC), VASC and VNPT Information and Public Relations. Also, 63 VNPT provincial and urban branches nationwide might become 63 one-member companies.

Vinalines’ financial storm

Vinalines, caught in a financial tsunami, continues to burden  the state.

It suffered a VND1,439 billion ($69.2 million) loss in 2012’s first half, double the loss sustained during the same period last year and accounted for 11 per cent of its charter capital. Vinalines director Nguyen Canh Viet said the company had faced a perfect storm of liquidity and jobs woes.

The losses caused by two former Vinashin subsidiaries, Vinashin Lines and Bien Dong Shipping Company (BISCO), amounted to nearly half of the sum, or VND700 billion ($33.65 million).

Meanwhile, the figure was VND267 billion ($12.84 million) for Falcon Shipping Company (Falcon), said Vinalines. Also, its three associated companies in Cai Mep-Thi Vai area were saddled with debt, driving the firm further under water.

Vinalines also felt the heat due to its shipping fleet with the total capacity of 3.7 million dead weight tonnes (DWT) (by June 2012) financed by bank loans.

“With annual interest rates up to 21-22 per cent, paying interest on a loan of VND30-40 billion ($1.44-1.92 million) to buy a 20,000dwt-ship has bitten into all the ship’s revenue. Not to mention, leasing ships were faced with lower rents from its partners,” BISCO director Tran Thien said.

Its subsidiaries and associated companies’ withdrawing from non-core business with total VND370 billion ($17.79 million) was still a long way off, Vinalines said. Except from success in selling five ships with total loads of 182,000dwt, restructuring loans has hit difficulties.

By the end of 2012, Vinalines has been capitalising Khuyen Luong Port, Vinalines Nha Trang and Vinalines Haiphong Maritime Services. The firm is also expected to accomplish the merger of Can Tho and Cai Cui ports, of Petrol Maritime Trade-Vinalines and Vinalines Petrol Company and change into a one member limited company.

Itochu struggles to find market

Itochu Corporation’s investment in Vietnam-based ethanol facility is proving a headache.

Kohei Wantanabe, executive advisory officer of corporate administration of the Japanese group, said the delay in promulgating a legal framework for sale of bio-fuels in Vietnam was a barrier for Itochu and PetroVietnam Oil to sell their joint venture’s product in the domestic market.

“We completed the project and put it into commercial operation several months ago. But we don’t have a market for this product,” said Wantanabe.

Itochu two years ago joined hands with PetroVietnam Oil, a subsidiary of PetroVietnam, to build the $80 million Orient Bio-fuel facility in southern Binh Phuoc province. The facility started commercial operation from spring 2012 using cassava, a well-grown crop in the region as feedstock, aiming production of around 100,000 kilolitres per year. The ethanol produced by Orient Bio-Fuels is expected to be sold through gas stations under PetroVietnam Oil.

When deciding to invest into the project, Itochu saw a huge potential market as the Ministry of Industry and Trade (MoIT) was drafting a legal framework allowing sale of gasoline mixed with ethanol in Vietnam.

However, things did not go in accordance with the plan. The MoIT has yet to introduce such important legal documents and no timeline has been offered.

“We are discussing with our partner to find the best way to minimise losses,” Watanabe said.
Itochu is not the only victim of this delay. Other ethanol production plants in Vietnam - two operating in central Quang Nam and Quang Ngai provinces and one in northern Phu Tho under construction, are facing similar difficulties.

Luxury cars roll into Vietnam despite economic doldrums

At least 10 super luxury cars have been imported to Vietnam within 2012’s first six months, with five Rolls-Royce Phantom Dragons, each estimated to cost $1.2 million, out of 33 on the world market imported, according to local importers.

Besides that, there have been some super luxury cars being rolling into Vietnam’s streets such as Bugatti Veyron, Lamborghini Murcielago LP670-4 SV, Bentley Mulsanne, Ferari F430 Spider, Mercedes SLR Mclaren and Audi R8 V10.

Most of them are million-dollar cars and have a limited quantity for each model. Similarly, lower-priced luxury car models of Audi, BMW and Porsche were sold well despite the current downturn and high tax barriers for imported cars.

Tran Tan Trung, director of Lien A International Company - the official Audi dealer in Vietnam, believed that despite of the gloomy economy, luxury Audi cars such as A5 Sportback, A6, Q5 and A8 were the best sellers.

“Even some newly-introduced car models are being hunted by Vietnamese customers,” added Trung.

In a similar development, Mercedes-Benz Vietnam has opened two new showrooms in Haiphong and Danang to catch this wave. In Danang, the German car manufacturer sold three R300L new generation with a total bill of VND10 billion ($478,900) in the first days of launching.

To date, some luxury cars have official distributors in Vietnam such as BMW, Audi, Porsche, Chrysler, Dodge and Subaru. But famous super luxury automobile manufacturers such as Ferrari, Bentley, Lamborghini and Maserati still have no authorised dealers in Vietnam.

With the positive moves from Vietnam, Bentley Asia revealed that it was casting its eyes on Vietnam market and would soon introduce official dealer in Vietnam in 2012. Contrary to the positive picture of super luxury and luxury cars, middle and low-class cars are facing with big challenges.

According to Vietnam Automotives Manufacturers’ Association, the volume of imported completely-built units was down 30 per cent in June compared with the same period last year. Total sales for first six months stopped at 13,978 units valued at $285 million, a significant fall of 58 per cent in volume and 54 per cent in value versus the same period of 2011, respectively.

Rubber firms bend with downtimes

Natural rubber firms are suffering a downtrend in rubber prices, but tyre-makers are loving it.

Falling rubber prices continue to badly affect natural rubber companies and their profit lines.

International rubber prices had decreased by 3.6 per cent during July 9-21 and so have domestic rubber prices, according to Vietnam Rubber Group, contrasting with the colourful picture of 2011’s favourable business results.

However, the reduction in domestic rubber prices was lower than that in the world’s rubber prices. Domestic prices fluctuated within VND58-59 million per tonne ($2,788.5-$2,836.5), said Hoa Binh Rubber Joint Stock Company’s (HRC) spokesman Banh Manh Duc.

He said to avoid risks resulting in decreasing rubber prices, in 2012 the company had cut rubber latex exploitation and purchased it from small rubber farms. Currently, 2012’s rubber exploitation has reduced compared with that in 2011 even though the third quarter is the rubber exploitation season. Specifically, HRC gained more than $2.88 million in after-tax revenue, equal to 50 per cent of 2012’s set target during the first six months, said Duc.

Meanwhile, Tay Ninh Rubber Joint Stock Company (TRC) attained $5.97 million in revenue during the first half of 2012. Of which, only $2.21 million came from rubber producing activities.

According to HRC, its first six months’ business results were badly affected by the downward trend in June, VND66.91 million ($3.22 million) per tonne, that pulled the average rubber price in the first half of 2012 down to only VND58.23 million ($2,799.5) per tonne.

The firm was expanding its rubber tree planting areas in Laos and Cambodia. Phuoc Hoa Rubber Joint Stock Company (PRH) now possesses the largest rubber tree area of about 15,000 hectares amongst the five listed natural rubber companies. Domestic consumption accounted for 60 per cent of its total rubber volume, while its export value to Asian markets equaled 35 per cent, of which China’s market counted for 20 per cent.

However, due to the downtrend in China’s market, the firm has decreased its export value to this market to prevent from its influence. PHR said it gained $41.15 million in revenue from rubber and $16.47 million in profit, in the first half of 2012, equal to 67 per cent of 2012’s year target.

According to a report by brokerage house VNDirect, the rubber industry’s total output in the first half of 2012 equaled only 30 per cent of the year’s target.In contrast, tyre-makers such as Danang Rubber Joint Stock Company (DRC), Southern Rubber Industry Joint Stock Company (CSM) and Saovang Rubber Company (SRC) benefited from decreasing inputs prices because both natural and synthetic rubber prices are dropping.

Specifically, DRC reached $8.65 million in revenue, accomplishing 78 per cent of the 2012’s target, during first six months. In other case, CSM had achieved a full year target in the 2012’s first half alone when the figure reached $7.2 million.

Troubled companies stiff caterers    

Many businesses facing financial difficulties have been delaying payment for meal services or refusing to pay at all.
 
Representatives from restaurant Com123 said that, to date, the total amount they are owed for meal services has reached hundreds of millions of VND. Cavico Power and Resource Joint Stock Company still owed VND43 million (USD2,047) for three months of lunch services for its staff. They still have not payed despite having made numerous promises.

Debt collection has become a problem for the restaurant since many of the staff who ordered meals are no longer at the company.

AFC Software JS Company gave different excuses to avoid paying their debt of VND8 million (USD761.9). Recently they moved headquarters. After the move they asked for another deferment so they could clean up the new offices. The company made several other moves, leaving the restaurant unable to contact the responsible parties.

Tas Technology and Software Application Company in Cau Giay District also owed VND8 million.

Nguyen Manh Hung, the manager of Com123, complained that a company in Cau Giay District sold its stake in another business. He said that there was no one to accept responsibility. "We've tried to get in touch with company officials, but are frustrated at every turn. We can't find who to collect the money from," he said.

Nguyen Duc Anh, the owner of a rice restaurant in Thanh Xuan District, said they have faced the same problem over the past year. They are currently owed VND50 million (USD2,380) by company on Nguyen Trai Street. He has had no success in trying to collect his debt. Recently he heard that the company was in the process of liquidating its assets.

Nguyen Thu Hoa, an owner of a restaurant in My Dinh Commune, Tu Liem District, said that she has been providing lunch services to around 10 large companies, without payment. Still she continues to provide meals because she is afraid that it will become harder to collect if the service is terminated.

Hoa said that every month she has to spend tens of millions of VND on food and staff. She is only able to stay in business because her suppliers are acquaintances and she does not have to pay rent on restaurant space.

“A lot of companies owe back debts for salaries, not only meal payments," she said.

Nguyen Duc Anh did not have such a lucky situation. He was forced to close his restaurant in Thanh Xuan District because of the losses, largely attributable to large companies unwillingness to pay their bills. Even though he increased his prices for rice lunches from VND20,000 to VN25,000 due to rising costs, he was still unable to maintain his business. In turn, he still owes many of his suppliers.

Investment in agricultural sector still low
 
Only 55-60 per cent of the agricultural sector has met its investment needs, and if a new policy for the industry is not drawn up by the Government, the sector could be taken over by foreign companies, according to experts.

Although agricultural exports have recorded steady growth over the years, investment in the sector has been scattered and ineffective.

Agriculture contributes 20 per cent of the country's gross domestic product (GDP), providing jobs for half of the workforce and ensuring food security.

Public investment in agro-forestry and fishery production accounts for nearly 36 per cent out of the total agricultural sector's investment, according to a recent report from the National Assembly's economics committee.

Foreign direct investment (FDI) in agriculture fell from 8 per cent in 2001 of the country's total pledged FDI capital to under 1 per cent last year, the Ministry of Agriculture and Rural Development has said.

FDI investment in the agricultural sector in the 1990-2010 period stood at only US$4.3 billion, according to the ministry.

Poor facilities have hindered both local and foreign investment in the sector, experts have said.

The agricultural sector has played a key role in maintaining economic stability amid the global economic crisis, but it is faced with many risks. Many farmers and businesses have incurred major losses due to a drop in prices for farm produce as well as prices for livestock and poultry. Le Van Me, director of Phu Son Breeding Company, said the breeding business can be a gamble because prices are sometimes too high or too low, and there are disease threats.

Experts said that has occurred because investment in the industry has not been structured well.

There main factors of the animal breeding industry, breeders, feed and disease-control, remain problems.

La Van Kinh of the Institute of Agricultural Science for southern Viet Nam said low breeder quality had increased production costs.

According to the Viet Nam Animal Feed Association, the country has to import as much as 80 per cent of materials for animal feed production.

Over-reliance on import materials has also driven up production costs.

Animal feed only accounts for 50-55 per cent of pig-production costs in the US and Canada, but in Viet Nam it is as high as 75 per cent.

According to many experts and pig-farm owners, Viet Nam's animal breeding industry is on the verge of being taken over by foreign firms if the Government does not create a clear development policy for the industry.

Delta provinces urged to boost links

A transport infrastructure development plan for the Cuu Long (Mekong) Delta from now to 2020 would give investment priority to projects that can improve alliances among provinces in the region, according to the Ministry of Transport.

This follows up on a 2011 prime ministerial decision (Decision No 638/QD-TTg issued April 28) that set out directions, tasks and plans for transport infrastructure works in the region through 2015 with orientation towards 2020.

It said investment decisions should be based on sound plans that would ensure the building of "synchronous and interconnected system for multimodal transportation that meets the requirements of and boosts socio-economic development.

The decision said this would, in turn, ensure security, social order and safety in the whole region, strengthen the integration process with the country, region and the world.

Under the plan, 187 transport infrastructure development projects will be implemented from now to 2015, including 56 directly managed by the Government, with combined capital of VND94.3 trillion ($4.5 billion)

The 131 remaining projects, under the control of provincial administrations, will require a total investment of VND69.5 trillion ($3.3 billion)

The transport ministry says that available resources including capital from the State Budget and government bonds can only meet 30 per cent of capital needed.

Hence, it has proposed that the investments be made selectively, with priority given to works that would closely connect localities with each other and generate a momentum for socio-economic development that can spread across the entire region.

The remaining projects can be implemented later based on capital resources to be raised after 2015, the ministry has said.

Nguyen Phong Quang, deputy head of the Southwest Steering Board, agreed with the proposal.

He said most localities in the Mekong Delta investment priority should be given to projects that meet pressing needs of localities in the region.

Deputy Minister of Finance Nguyen Huu Chi admitted that the biggest problem for transport infrastructure development in the delta was a dearth of capital.

The finance ministry has asked the Government to allow the region to use capital raised from government bonds for 2013 to implement the most urgent projects in 2012, Chi said.

He also said that localities should seek capital from other sources so that the important projects can be completed on schedule.

In a conference held to provide implementation guidelines for Decision 638, Deputy Prime Minister Vu Van Ninh urged the transport ministry to coordinate with the Southwest Steering Board and localities in the delta to sort out projects in the order of importance.

He said localities should work harder and fully tap available resources. They should try to mobilise capital under different forms including Build-Transfer, Build-Operate-Transfer, and Public-Private Partnerships, he added.

Strict quarantine for plant imports

The Ministry of Agriculture and Rural Development has drafted a law based on public opinion regarding imports of botanical goods to Viet Nam. Under the law, products must go through quarantine and testing to eliminate any risk of disease. Companies whose products fail to reach the required standards will be notified with a detailed explanation.

The law will replace outdated regulations that were put into place in 2001, while creating a better legal framework to control plant protection and quarantine activities in Viet Nam.

According to the ministry, Viet Nam's authorities conducted tests on over 540,000 batches of imported and exported botanical products each year.

However, current regulations were not strong enough to curb violations.

Also mentioned in the draft, Vietnamese farming products will be quarantined and tested carefully to ensure that exports satisfy the import criteria of other countries.

According to the ministry, the law would help to promote and maintain Vietnamese products in international markets and avoid losses.

Head of the ministry's Plant Protection Department Nguyen Xuan Hong said that the new regulations were in line with international standards and practices.

The draft also clearly stated that the application of advanced technology would help to detect disease risks, he said.

Former deputy head of the department Vuong Quoc Tuong said that stricter management of botanical products was necessary.

The draft also outlines the responsibilities of producers, saying they must carry out pro-active preventive measures to detect diseases and stop them from spreading.

The Government will encourage all economic sectors, individuals and organisations to join hands in plant protection and quarantine activities.

Regulations on international co-operation in this field are also introduced in the draft to help Viet Nam realise its commitments to international conventions including the International Plant Protection Convention and Sanitary and Phytosanitary Measures Agreement.

The ministry expects to finalise the draft and submit it to the Government by December before it is submited the National Assembly next year.

Oil refinery expansion backed
 
The Prime Minister ratified a decision on a preferential financial regime for the country's first oil refinery to ensure its business efficiency and future expansion.

According to a report published on the Government website www.chinhphu.vn last Friday, the Dung Quat Oil Refinery will be exempted from corporate income tax of 25 per cent for four years, and subsequently be subject to only 10 per cent for 30 years, and 12.5 per cent for a further 9 years.

Under Decision No 952/QD-TTg, the Viet Nam National Oil and Gas Group (PetroVietnam) will take responsibility for approving and supplementing charter capital for the Binh Son Refining and Petro-chemical Co Ltd, the operator of Dung Quat.

Nguyen Hoai Giang, director of the Binh Son Refining and Petro-chemical Co Ltd, told VnExpress.net that the incentives would help the refinery operate more effectively, attract new investors and raise the annual capacity to 10 millions tonnes of petroleum in the future.

In addition, higher capacity would help the refinery supply more products for the local market in a bid to ease pressures on the rising exchange rates between the US dollar and Vietnamese dong, he said.

Dung Quat now has an annual capacity of over 5 million tonnes and is running at full capacity.

In the first half of this year, Binh Son Co produced and sold 2.68 million tonnes of petrol products in the domestic market and reaped a total revenue of VND60 trillion (US$2.86 billion). It paid some VND7.4 trillion ($352 million) to the State budget.

It planned to churn out 6 millions tonnes of petroleum with an expected turnover of VND108 trillion ($5.1 billion) by the end of this year, hoping to add an estimated VND15 trillion ($714 million) to State coffers this year.

Sugar group wants quotas scrapped
 
The Viet Nam Sugar and Sugarcane Association (VSSA) has called on the Government to scrap its system of setting individual sugar import quotas for food processing enterprises.

Nguyen Hai, chairman of the association, said the Government should import a certain amount of sugar and then invite bids to balance supply and demand.

Businesses which offered the best prices would be the winning tenders.

Hai said the mechanism would create transparency while ensuring enterprises' demands for sugar are met.

In an interview with the Viet Nam News, VSSA's general secretary Ha Huu Phai said that under a World Trade Organisation commitment, Viet Nam was required to open its sugar market by allowing imports every year. In 2005, the country imported 25,000 tonnes, 2010 saw 70,000 tonnes imported, and the maximum this year would also be 70,000 tonnes.

Food processing businesses have said that a shortage of sugar was to blame for production problems, but sugar refineries have refuted the claims.

Phai said producers had asked the Ministry of Industry and Trade (MoIT) to provide an import quota as global prices were always lower than domestic prices for sugar.

Do Thanh Liem, general director of Khanh Hoa Sugar Joint Stock Company agreed, adding that it would be unfair if the ministry granted import quotas for some producers because the country had thousands of businesses involved in the sector. — VNS

Company asks for approval to import 100,000 tonnes

Hoang Anh Gia Lai Joint Stock Company has asked the MoIT for approval to import 100,000 tonnes of sugar next year with a low import tax rate of 2.5 per cent.

The agriculture and rural development ministry's statistics showed that by the end of last month sugar refineries produced 1.3 million tonnes of sugar, about 160,000 tonnes more than the same period last year.

By middle of this month, sugar inventories at refineries added up to 240,000 tonnes.

Vinacomin wants coal export tax cut to avoid losses
 
The Viet Nam National Coal, Mineral Industries Holding Corporation (Vinacomin) has petitioned the Government to reduced the coal export tax from 20 to 10 per cent this year to help the corporation avoid further losses.

As of last month, coal stockpiles had reached 8.5 million tonnes, according to Nguyen Van Bien, deputy general director of Vinacomin. Despite this, Bien said Vinacomin had incurred losses of VND8 trillion (US$380 million) every year on average for several years, because it sells coal for power production at below market prices under a Government subsidy programme.

Importers still wanted to buy coal from Viet Nam but offered buying prices lower than the production cost, said Bien. "As a result, Vinacomin dare not continue signing new export contracts because we're afraid of suffering further losses," said Bien.

In the first half of 2012, Vinacomin exported nearly 7 million tonnes of coal. But so far this month, it has exported only 250,000 tonnes of coal and has no more export orders.

"We anticipate that coal shipments in the remaining months of the year are likely to be low," Bien said.

He said one tonne of coal for export is subjected to many taxes, including valued added tax, natural resources tax, environment tax and exploration tax, which substantially inflate coal prices and make it extremely difficult to earn a profit.

Bien said Vinacomin wanted the Government to reduce the export tax by half to boost the coal sector. He said this could be a temporary measure that was still in line with the country's strategy to gradually minimise coal exports.

Viet Nam plans to gradually cut down on coal exports as local demand surges and supply declines. The Government policy is to ensure sufficient coal supply for the country, especially for the power sector.

Japanese investors eye Dong Nai Province

Many investors, particularly from Japan, are expressing keen interest in Dong Nai Province, according to the province's Department of Planning and Investment.

By July 20, total newly registered and additional FDI capital was US$986 million, an increase of 113 per cent compared to the same period last year.

At least 85 per cent of capital ($838 million) has been invested in the support industry.

Bo Ngoc Thu, director of the department, said many small- and medium-sized Japanese companies had invested in production of machinery and electronic parts.

Thu said the province's development orientation was to attract investment in the support industry and hi-tech to create a breakthrough in local industrial development.

Pham Nhat Hanh, head of business department at Long Duc Industrial Park in Dong Nai Province's Long Thanh District, said the industrial park had attracted three investors, Japan's Belmon, Lixil and Kobelco-Eco Dolution, and was negotiating with some other investors.

Lixil Viet Nam Co has implemented a project covering an area of 55 ha with total investment capital of $441 million. It mainly produces building materials such as aluminum windows and frames.

The project includes areas for producing auxiliary products in neighbouring provinces.

Kobelco-Eco Solution has a $3-million project to cover a one-ha site in the province's Long Duc Industrial Park.

It will manufacture glass-coating mechanical equipment used in chemical and pharmaceutical industries.

Construction will start in the third quarter and operation would begin in the second quarter of next year.

Its expected capacity is 400 tonnes of products annually.

Hanh said in order to create conditions for investors, especially for investors in the support industry, Long Duc Industrial Park has more than 10,000 sq.m of building factories for hire.

At Nhon Trach III Industrial Park, other investors such as Daiwa Light Alloy Industry Viet Nam have poured money into producing machinery parts from aluminum alloy and Toan Cau Mechanism Co specialises in producing metal – and plastic-made parts used for automobiles and motorbikes.

 Steel stocks hit record high as demand falls off

Stocks of steel increased about 15 per cent at the end of June compared to those in the first months of the year, Viet Nam Steel Association chairman Pham Chi Cuong has announced.

"Never before has the quantity been as large as at present," he told the Vietnam Economic Forum website vef.vn.

According to Cuong, stores of steel now amounted to 350,000 tonnes per month while only around 300,000 tonnes were consumed. In previous years, monthly inventories ranged between 250,000 and 300,000 tonnes while about 400,000-450,000 tonnes were sold each month.

Firms were producing 30,000-70,000 tonnes per month but many could not even sell one-third of this amount. For example, the Thai Nguyen Steel Co had seen sales drop to 14,000-15,000 tonnes per month from the previous levels of 20,000-30,000 tonnes.

Cuong said some steel makers had to cease production during the last two months, and many had to cut working shifts to handle the downturn.

Hoa Phat Group general director Tran Tuan Duong was quoted by vef.vn as saying the company had to cut 10-15 per cent of its steel production capacity to reduce inventories.

Interest rates, though slashed to below 15 per cent per year, still caused great difficulties for firms. Even at this level, each tonne of steel would cost an extra VND200,000 (US$9.6) per month.

Many producers have said they expected banks to cut rates to as low as 7-9 per cent so that they could improve their production and business activities. They also want the Government to slash the value-added tax from 10 per cent to 5 per cent to help them avoid bankruptcy.

The electricity price hike of 5 per cent at the end of June had caused even more concerns, they said, specifying that electricity prices now accounted for 6-7 per cent of their production costs.

While making a tonne of steel needed about 600kWh of electricity, the 5 per cent hike would raise costs by at least VND39,000 ($1.87) per tonne. A firm producing 40,000 tonnes of steel per month would have to pay VND1.56 billion ($75,000) each month.

Cuong said that although the steel industry was expected to grow 3-4 per cent this year, it would be hard to reach this goal since both steel consumption and consumer prices had been in decline for the last two months.

He added that about 20 per cent of steel enterprises were projected to go bankrupt this year, with many struggling to pay debts and unable to pay their employees.

Vietnam-Italy Steel Co deputy general director Tran Ngoc Anh said local steel companies also faced significant pressure in competing with imported products, especially Chinese goods.

The price of Chinese rolled steel was now about VND1 million ($48) cheaper than domestically produced rolled steel, he added.

Industry insiders specified that Chinese steel makers enjoyed an interest rate of 5 per cent - in contrast to domestic firms, which pay three times that much. Local banks should give local firms more support with regard to interest rates, they said.

Viet Nam Steel Corporation deputy general director Nguyen Trong Khoi said local enterprises should further cut costs, seek new contracts and look to expanding export markets in Southeast Asia, Middle East and North Africa.

NBB transfers commercial centre to Lotte Viet Nam

Nam Bay Bay (NBB) Investment Corporation has successfully transferred the Hung Vuong Commercial Centre project in the southern Binh Thuan Province's Phan Thiet City to Lotte Viet Nam at a cost of US$4.5 million.

The 7,453 sq.m project is expected to be completed and put into operation in the third quarter of next year.

Metro builds wholesale outlet in Kien Giang

Metro Cash & Carry Viet Nam broke ground for a new wholesale outlet in the Mekong Province of Kien Giang's Rach Gia City on Saturday (July 28).

Metro Rach Gia - the 18th cash and carry centre in Viet Nam – aims to serve the growing tourism industry as well as thousands of fishery and seafood processing businesses in the province Kien Giang and the southern coastal region.

With a total investment of US$15.6 million, the new centre, which will begin operations in October 2012, will sell more than 25,000 food and non-food items.

It will also generate more than 400 new direct jobs for the local residents.

Khanh Hoa to welcome new oil refinery project

Korea's Daelim Industrial Co Ltd planned to co-operate with the Viet Nam National Petrolimex Group to start construction on the Nam Van Phong Oil Refinery Project in the southern province of Khanh Hoa in August or September, according to the management board of the Van Phong Economic Zone.

Dealim and Petrolimex signed a memorandum of understanding in October last year to co-invest in the US$ 3 billion project.

 Coffee exports fall 7.8% sin volume this month

Viet Nam's coffee exports this month dropped 7.8 per cent in volume and 8.6 per cent in value compared to last month, according to the General Statistics Office.

This crop is estimated to reach 1.403 million tonnes, or 23.38 million bags, up 29 per cent compared to the same period last year. Turnover is also expected to surge 30.5 per cent to $2.98 billion.-

 Bac Lieu inaugurates rice warehouse worth $2.3m

An 18,000 tonne rice warehouse was put into operation late last week in the southern province of Bac Lieu's Hong Dan District.

The VND47.5 billion (US$2.26 million) facility includes a 6,000sq.m warehouse, a wharf and two rice processing lines.-

 Binh Duong helps local businesses get credit

The southern province of Binh Duong would set up a fund to help businesses access credit, according to the provincial People's Committee.

The fund, which will have a charter capital of VND150 billion (US$7.14 million), will also help provincial small and medium-sized enterprises, especially those in farming and exports, to take out low interest loans.