Lexus makes its Vietnamese debut

Toyota Japan’s luxury Lexus brand has officially debuted in Ho Chi Minh City on December 26, adding a new member to Vietnam’s high-end car market.

Toyota Japan General Director Yoshihisa Maruta said Lexus is aiming to become Vietnam’s leading luxury automotive brand.

The company will focus on consolidating the reputation of its trademarks and ensuring the best quality of customer care.

Lexus also inaugurated Lexus Sai Gon Centre, its first agent in Vietnam, with investment capital totalling more than VND200 billion.

It released the Vietnamese price listings for its LS460, GS350, ES350, LX570, and RX350 models, which range from an entry level of VND2.5 billion to VND5.7 billion at their most expensive.

All Lexus cars are imported from Japan and include three-year warranties and maintenance policies.  

Vietnam – Cambodia’s second largest partner

Vietnamese goods enjoy many advantages over Thai and Chinese competitors on Cambodian markets.

The Ministry of Industry and Trade’s Asia-Pacific Market Department highlighted the strong trade ties uniting Vietnam and Cambodia and the two governments’ mutual commitment to bilateral trade cooperation.

Modern transport infrastructure has facilitated particularly high export-import turnovers.

Two-way trade turnover reached US$3.3 billion in 2012, an annual increase of 17%. Vietnam is currently Cambodia’s second largest trade partner.

Vietnam’s advantages over regional rivals include shared borders, ten international border gates, and similar consumer demands.

The Asia-Pacific Market Department said Cambodian consumers prefer Vietnamese goods over their Thai equivalents because of quality and reasonable prices.

Thai goods still vastly outnumber their Vietnamese competitors on the shelves of Cambodian supermarkets.

Almost all major Vietnamese companies operating in Cambodia are tied to distribution monopolies.

They are also reluctant to invest in Cambodian marketing and advertising initiatives. Businesses should work on developing their trademarks’ reputations and expanding distribution channels.

The Asia-Pacific Market Department approves of Vietnamese enterprise attempts to compete with Thai rivals in design, pricing, packaging and distribution, despite the considerable initial outlays such a strategy requires.

Experts even recommend attempting to establish new distribution networks in conjunction with out foreign investors.

The numbers of Vietnamese businesses with Cambodian stores—serving consumers directly—remains modest.

Vietnamese enterprises would also benefit from gaining more of a purchase in Cambodian supermarket franchises.

Da Nang urged to boost int’l integration

A December 27 conference in Da Nang city discussed the role of the locality and businesses in international integration and sustainable development.

Representatives from the Ministry of Foreign Affairs’ Multilateral Economic Cooperation Department recounted the Party and State’s achievements in foreign policies in recent times and orientations for comprehensive international integration in the time ahead, Vietnam’s international economic integration in the context of global economy, the establishment of the ASEAN economic community by 2015, economic growth models along with issues related to a green economy and economic diplomacy.

Da Nang has also developed a concrete action plan for boosting international integration by perfecting the legal basis, invigorating the local economy and expanding relations with foreign partners, and developing human resources.

Over the years, the city has established the ties of friendship and cooperation with 32 foreign localities and over 150 international organizations. It also has maintained investment and trade cooperation with more than 100 nations and territories in the world.

Contract inked for Thai Binh power plant construction

The Electricity Vietnam (EVN) and the Marubeni Corporation from Japan on December 26 inked a contract to build the main thermal power plant of the Thai Binh Power Station in the northern province of the same name.

The Engineering, Procurement and Construction contract is worth US$819.6 million and US$190.9 million.

At the signing ceremony in Hanoi, EVN General Director Pham Le Thanh said the project has an investment of VND26.5 trillion (US$1.3 billion), 85 percent of which comes from the Japan International Cooperation Agency and the remainder from EVN.

The construction of the plant is scheduled to kick start in the first quarter of 2014.

The first turbine is expected to operate in the last quarter of 2017 and the second, in the second quarter of 2018. They will generate nearly 3.3 billion kWh each year.

The two-turbine plant is part of the two-plant Thai Binh Power Centre in Thai Thuy district, Thai Binh province.

On December 23, a contract to build the Vinh Tan Thermal Power Plant No. 4 in the central province of Binh Thuan was signed.

The Vinh Tan No. 4 and Thai Binh plants are among power projects to become operational in 2017-2018.

2013 - a booming year for Vietnamese exports to US

A senior trade official has hailed 2013 as a successful year for Vietnamese exporters in general, especially those ship goods to the US.

Dao Tran Nhan, Minister Counsellor for Trade and head of the Vietnam Trade Office in the US, said on the fringes of the recent trade counselors’ conference that Vietnam will run a trade surplus of US$20 billion with the US when its export is estimated to surpass the US$25-billion mark.

The figure is significant as export to the US accounts for 20% of Vietnam’s total export, Nhan said.

About opportunities and challenges ahead, the counsellor emphasised that trade with the US is political trade.

Dealing with anti-dumping lawsuits and anti-subsidy issues, offering legal assistance and clearing bottlenecks for Vietnamese exports are a major part of his office’s workload.

He forecast that Vietnam’s export to the US will grow by some 10% in 2014.

To assist exporters to earn higher turnover and local negotiators in Trans-Pacific Partnership deal, Nhan said his office has informed the Ministry of Industry and Trade and concerned ministries and agencies about trade barriers imposed by the US as well as the country’s new policies on export.

It also made in-depth studies on new laws and disseminate them to the circle of business players on a regular basis, making them aware of technical barriers and others involved, he said.

Vietnam enjoys trade surplus with Malaysia

Vietnam recorded a trade surplus of US$834 million with Malaysia in the first 11 months of 2013.

According to the Office of Commercial Affairs at the Vietnamese Embassy in Malaysia, two-way trade between Vietnam and Malaysia hit US$8.31 billion in the period, a rise of 13.83% compared to the same period last year. Of which, Vietnam’s exports fetched nearly US$4.6 billion, a year-on-year increase of 9.85%.

Computers and electronic products topped the list of Vietnamese exports as they brought home US$1.1 billion, followed by crude oil (US$879 million), mobile phones and spare parts (US$596.5 million), and rubber (US$464 million).

The country shipped 453,240 tonnes of rice to Malaysia, raking in US$225.5 million. The figure is expected to reach 529,000 tonnes by the year-end.

Meanwhile, Vietnam imported over US$3.7 billion of goods from Malaysia, up 20.58% from a year earlier.

As of November 20, Malaysia ranked 8th among 100 countries and territories investing in Vietnam, with a total of 450 valid investment projects worth US$10.32 billion.

Amended provisions on construction contracts

With a lump sum contract, the bidding package price and contract price must factor in risks related to cost escalations while the contract is being implemented.— File Photo

On 11 December 2013, the Government issued Decree No. 207/2013/ND-CP amending a number of articles in Government Decree No. 48/2010/ND-CP (7 May 2010) that deal with construction contracts.

Supplementing a principle for signing construction contracts

The Decree supplements the principle that a construction contract can only be signed once the party awarding the contract has a valid plan to make payments to the party that will execute it under the schedule specified in the construction contract, except when the work must be constructed on an emergency basis.

Conditions for construction contract pricing

1. Lump-sum: With a lump sum contract, the bidding package price and contract price must factor in risks related to cost escalations while the contract is being implemented.

The lump sum contract price can only be applied for bidding packages at the time of contractor selection and negotiations to sign a contract that can define the contract volume, quality, performance progress and unit-price for performing jobs; or in some cases, where it is not possible to determine the volume and unit price (such as EC, EP, EPC and turnkey contracts), the contract receiving party is qualified in terms of capacity and experience to determine a lump sum contract price.

2. Fixed unit-price: The unit price for contractual work must include risk factors related to the escalation of costs during contract implementation.

The fixed unit-price can only be applied for bidding packages at the time of selecting contractors and negotiating to sign a contract where contract quality, performance progress and unit-price to perform jobs can be defined, but where the work volume is yet to be determined.

3. Adjustable unit-price: This can be applied only for bidding packages at the time of selecting contractors and negotiating contracts where the volume and price escalation factors for unit-prices to perform contractual work cannot be determined.

4. Time-based and percentage pricing: These are applied for contracts for construction investment consultation (excepting construction surveys) and insurance for construction activities.

New rule on guarantee for contract advance payment

Before the awarding party makes an advance payment to the receiving party, the latter must issue a guarantee to the former for funds equal to the advanced amount. If the receiving party is a consortium of contractors, each member of the consortium must give the awarding party a guarantee for contract advance payment received, except in cases where consortium members agree to let the consortium leader issue the guarantee for contract advance payment received.

The effective term for guarantees issued for contract advance payments is extended until the awarding party recovers the amount advanced. The value of guarantee issued will fall corresponding to the amount of advance payment recovered under the schedule agreed to by both parties.

This Decree takes effect on 1 February 2014. Construction contracts that have been signed and begun implementation before this date will not be affected by its provisions.

SBV looks to increase dong deposits

The State Bank of Viet Nam (SBV) is determined to maintain the strength of the Vietnamese dong, while speeding reforms to the nation's economic system and resolving troubled loans.

Central bank Governor Nguyen Van Binh has described 2013 as a successful year in reforming the nation's monetary policy system.

"The consistency of the monetary policy will continue in the coming years. Then, we can confirm to those who have deposited Vietnamese dong in banks, and to those who haven't, that they should be more confident about depositing their money in banks. This investment channel is, indeed, secure and attractive," Binh said.

Other economic experts also repeated the central bank's recommendation to deposit money in the banks.

Central Institute for Economic Management (CIEM) Deputy Director Vo Tri Thanh added that the central bank monetary policy, along with foreign exchange rates, appeared to be more supportive of the Vietnamese dong than for the US dollar.

Le Xuan Nghia, former deputy chairman of the National Financial Supervisory Committee, also advised the public that savings was a good alternative for investing their money.

And in the current context of sluggish stock and real estate markets, if an investor considers the interest against risks, savings appeared to be a popular choice, said Quach Manh Hao, head of the finance and banking department at Ha Noi National University's Economics University.

However, experts remain concerned that risks to the economy continue because of attempts to revive the economy through public investment, which might cause instability due to ineffective management and collaboration. Such potential instability reduces the attractiveness of the dong, they add.

These concerns might also become widespread throughout the public.

"I'm not sure how safe and beneficial dong deposits would be. The only one thing I know for sure is that I have to pay more and more for the same consumer items than I previously did. I prefer deposits in foreign currencies, at least until I can see some certainty," said Do Thi Hai, a retailer who just converted her money to Euros.

In an attempt to revive public confidence in the dong, as well as to help the economy recover, the central bank has taken bold steps to restructure the nine weakest banks, which were on the verge of a crisis after many years of excessive credit growth and unsecured lending.

Under the banking restructuring plan, and with an eye towards 2015, which was a program initiated last April to improve the resilience of the money system, the SBV has received proposals from 24 out of 25 joint stock commercial banks and has given its approval to 11 of these proposals.

Handling bad debt is the focus of the reforms. The Viet Nam Asset Management Company (VAMC), which is monitored by the SBV, was launched in an attempt to clear balance sheets and boost the liquidity of domestic banks.

Bad debt currently is listed at VND142.3 trillion (US$6.78 billion) based upon bank reports, according to deputy governor Le Minh Hung's statement early this month. By the end of September, Viet Nam's bad debt accounted for 4.62 per cent of total loans.

Binh added that the VAMC helped consolidate all bad debts, which would gradually create a complete debt market for local and foreign investors to participate in.

"Our VAMC model is different from other models adapted in the world, however, it suits the situation for our state budget. It hasn't resolved bad debt completely, but it serves as a good instrument for all parties, including banks, the economy and investors," Binh said.

In another development, the State Bank of Viet Nam also issued policies to support agricultural production. To facilitate farmers' access to loans, the SBV has applied a ceiling interest rate for long-term loans with a current rate of 9 percent.

If farmers or agricultural enterprises prove that their projects would be productive, they would then be given access to loans, Binh confirmed.

Viet Nam's largest aquarium opens in Ha Noi

The country's largest and most modern aquarium, Vincom Mega Mall (VMM) Times City, opened in Minh Khai Street, south of Ha Noi yesterday.

The aquarium has a capacity of 3 million litres of seawater and is home to thousands of marine creatures and reptiles. Penguins, spider crabs, otters and sea cows will be on display for the first time in the country.

According to the investor Vingroup, VMM has over 300 stores and an Ocean Mart hyper-market, spanning over 11,500sq m, a 15,000sq m food centre, and other leisure attractions. The company said that 90 per cent of the mall has been occupied by famous brands after they offered to pay seven months' rent.

Delta needs aquaculture funds

The Cuu Long (Mekong) Delta of Viet Nam requires over VND2.6 trillion (over US$123 million) for 56 aquaculture projects in the 2013 – 2020 period, the Ministry of Agriculture and Rural Development has said.

According to reports released at an aquaculture development seminar held in Kien Giang Province on Friday, the projects feature tra fish, shrimp and mollusc breeding; seafood catches; production of breeders; and projects in infrastructure and human resource development for the region's aquaculture industry.

Along with rice and fruits, seafood is one of the major products of the Mekong Delta region.

However, aquaculture and exploitation has not developed as well as expected, according to representatives of MARD at the seminar.

The region's aquaculture sector must be re-adjusted so that it can be better developed with diversified products and higher added value. Organised by MARD, the Steering Board of the Southwest Region and the People's Committee of Kien Giang Province, the seminar was held to promote investment in the Mekong Delta's aquaculture industry.

According to MARD, the master plan for the development of the country's aquaculture industry towards 2020 with a vision to 2030 was approved by Prime Minister Nguyen Tan Dung in August 2013.

It required the establishment of a fishery centre in Kien Giang Province to serve the Southeast Region fishing grounds.

The plan also calls for the establishment of an aquaculture centre in Can Tho to support the aquaculture areas in the Mekong Delta.

Vietnamese shipbuilder launches logistics vessel

The Song Thu shipyard, in co-operation with Damen Group from the Netherlands, has delivered a patrol vessel ordered by the Military Logistics Department.

The ship, which is 22.35m long and 4.96m wide, was built to transport commodities offshore and travel as fast as 20 nautical miles per hour.

The Da Nang-based corporation, which is a major ship builder in Viet Nam, has built various vessels for export, including fast crew supply ships, rescue ships, salvage tugs, drive tugs and patrol boats, for the Middle East, South America, Europe and domestic market, with annual exports volume of US$55 million. The ship builder earned revenues of 1.5 trillion ($71 million) in 2013.

Domestic rubber exports surpass $1b, causing trade surplus

Viet Nam's rubber industry has posted a trade surplus, after suffering from deficits for many years, as exports of rubber products exceeded US$1 billion this year.

This information was released by Chairman of the HCM City Rubber and Plastic Manufacturers Association Nguyen Quoc Anh at a recent press conference to introduce a rubber and tyre exhibition to be held in the city.

Domestic rubber exporters can now join the billion-dollar-club, he said, noting that they must also work to improve the quality of their products. Viet Nam has become the fifth largest natural rubber producer in the world, with 910,500 ha of land set aside to grow rubber trees, producing 836,600 tonnes of rubber in 2012, she noted.

Banks loan $150m for offshore oil and gas exploration

PetroVietnam Exploration and Production Corporation (PVEP) on Monday signed a credit contract worth US$150 million with Vietcombank and Seabank for oil and gas exploration and production in the technically difficult Blocks 10 and 11-1.

Vietcombank will provide majority of the funding with a $125.25 million loan and Seabank will provide a loan for the remaining $24.75 million.

Under the agreement, the two sides have committed to maintaining a long-term and effective relationship in several related sectors.

PVEP general director Do Van Hanh said technical difficulties have necessitated a large infusion of capital to complete the project.

Road project sees long delay

The construction of the Ca Na–Hiep Kiet route is behind schedule because of a shortage in human and financial resources, according to local officials.

The 105-kilometre route along the coast of the central Ninh Thuan province, which is being constructed at a total investment of VND4.55 trillion (US$216 million), is expected to become the main trading gateway between famous coastal tourism destinations in the central provinces of Binh Thuan and Khanh Hoa.

The project is divided into eight phases, seven of which will be funded by government bond sales of over VND4.35 trillion ($207 million), while the last phase will receive support from a State budget-funded programme to develop infrastructure.

The construction, which officially began in October 2009, had been expected to finish last year.

However, only two of the eight phases have been completed, while the other phases are still ongoing.

Some project contractors were found to be incompetent, while others were found to be executing other traffic projects at the same time, which led to delays in the completion of the project, according to a report by the Ministry of Transport.

"Although the province's Transport Department has asked the contractors several times to speed up progress on the project, the delays have continued," Pham Van Dinh, the head of the Steering Committee of the province's Transport Projects told the Nguoi Lao Dong (The Labourer) newspaper.

"The department has reduced the work of three contractors who were executing phases slowly and assigned those tasks to other contractors with better capabilities," he added.

Dinh noted that until now, only 35 per cent of the total investment, about VND1.6 trillion ($76 million), had been allocated to the project, which has led to construction delays.

Orfarm launches first organic showroom

To celebrate the Christmas season and welcome the New Year, ORFARM officially launched its first Organic Showroom in Hanoi at Building T28 in Thang Long International Village, Tran Dang Ninh Street, Cau Giay District, Hanoi.

With this central location, ORFARM’s showroom is offering the first made-in-Vietnam organic food brand, offered on a farm-to-customer basis and bred following Japanese standards on Bau Chau Organic Farm in Hanoi’s Soc Son district.

All ORFARM products strictly follow Japan’s environmentally-friendly EM technology (effective microorganism), based on the idea of coexistence with native and indigenous microorganisms, not by excluding them. EM technology is good for plants, animals and humans.

Orfarm products ensure three main criteria: non-waste, non-insecticide, and non-stimulus or harmful chemicals.

EM advanced technology gives farms the potential to suppress putrefactive microorganisms, dominate the sphere, and create re-animated surroundings, which is to say, organics are transformed through the process of fermentation as opposed to putrefaction and living organisms as well as inorganic materials won’t deteriorate.

The prices of Orfarm organic products are higher than non-organics but their value to human health and the environment more than make up for this difference. The products also aim to raise awareness of co-existence and co-prosperity.

At current, the Orfarm showroom provides organic pork, chicken, eggs, vegetables and cold dishes including Jambon, Klobasa, Salami, sausages, bacon, and more, all processed by a high-tech production line and following European style. To the end of December, Orfarm is offering a special discount of 10 per cent off all products and will be holding a month long promotion in January 2014. Home delivery is available.

The application of modern technology is considered to be a decisive factor in developing Vietnam’s infant dairy sector, an area with considerable potential for growth.

Industry insiders have affirmed applying more sophisticated technology in breeding dairy cows and the production of fresh milk is the only way to boost the sustainable development of Vietnam’s dairy sector. This is a promising sector throughout the country, even in places considered to have unfavourable natural conditions.

“Hi-tech applications are key to the success of Vietnam’s dairy sector,” said Thai Huong, chairman of TH true MILK.

The firm’s experience of breeding dairy cows and producing fresh milk in the central province of Nghe An can be cited as a typical example of success. This region is hot and dry, conditions that are naturally unfavourable for raising dairy cows. However, thanks to the application of technical expertise, there are now 28,000 dairy cows in the province. Whilst the Central Highlands of Lam Dong province, which has more favourable climatic conditions only has 5,000 cows.

According to Huong, TH true MILK has made a total investment of $1.2 billion in the large-scale project with a closed production process, equipped with the most modern technology in Asia.

“Now operational, TH true MILK’s project has already changed the structure of Vietnam’s dairy sector. The production of sterilised reconstituted milk has reduced from 92 per cent to 70 per cent. With the introduction of a closed process from pasture to dining-table, the project has helped to create a solid foundation for the organic fresh milk industry in Vietnam,” said Huong.

Vietnam has a hot and wet tropical climate that is generally unfavourable for breeding dairy cows. The application of modern technology helps to deal with many limitations in terms of climate and environment. These are traditionally viewed as weaknesses for the development of Vietnam’s dairy sector.

“Modern technology is a prerequisite factor in the development of Vietnam’s dairy sector,” said Dang Kim Son, general director of Institute of Policy and Strategy for Agriculture and Rural Development.

Yuval Rachmilevitz, chairman of Afimilk, Israeli’s top manufacturer of milk technology, said the expeditious way to sustainably develop Vietnam’s dairy sector was to apply scientific know-how.

Rachmilevitz said many Israeli firms wished to invest in Vietnam’s milk industry, but are awaiting incentives from the Vietnamese government.

“The Vietnamese government would need to give financial support to dairy farmers to construct large-scale farms, make long-term plans for price stabilisation and ensure hygiene and safety regulations. This will help lure foreign investors,” Rachmilevitz said. “Investors need to be able to trust that they can accrue profits from these policies.”

According to the Ministry of Agriculture and Rural Development (MARD), the country imports some 1.2 million tonnes of milk every year, making it one of the world’s 20 biggest milk importers. Currently, the volume of locally-made fresh milk meets only 30 per cent of the milk processing industry’s demand.

According to Nguyen Xuan Duong, acting director of the MARD’s Department of Livestock Production, per capita milk consumption in Vietnam stands at 14.8 kilogrammes. This is much lower than the average level of 35kg in the rest of Asia.

According to the MARD, Vietnam’s dairy sector aims to expand the herd size from nearly 170,000 cows in 2012 to 500,000 cows by 2020 and increase milk output by one million tonnes, growing over 11 per cent year-on-year.

Japanese weigh anchor at Cam Ranh shipyard

The Khanh Hoa Provincial  People’s Committee will call on investors to develop a shipyard in Cam Ranh Bay as soon as the project’s current Japanese investor officially has their investment certificate withdrawn.  

Vo Tan Thai, director of the Khanh Hoa Provincial Department of Planning and Investment told VIR last week that the Japanese firm’s Oshima Shipbuilding Vietnam Co., Ltd had announced it would end investment in its $180 million project as the firm lacked sufficient funds.

Thai added that the province was preparing administrative procedures for revoking the investment certificate of the giant shipyard, but the process could take up to six months.

“Oshima delayed construction too long and that affected both the province’s investment climate and local residents,” said Thai.

An anonymous Oshima Shipbuilding source confirmed to VIR that Oshima was set to withdraw and Oshima’s parent company in Japan were working with local authorities on this.

According to Thai, the project held a key part in Vietnam’s shipping master plan. According to the initial plan, work was expected to kick off in August 2013, with the first phase of the shipyard completed by 2017.

The site’s detailed plan was completed 15 months after Oshima Shipbuilding received an investment certificate back as February 2012.

A 304 hectare site was identified for the project in Hoa Diem and Hiep Thanh hamlets in Cam Ranh city’s Cam Thinh Dong commune.

The $180-million shipyard was eventually supposed to employ 3,000 local workers.

In the first phase, the yard would be capable of producing up to 12 ships a year, including ships of up to 82,000 tonnes. In the second phase, the shipyard could expand to produce 48 vessels a year by 2026.

Cam Ranh Bay is one of Vietnam’s key deep-water bays and also one of three major economic areas in the province. The province already hosts two shipyards with one owned by state-run developer Vietnam Shipbuilding Industrial Group (Vinashin) and the other by Huyndai - Vinashin Shipyard Co., Ltd, a joint venture between Korea’s Huyndai Group and Vinashin.

Boston Consulting predicts wider geographic wealth

The Boston Consulting Group (BCG) is expanding its presence in Southeast Asia with a new office in Vietnam where the US firm believes a growing affluent class will more than double in size by 2020.

“It’s right time for us to open our Vietnam office today,” the company’s chairman Hans-Paul Bürkner said as he opened the office located in Ho Chi Minh City last week. Bürkner added that his corporation’s survey, issued the same day, showed Vietnam and Myanmar were the region’s new growth frontiers. He commented Vietnam has one of the world’s largest domestic populations with a young and dynamic workforce that provided the potential for strong economic growth.

Vincent Chin, senior partner and managing director of the firm, added that Vietnamese companies were no longer content to serve only the domestic market, with some hoping to become regional and global businesses.

Douglas Jackson, partner and managing director of BCG Vietnam, explained, “The choice to open an office in Vietnam is a logical one. The Vietnamese government has done a remarkable job converting economic gains into well-being for its citizens. Everywhere one sees long-term planning and investment that will reshape industries and strengthen the economy.”

Vietnam today is facing economic difficulties, but offers remarkable opportunities for firms bold enough to navigate its short-term complexities, said Jackson, co-author of the study and former senior executive at VIB Bank in the country.

Jackson underlined that the latest survey showed the middle-income earners and the newly rich in Vietnam and Myanmar would more than double in size by 2020, and consumers in the two countries were the most optimistic in the world. “They are even more optimistic than their counterparts in China, India and Indonesia,” he said.

According to the publication, there will be more than 30 million middle and affluent consumers in Vietnam by 2020. These consumers were not just growing in numbers, they are also spreading out. Today, a company can reach one-half of Vietnamese middle and high-spending consumers by serving Ho Chi Minh City and Hanoi alone. But by 2020, several sizable groupings of such consumers would crop up along the 1,200-kilometre-long spine of the country. Ho Chi Minh City and Hanoi would account for only at one-third of this consumer group by 2020, and companies would need to have a presence in nearly twice as many locations as does today to achieve comparable coverage.

The survey grew out of a desire to understand consumers in Vietnam and Myanmar.

BCG’s Centre for Consumer and Customer Insight conducted primary research in both countries and analysed population and income trends in nearly 1,400 districts in Vietnam and 75 provinces in Myanmar, said Tuomas Rinne, a BCG partner and another co-author.

Forex stability remains key to ensuring sustainable growth

Prime Minister Nguyen Tan Dung has required the State Bank to continue stabilise the dong’s exchange rate in 2014.

At a year-end banking sector conference last week, the prime minister asked the State Bank to maintain the dong’s exchange rate within a 1-2 per cent band during 2014.

This contrasted with some earlier forecasts that suggested the dong might face major devaluation. The state-owned BIDV’s research centre, for instance, had predicted the dong would undergo a 2-4 per cent devaluation in 2014. The National Financial Supervisory Commission (NFSC) also said that the exchange rate should be more flexible to support the competitiveness of Vietnamese exports.

“The agencies which predicted fluctuations in the exchange rate should have a serious look at themselves. Their predictions caused instability,” PM Dung claimed.

Dung also required the country’s foreign exchange reserves to be increased and emphasised the need to tightly control the gold market in order to minimise effects on the forex market, interest rates and macro stability.

The PM reiterated that the State Bank should continue to hold a monopoly in the international trade of gold. Banks were no longer entitled to accept gold deposits or lend in gold, and the State Bank was being encouraged to attract home savings in gold to be deposited into the country’s official banking sector.

The State Bank successfully maintained forex exchange rate stability within a band of 2-3 per cent during the last two years and marginally devalued the dong by 1 per cent in June this year from VND20,828 to VND21,036 per dollar.

Both HSBC and ANZ in their reports released in October 2013 predicted the exchange rate in 2014 would be VND21,500 per dollar.

The stable forex market helped reduce the proportion of foreign currency deposits in the country’s total means of payment to 12 per cent in 2013 from 12.36 per cent in 2012 and 15.8 per cent in 2011. Foreign currency reserves in 2013 also doubled compared to 2011, according to State Bank figures.

Economist Vu Dinh Anh supported forex stability. “There were calls for further devaluation of the dong to support exports. But such a move might fuel inflation while helping exports only a little bit,” he said.

“A major devaluation of the dong could spark a run on the currency, which is why the State Bank has used stability and flexibility as the basis for controlling the forex market in recent years. The stability of the forex market has already raised confidence in the dong among domestic and foreign invested firms, helping them set longer-term business plans,” said Anh

Banking expert Nguyen Dac Hung said that the stable exchange rate had positively affected Vietnam’s overseas and public debts. Hung said with a 3-4 per cent devaluation, Vietnam’s debts in domestic currency would increase by tens of trillions dong.

According to Hung, a stable forex market had created conditions for the State Bank to buy a huge amount of foreign currency. Total forex reserves in 2013 were estimated at $30 billion, much higher than the $22 billion recorded in 2012 and higher than the internationally-recognised safety level of 12 weeks of import value.

The prime minister also insisted that the banking system continue to focus on controlling inflation, and that the governor of the State Bank needed to take responsibility for the issue. The bank also needed to retain stable interest rates and calculate the total means of payment and credit growth in relation to the government’s inflation target.

“Many enterprises are facing difficulties. Most of their capital is in the form of bank loans so interest rates need to maintain stable,” the PM reiterated.

Intrigue surrounds Agribank’s sale of AJC

Agribank’s attempt to divest from Agribank Gold Corporation has attracted interest and controversy as the latter seeks to resist the deal and confusion remains over Agribank’s motives.

Agribank has required its ownership representative at Agribank Gold Corporation (AJC) to outline a plan to divest itself entirely from AJC, according to reliable sources.

However, an AJC executive, speaking to VIR on terms of anonymity, revealed that AJC has tried to resist the deal. “AJC proposed that Agribank divest just 25.25 per cent of its commanding 61.25 per cent stake in AJC, retaining a 36 per cent decision-making stake until 2015 when they could divest entirely,” the executive said.

With AJC currently holding the domestic and foreign currency deposits of Agribank, as well as overdue gold deposits totalling 12,921 taels of SJC and AAA gold bars, many at AJC are perturbed by the deal.

“If Agribank divests 100 per cent, then how will payment for those deposits be made?” said the AJC executive, “I believe the state must retain at least 36 per cent of the charter capital at AJC to resolve the issue of previous gold deposits. This way they can ensure the protection of customers rights.”

Agribank leaders were unavailable for comment when contacted by VIR last week.

The AJC executive added that while many other banks were asking for permission to trade gold, Agribank’s move to sell the gold trader seemed counterintuitive.

As the State Bank tightens the bullion market, fewer firms are being allowed to sell gold. Through AJC, Agribank currently has the largest network of gold traders in the country, primarily in rural locations. The sale of AJC would leave plenty of room for others to enter the sector.

Agribank is undergoing restructuring and divesting from some member companies. “But divesting from gold business is not reasonable as gold is not a bank’s non-core business,” noted the AJC executive.

The lack of motive on Agribank’s part has led many observers to speculate that Agribank leaders are being lobbied by some investors seeking to take over Agribank’s stake at AJC. SeABank, HDBank, TPBank, Doji Group and Muong Thanh Group have all been linked to a desire to buy shares in AJC.

Key among them is the Muong Thanh Group which has the strongest capital reserves. The group established the Muong Thanh Gold and Financial Investment Company, but despite huge financial strength, they still lack a competent network and widely-known brand name. Muong Thanh was not available for comment on the sale of AJC when approached for comment last week by VIR.

Agribank Gold Corporation (AJC)

- Currently holds VND662 trillion ($31.5 billion), $3.76 million and €90,541 of Agribank’s local and foreign currency reserves.

- Total chartered capital of VND206 billion ($9.8 million).

- Largest stakeholder is Agribank with a 61.25 per cent stake.

- Second largest shareholder is SeABank, with a 10 per cent stake, which rises to 30 per cent when subsidiaries of the bank are taken into consideration.

Keppel Land at home in Hanoi

Singaporean property developer Keppel Land has expanded to the north, with ambitious plans to develop a major residential project in Hanoi to build on its achievements in south of the country.

A source from the Hanoi Municipal Department of Planning and Investment said Keppel Land had completed procedures for establishing a joint venture with the Vietnamese-owned FBS Company – a subsidiary of Gami Group, for developing Hanoi Westgate urban project.

The Singaporean property developer will hold a 60 per cent stake in the joint venture. Sources close to the project said Keppel Land and FBS would take over 50 years to fully develop the Hanoi Westgate, while the value of the giant development had yet to be announced.

FBS first started work on the project in 2008. The project covers 52.52 hectares along Thang Long Boulevard, about 20 kilometres from the centre of Hanoi. FBS has also developed a series of urban projects in Danang, Thai Binh, Phu Yen and Phu Tho.

The anonymous source added that the project was likely to mirror Keppel Land’s residential projects in Singapore, Indonesia or the Sino-Singapore Tianjin Eco-City in China.

The green-focused project is likely to suit Hanoi’s plan for developing more environmentally friendly developments, such as Quoc Oai town, which was announced by the Hanoi Municipal People’s Committee in July last year. This so-called ‘ecological’ town will covers an area of 900ha, aiming to boost the development of a green belt surrounding Hanoi.

Hanoi Westgate is Keppel Land’s first urban residential project in Hanoi, even though the company has invested in three office buildings and serviced apartment projects in the capital already. The move highlights Keppel Land’s expansion strategy and long-term confidence in Vietnam, despite the largely stagnant property market.

Keppel Land, a subsidiary of Singapore’s Keppel Corporation, is among the largest property developers in Singapore. With a strong reputation, the engagement of Keppel Land in Hanoi Westgate will significantly bolster the prestige of the project.

Keppel Land has invested in Vietnam since the 1990s through a partnership with the Book Distribution Company under the Ministry of Culture and Information in the construction of the business-orientated International Centre Building in Hanoi.

Keppel Land currently has 18 licensed projects with a combined total investment capital of about $2 billion and about 22,000 homes in the pipeline in Vietnam. Those include the Saigon Centre, Villa Riviera, Riviera Cove, The Estella, South Rach Chiec, Saigon Sports City and Dong Nai Waterfront City.

In an interview with VIR in August, Linson Lim, president of Keppel Land in Vietnam, said the company remained confident about Vietnam’s property market.

“The fundamentals of the country have not changed and foreign investors will continue to look to Vietnam or expand their presence here. This is where Keppel Land, with our reputation as one of Vietnam’s leading property developers with a strong track record in quality properties, will meet the demand for investment-grade office buildings and superior homes,” said Lim.

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