Cigarette fraud leaves smoking budget hole

Illicit cigarette sales are putting a serious dent in Vietnam’s tax collection despite government measures to stub out the trade.

The Vietnam Tobacco Association (VTA) said an estimated 813 million cigarette packs were illegally brought into Vietnam in 2010, accounting for approximately 18 per cent of the local market consumption. The figure was equivalent to an area of 11,000 hectares of tobacco leaf and meant job losses for over 50,000 labourers in four months.

At the same time, the VTA reported, illegal sales of cigarettes spelled losses to the state budget of $200 million per year in 2009 and 2010. Tobacco and cigarette tax occupied 2 per cent of the state’s annual budget collection.

According to the government’s Central 127 Steering Committee, an anti-trade fraud, fake goods and smuggling entity, in 2009 and 2010 local authorised agencies dealt with 25,637 cases involving the transport and trading of fake and illicit cigarettes.

They also seized over 18.2 million illicit cigarette packs. Localities seeing major busts were Ho Chi Minh City, Can Tho city, and the provinces of Quang Tri, Long An, An Giang and Kien Giang.

In 2009, eight cases involved criminal charges. However, since last year’s introduction of Decree 76/2010/ND-CP which set out new penalties for tobacco trading violations, some 40 cases involved 48 violators had resulted in criminal charges. In the first two months of this year alone, 12 cases involving 12 violators were subject to criminal charges.

Over the past few years, the tobacco industry has created employment for over 200,000 local workers and secured the livelihoods of some 800,000 people.

In 2010, the industry notched up earnings of over $143 million in export revenue and contributed more than VND11,700 trillion (over $585 million) to the state budget.

According to the Central 127 Steering Committee, the ministries of Industry and Trade, Public Security, and Finance and the committee itself would this year continue to work with local authorised agencies to crack down on illicit cigarette traders in big cities and in key areas along Vietnam’s borders.

Partners to offer shelter for storm hit textile firms

Textile and garment firms have a growing appetite to hook up with domestic and foreign partners amid uncertain economy.

For example, recently Ho Chi Minh City-based Phuoc Long Investment Joint Stock Company (PLI) and Japan’s Sumikin Bussan Group began construction of VND23 billion ($1.1 million) Phuoc Long-Sumikin Bussan garment plant in Ho Chi Minh City’s district 9.

According to PLI’s general director Ho Thi Thu Ha, Sumikin Bussan was one of Japan’s leading business groups.

“With Sumikin Bussan’s global customer base, PLI is steady in mind in shaking hands with the Japanese partner to build the export garment production plant,” Ha said.

She also added the plant would turn out top-of-the line garment products carrying well-known brands such as Blue Label, Burberry Gold, Dkny, Cecio Cela or Evex for export to the US and Japan.

Earlier, to facilitate export to US market, Phong Phu Joint Stock Corporation held negotiations with its strategic partner, US-based ITG Group, on the building of a textile-garment complex in Hoa Khanh Industrial Zone in Danang city for $80 million.

Phong Phu also held talks with ITG on scaling up investment for a joint venture project on producing cotton, denim and synthetic fabrics with a total investment of around $100 million.

Vinatex and Vietnam National Oil and Gas Group (PVN) joined hands to expedite a project on building Dinh Vu cotton and yarn factory with a daily capacity of 500 tonnes at a cost of $324.8 million.

After the Dinh Vu plant came online last month, Vinatex and PVN continued pouring capital into building another yarn factory Pvtex Phu Bai worth over VND140 billion ($6.76 million).

According to Pvtex Phu Bai director Le Quoc An, in the first phase the factory with 1,400 spindles would turn out 2,500 tonnes of yarn per year and begin operation in the first quarter of 2012.

After completing first-phase investment, the factory will embrace second-phase investment to double its production.

The factory will act as a ‘laboratory’ to test and improve material quality before selling to businesses. It would also produce and trade in 100 per cent polyester items, said An.

In the coming period, Vinatex would step up efforts to woo local and foreign firms pumping capital into textile, dyeing and supporting industry complexes which were still underdeveloped in the country, according to Vinatex chairman Vu Duc Giang.

Giant retailer growth hits the express aisle

Japan’s Itochu Corporation and FamilyMart are planning to expand the FamilyMart retail chain to hundreds of stores in Vietnam via a joint venture established early this month with domestic outfit Phu Thai Group.

The joint venture, Vina FamilyMart, will see Phu Thai Group hold a 51 per cent stake and FamilyMart-Itochu 49 per cent. FamilyMart will grant a master licence to the joint venture for its future operations within the country, and conclude area franchise agreements.

In a recent meeting with the Ministry of Planning and Investment, an Itochu representative said the corporation planned to open 300 stores in Ho Chi Minh City and 100 stores in Hanoi by 2013.

FamilyMart opened the first Japanese-style convenience store in Ho Chi Minh City in December 2009, with seven stores operating today. Those stores are run by Family Company, a wholly-owned subsidiary of Phu Thai Group.

Itochu said it expected the new joint venture would thrive on the strengths of the three partners - Phu Thai’s strong infrastructure with its extensive distribution network in Vietnam, the convenience store operating know-how of FamilyMart and Itochu’s strengths in procurement.

“These three strengths will not only accelerate store openings and build up the FamilyMart franchisee base in Vietnam, but also contribute to the general development of retailing in Vietnam and its overall modernisation, by proposing new modes of consumption and enjoyment to local consumers,” FamilyMart said in an announcement.

Despite the Vietnamese economy’s obvious battles with inflation and declining consumer confidence, Itochu believes Vietnam has one of the highest economic growth rates in Asia and a very young population, with the market to see rapid growth.

In line with its World Trade Organisation commitments, Vietnam opened its retail market to international entrants with 100 per cent foreign capital in early 2009, at the height of the global economic crisis when many multinational companies were taking a more conservative approach to expansion.

Vietnam is considered one of the most attractive retail markets among developing countries. United States-based AT Kearney in June downgraded Vietnam’s ranking from 14th to 23rd place in its annual Global Retail Development Index 2011, but said that Vietnam “is still attractive with an expected market size of $113 billion by 2012 and a growing population of 88.9 million.”

Reliance on imports poses risks
 
Viet Nam's increasing reliance on imports of goods and materials from foreign countries, especially China, is a risky move, according to experts.

Viet Nam imports large quantities of fertiliser, machinery, equipment, electronic parts and material for leather, footwear, garment and textile production from China, along with petrol and oil from Singapore and home appliances from Thailand.

According to the General Department of Customs, Viet Nam trade deficit with China increased during the first half of this year, as imports from China to Viet Nam rose sharply.

The nation imported 1.84 million tonnes of fertiliser in the first half of the year, including 713,000 tonnes from China; US$7.09 billion worth of machinery and equipment, including $2.4 billion from China; $2.75 billion worth of computer and electronic components and products, including $897 million from China; and $6 billion in material for leather, footwear, textile and garment industries, including $2 billion from China.

Pham Xuan Hong, general director of Sai Gon 3 Garment Company, said Viet Nam had to import 70 per cent of material used for the local textile and garment production, including 20 per cent from Thailand, Indonesia and India. Only 30 per cent of material used for production was sourced domestically.

"Domestic textile and garment producers can't get enough material for production locally, so they have appointed foreign firms as material providers especially Chinese firms," Hong said.

The textile and garment industry registered a growth rate of 30 per cent in export value for the first months of this year, he said. But, export value had a real increase of 10 per cent due to high import prices for cloth.

For instance, the whole sale price of a shirt had increased from $10 per unit to $12 due to high production costs. So if local producers make their products with only local materials, they would gain a higher export value, Hong said.

Truong Thi Thuy Lien, director of the Lien Phat Ltd Company, said that since early this year, prices of materials imported from China had increased by 40 per cent against the end of last year.

The greatest risk from importing the material from China was a sudden increase in the price of the imports, she said.

Economic expert Le Dang Doanh said local producers had to import a large quantity of material from China because the country was nearby, so transport costs were low, and added incentive for domestic exporters.

However, if local producers rely too heavily on imports from other countries, the risks they face are high.

To deal with the risk, the Binh Tan Consumption Goods Company (Bita's) had sought new suppliers in Thailand, South Korea, Malaysia and Italy, in addition to its Chinese partners, said Do Long, Bita's general director.

Hong said the Sai Gon 3 Garment Company had ordered material from ASEAN countries and even bought material from joint ventures in Viet Nam.

But, the amount of material was still not enough to satisfy demand and producers were finding it difficult to reduce imports of material from China, Lien said, adding that Viet Nam was not a centre for producing materials used for leather, footwear, textile and garment industries. Local producers have had to depend on material imported from China.

Huynh Van Minh, chairman of the HCM City Enterprises Association, said domestic producers could not diversify their sources of material, machinery and equipment due to financial limitations.

Viet Nam should develop a centre for making the material to meet domestic demand, creating favourable conditions for the local producers in improving their competitiveness on the world market, Minh said.

Ministry reports on August commodities prices

The Ministry of Finance has released a report on prices of several key commodities including food, construction materials, oil and gas during the first half of August.

The ministry reported that after a decrease last month, paddy prices in southern provinces, the country's largest paddy granary, in early August surged by VND700-VND1,100 per kilo against last month. This contributed to lifting the price of a kilo of rice by VND800-VND1,000.

The ministry attributed the rice price hike in the domestic market to the rising demand for Vietnamese rice exports. A tonne of Vietnamese export rice surged by US$35-$40 per tonne to $515-$530.

Meat prices meanwhile decreased during the first half of this month thanks to rising supplies. Pork decreased by VND1,000 a kilo in northern provinces and roughly VND3,000-VND4,000 in southern provinces.

A decrease of VND5,000-VND10,000 was also seen for beef and poultry products, the ministry said.

Despite previously expected rising demand for sugar to produce traditional cakes for the coming Mid August Festival, sugar prices remained stable in the first half of August, the ministry said, attributing this to a slight decline in sugar prices on the world market in the wake of rising prospects for sugar supplies from India.

As for construction materials, the ministry reported cement prices surged VND50,000 per tonne in the north and VND10,000 in the south against last month, despite decreasing demand during a period of heavy rain.

In contrast, the steel price declined by VND200,000 per tonne to VND17.5 million-VND18.3 million as steel producers have significantly large steel stockpiles.

Petrol prices during the first half of August remained unchanged while LPG prices surged by VND8,000-VND8,500 per 12kg canister due to world price hikes in the wake of higher emand from the US and European countries to prepare for the coming winter. Th finance ministry on Wednesday also annouced measures to keep he consumer price index this year at 17 per cent.

The ministry said it would tighten watch over businesses' input production costs and their sale prices as well as the distribution system in a move to better detect pricing violations.

Petrol imports drop during first seven months

Petrol imports totalled 6.5 million tonnes and reached a cost of US$5.9 billion in the first seven months of the year, accounting for 10.2 per cent of the nation's total imports, according to the General Department of Customs.

The figure represents a decrease of 42 per cent in volume and 8.6 per cent in value, however, in comparison with the same period last year.

In July alone, Viet Nam imported about 533,500 tonnes of petrol, valued at $512 million – a decline of 39.2 per cent in volume and 37 per cent in value compared to the previous month.

Kuwait became a new petrol exporter to Viet Nam, shipping 393,600 tonnes during the month. Meanwhile, exports fell from traditional suppliers such as Malaysia, Russia and China.

Global crude oil prices have dropped significantly this month, with experts predicting the price would continue to decline as global traders anticipated another recession that would restrain demand.

Since the beginning of August, crude oil prices have dropped 9.93 per cent, while jet fuel prices have fallen by 1.68 per cent and diesel oil by 2 per cent, according to the Viet Nam National Petroleum Corporation (Petrolimex).

US-based Merrill Lynch has forecast that oil prices could fall to as low as $50 a barrel this year.

Petrolimex expected that the price it would pay for refined petroleum products on the Singapore market would decline with the world price. In the first half of August, the price of these commodities fell by 1.14-3.11 per cent. The decrease in the price of petrol and other refined petroleum products would continue to lag behind crude oil prices, expected to fall 5.8-9.9 per cent.

Petrolimex was looking to buy 31,000 tonnes of petrol RON 92 for shipment in the first week of next month. Last week, meanwhile, Petrolimex's representative in Singapore signed a long-term contract with Bangladesh Petroleum Corporation, under which the Vietnamese corporation would supply fuel oil to Bangladesh.

Nguyen Tien Thoa, director of the price management department under the Ministry of Finance, said there would be no immediate change in petrol prices.

"Viet Nam has not imported crude oil so changes in global crude oil prices won't affect local prices," Thoa said.

Earlier last week, the ministry announced that the computed average cost of petrol between July 12 and August 10 was higher than the existing domestic retail price by VND342 to VND530 per litre. Therefore, the ministries of Finance and of Industry and Trade decided jointly to leave retail petrol prices unchanged. Domestic petrol prices averaging VND21,300 per litre remained VND3,822 to VND13,056 lower than those in neighbouring countries like Laos, Cambodia, Singapore and China, Petrolimex said.

Quang Ngai strikes deal on bio fuel projects

The Viet Nam National Oil and Gas Group (PetroVietnam) has reached an agreement with the authorities of central Quang Ngai Province to co-operate in investment and development of bio fuel production and a bio fuel market in the province.

At present, PetroVietnam is building the Dung Quat Bio-Ethanol Plant in Quang Ngai, expected to come under trial in October and begin production on November 15.

For its part, the People's Committee of Quang Ngai would manage the planting of cassava to feed the plant.

Provincial authorities would create favourable conditions for farmers to join the operation, including contribution of capital to the plant and technical services for growing cassava.

Meanwhile, PetroVietnam would invest in the region to ensure economic effectiveness and environmental protection.

The group would have incentives for farmers and sign contracts with them to buy their product. It also would invest in infrastructure, including roads, irrigation and waste water treatment systems.

Under the agreement signed last Friday, the two sides would co-operate in developing a distribution system for bio petrol E5 and E10.

Ethanol fuel mixtures have "E" numbers which describe the percentage of ethanol in the mixture by volume, for example, E5 is 5 per cent anhydrous ethanol, distilled from cassava, and 95 per cent petrol.

The parties planned to develop the bio fuel market in the province before selling nationwide as the Government required.

In the first five months of this year, the major distributor of E5, PV Oi, which is a member company of PetroVietnam, said it had sold 4.2 million litres of E5 fuel through 30 petrol stations.

Phan Dang Tuat, head of the Ministry of Industry and Trade's Institute of Industrial Strategic and Policy Studies, said the consumption of E5 on the local market would continue to remain low if the State did not create preferential policies for distributors and customers of E5, and schedule a date for its compulsory use.

Under the plan to develop bio-fuel by 2015 and towards 2025, Viet Nam would produce 150,000 tonnes of bio-fuel in the 2010-15 period and 1.8 million tonnes of bio-fuel by 2025. The bio fuel would be used nationwide from 2014.

PV Oil deputy general director Le Xuan Trinh said the company would continue to invest in its distribution system and increase the number of stations that sell E5 to around 300 or 400.

Advertising revenues to hit $1.2 billion

Advertising revenue in Viet Nam this year was estimated to reach US$1-1.2 billion, an increase of 10 to 15 per cent compared to last year, Viet Nam Advertising Association vice president Do Kim Dung said.

Because of the economic situation, advertising had not matched last year's increase of 30 per cent, Dung said.

Most of the revenue had come from the media communications account, the rest was divided among other types of advertising such as outdoor advertising , leaflets and billboards.

Millions invested in industrial zones

Southern Can Tho City has attracted investment of more than US$70 million in industrial zones and export processing zones this year. Six new projects have been started, contributing to a total of 197 projects on a combined 546,518ha. The aggregate registered capital investment is $1.7 billion.

Can Tho plans to send a promotion team to go to China, Laos and Cambodia to invite more foreign investors.

Garment projects encouraged in Nghe An

Nghe An's Department of Industry and Trade has encouraged investment, expansion and new project to meet the country's objectives in the textile and garment industry.

The industry aims to produce 16 million pieces of knitwear this year (an increase of 160 per cent on last year), 96 million garments (an increase of 115 per cent), 284,000 tonnes of thread (an increase of 133 per cent)

Nghe An is home to more than 2,500 garment and textile manufacturers/enterprises.

Vietnam’s exports to Africa soar 172 percent

Vietnam’s export turnover to Africa reached $2.6 billion in the first seven months of this year, up 172 percent from the same period last year.

The achievement marked Africa as the key market where Vietnam had maintained a trade surplus, reaching nearly $1.88 billion in the reviewed period, according to the General Customs Department.

Vietnam’s exports to Africa posted outstanding value in some markets such as South Africa, rising six-fold over the same period last year to $1.5 billion, and Senegal rising three-fold to $154 million.

Exports to Egypt and Ghana also saw positive increases, posting 36 percent to $75 million and 27 percent to $124 million, respectively.

Rice remained Vietnam’s key export item to the African market, accounting for 25-30 percent of the country’s annual total export rice.

Senegal was Vietnam’s largest rice importer on the African continent, spending$ 143 million. It was followed by Ivory Coast and Ghana with $86 million and $56 million, respectively.
African countries are expected to import about 9.8 million tons of rice from Vietnam for the whole year, a year-on-year increase of 2 percent.

In addition to rice, Vietnam’s other export items such as apparel, footwear, seafood, telephone and accessories won firm footholds in the African market.

ÅF wins consulting projects in central Vietnam

Sweden-based ÅF has been awarded two contracts funded by the World Bank to serve as an advisor to the cities of Quy Nhon and Nha Trang in central Vietnam.

The total value of these consulting services for ÅF is more than $2 million.

ÅF’s task is to support the management of the cities’ utilities in the fields of waste management and water treatment.

In an additional consulting project, ÅF will serve as an advisor to Vietnam’s Ministry of Finance.This assignment involves securing the environmental and social compatibility of local infrastructure projects, which will be financed by the Local Development Investment Fund of the World Bank.

ÅF has an office in Hanoi and has been established in the Vietnamese market for over 15 years.

ÅF has implemented over 30 major projects in Vietnam, ranging from large hydropower dams, pulp and paper mills, and coal and gas-fired power plants to urban development and environmental projects.

HCM City’s CPI sees 0.68 percent rise in August

The consumer price index (CPI) of Ho Chi Minh City in August increased by 0.68 percent over last month, said the municipal Statistics Office.

The index represented a rise of 13.49 percent from early year and 18.98 percent over the same period last year, the source added.

The biggest price hike in the month was seen in goods and services, up with 1.52 percent.

It was followed by foodstuff and restaurant services with 0.99 percent, the lowest monthly increase since the beginning of the year . Market researchers attributed the moderate rise to lower consumption of poultry and cattle meats in July - the vegetarian month.

The education group saw an increase of 0.96 percent due to the beginning of a new academic year.

Other groups such as housing, electricity, water and fuel increased by 0.79 percent and garment-footwear up 0.71 percent.

Of the consumption categories, only transport services remained unchanged in comparison with last month and post and telecom services decreased by 0.15 percent.

During this month, gold price soared 8.76 percent against last month while the price of US dollar was up 0.15 percent.

Trade surplus with US hits $6.8 billion in 2011
 
Viet Nam's trade surplus with the US reached US$6.8 billion during the first seven months of the year, according to the General Department of Customs.

The department reported that Viet Nam exported $9.3 billion worth of goods to the US during the period, with imports to Viet Nam from the US during the same period valued at $2.5 billion.

Industrial products including textiles and garments, wooden furniture and footwear were Viet Nam's biggest earner in the US, with a value of $5.6 billion in exports during the first seven months.

Agricultural, forestry and fishery products also contributed significantly to the nation's export earnings. Among these items, seafood topped the list with export earnings of $597 million, followed by coffee and cashew nuts with $228 million and $216 million, respectively.

Director of the Ministry of Industry and Trade's American Market Department Nguyen Duy Khien said that despite the positive results, the nation's export turnover to the US accounted for less than 1 per cent of the US's total import value.

The US market still presented Vietnamese exporters with many opportunities, said Khien, adding that Vietnamese garment and textile exports currently accounted for 8 per cent of the sector's market share in the US. The figures for footwear and seafood were also only 7.8 per cent and 5 per cent.

Vietnamese products that could enjoy brisk sales in the US include textiles and garments, furniture, bags, wallets, umbrellas, seafood and footwear alongside added-value industrial items such as machinery equipment and spare parts.

However, to capitalise on the opportunities, domestic exporters must improve their supply capacity to be able to meet large-sized orders, Khien said.

He explained that US importers currently still preferred to buy Vietnamese goods via middlemen to minimise risks as they were afraid Vietnamese traders could not ensure a regular and stable supply of goods at large volumes.

Experts recommend domestic exporters to boost export of processed and high value-added products, especially agricultural produce, in stead of focusing only on the export of unprocessed materials.

The Government should further improve the investment climate to attract foreign investors to the country's high-tech processing industry as the sector remained restricted, the experts said.

Viet Nam's exports to the US reached $15 billion last year, accounting for 20 per cent of the country's total export turnover.

Forex rates expected to stay stable

The Vietnamese dong will not depreciate beyond VND21,000 to US$1 through the end of the year, National Financial Supervisory Committee vice chairman Le Xuan Nghia predicted at a seminar in Ha Noi last week.

Expecting only a slight depreciation of the dong against US dollar in the next few months, Nghia affirmed that a declining trade deficit and rising foreign currency reserves, would continue to stablise the foreign exchange market.

From July of last year through March of this year, the dong depreciated significantly against the dollar, creating tense circumstances on the foreign exchange market.

A possible shortage of US dollars might arise by the end of this year as many enterprises had borrowed from banks in US dollars in recent months and would need to gather dollars back in to repay the loans, Nghia warned. The disparity between banks' dollar supplies and outstanding loans stood at VND100 trillion (US$4.8 billion) at the end of July.

Whether gold prices would continue to skyrocket, as they have in recent months, was also a point of uncertainty, he said. A survey conducted by the Japan International Co-operation Agency (JICA) in 2003 showed that Vietnamese were hoarding up to 40 per cent of their assets in the form of gold.

A German expert at the seminar predicted that if the US economy continued to sputter, coupled with eurozone debt worries, gold might reach $2,500 per ounce.

Tran Dinh Thien, director of the Institute of Economics, suggested that investors look to a more stable currency, such as the Chinese yuan.

Despite the property market's current doldrums, seminar participants were also bullish on domestic real estate, predicting that if the Vietnamese economy showed signs of flourishing, property would remain the most lucrative investment.

However, senior economist Nguyen Tri Hieu suggested that real estate values might decline by as much as 30 per cent by the end of the fourth quarter, and he urged investors to sell real estate assets.

The seminar, entitled Viet Nam's Financial and Monetary Market – Challenges and Forecasts, was aimed at finding solutions for commercial banks and businesses to overcome difficulties arising from tight monetary policies, as well as helping individual investors choose the most lucrative investments among foreign currency, gold, real estate, securities and bank deposits.

The seminar also heard that remittance from abroad had fallen from $2.4 billion in the first quarter to $1.9 billion in the second.

New tax on land, property transfers

People who transfer land use rights and ownership of houses and apartments will be subject to a tax of 25 per cent on their income from the transactions, said the Ministry of Finance.

The new tax rate was stipulated in Circular 113/2011/TT-BTC, recently issued by the Ministry of Finance. The circular also outlines ways to calculate personal income tax including income tax on real estate transactions.

Under the new circular, organisations and individuals paying commissions, salaries, wages and other service charges valued at more than VND1 million per transaction will have the tax deducted before paying their general income tax. Deductions are applied at a rate of 10 per cent for individuals who have tax file numbers and 20 per cent for those without tax file numbers.

Purchasing contracts for houses or apartments signed before Decree 71/2010/ND-CP on the implementation of the Law on Housing came into effect on 23 June, 2010, have to pay 25 per cent of their personal income tax.

For the transfer of purchasing contracts on housing to be built in the future, people making tax declarations will be subject to a tax of 25 per cent on their income.

PV