Vietnam markets tumble due to Syria effect

Both Vietnamese stock exchanges tumbled on August 28 following shaky performance in global markets due to the prospect of the US and allies attacking Syria.

Investors in Vietnam also unloaded shares across the boards to avert risks.

On the Ho Chi Minh Stock Exchange, the VN-Index lost more than 12 points, or 2.53 percent, to close the day at 473.30 points.

A heavy slump in blue chip stocks dragged the market down.

None of the markets flagship 30 stocks advanced with 29 losing ground, pushing the VN30 down 2.14 percent to 528.62 points.

However, trading improved as low valuations drew risk-neutral investors. Nearly 69.3 million shares worth 1,275 billion VND (60.7 million USD) were traded by the end of the session, more than doubling the previous day's levels.

FLC Group (FLC) was still the most active code with 4 million shares traded after falling 2 percent to 4,900 VND each.

On the Hanoi Stock Exchange, the HNX-Index also gave up 1.18 percent to finish the session at 60.68 points.

Bottom-fishing activities on the northern bourse also pushed up trades here. The market volume doubled over the previous day to reach 23.4 million shares worth 206.5 billion VND (9.8 million USD).

Sai Gon-Hanoi Bank (SHB) led the northern market with trades of 3.7 million shares, dipping 1.5 percent to end at 6,400 VND each.

The foreign sector increased their selling, concluding as net sellers on both exchanges, unloading combined shares worth over 70 billion VND (3.3 million USD).

Vietnam needs to win over European businesses

The 12th quarterly EuroCham Business Climate Index (BCI) survey released on August 27, shows that business confidence and outlook among European businesses in Vietnam remains unchanged from last mark at around the 50%.

But EuroCham members involved in the survey are very concerned about their current business prospects on account of increased inflation levels as well as overall macroeconomic management in Vietnam.

The survey also finds that during the last six months around one fifth of the respondents considered shifting their business to another ASEAN market.

More than half of the businesses polled are active in the services industry, a quarter in manufacturing and the rest in trading and other activities.

The BCI, which turned around in the last two quarters, now remains stuck at the midpoint. This is to a large extent due to the reduction in respondents assessing their current business situation as positive - from 43% to 38% -, which is further strengthened by the increase in respondents having a negative view of the current situation from 25% last quarter to 28%.

However, looking to the future, the business outlook has seen continued improvement with respondents having positive expectations, rising to 51% from 43% last quarter - and 30% the previous quarter.

This is a clear demonstration of the fact that EuroCham members are committed to Vietnam in the long term. However, investment plans are decreasing with the number of respondents expecting to increase investments in Vietnam decreasing by 8% (from 42% to 34%).

The number of companies intending to ‘significantly increase investment’, has returned to the levels of the first quarter of the year of 8% from last quarter’s 13% - and 20% one year ago.

In addition, there has also been a slight increase in members expecting to decrease their investments in Vietnam, from 19% last quarter to 21%.

When asked about their expected number of orders and revenue in the medium-term, they answered in the positive.

Even with many companies facing a drop of 17% in revenue, the number of respondents showing their positive view has increased from 53% to 61%, showing significant sign of rebound to the same level one year ago.

The positive growth in revenue has not translated into higher rates of recruitment: the number of respondents expecting to increase staff (by 8 percentage points) is roughly the same as the ones expecting to decrease headcount (9 percentage points). However, compared to last year, the number of respondents expecting to employ more staff has grown - from 32% to 47%.

43% of respondents agreed that inflation will have a significant impact on - or even threaten - their business (8 percentage points higher than last quarter’s figure).

However, this is still a slight improvement, compared to last year’s 49%. Other members estimated the average rate at 5.94%, compared to last quarter’s 5.13%, which represents a noticeable difference.

Returned scepticism of overall economic outlook

Last quarter only 48% of respondents expected a deterioration of the macroeconomic environment. This quarter, the appreciation of the macroeconomic situation has dropped a lower level with a majority of respondents (60%) presenting their negative view.

Japan continues to support Vietnam in achieving its key goal to become an industrial and modern country by 2020, says Japan International Cooperation Agency (JICA) President Tanaka Akihito.

Akihito told the local media in Hanoi on August 27 that through the current Vietnam visit he saw with his own eyes the efficiency of Japan’s official development assistance (ODA) in Vietnam.

He said Vietnam still needs various development demands that require financial and technical support despite becoming a middle-income country in 2010.

“Though Vietnam has become a middle-income country, I acknowledge that the support principle of Japan to Vietnam is unchanged,” he said.

JICA President Tanaka Akihito appreciated Vietnam's effective use of Japanese ODA

“Japan will continue to help Vietnam achieve the key goal of becoming an industrial and modern country by 2020 and meet the country’s five- and 10-year socio-economic development strategies,” he confirmed.

Akihito noted Vietnam has met many challenges on its path to achieving its goal of industrialisation and infrastructure improvement, plus greater human resource training, policy and institutional reform.

According to him, Vietnam needs a great deal of financial resources for basic infrastructure development, and capital mobilisation from the private sector is a big challenge.

Akihito announced that Japanese ODA priorities will be given to Vietnam in three main pillars: fostering economic development and strengthening competitive ability through infrastructure construction; enhancing state management; and assisting vulnerable groups through local support and health care.

Japan will also help Vietnam reform State-owned enterprises (SOEs) and cope with environmental problems such as climate change and disaster prevention.

Explaining ODA’s role in Japan’s economic foreign policy, the JICA president said given the globalisation process, Japan believes it is necessary to foster friendly relations with other countries in the world, which will in turns have a large impact on Japan.

 “Taking Vietnam as an example, convenient economic development of Vietnam will increase Japanese investment. This not only contributes to boosting Vietnam’s growth, but is also an advantage for Japan’s economy. Infrastructure development through ODA sources will contribute to promoting foreign investment,” said Akihito.

Japan has now become Vietnam’s biggest aid donor over the past 20 years, providing a total of 1,836 billion Yen (approximately US$18.785 billion) to the country. It has supported socio-economic development in Vietnam through infrastructure construction, human resources training, and mechanism and policy reforms.   

Thailand’s GI recognition of Buon Ma Thuot coffee

Thailand will soon grant a certificate of geographical indication (GI) to Vietnam’s Buon Ma Thuot coffee trademark, said Jutathip Vuthiparum from the Thailand Intellectual Property Department.

The department investigated the Buon Ma Thuot region in early August before granting the GI certificate for coffee to Vietnam, Jutathip told Thanh Nien Newspaper in Bangkok recently.

The certificate is convincing proof that the product possesses certain qualities is based on traditional methods to certify its geographical origin.

She said Thailand has asked to protect the GI for Thai silk in Vietnam.

Thai silk is a trademark that originates from the northeast region of Thailand, where high quality silk has been produced for hundreds of years as a cottage industry. It has been supported by Queen Sirikit since 1970.

Vietnam – a new King of Coffee

Vietnam has been praised as the new King of Coffee in a recent article published on Le Point – a French weekly magazine.

Titled “Le Vietnam, nouveau roi du café”, the article said Vietnam is the world’s second largest coffee producer after Brazil, supplying 39 % of robusta coffee bean for the world market.

The Southeast Asian country is the leading coffee supplier of France, it said, quoting the Vietnamese Ministry of Agriculture and Rural Development that Vietnam earned US$2.3 billion from producing 1.76 million tonnes of coffee last year.

Several foreign groups such as Mondelez, Nesle or Ecom are providing assistance to Vietnamese farmers in coffee cultivation techniques. US group Mondelez has opened a training centre in the country, and committed to investing a total of US$200 million from now to 2020 in Vietnam’s coffee industry.

Industry experts say the coffee industry’s future lies in Vietnam, as no other country can meet the great demand for robusta coffee materials at a time when the consumption of this variety is ever-increasing.

 Industrial production slows to 4.4% in August

Vietnam’s index of industrial production (IIP) in August increased by only 4.4% compared to last year’s same period, much lower than the 7% rise of last month.

The General Statistics Office (GSO) reported the processing and manufacturing sectors increased 6.9% from a year earlier, production and distribution of electricity jumped 8.4% and water supply, sewage and waste management soared 9.5%.

By contrast, the mining sector fell by 5.2%.

The country’s IIP in the past eight months of the year rose 5.3% against the same period last year. However, many industries exceeded the figure, such as prefabriacted metal, chemical products, paper, medicines, and pharmaceuticals and drink manufacturing posted growth of between 8.5% and 12.9%.

Production of electronic, computer and optical products fell 0.5% on year, metal manufacturing decreased by 1.9% mining and quarrying of coal and lignite tumbled 3.4% and production of beds, wardrobes, tables and chairs dropped 6.2%.

Other mining and quarrying operation downed 6.4% year-on-year.

Quang Ngai topped the list of cities and provinces with an IIP increase of 26.8%, followed by Vinh Phuc (20.3), Danang (10.3%) and Hai Duong (9.5%).

Meanwhile, IIP of Ba Ria-Vung Tau and Quang Ninh provinces dropped 1.1%, the GSO reported.

GSO experts attributed the low increase in industrial production to high stockpiles in the manufacturing and processing sectors, which account for nearly 80% of the country’s total industrial production value.

By August 1, the inventory index of the manufacturing and processing industries was 9%, up 0.2% against the previous month.

There were also large stockpiles of chemicals, engines and food.

More investment projects licensed in Binh Duong

The southern province Binh Duong on August 27 licenced 23 foreign direct investment (FDI) projects and two domestic ones, with total capital of nearly US$220 million.

Among them, 12 are invested by Japanese businesses.

Several big projects include a new paper packaging plant of Japan’s Tomuku company valued at US$47.6 million and Amway Vietnam’s US$21.1 million investment for a functional food factory.

By August 15, the province attracted a total of 2,174 FDI projects with aggregate capital of over US$18 billion. Many large corporations are interested in Binh Duong and want to invest in real estate and services rather than industrial manufacturing.

Binh Duong provincial People’s Committee Chairman Le Thanh Cung said the province plans to call for investment in hi-tech and support industries serving garment and textile, footwear and woodwork, as well as in services such as education, health care, finance and banking.

He said the province is streamlining administrative procedures and quickly deal with arising difficulties to facilitate business operations.

Japanese investors eye Vietnam’s real estate market

Many Japanese businesses have expressed keen interest in the long term potential of Vietnam’s real estate market.

The Ministry of Planning and Investment reports in the past 8 months real estate ranked second in attracting foreign direct investment (FDI), totaling US$588.11 million.

Japan’s EXS Capital Fund single-handedly invested US$37 million in the real estate sector.

Savills Vietnam Executive Director Neil MacGregor said his firm has teamed up with its Japanese arm to organise a range of seminars introducing Vietnam’s investment opportunities to Japanese businesses.

Citing the generally positive response, he predicted Japanese firms will continue investing in the real estate sector, considering Vietnam a medium and long-term investment destination.

Signs of real estate recovery in Ho Chi Minh City and Hanoi buck global downward trends. Foreign investors monitoring the market closely can capitalise on the rebound.

The United Nations says Vietnam’s golden population ratio will last until 2035, giving the country an enviably abundant labour force.  Its GDP is forecast to grow sustainably, luring more foreign investors interested in negotiating merger and acquisition deals.

Reinforcing national financial supervision

The 2013 Vietnam Finance Conference needs to recognise the importance of improving the nation’s macro-economic and financial supervision proficiency in the context of a turbulent market environment.

Deputy National Financial Supervisory Commission (NFSC) Chairman Ha Huy Tuan made the statement at the opening ceremony of the conference themed “Reinforcing National Financial Supervision: Policy and Technology Initiatives”, in Hanoi on August 27.

He recalled the impact of the global financial crisis on Vietnam’s economy and stressed the need for stabilisation. He said Vietnam’s financial monitors and supervisors must be capable of identifying incipient financial crises, preventing systematic risks, and addressing crisis-related issues as promptly as possible.

Tuan recommended strictly adhering to the principles of the market, expanding supervisory agency powers, and promoting transnational cooperation in macro-economic supervision.

Vietnam should look to construct a legal framework facilitating marco-economic stabilisation and consult with foreign experts to stress test the national financial system.

Central Institute of Economic Management Deputy Director Tran Kim Chung summarised the current state of Vietnam’s financial supervision system.

He said the system’s focus on banking, insurance, and securities has delivered a healthier monetary market and more intense competition.

Chung warned the system’s jurisdictional overlaps reveals opacity in financial management and inefficiency in auditing.

The system can eliminate this waste by encouraging relevant agencies to share information and apply the information technology infrastructure that can alert authorities to emerging symptoms of potential problems.

State Bank of Vietnam’s Strategic Banking Institute Director Nguyen Thi Kim Thanh raised her concerns regarding the risks Vietnam faces as the national economy takes the lead in the ongoing international integration process—risks balanced by a surfeit of potentially lucrative opportunities.

Other delegates touched upon the current supervisory system’s strengths and weaknesses including its rate of IT application and its promotion of market surveillance and local stock market information disclosure.

Vietnam Finance 2013 also offered participants a chance to learn from their peers’ experiences and familiarise themselves with the latest technological solutions developed by international experts on the industry’s cutting edge.

The conference was jointly organised by the Finance Ministry and the International Data Group (IDG Vietnam).

French paper hails Danang’s development model

Renowned French newspaper Le Monde has published an article praising Danang’s impressive development and sustained international integration, noting its average annual growth rate of 12.7% over the past 12 years.

The article said that despite the global economic downturn’s impact on Vietnam’s economy, the city still managed a 9.1% growth rate in 2012.

Danang has become the final destination in the East-West Economic Corridor running through ASEAN members like, Myanmar, Thailand, and Laos.

Its development can be credited to its industrial production and tourism industry expansions. The city has established a range of suburban economic zones. Lien Chieu district’s Hoa Khanh industrial zone is currently home to 250 businesses.

French investor and Dacotex Group Founder Christian Leroux, who employs 2,500 workers in Vietnam, told Le Monde his company’s decision to invest in Danang’s industrial zones has proven astute. He highlighted the city’s prime location and port infrastructure.

Leroux declared. Danang looks like Mexico’s Acapulco City and is destined to become Vietnam’s “Singapore”. The French businessman said he regrets nothing about his Danang investments.

Over the past five years, the amount of goods transported via sea has increased 10%. The number of sea travelers to Vietnam’s third biggest city has also surged 40%.

Danang boasts a diverse selection of luxury hotels dotting its white sand beach. It welcomed 2.7 million tourists, including 603,000 foreigners, in 2012.

Retail and service turnover on the up

The country's total retail sales and service revenues were estimated to reach VND1,706 trillion (US$80.47 billion) in the first eight months of 2013.

The figure represents a 12.3 per cent year-on-year rise, the General Statistics Office (GSO) said, adding that the rise would be 5.1 per cent if price hikes were excluded.

In August alone, Viet Nam's total retail sales and service turnover was estimated at VND216.4 trillion ($10.21 billion), up 0.69 per cent on last month.

The trade sector contributed 77 per cent of the total turnover with VND1.3 trillion, increasing 11.6 per cent over the corresponding period last year.

And it was the trade sector which posted the highest growth in August registering a 0.81 per cent increase from July.

The hotel and restaurant sector followed with VND205.7 trillion, accounting for 12 per cent of the country's total retail sales and services revenue, posting the highest growth in the eight-month period with a year-on-year rise of 15 per cent.

The service sector came next, accounting for 10.2 per cent of the total, rising 14.92 per cent over the same period last year, while the tourism sector jumped 6.7 per cent.

Individual economic sectors contributed the highest portion to the total retail and services revenue with VND860.3 trillion or 50.43 per cent in the period, increasing 16.5 per cent over last year, followed by private economic, state-owned economic and foreign-invested sectors.

However, the foreign-invested sector posted the highest growth level with 9.58 per cent in August and 37.54 per cent over the first eight months, the GSO added.

Binh Duong nails 2013 FDI target

Southern economic hub Binh Duong yesterday announced that it had achieved the full-year target of attracting US$1 billion worth foreign direct investment (FDI).

Le Thanh Cung, chairman of the province People's Committee, said despite the global and national economic difficulties, FDI flows into Binh Duong remain strong.

"The province has attracted $1.049 billion worth FDI [this year]. Overall, it has attracted nearly $18.5 billion."

To attract foreign investment, the province organised many conferences and meetings, promptly identified and resolved problems faced by investors, and generally created favourable conditions for investment and business.

The committee issued licences for 28 projects with a total investment of around $230 million. Of them, 13 are new ones while the other 15 are expanding.

Half of them are from Japan, while the rest are from Viet Nam and many countries and territories like Taiwan, Holland, South Korea, the US, Singapore, and Samoa.

Their investment ranges from $2 million to $47.6 million.

Talking at the issuing ceremony, Yakabe Yoshinori, Japan's deputy consul in HCM City, said: "Binh Duong is an active province in business activities and attracting foreign investment."

Located in the southern key economic zone, which also comprises HCM City, Dong Nai, Ba Ria-Vung Tau, and others, Binh Duong would attract a lot of foreign investment because of its developed infrastructure and favourable conditions, he said.

Provincial authorities promised to continue with business-friendly polices, improve socio-economic infrastructure and the quality of human resources, and effect administrative reform.

The committee said in a report that the province's economy grew by 9.5 per cent year-on-year in the first half of the year.

Full-year growth is expected to be even higher at 12.7 per cent.

Powerway to build $50 million energy plant in Bac Giang

Chinese Powerway Group plans to spend US$50 million on a solar powered battery factory in the northern province of Bac Giang, said the provincial Industrial Zones Management Board recently.

Accordingly, Powerway would set up a company in Viet Nam to develop the project spanning about 70,000 square metres in Song Khe – Noi Hoang IZ. The plant is expected to employ about 700 people.

If approved, investors expect to complete the project in 18 months.

HCM City opens pilot dairy farm

The HCM City Department of Agriculture and Rural Development officially opened yesterday the Dairy Demonstration and Experiment Farm in Binh Chanh District.

The 10-ha farm, construction of which started in 2011, will apply Israeli know-how in raising high-productivity cows, farm management, nutrition and other veterinary practices.

The project stems from a MoU on technical co-operation signed in 2007 by the HCM City Department of Agriculture and Rural Development and Israel's Agency for International Development Co-operation (MASHAV).

Department director Le Thanh Liem said around two-thirds of the project cost of VND70 billion (US$3.33 million) was sourced from the city's budget and the remaining $1 million from non-refundable ODA.

The Centre for Management of Animal Genetics and Seeds Evaluation has been assigned to be investor and operator of the project.

The project aims to increase milk productivity to reach 8,000kg per cow per year and lower production costs.

It will later expand the farm's practices, including total mixed ration (TMR) feeding, to other localities.

Since the project began, 30 Israeli experts have been sent to Viet Nam.

Average milk productivity in the farm is estimated at 17.3kg per cow per day. The cows are milked three times a day.

The HCM City Department of Agriculture and Rural Development and MASHAV yesterday signed a renewal of the MoU until 2017.

According to the department, HCM City has a total of 93,000 dairy cows, accounting for nearly 54 per cent of the country's total. Of these, 42,000 are milch cows. Average milk yield in the city is 15kg per cow per day.

The city produced 231,500 tonnes of fresh cow milk last year, accounting for 61 per cent of milk production in the country.

Tech innovation key to growth

Experts yesterday called on the government to implement better policies and apply new technologies to shore up the nation's financial system.

Speaking at the 10th Annual Viet Nam Finance Conference themed "Reinforcing national financial supervision: Policy and technology initiatives," finance experts urged that a stronger legal framework and more advanced technology would boost economic growth.

Deputy Chairman of the National Financial Supervisory Commission (NFSC) Ha Huy Tuan said the financial market was undergoing rapid and turbulent development with many risks threatening market stability.

In spite of such trends, financial supervision in Viet Nam remains limited, particularly at the macro-level. Inadequate supervision of the financial system drew national attention during the global financial crisis in 2008 and was scheduled for improvement to safeguard the nation's financial sector.

Deputy Director of the Central Institute of Economic Management Tran Kim Chung said there was a lack of co-ordination and overlap between finance agencies, including the Ministry of Finance, the State Bank of Viet Nam, NFSC and deposit insurance agencies.

Database systems and information technology (IT) were also said to be inadequate in all three sectors of the financial system - banking, securities and insurance - causing difficulties for supervision, he said.

He added that supervision was lagging behind market development due to a lack of human and technical resources, and finance capabilities, adding that risk-based tools and improved co-ordination between relevant organisations would improve supervision.

According to Pham Cong Minh, Deputy Director of the Department of Financial Informatics and Statistics, improving financial supervision would involve greater monitoring of financial markets.

He said databases and software would help improve supervision, urging the establishment of a "Datacentre" to manage relevant market information.

He also stressed that the collection and monitoring of relevant data would provide early warnings for a future crisis.

According to the Director of the Department of Technology, Doan Thanh Tung, the application of IT and disclosure of stock market information had provided greater transparency for investors and enabled forecasts for market activities.

Experts at the conference highlighted that new IT solutions were consistent with the country's plans to deploy an e-Government service nationwide.

New technologies aimed at improving tax and financial services were also on display at the conference.

Japan expands investment in Vietnam

The number of Japanese businesses operating in Vietnam has increased steadily in recent years, showing their keen interest in this potential market.

Japanese Consul General to HCM City Hida Harumitsu revealed this at an August 23 conference in Ba Ria-Vung Tau province commemorating 40 years of Vietnam-Japan cooperation and development.

He said Japan has consistently been Vietnam’s leading official development assistance donor committing annual aid of around US$1.8 billion.

Japan poured US$5.1 billion worth of investment into Vietnam last year, ranking it first among foreign investors in the country. Its investment in Vietnam reached US$4 billion in the first half of 2013 alone.

The Japan Business Association (JBA) in HCM City has grown constantly, admitting a total of 643 member businesses to date.

With its advantageous location and developed oil and gas industry, Ba Ria-Vung Tau has emerged as an attractive destination for Japanese investors. The province has welcomed 18 Japanese-invested projects valued at US$1.7 billion, 12 of which have already entered operation. Major conglomerations like Kyoei Steel, Nippon, Sumitomo, Itochu, and Sojitz contribute to this total.

Around 3,000 Japanese tourists visit the province every year.

Ba Ria-Vung Tau is actively coordinating with Japanese agencies - such as the Japan International Cooperation Agency (JICA), Japan External Trade Organisation,(JETRO), the JBA, and Japanese Dream Incubator Company - to strategise development and tailor policies conducive to additional investment.

The province has also asked the Government to incentivize support industry and industrial zone investment in particular.

As of July 2013, Japan had more than 2,000 valid investment projects in Vietnam capitalised at US$32.78 billion.

Ben Tre aims to save cacao trees

Authorities in the Cuu Long (Mekong) Delta province of Ben Tre have urged farmers not to cut down cacao trees in coconut orchards to grow citrus fruits, saying the coconut-cacao inter-crop model is still sustainable.

Besides, soil conditions in many areas are not good for citrus trees, they said.

Doan Quang Duc, deputy head of the province's Agriculture and Fisheries Extension Centre, said farmers should not cut down cacao trees to grow orange or lemon just because they fetch high prices.

The province supports farmers by providing them 40 per cent of the money required for buying cacao seedlings. The model, one of the province's major policies, is facing a challenge with many farmers cutting down cacao trees and planting fruit trees.

In Giong Trom and Chau Thanh Districts, farmers have cut down over 1,500ha of cacao to grow green-peel and pink-flesh grapefruit, lemon, orange, and mandarin, according to the provincial People's Council.

Tran Van Biet, who in 2010 became the first farmer in his My Thanh Commune in Giong Trom to grow cacao in a coconut grove, said at the current price of VND45,000 per kilo of fermented cacao beans, he earns an annual profit of less than VND3 million (US$140) per 1,000sq.m.

Nguyen Van Thanh in Giong Trom's My Thanh Commune has cut down all the cacao trees on his 1-ha coconut grove to grow lemon and green-peel and pink-flesh grapefruit.

Farmers estimate that at current prices, 1,000sq.m of cacao yield the same income as a single green-peel and pink-flesh grapefruit tree. The area under cacao in Giong Trom, one of the biggest growers of the crop, has halved to 1,250ha, according to the local Agriculture and Rural Development Bureau.

Growing cacao in coconut orchards has helped farmers earn significant extra incomes and improved their lives, especially those with small pieces of land, local officials said. But coconut and cacao prices have been volatile and low in recent years, discouraging growers.

On the other hand, the prices of citrus fruits like orange, mandarin, and, especially green-peel and pink-flesh grapefruit have shot up, tempting many farmers to switch.

Phan Van Khong, director of the province's Agriculture and Fisheries Extension Centre, said cacao supply in the province would fall short of the demand from processors.

In September Puratos Grand-Place Viet Nam Co Ltd is expected to open a processing plant with an annual capacity of 2,000 tonnes in Chau Thanh District, said the local Investment Promotion Centre.

Two other companies, Pham Minh and Cargill Vietnam, have set up operations in the province to buy a total of 1,300 tonnes of cacao beans annually, Khong said.

Ben Tre has the largest area under cacao in the country with more than 8,000ha. Of this 5,000ha is productive with a maximum yield of 3,000 tonnes of beans a year.

"It is a good time to grow cacao, but farmers are cutting down their trees," Khong said.

Local agricultural extension agencies blame themselves for farmers cutting down cacao trees, saying they failed to impart techniques to increase yields to farmers, he said.

In the province the average yield is less than 600kg per hectare.

But if farmers use proper farming techniques, the yield could be more than 1.3 tonnes, Khong said.

He blamed this and the lack of other agricultural advocacy activities on the shortage of funds.

Coffee bean price continues to plummet

The price of coffee beans in the central highland provinces has continued to fall in the past month to VND37.8-38.3 million per ton as foreign news agencies predict a bumper harvest this year.

As of now, the price of coffee bean has dropped by VND1,000 per kilogram compared to that in mid-June, and nearly VND7,000 per kilogram compared to that in mid-March.

Continuous sharp fall in coffee price will possibly cause local coffee companies to suffer huge losses as they bought coffee when the price was still high. In addition, payment due date for bank loans is approaching closer.

However, even if firms accept losses, they will still fail to deliver enough coffee to fulfill contract requirements, as farmers decline to sell coffee when price drops.

Competition on local coffee market heats up

Statistics of market researchers show that coffee consumption on the local market posted strong growth in the year’s first half and enterprises are in fierce competition.

According to Kantar Worldpanel Vietnam, coffee consumption growth in urban areas in the six-month period was around 17%, with instant coffee rising by 23% and roasted coffee up 7%.

Coffee posted a 10% growth rate in rural areas with 13% and 4% as the respective rates for instant and roasted coffee.

The survey of Kantar Worldpanel pointed out that instant coffee reached around 57% of households in urban areas with each spending an average of VND30,000 per month. Meanwhile, the respective figures for roasted coffee in urban areas were 35% and VND45,000.

In rural areas, instant coffee products reached around 50% of households with average spending of some VND20,000 per month. Besides, 20% of households in rural areas use roasted coffee with VND20,000 per household per month.

Surveys of Nielsen Vietnam also indicated strong growth in instant coffee in Vietnam.

Last year’s value of instant coffee grew by 34% from the previous year and the growth rate in the year’s first half was 28%.

In terms of volume, the instant coffee consumption in the January-June period increased by 28% year-on-year while the rise of last year was 21%. Besides, instant coffee sales amounted to around US$130 million last year.

Currently, there are some 20 enterprises producing instant coffee. However, the market is dominated by three giants – Nestle, Vinacafe Bien Hoa and Trung Nguyen.

According to statistics of Euromonitor, Vinacafe Bien Hoa took the lead in the instant coffee market in 2011 with market share of 32.6%, followed by Nestle Vietnam with 31.1%. Nevertheless, last year saw Nestle jump to the front to achieve market share of 33%, while second-placed Vinacafe Bien Hoa saw its share drop to 32.5%.

Trung Nguyen took the third position with its market share hovering around 18.2%.

The combined instant coffee market share of these three big names was over 83%, leaving the small fraction for dozens of other brands.

However, in terms of roasted coffee, Trung Nguyen currently holds the biggest market share with around 80%.

Vinacafe Bien Hoa has also moved into this product line, targeting to dominate the Vietnamese coffee market with an 80% market share of instant coffee and a 51% market share of roasted coffee in 2020.

Recently, businessman Pham Dinh Nguyen, who is known for buying the U.S. smallest town Buford, has introduced the new coffee brand - PhinDeli.

According to Do Quoc Tuan, CEO of PhinDeli Joint Stock Company, the growth potential of Vietnam’s coffee market is huge. PhinDeli will find a place in the market by introducing clean products free from harmful chemicals, he said.

The competition among coffee producers is heating up after Nestle opened its plant worth over US$320 million and Vinacafe Bien Hoa also put into operation a 3,200-ton plant in Dong Nai Province lately.

Despite being a coffee grower and a major exporter, Vietnam’s coffee consumption is quite low compared to regional countries.

The coffee demand is forecast to increase thanks to penetration of coffee cultures from western countries, strong investments in coffee plants and huge spending on advertising of competitors.

Eurimonitor forecast that the compound annual growth rate (CARG) of coffee in general in the 2011-2016 period would be 9.1% and that of instant coffee would reach 11%.

Be prepared for TPP, say experts

Local experts during a seminar on Wednesday advised enterprises to be well-prepared to take advantage of the Trans-Pacific Partnership (TPP) as TPP negotiations are expected to finish late this year.

Speaking at the seminar themed “TPP negotiation updates - Requirements from apparel, leather shoe and agriculture” organized by Thoi bao Kinh te Sai Gon Online and WTO Center under the Vietnam Chamber of Commerce and Industry (VCCI), Diep Thanh Kiet, vice chairman of the Vietnam Leather and Footwear Association (Lefaso), said that enterprises should understand benefits and disadvantages brought about by TPP.

“It means that local enterprises should watch developments of TPP negotiations,” Kiet said.

Luong Van Ly, head of trade and investment department of the law firm Viet Long Thang, said that enterprises should learn about results of each round of negotiations and anticipate the trend.

For instance, some sectors will see impacts from TPP quickly and vice versa but finally, TPP will influence all sectors.

Besides, environmental issues are no longer indirect factors for enterprises in making trading decisions. Given TPP, customers will base on environmental factors to decide whether they will buy goods from Vietnamese companies.

In addition, the ‘yarn forward’ rule of origin (ROO), which requires the TPP nation to use a TPP member-produced yarn in textiles to receive duty-free access, will become a big challenge to local enterprises when TPP is translated into reality.

However, businesses wondered how they could learn about TPP information while negotiations keep taking place. Some information is not reliable and TPP nations still keep it confidential.

Concerning the problem, Ly said that enterprises should go back to commitments to the World Trade Organization (WTO) and the U.S.-Vietnam Bilateral Trade Agreement (BTA). Basically, TPP must respect what has been committed to WTO and TPP rules will be equal to or higher than WTO.

If the State fails to act as an information provider for enterprises, VCCI should organize training courses and give enterprises information of what they will have to face in the future, Ly added.

Le Quang Hung, chairman of Garmex Saigon Company, said that a TPP forum should be organized to provide information for enterprises and create connection among them.

Meanwhile, some experts said that capability of businesses is the most important factor. When TPP begins effect, the business environment will turn transparent, forcing enterprises to improve their capability instead of using tricks to gain profits like before.

Besides enterprises’ effort, the State plays an important role in helping them enjoy benefits from TPP. For apparel and leather footwear, the two key export sectors of Vietnam, it is necessary to develop material and accessory supplies right in the country to enjoy TPP interests.

Kiet of Lefaso said that the TPP agreement must be ratified by national assemblies after negotiations finish. The process will take around one year and a half. As the U.S. will give Vietnam three years before application of the ‘yarn forward’ ROO, Vietnam will have several years to build up domestic material supplies.

Some enterprises said that it is too late for Vietnam to build material supplies while others said success depends on determination of the Government. For instance, the Government right now should assign the Ministry of Industry and Trade to build up apparel and footwear material clusters in a specific period instead of letting local authorities to decide the plan.

Lenders to spend more on risk management: KPMG

Over 90% of local banks polled by KPMG said they would increase investments in credit risk management in the next one year.

The audit, advisory and tax services group KPMG conducted its first-ever banking survey in Vietnam, polling 20 local lenders with huge total assets but only received responses from 13 members.

About 27% of the banks interviewed said they would make stronger investments to build a more advanced credit risk management system while 67% replied they would raise the expenses, albeit slightly.

Notably, up to 40% said they were not satisfied with the current internal credit rating systems, as per the survey released on Wednesday.

According to KPMG, credit risks mainly result from the weak credit models that have been deployed similarly among members in the banking industry over the last four to five years.

KPMG deems it necessary to adjust credit models based on the particular characters of each bank to make them fit with the lender’s strategy. The failure to have a suitable credit risk management system is one of the factors pushing up bad debts at local banks, KPMG remarked.

Official bad debt ratios have been rising since 2009, with the ratio recorded in this March posting 4.67%. However, many experts and organizations argued that the figure had failed to reflect the actual bad debt situation and credit quality at lenders in the country.

At a meeting to announce the survey result in HCMC on Wednesday, KPMG expert Tran Dinh Vinh reported bad debts of local banks had mainly come from their affiliated securities firms and finance leasing companies as well as State-owned enterprises as their major clients.

The lenders had given loans en masse to their affiliated securities firms in previous years while most customers of finance leasing companies are ineligible for taking out bank loans. Meanwhile, bad debts of State-owned companies in many cases are not classified as bad debts as instructed by the Government.

Current bad debts reported by lenders do not include debts that they already transferred, meaning the debts are no longer present in the banks’ balance sheets, Vinh pointed out.

Besides, overdue corporate bonds are neither counted as bad debts nor have risk provisions extracted accordingly by local banks while certain bad debts have been restructured in line with Decision 780 of the State Bank of Vietnam.

In other words, bad debts reported by local banks are not correct.

The survey, however, indicates that up to 73% of the banks interviewed now were fairly optimistic about financial prospects of the banking industry compared to a year ago while 7% showed strong optimism. Up to 87% expected their revenues to rise in the next 12 months.

India’s JK Group eyes US$150-mil. pulp factory

India’s JK Group is preparing to develop a pulp factory project in Dung Quat Economic Zone in Quang Ngai Province with total investment of around US$150 million.

Le Van Dung, deputy head of Dung Quat Economic Zone Management Board, said that the group earlier had plans to cooperate with Japan’s Sojitz Corporation to develop the project. However, JK Group currently is the only investor named in the investment document.

The project is expected to cover a total area of 100 hectares with annual capacity of 200,000 tons of pulp. The investor will take advantage of wood chips of some types of trees in the province that have been exported to some countries in recent times, Dung said.

However, the investor is still waiting for administering agencies to appraise environmental impacts of the project, evacuation and resettlement plans.

Some enterprises in the industry said that Vietnam has annually increased pulp production capacity but has yet to meet demands of local producers. Most factories now still have to rely on pulp imports.

According to the Vietnam Pulp and Paper Association, Vietnam is among the biggest wood chip exporters in the world over the past three years. The nation exported six million tons of wood chips last year, equivalent to 2.7 million tons of pulp, at low export prices.

As Vietnam has to import over one million tons of pulp and paper at high prices, many foreign investors have eyed pulp production in the nation.

Hong Kong’s Lee & Man is developing a paper and pulp production project in Hau Giang Province. Licensed in 2007, the paper packaging plant will cover 200 hectares with capacity of 420,000 tons a year and total investment of US$280 million. Meanwhile, the pulp factory is developed on an area of 70 hectares, having capital of US$348 million and annual output of 330,000 tons.

Lee & Man expected to launch the project into operation in 2009. However, the project had been halted several times.

Earlier, Cheng Ching Kay, director of Lee & Man Paper Vietnam Company, in a document sent to the chairman of Hau Giang Province on April 22, 2011 promised that the paper and pulp plants would start official operation within this month. However, the investor then sought approval to delay its completion until late 2015.

Local authorities have given approval in principle to delay the deadline until late 2014 but asked the investor to set up a specific roadmap to restart the project.

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