Vietnamnet.vn
Podcast
On the HCM Stock Exchange, the VN-Index concluded this morning at 384.94 points, an increase of 3.2 per cent over the previous session.
More than 74 per cent of shares closed higher, of which half hit the daily limit of 5 per cent.
All of the 10 leading stocks by capitalisation gained, seven of which soared to the ceiling prices, including insurer Bao Viet Holdings (BVH), Phu My Fertiliser (DPM), food giant Masan Group (MSN), steelmaker Hoa Phat Group (HPG), PetroVietnam Finance (PVF) and real estate developers Hoang Anh Gia Lai (HAG) and Vincom (VIC).
Saigon Securities Inc (SSI) became the most active code with 1.8 million shares exchanged, hitting the ceiling price at VND15,000 ($0.71).
Trading value today decreased 12 per cent over the previous session, however, totalling just over VND296 billion (US$14.1 million), on a volume of nearly 21.6 million shares.
The benchmark HNX-Index on the Ha Noi Stock Exchange also rose 1.54 per cent to finish this morning at 59.34 points.
Advancers edged decliners by 168-59, but value of today's trades declined slightly over the previous session to nearly VND156.5 billion ($7.4 million) as just 19.3 million shares changed hands.
Shares of VNDirect Securities Co (VND) continued to be the most attractive to investors as more than 2.6 million shares traded. VND closed 2.9 per cent higher at VND7,100 ($0.34).
Vietnam’s agriculture on show at Davos forum
Vietnam has been hailed as an outstanding example for agricultural development in developing countries at the 42nd World Economic Forum in Davos.
Addressing a session on a new vision in agriculture as part of the Davos forum, Minister of Agriculture and Rural Development Cao Duc Phat presented the operation of the five groups of tea, coffee, vegetables and fruit, seafood and common goods basket and Vietnam’s experience in implementing the five groups.
While Vietnam continues promotion of agricultural development and economic restructuring, the five working groups made every effort to improve product value, to obtain a common goal of raising income for farmers and developing a sustainable environment.
Minister Phat highlighted the main tasks for 2012, including promoting operations of the five goods groups and the newly established rural credit group, adding environmental protection in the direction of green growth into the groups’ activities.
Vietnam will study and apply solutions to expand activities in all goods groups and build policies and mechanisms at regional and national levels.
The Minister called for more participation from businesses in investment, technical consultancy, policy building and creating conditions for farmers to be more involved in production, with efficient support from the State and businesses in agricultural development.
Vietnam officially participated in the “New Vision in Agriculture” initiative in 2010, which aimed to increase agricultural output by 20 percent while reducing the poverty rate and carbon discharge by 20 percent in 10 years.
Gold exceeds VND46 mln, at 2-month high
Domestic gold price has ended the first week of the Lunar New Year 2012 with a straight rally to VND46 million a tael, its 2-month high.
Though many big local gold traders, including Saigon Jewelry Co (SJC), Phu Nhuan Jewelry Co (PNJ) and Sacombank Jewelry Co (SBJ), have yet resumed their operations due to the Lunar New Year holiday (Tet) break, many retail shops in Hanoi and Ho Chi Minh City have raised the price of SJC gold bullion to VND46 million a tael.
The gap between the bid and ask prices has been widen to some VND700,000-1 million a tael due to uncertainty in the future price including world price and that which will be officially listed by SJC on Monday.
The bid and ask prices of SJC gold bullion at Hanoi-based Bao Tin Minh Chau and DOJI Co were VND45.5/VND46 million a tael and VND45.65/VND45.95 million a tael, up VND1 million and VND1.1 million week on week respectively.
The price of SJC gold bullion has rallied for the 4th week in a row this year with a 7.8 percent rise, equivalent to VND3.3 million a tael.
The price hike, started since January 23 with a 2.2 percent rise -- about VND1 million -- to VND45 million a tael, closely pursued international trend of which the spot gold has shot up to around $1,737.3 an ounce on the last trading session of this week.
COMEX gold futures, per the February 2012 contract, have finished higher 4.1 percent – around $68.2 an ounce – to $1,732 an ounce.
World gold price increases under the influence of unfavorable factors such as the lower-than-expected quarterly GDP growth of U.S. in Q4, and the concerns about rising inflation in the U.S. and the unsettled European debt crisis.
Gold prices rose on Friday, on track for their biggest three-day rally since late October, after a report showing disappointing U.S. economic growth boosted the metal's safe-haven appeal, according to Reuters.
Gold's gains extended a rally ignited on Wednesday when the Federal Reserve said it would likely keep interest rates near zero until at least late 2014, said Reuters.
Gold also got a boost from reports that the world's biggest hedge fund, Bridgewater Associates, was bullish on the precious metal as a hedge against inflation as governments print more money to reduce debt, Reuters reported.
Besides, the news that central banks around the world bought 450 tons of gold in 2011, the highest volumes in nearly 50 years, has also promoted the purchase of investors. Last week, the world largest gold fund SPDR Gold Trust posted a net-buying of over 15.4 tonnes of gold.
Three other funds, including ETF Securities, Deutsche Bank and Swiss & Global, have also bought a total of 2.4 tonnes of gold. In particular, the purchase of Swiss & Global funds accounted for 66.67 percent, or 1.6 tonnes of gold.
The survey of 25 people including fund managers, gold businesses, and technical analysts for the next week conducted by Kitco.com has showed that there were 19 people believe that gold would continue its rising momentum, while six people thought that gold would fall.
Truong Van Phuoc, Eximbank's General Director, told Phap Luat newspaper that the gold market would still be volatile in 2012 since the world still in the stage of overcoming the crisis, especially the debt crisis, and the U.S. is preparing for its presidential election.
Phuoc said as most predictions are that the gold price will continue to rise, local gold business must be very careful in the short-term or long-term.
Because gold prices have risen very high amid the global economic crisis, if world economic recovery takes place within this year, the ability for the price of the precious metal to reverse is very high.
In short-term, gold prices may rise, but in long-term it may not increase much, or even going down.
Tran Thanh Hai, general director of Gold Business and Investment of Vietnam (VGB) Joint Stock Co, said in 2012 that gold investment is still profitable channels. Domestic gold prices this year will largely depend on world factors.
This year the gold market is still volatile, gold could rise above $2,000 an ounce. However, investors must be careful, if they buy gold on borrowing, the risk of capital loss is very high, he aa.
Nguyen Cong Tuong, deputy head of SJC, said gold is like to rise in the long-term because the current supply cannot meet up with demand, besides the prices of gold also suffer from many different causes.
In 2011, gold prices have risen 28-31 percent, and gold has repeatedly set up new record after one another in recent years, he said.
Power firm targets higher output
PetroVietnam Power Corporation (PV Power) targeted 10,000MW in power output by 2015, equal to the entire output by major power company EVN, said Vu Huy Quang, the corporation director general.
The corporation would also develop production of clean energy, he said at a recent press conference.
PV Power plans to churn out nearly 16 billion kWh this year, about 2.6 billion kWh more than last year, the company announced. The boost was expected to earn VND21.2 trillion (US$1 billion) in revenue, a 10 per cent increase against last year. Before-tax profit was estimated to reach VND813 billion ($39 million), a year-on-year increase of 65 per cent.
PV Power estimates show it would likely contribute VND528 billion ($25.1 million) to the State budget.
Nguyen Thi Ngoc Bich, the corporation's deputy director general, said that it needed more than VND4 trillion ($190.5 million) in investment to expand its power factories this year, slightly lower than last year's VND4.8 trillion.
In the face of the economic crisis, it was not easy to arrange the capital, she said.
"Although the corporation met with many difficulties due to the crisis last year, it still churned out 13.4 billion kWh, up 7 per cent against the target set by the holding company – the Viet Nam National Oil and Gas Group (PetroVietnam)," she said.
The achievement reflected the corporation's great efforts because many electricity projects faced bottlenecks due to limited financial resources and poor quality of gas, she added.
One major difficulty was that EVN owed PV Power up to VND14 trillion ($667 million) for power supplies, she said.
Public decries housing tax proposal
The Ho Chi Minh City Department of Construction’s recent proposal to levy a tax on local residents’ houses in a bid to curb speculation in the real estate sector has ignited a huge uproar.
According to the department, the housing tax, in addition to the already imposed land tax, will help prevent property prices from skyrocketing, which would result in economic instability; while also increasing the state budget collection.
The housing tariff is expected to be a progressive tax, which means households holding larger land areas and possessing more houses will have to pay higher tax rates.
Earlier, a similar proposal was made by the Ministry of Construction, which would allocate each household a standard housing area of 100 square meters. Each square meter exceeding the norm will be levied a tariff of VND30,000 (US$1.44) a year.
However, the proposal has yet to be approved by the National Assembly, thanks to strong disagreement from the public, especially during this troubled economic time.
The housing tax is aimed at curbing house speculation, while in fact most speculators have been targeting land, not housing projects, members of the public said.
Most real estate businesses said it is not the right time for the housing tax to be levied, according to Thanh Nien newspaper.
The property market has already been frozen for the last few years thanks to a huge number of difficulties, and this new tax is likely to completely destroy it, insiders said.
The housing tax will discourage housing investors, and also cause the prices of land and housing to soar, since the real estate sector already attracts many different taxes.
Meanwhile, Nguyen Van Duc, deputy chairman of the HCMC Real Estate Association, concurred with the idea of imposing a housing tax, but added that it is not the right time to apply the tariff.
The real estate businesses will continue to struggle for survival this year, and the new tax will only further dampen the market, Duc told Thanh Nien.
“The housing tax will be the last straw for the property sector,” he said.
An expert who wants to remain anonymous said that in order to stop land and house speculation, the government should simplify the administrative procedures in property investment to enable investors to increase supply, thus reducing property prices.
Once land and house prices have dropped, the public will have more chances to buy houses at reasonable prices, and speculators will no longer be able to function, he said.
For his part, lawyer Nguyen Van Truong, head of Truong law firm, said that it is unreasonable to repeat the housing tax discussion at this time, as the proposal has previously been rejected.
Telecom sector expected to continue M&A trend
Following the industry’s first acquisition last year, the domestic telecom sector is expected to witness more mergers and acquisitions this year, insiders said at a seminar last week.
At the seminar concerning the Vietnamese telecom sector outlook in 2012, industry
insiders said the government this year will also strengthen the privatization process to create a real competitive telecom market.
Last year saw the first ever acquisition in the telecom industry, with debt-stricken EVN Telecom, an affiliate of the country’s power monopoly Electricity Group of Vietnam, acquired by the military-run Viettel Telecom.
This has raised an alarm bell for other telecom companies regarding the challenges facing them in the domestic market, Saigon Tiep Thi newspaper reported.
Besides EVN Telecom, other telecom companies are also facing difficulties in attracting investment or finding customers, while some others are still unable to launch their services despite having the necessary licenses.
This has shown signs of “a problematic telecom market,” the seminar deputies said.
Speaking at the seminar, Doctor Mai Liem Truc, former deputy minister of the erstwhile Ministry of Post and Telecommunication, which is now the Ministry of Information and Communications, stated that the domestic telecom industry has made strong breakthroughs during the last 10 years.
“Vietnam is among the countries that have the lowest telecom fees, and the public can enjoy the services without obstacles,” Truc said.
However, he added, the Vietnamese telecom industry has begun to falter over the last two years, with many services losing their quality, and many new businesses falling into trouble.
On the brink of bankruptcy, many businesses that hold low market shares have issued low-cost packages, creating unhealthy competition in the industry, he said.
Truc added that most of the operational telecom companies are state-owned enterprises, which means the current telecom market is not actually competitive.
“90 percent of the telecom network and assets belong to the government,” he said, adding that only a small proportion of this has been privatized in the last ten years.
Truc said that during this hard time for the market, if the government still holds 100 percent stakes in the state-run telecom companies, there will be only one or two businesses able to survive.
“In the next ten years, the government and the Ministry of Information and Communications should restructure the industry; we only need four major businesses,” Truc advised.
This opinion was shared by Nguyen Thanh Hung, Deputy Minister of Information and Communications, who said the telecom market will continue to follow the merger and acquisition trend in the years to come.
“The telecommunication ministry will also consult the government to privatize the state-run telecom enterprises to create a more competitive market,” Hung added.
New cement plants to start despite low consumption
Although the domestic cement sector has yet to be able to solve its oversupply problem, a number of new cement plants are expected to become operational this year.
According to Nguyen Van Thien, chairman of the Vietnam Cement Association, if the cement projects that are under construction can meet their deadlines, the country this year will welcome seven to eight more cement manufacturing plants with a total design capacity of 7 million tons a year.
These projects all belong in the cement industry development plan that has been approved by the government, Thien told Tuoi Tre.
“[The new projects] will raise the total supply of the cement sector to 60 million tons, far more than the real demand of less than 10 million tons,” Thien said.
“In terms of design capacity, the industry’s production capacity will be 77 million tons a year, exceeding the actual consumption capacity of only 50 million tons.”
For his part, Phan Dinh Quang, head of marketing of Fico Tay Ninh JSC, said the additional plants will exacerbate the already tough situation facing the cement sector.
“Cement manufacturers will face heavier competitive pressure,” Quang lamented.
Meanwhile, the cement manufacturing industry is still struggling to solve the problem of low consumption.
Thien of VNCA said total consumption last year was only 49.5 million tons, down by nearly 1 million tons against 2010.
“We also have a pessimistic outlook on the figure this year, which is expected to be less than 50 million tons,” Thien said.
Nguyen Van Trung, CEO of Fico Tay Ninh, confirmed that 2011 was a hard year for the cement manufacturers.
Trung said the tightened credit policy targeting the real estate sector and the government’s cutting of public spending are the main causes for the sector’s low consumption.
“Such a situation is likely to repeat itself this year, with the difficulties expected to be even more unpredictable,” Trung stated.
With such a stiff challenge facing them, Quang said many cement manufacturers have considered exporting their products.
However, Quang said that export prices are only around US$56 – 68 a ton, due to tough competition from Thai and Chinese rivals.
“Such prices will result in poor business effectiveness given the expenses spent for exports,” he said, adding that the export effectiveness is even lower than selling the product domestically.
The CEO of a subsidiary of the state-run Vietnam Cement Industry Corporation also said exporting cement is just “a temporary solution.”
His company last year exported 100,000 tons to Cambodia, he said.
He said the domestic cement industry cannot compete with its Chinese, Thai, and Indonesian counterparts since the latter all have had their production lines reach complete depreciation.
“Meanwhile, Vietnamese manufacturers are still burdened by clearing bank interests, making their cost prices much higher.”
Industry insiders also said cement exports should not be encouraged, since it brings in low value and poor effectiveness.
Ailing cement industry needs to export more
Exports were a main outlet for the ailing cement industry last year, Nguyen Thanh Tung, director of Viet Nam Cement Corporation's administration office, said at a recent conference.
The industry faced many difficulties last year in part due to the stagnant real estate market.
This year, about eight new cement factories will go into operation with a combined capacity of 6.9 million tonnes, bringing the country's whole capacity to 73 million tonnes.
According to the Viet Nam Cement Association, the total demand for cement this year will be about 60 million tonnes, of which, 53 million tonnes will be for local consumption and the remainder for export.
Under the Ministry of Construction' rules, joint ventures will have to export 30-40 per cent of their total output.
In fact, China is the largest importer, accounting for half of the world demand. India is the second importer. Cement demand in some Asia Pacific nations are also rising - and Africa is also becoming a promising market.
Industrial analysts said Viet Nam should take advantage of these needs, despite the low value and high cost of transportation. Cement could also be difficult to store.
In addition, the country's poor infrastructure is also limiting efforts to further increase cement exports. Rising input costs related to fuel, power and coal during 2011 also created significant challenges for the sector.
Higher costs push prices up. For instance, clinker used in cement making may hit to more than US$40 per tonne compared to $36 previously. Exports of cement to Africa and Latin America require vessels capable of carrying more than 50,000 tonnes.
Nguyen Van Diep, also from Viet Nam Cement Association's administration office, said tight co-operation was needed between the ministries and State bodies to map out export strategies.
He said the Government should create favourable conditions for enterprises to borrow capital, cut costs and attract more foreign investors in a bid to raise competitiveness, he added.
Analysts suggest there is a big export market in Africa because its infrastructure is poor and demand for cement is rather high. To tap into this market, firms had to promote products more professionally.
Bank employees to face trial for embezzlement
6 employees of the Bank for Agriculture and Rural Development of Vietnam (Agribank) in Hanoi are likely to face criminal charges for embezzling VND46 billion ($2.2 million) for gambling.
The Hanoi police has concluded that this case of “property embezzlement, gambling, and irresponsibility causing serious consequences” caused a loss of VND46 billion to the bank.
Of the 6 employees, 3 from Agribank’s My Duc District branch - tellers Le Quang Khai and Nguyen Thanh Hai, and head of the budget accounting department Le Van Hien - have appropriated the amount by illegally transferring money from customers’ accounts to their own accounts.
The other 3 - head and vice head of the Kenh Dao transaction office Nguyen Van Nghi and Tran Van Hai, and teller cum post-checker Hoang Huu Hop, may be charged with lax management.
According to the investigation, Le Quang Khai knew about the IBET football betting website through his former high school classmate Pham Van Quyet, who lives Dai Nghia Town, My Duc District.
Khai then enticed Nguyen Thanh Hai and Le Van Hien to join him in betting at the website.
The defendants used this website to bet for a series of football matches around the world. At first, Le Van Hien won about VND2 billion, while Hai and Khai won around VND100 million.
Last October, Hien, via Khai, asked for a betting account for his own and Quyet gave him one that was worth VND250 million. Hien then used the new account and lost about VND12 billion.
Hien then, via Khai again, asked to raise the money in the account up to VND1.5 billion.
In January 2011, Nguyen Thanh Hai also asked for a private account worth VND750 million and played until he lost about VND10 billion, of which the biggest loss was VND2 billion in a single week.
After losing so much, Khai and Hai joined hands to illegally withdraw the money 177 customers depositing at their saving accounts in Huong Son and Kenh Dao transaction offices under Agribank’s My Duc District branch by using the accounts and passwords of the head of the bank.
Khai withdrew VND34 billion from 159 accounts and Hai, VND11 billion from 18 accounts.
The Hanoi police have charged Pham Van Quyet with organizing gambling, but have yet arrested him.
For the leaders of the Huong Son transaction office, there were errors in the protection of account numbers and passwords, but at the time of the case, they had been on leave so may not be charged for criminal acts.
According to the investigation, Khai and Hai were able to appropriate such a great amount of money from customers’ deposits for a long period of time without being detected because they were covered by Le Van Hien.
The remaining defendants, who didn’t receive any benefit in the embezzlement, would be charged with irresponsibility causing serious consequences.
City shoppers see slight increase in post-Tet prices
There have been no major fluctuations in the prices of commodities after the Tet (Lunar New Year) festival in HCM City, with only a slight increase registered over normal days.
On the fifth day of Tet, vegetable prices increased by VND2,000-4,000 per kg, pork prices by VND10,000-15,000 to VND 120,000-140,000 per kg. Prices are expected to stabilise on the sixth day of Tet when supermarkets and other stores resume operations.
However, a trader at the Han market in Hai Chau District, Da Nang City, said beef prices stood at VND230,000-270,000 per kg, an increase of VND40,000-50,000 per kilo. The price of pork is VND270,000, an increase of VND40,000.
Soft drink agents in Tran Phu and Le Do streets in the central city said beverage prices, especially beer, has increased significantly. The price of Heineken beer jumped by VND40,000 to VND420,000 per carton while that of Tiger beer increased by VND30,000 to VND320,000 per carton.
However, the prices of vegetables and fruit at some markets in Da Nang showed a tendency to decrease compared to the days just before Tet, the Tuoi Tre newspaper report said.
At the Sieu Thi Market in Thanh Khe District, for instance, the price of rau thom (a Vietnamese herb) was VND8,000 for 100g, a decrease of VND2,000, while that of lettuce went down by VND500 to VND2,500 per 100g.
According to the HCM City Department of Industry and Trade, the prices of goods were mostly stabile during the three days of Tet because of sufficient supply. Price increases were seen in fresh food items, including vegetables and fruit because consumption demand increased by 20-50 per cent.
On the second day of Tet, some sales outlets under the price stabilisation programme, reopened with pork prices down by VND10,000 to VND84,000-95,000 per kg, VND15,000-30,000 lower than the market price. However these sales outlets only remained upon until noon everyday.
The department said sales volume during Tet increased by 20-25 per cent compared to the same period last year, mainly in supermarkets because of many promotional programmes and well-prepared supply of goods.
Many supermarkets offered 10-50 per cent discounts on 3,000 items from the beginning of November to January 22 to push up consumption. Besides, the supermarkets increased their working time by four hours per day as Tet approached to meet consumers' demand.
The wholesale market's supply for this year's Tet market accounted for 40-50 per cent of the total, and businesses that joined the price stabilisation programme contributed 30-40 per cent, the department said.
Japanese firm sets up $65.2 million subsidiaries in VN
Shin-Etsu Chemical Co Ltd has spent 5 billion yen ($65.2 million) for the establishment of its first two subsidiaries in Vietnam.
The 3 billion yen ($39.1 million) Shin-Etsu Electronics Materials Vietnam Co Ltd and the 2 billion yen ($26.1 million) are set up for the manufacture of silicone-based materials for high-brightness LED packaging and the separation and refinement of rare earths respectively.
Shin-Etsu Electronics Materials Vietnam, specializing in manufacturing and sales of silicone-based encapsulating materials and reflectors for LEDs, will cover about 50,000 square meters in northern Hung Yen Province’s Thang Long Industrial Park No.2.
It is located around 30 kilometers and 70 kilometers away from the capital city of Hanoi and the coastal city of Hai Phong respectively.
Shin-Etsu Magnetic Materials Vietnam, focusing on processing ore to extract a wider variety of the metals, will be located on an 80,000-square meter area in Dinh Vu Industrial Park in Hai Phong City.
The plant, which is expected to process 1,000 tons of rare earths mined in Australia, India and other places annually, would be Shin-Etsu's first such facility outside Japan, said Nikkei newspaper.
The Vietnamese operation will raise the company's extracting and refining capacity 50 percent, and is likely to help reduce its reliance on China for raw materials, said the Japanese business newspaper.
Almost all the materials of Shin-Etsu Magnetic Materials Vietnam will be set aside for Shin-Etsu Chemical Vietnam, the company told Tuoitrenews.
Shin-Etsu, the world's second-largest producer of rare-earth magnets, will supply the plant with spent magnets recovered from hybrid vehicles, hard drives and other items, as well as leftover materials from its rare-earth magnet factory, the Nikkei said.
The 2 production bases, the first of its kind owned by Shin-Etsu Group in Vietnam, are scheduled to start operations in March and in February of the next year with approximately 30 employees and 50 employees respectively.
The expected revenues for Shin-Etsu Electronics Materials Vietnam will be around 3.5 billion yen or 4 billion yen after two or three years.
With the newly established production bases in Vietnam, Shin-Etsu can take advantage of the demand following future economic growth in Vietnam and its neighboring countries.
“In addition, in view of its excellent workforce with its high level of education and diligent national character and the country having the infrastructure that is necessary for manufacturing, we came to the conclusion that Vietnam is the most suitable country in which to make this investment,” the company said in its press release.
“We welcome the decision of Shin-Etsu Chemical Co., Ltd. to expand into Vietnam.
Presently, the Japan-Vietnam relationship is in a very good stage of development and this is a suitable point in time for Japanese companies to come into Vietnam,” the company quoted H.E. Doan Xuan Hung, Ambassador Extraordinary and Plenipotentiary of Vietnam to Japan, in a recent message sent to the company.
In late October last year, the Prime Minister of Vietnam, Nguyen Tan Dung, and his Japanese counterpart, Yoshihiko Noda, signed an agreement on mining and processing of rare earth in Dong Pao mine in northwestern upland province of Lai Chau.
The mine is considered to have big reserves of rare earth minerals including lanthanum, cerium and neodymium which are necessary to produce liquid crystal displays and batteries for hybrid cars.
The two countries will launch a research center in Hanoi this year to develop technologies for the separation and refinery of rare earth minerals from the ores without polluting the environment.
Vietnam yet to best use overseas remittances
Overseas remittances have increased steadily for Vietnam in recent years, but the country is yet to have policies to attract this resource of capital for economic development.
Over the past 2 years, Bui Van Quang, a Vietnamese mechanic working in South Korea, has sent an average US$15,000 annually to his family in the rural area of the northern province of Hai Duong.
Quang says the sum has been used to repay debts, buy a piece of land and gold for savings and help some relatives.
Quang is among 400,000 Vietnamese guest workers abroad.
Besides remittances sent home by these workers, Vietnam also receives a large amount of remittances every year from overseas Vietnamese.
According to the Vietnam Social Science Institute, there are about 4 million overseas Vietnamese living in 100 countries and territories worldwide.
Remittances to Vietnam have increased steadily, while other sources of foreign capital like foreign direct investment (FDI), foreign portfolio investment and official development assistance (ODA), have not been stable.
In 1999, remittances made up 4.2 percent of Gross Domestic Product (GDP) and increased to 7.7 percent in 2010 when GDP value was US$100 billion.
Figures from the State Bank of Vietnam (SBV) show that remittances to Vietnam is about $2.5 billion in the first quarter of this year, $2 billion in the second quarter and $2.5 billion in the third quarter.
SBV estimated that the amount for the whole year could reach US$8.5 billion.
Last year, remittances amounted to US$8 billion. In comparison, FDI was US$9.6 billion and ODA was $2.6 billion.
This big amount of remittances helped offset nearly 50 percent of the trade deficit and reduce reliance on foreign funds, especially foreign aid.
The official figure for remittances does not include cash and kind sent to Vietnam via channels other than the banking system.
According to the SBV, this amount is equal to at least 30 percent of the remittances sent through the official channel.
According to a report by the World Bank (WB), Vietnam ranks No. 16 among countries that received the greatest amount of overseas remittances in 2010.
In Southeast Asia, Vietnam ranks second after the Philippines which received $21.3 billion. Remittances sent to Vietnam are mainly from overseas Vietnamese in the US, Canada and France.
However, most recipients are well-off families in urban areas, especially HCMC. The city is the biggest recipient of remittances in Vietnam although it does not have a large number of guest workers abroad.
In recent years, remittances to cities and provinces that have a large number of guest workers abroad have also increased rapidly.
Figures from WB’s survey show that remittances sent to such cities and provinces are nearly equal to the local GDP.
Vietnam’s labor export has expanded in recent years. The main export markets are Asian countries and territories, especially Taiwan and Malaysia.
The bank has forecast that this source of remittances may continue to increase in the years to come if the global economy maintains the current pace of recovery.
Inadequate policies
Most remittances to Vietnam are used for investment in real estate, and the rest is for bank deposits and purchase of durable goods.
In a conference on international migration held in Hanoi in last June, WB experts released a survey of over 4,000 families that received remittances in Vietnam in 2008. The survey shows that the remittances helped the recipients increase spending on land and housing.
The experts also estimated that 48 percent of remittances over the past 5 years went to real estate. A small part was used for investment in services and for travel.
“Remittances have an insignificant impact on poverty reduction, as the money is sent mainly to well-off families and is not for spending,” the survey said.
A leader of a commercial bank that helps pay 20 percent of the total remittances to Vietnam every year said most of the remittances are used for real estate purchase.
Part of the amount is for trade payment, as recipients can get the money very quickly, within just 12-24 hours, while it takes between one and two weeks to settle payment through banks.
Another part is deposited at banks to enjoy high interest rates for foreign currency deposits. For example the interest rate for deposits in U.S. dollar at banks abroad is only 0.25-0.5 percent per year while the rate in Vietnam reached 5 percent earlier this year.
According to DongA Bank, remittances to Vietnam in the first half of this year surged 20 percent from the same period last year and the rate of US dollar deposits at the bank rose 10-15 percent due to the high interest rate for US dollar deposits.
However, a big concern is that a large amount of remittances this year has not been deposited at commercial banks but has been sold to the black market, which offers an exchange rate higher than that quoted by banks.
This foreign currency source has exerted a big pressure on the exchange rate, increased dollarization in the economy and posed a headache for market management authorities.
According to big remittance payers, such as Sacombank, DongA Bank, ACB, Agribank and Vietinbank, only 10-15 percent of the recipients deposit or sell the foreign currency they receive to the banks.
If only 50 percent of the remittances is deposited or sold to banks, the pressure on foreign currency shortage can be eased. Bankers hope that SBV’s Decree 95 on foreign currency management with strict penalties for violators issued recently can help direct more remittances to their banks.
However, it needs more long-term solutions to attract this precious source of foreign currency. Although the policy and procedure regarding overseas remittances and foreign currency management are sufficient, reality shows that they are not favorable.
For example, people can sell foreign currency to banks easily, but when they need foreign currency for medical treatment, overseas study or travel, it is not easy to buy the money from banks and the procedure is complicated.
In addition, sustainable investment channels to attract overseas remittances are not available. The procedure for house purchase by overseas Vietnamese is still complicated. Policies to attract remittances to sectors that badly need investment such as education, healthcare and services are not available either.
Incentives to encourage recipients of remittances to invest in businesses to create jobs and contribute to economic development are yet to be seen.
High export taxes slow rubber production
The rubber export target for this year of 880,000 tonnes is unlikely to be achieved since high export tariff rates of 3 to 5 per cent have caused many companies to limit production.
Southern Rubber Industry Joint Stock Co (Casumina) deputy director Le Van Tri said that his company has seen annual growth in exports of over 20 per cent in recent years, but the level of increase this year was likely to be only 5-10 per cent.
Tri urged the Government to delay the tax or domestic companies would be unable to compete on a world market already made challenging by the economic downturn. The global recession has, in particular, slowed auto production, reducing demand for rubber needed to produce tyres, he said.
Lower demand has already led to lower prices and tighter profit margins, he added, making the tax even more burdensome. In 2011, rubber latex could fetch about VND90 million (US$4,300) per tonne, but this has fallen already this year to about VND60 million ($2,900) per tonne.
Dong Phu Rubber Joint Stock Co chairman Nguyen Thanh Hai said that about 60 per cent of his company's total rubber output was for export. The Government regularly encouraged companies to step up exports, so the export tax was contrary to policy, he suggested.
Viet Nam Rubber Association general secretary Tran Thi Thuy Hoa disagreed, however, that the taxation levels were excessive, with current taxes levied only on certain products. But the association would be concerned if the Government were to apply the taxes to a wider range of products.
Vietnam: a magnet for Eastern European airliners
A new wave of Eastern European airliners offering services connecting Vietnam to their countries has emerged, said Do Xuan Quang, CEO of airline dealer Vector Aviation.
After their recovery from a period of economic ills, many airline carriers in Eastern Europe are seeking new markets, and Vietnam appeared to be their potential choice in both Asian and Southeast Asian markets, Quang told newswire Saigon Times Online.
In the last few years, Vietnam has attracted many Eastern European airliners, including the Polish national airline, which is offering services on the Warsaw-Hanoi route, and the Ukraine’s carrier AeroSvit with its Kiev-Ho Chi Minh City flights, he said.
“Not to mention the Russian airliners Aeroflot and Transaero, which are exploiting the routes connecting Vietnam and Russia, as well as other countries from the former Soviet Union,” he added.
Quang said air carriers from Kazakhstan, Hungary, Uzbekistan and Czech Republic are also eying flights to Vietnam.
Last year Czech Airlines planned to open services to Vietnam, and the plan was expected to be implemented this year, he said.
Quang said one of the potential opportunities for Eastern European airliners to effectively exploit the Vietnamese market is the increasing number of Eastern European passengers wishing to visit Vietnam.
“Most of the airliners can target tourists who want to come to Vietnam to enjoy a warm and tropical climate when the freezing winter hits Eastern Europe,” Quang said.
He added that the carriers also have in mind passengers from Northern European countries such as Sweden, Norway, and Finland, who tend to use services offered by Eastern European airliners because of their lower costs compared to their Western European counterparts.
“For instance, a seat on AeroSvit costs slightly over US$720, while the Western European carriers charge around $1,200 for a ticket on the same route,” Quang explained.
“Such a large difference will drive passengers to the airliners whose airfares are lower but service quality is guaranteed.”
Quang added that another target group of potential passengers is the overseas Vietnamese who are working in Hungary, Ukraine, Russia and the eastern part of Germany.
“There are around 12,000 Vietnamese living and working in Ukraine, and the figure in Russia is even larger,” Quang said.
However, he admitted that despite such high potentials, only a few direct flights exist at the moment between Vietnam and Eastern European countries, with visa clearance the main obstacle.
“It is not easy to apply for a visa to enter Russia, and is much harder for one to visit Ukraine,” he said.
Siam Cement eyes stake in cement maker in VN
Thailand's Siam Cement Pcl said on Wednesday it was interested in buying a stake in a cement maker in Vietnam and expected to spend less than 10 billion baht ($315 million) on the acquisition.
Siam Cement, which is looking for opportunities to buy assets in Southeast Asia, expected to conclude details about the deal in the second half of this year, Chief Executive Kan Trakulhoon told reporters.
Earlier, the country's top industrial conglomerate reported an 81 percent fall in quarterly net profit, hit by weak activity because of flooding plus changes in government taxation.
VN-made luxury handbags enter US market
Binh Duong Province-based TBS Group has marked a turning point for the Vietnamese fashion handbag industry with the export of the first domestically-made luxury lifestyle handbag shipment to the US.
TBS Group has become the first 100 percent domestic owned firm, and the fifth fashion handbag manufacturer in Vietnam, to make the products for US-based Coach Inc.
"With fashion handbags, Coach Inc always requires the providers to handle a specific stage of product development,” said TBS chairman Nguyen Duc Thuan.
“If TBS performs well in this stage, we could not only raise more added value for our own products, but would also be more active in the choice of materials, thus creating better conditions for the development of domestic supporting industries," he added.
Before manufacturing for Coach, TBS Group had 20 years of experience in making shoes for famous brands like Decathlon, Skecher, and DC for export to the EU and US markets; but it had never made luxury handbags.
Coach knew this, but after considering the scale, system and working style of the TBS Group, the American corporation asked whether the TBS Group could produce fashion handbags for it.
"I started to dream about the future of the Vietnamese handbag industry, when it can reach the world market,” Thuan said.
“I worried about what we could gain and what may be lost were TBS to jump into this new industry, but the instinct of an entrepreneur with two decades of experience working in the footwear industry forced me to make the final decision to strike the deal with Coach,” he added.
While the Vietnam has annual revenues of $1 billion in handbag exports, domestic firms receive only a small proportion of this sum, while the rest is paid to foreign-invested firms, said Thuan.
It took TBS four months last year to repeatedly prove to Coach’s inspectors that it is capable of manufacturing handbags with the TBS brand reputation and expertise in production.
In early April, TBS Group convinced Coach by presenting a project to build a brand new handbag plant in accordance with Coach’s global guidelines with 3,000 workers, including departments for designing and making samples. Unlike leather shoes or apparel production, all equipment and technology used for the plant must be new and, of course, very expensive.
One month later, work on the factory and the trial contract of 20,000 bags to be delivered in October 2011 was started.
As planned, Coach will buy millions of products according to the production capacity of the TBS Group in the coming years, with expected capacity of up to 5 million units a year.
With an average export price of $40-50 for a product, in terms of value producing a handbag brings higher revenue than the production of shoes or textiles/apparel products.
Representatives of TBS Group said revenues per capita from making such handbags will be 30-50 percent higher than that earned from the production of shoes.
In looking at the long-term expectations that Coach placed in the TBS Group with the plan to build an additional manufacturing plant in mid-2012 to bring total capacity to 7 million units a year, the opportunity is not only available for TBS Group.
"The problem facing Vietnamese enterprises is how to seize the same opportunity and be well-prepared in every area, from financing to human resources," Thuan said.
To be able to confidently become a partner of Coach and enhance its participation in the global supply chain, Thuan said TBS Group has spent a lot of effort in improving and restructuring the entire system of business, the most important aspect of which is restructuring its resources.
On the other hand, to compete with other manufacturers, according to Thuan, investment in technological equipment is very important, especially investment in modern programmed sewing machines priced from $14,000-36,000 each for clean and exact stitches.
Moreover, the material for high-end handbags in general is mainly high-grade leather, which is very expensive and vulnerable to scratches and degeneration in the production process.
Diep Thanh Kiet, deputy chairman of Vietnam Leather and Footwear Association, said that in fact there are not many businesses that can seize the same opportunities as TBS Group.
"With an investment for a plant costing over $10 million, it is clear that only businesses with strong administration skills and strong financial willingness dare to join the game," Kiet said.
OVs contribute to economic development
As part of the development of the overseas Vietnamese (OV) community, expatriate businessmen strive to integrate and make practical contributions to their host countries and the homeland.
According to preliminary statistics, there are about 3,500 projects and enterprises in Vietnam invested by overseas Vietnamese, with a combined registered capital of nearly US$11 billion.
This development can be partially attributed to specific policies and measures, which have facilitated overseas Vietnamese enterprises’ participation in all economic activities in the country.
In addition to investment and trade incentives, they have benefited from favorable policies such as laws on citizenship and housing, helping these entrepreneurs make further contributions to the country’s economic development.
According to economist Cao Sy Kiem, “Vietnam attracted $9 billion from overseas remittances this year. This is a huge resource and a decisive element for the country’s economic development, while improving capital sources for businesses”.
The business force is involved in almost areas, such as trade, construction, real estate and production of export goods, contributing to the State budget.
Bruce Nguyen Tien Dung, an Overseas Vietnamese from Canada , said, “I understand that Vietnam has a good potential business climate. Although difficulties exist in the economy, there remain opportunities for business and investment in the country.”
Nguyen Trung Thuc, Chairman of the Vietnam-Germany small and medium-sized enterprises’ association, said “In the last 10 years, we have experienced unceasing development thanks to local government support, as well as conditions decided by relevant agencies. We understand that they are under reform with a view to improving and simplifying administrative procedures and policies.”
Encouraging and mobilising the overseas businesses and promoting their resources to the country’s development and increasing cooperation with OV and other countries are the key tasks facing the government in working with the Vietnamese communities in foreign countries.
Nguyen Thanh Son, Deputy Foreign Minister and Head of the State Committee for OV, said the committee will consider this issue in a serious manner soon; stating that “through the Vietnam small and medium sized enterprises association we will propose that the Government and relevant agencies offer more favorable policies for OV to invest in the country as well as create conditions for domestic enterprises to do business in foreign countries”
Japan’s largest chemical producer invests in VN
Japan's Shin-Etsu Chemical Co will set up two companies specialising in manufacturing silicone-based materials for high-brightness LED lights, and refining rare earth minerals, with a total investment of 5 billion JPY (roughly 64 million USD).
In its press release, the largest chemical producer of Japan said Shin-Etsu Magnetic Materials Vietnam Co., Ltd. will separate and refine rare earth minerals used in electronics production, at a complex to be built on 80,000 sq.m. at Dinh Vu Industrial Park in the northern port city of Hai Phong .
The 2 billion JPY plant, which is expected to process 1,000 tonnes of rare earth minerals annually, will be Shin-Etsu’s first such facility outside Japan and is slated to come onstream in February, 2013.
The Vietnamese operation is likely to help reduce the company’s reliance on China for raw materials.
Meanwhile, Shin-Etsu Electronics Materials Vietnam Co., Ltd. will manufacture silicone-based materials for high-brightness LED lights at a facility to be built on 50,000 sq.m. at Thang Long 2 Industrial Park in the northern province of Hung Yen, at a total cost of 3 billion JPY.
.svg){kind=icon}
