Can Tho prepares for large investment promotion conference

As many as 500 domestic and foreign delegates are expected to attend a conference to promote investment in the Mekong Delta city of Can Tho, which is slated for August 10, 2018.

At a meeting held on May 29 to review preparations for the conference, Vice Chairman of the municipal People’s Committee Truong Quang Hoai Nam said that the city is scheduled to call for investment in 54 projects worth over 100 trillion VND (4.4 billion USD).

Among those, the three biggest projects are to develop infrastructure systems for industrial parks in O Mon and Thot Not districts, run by the management board of industrial parks and export processing zones of Can Tho city, with total estimated capital of about 18.2 trillion VND (about 801.7 million USD).

Can Tho also hopes to lure investment for a project to build a level-two logistics centre of the Mekong Delta economic sub-region. The project is estimated to cost 150 million USD and covers 242 hectares in Cai Rang district. It is expected to reduce logistics costs for not only Can Tho but the whole region.

Themed “Sharing Potential, Developing Together,” the Can Tho investment promotion conference 2018 will introduce the city’s strengths, potential and investment opportunities as well as investment plans and projects, and Can Tho’s commitments to investors.

At the same time, the event will highlight major targets of the city, along with a list of projects needing investment in the 2018-2020 period.

The city also hopes to learn experience to develop the city into a hub of services, effective agriculture and IT.

Investment licences for some projects will also be handed over to investors at the conference. Meanwhile, a number of projects, including Vinmec Hospital and FPT University will also be inaugurated on the occasion.

Ho Chi Minh City’s CPI up 0.43 pct in May

Ho Chi Minh City’s consumer price index (CPI) moved up 0.43 percent monthly and 2.9 percent annually in May, said the municipal Statistical Office on May 29. 

Among 11 commodity and services groups, eight posted price increases, including transportation (1.99 percent); food and catering services (0.84 percent); and apparel, headwear and footwear (0.16 percent).

Medicines and health care services experienced a price hike of 0.1 percent; household equipment and appliances (0.04 percent); other goods and services (0.03 percent); beverages and cigarettes (0.01 percent), and education (0.01 percent). 

Others saw lower prices, including housing, water and electricity, fuel, construction materials (down 0.01 percent); culture, entertainment and tourism (0.53 percent); and post and telecommunications (0.23 percent). 

During the month, gold and US dollar prices were down 0.43 percent and 0.09 percent, respectively, compared to April.

Tra fish export to US increases despite anti-dumping measures

Despite high anti-dumping tariff imposed by the US, Vietnam exported to the market 108 million USD worth of Tra fish products between January and April, up 26 percent from the same period last year.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the sum accounted for 17 percent of the total value of the country’s Tra fish exports in the four months, which were close to 600 million USD, an annual increase of 18 percent. 

The rise is partly attributable to increases of 5,000-6,000 VND in domestic material prices of Tra fish compared to last year, pushing up export prices during the period.

VASEP predicted Tra fish export to the US in the second quarter to increase slightly against last year, but the number of exporters remains under 3. It said anti-dumping tariff and inspection are two main reasons that prevent many businesses from exporting to the market. 

Apart from the US, Tra fish exports to China, ASEAN region, and Colombia were also forecast to be on the rise in the coming time.

On March 20, 2018, the US Department of Commerce (DOC) announced the final results of the 13th administrative review (POR 13) of anti-dumping duties on frozen pangasius fillets from Vietnam between August 1, 2015 and July 31, 2016, slapping unprecedentedly high rates of up to 3.87 USD per kg. 

Vietnam and China are currently the only two suppliers of Tra fish for the US, with Vietnamese Tra fish making up 90 percent of its total imports of the product.

Agro-forestry-fishery exports up 9.9 percent in five months

The total export value of agro-forestry-fishery products in the first five months of the year reached 15.6 billion USD, a year-on-year surge of 9.9 percent, according to the Ministry of Agriculture and Rural Development.

The export value of key agricultural products was estimated at 8.25 billion USD, up 9.6 percent from the same time last year. Meanwhile, seafood products contributed 3.12 billion USD to the total export turnover, up 9.7 percent, and forestry products 3.4 billion USD, up 8.7 percent.

The Vietnam Administration of Forestry said that China, Japan, the Republic of Korea and the US were the four largest importers of Vietnamese wood and wood-based products. The export value of forestry products accounted for nearly 22 percent of the total export value.

In May alone, the country raked in 347 million USD from shipping abroad some 452,000 tonnes of rice, bringing the total value and volume of rice export in the January-May period to 1.45 billion USD and 2.66 million tonnes, up 40 percent and 13.9 percent, respectively.

Average rice price in the period experienced an increase of 12.9 percent to 503 USD per tonne. China remains the largest buyer of Vietnamese rice, holding 33.5 percent of the market share.

Vietnam also enjoyed robust shipments of cashew. In the five month period, it sold 139,000 tonnes of cashew abroad and earned 1.37 billion USD, rising 19 percent in volume and nearly 23 percent in value as compared to the same time last year.

Some 1.3 million tonnes of cassava and cassava products were sold in foreign countries at a price of 460 million USD, falling 25.6 percent in volume and soaring 7.3 percent in value.

Meanwhile, coffee export increased 16 percent to 820,000 tonnes but dropped 0.8 percent in value to 1.6 billion USD. Rubber export also fell 12 percent in value to 620 million USD although the exported amount was estimated at 424,000 tonnes, or 16 percent higher than the same time last year. 

The export turnover of pepper experienced a plunge of 37.6 percent.  A total 108,000 tonnes were shipped abroad at a value of 377 million USD.

The ministry also said that the country spent 12.29 billion USD importing agro-forestry-fishery products during January-May, a year-on-year increase of 10.6 percent.

Hoa Lac Hi-Tech Park boosts investment climate improvement

The Management Board of Hoa Lac Hi-Tech Park (HHTP), based in Hanoi, will press on with improving its investment environment to attract more funding.

Deputy Minister of Science and Technology Pham Dai Duong, who also chairs the HHTP Management Board, said in the first four months of 2018, the management board granted investment registration certificates for four projects worth nearly 10.92 trillion VND (477.7 million USD) and covering 15.4 hectares of land. 

In 2017, certificates were provided for three projects with total investment of more than 5 trillion VND, covering 11.7 hectares of land.

Compared to 2016, average investment per hectare of land here has risen by more than two times to 31.5 million USD at present.

Duong said projects with investment registration certificates are being swiftly implemented. Notably, the factory of the Hanwha Aero Engines company, invested by the Republic of Korea’s Hanwha Techwin Co. Ltd, has had its construction completed and is operating on a trial basis. This factory project has total registered capital of 200 million USD, which is expected to rise to 260 million USD in 2021.

Meanwhile, two of the five projects worth 1 billion USD in total in the HHTP invested by Japan’s NIDEC Corporation received investment certificates last April. They are working to finalise procedures for construction so as to put the plant into operation in the first quarter of 2019.

He noted the HHTP Management Board will propose mechanisms and policies for the park to improve investment quality. It will also continue reviewing projects to ensure they are implemented as scheduled and prevent land wastefulness.

The board has so far revoked 19 projects that lagged behind schedule or failed to run as planned. It has also reduced land areas used by two other projects, the official added.

Located in Thach That and Quoc Oai districts, the 1,586-hectare Hoa Lac Hi-Tech Park is being developed into a science city hosting investors in biotechnology, information – communications, new material technology and automation.

Vinamilk named as most favourite brand in Vietnam

Vietnam’s leading dairy company Vinamilk was the most chosen consumer brand in Vietnam for four consecutive years from 2014-2017, according to the 2018 edition of Kantar Worldpanel’s Brand Footprint report.

With high Consumer Reach Points (CRPs), Vinamilk shines bright as the most chosen dairy brand in Hanoi, Da Nang, Ho Chi Minh City and Can Tho, and rural areas across the country in 2017. 

As the most popular fast-moving consumer goods brand in Vietnam, Vinamilk has various dairy products favoured by local shoppers like Ngoi Sao Phuong Nam, Ong Tho and Susu.

Unilever, Masan Consumer and Vinamilk were in the top three of brand owners in the four cities and rural areas. In the food sector, Masan and Vinamilk were the two most-chosen brands while Unilever secured its stronghold in the non-food sector.

Katar Worldpanel’s annual Brand Footprint study is based on research from 73 percent of the global population, a total of one billion households in 43 countries across five continents. 

As part of the study, Kartar Worldpanel tracks more than 18,000 brands around the world across beverages, food, dairy, health and beauty and home care. This year’s ranking analysed the brands in the 12 months to November 2017.

Brand Footprint is set apart from other brand rankings by providing information on real consumer behaviour rather than attitude. Consumer Reach Points (CRPs) from the basis of the ranking. The metric measures how many households around the world are buying a brand (penetration) and how often (frequency).

Key industries of Hanoi enjoy good growth in five months

Some key industries of Hanoi have posted good economic growth since the beginning of 2018, contributing to a year-on-year rise of 7.8 percent in the local index of industrial production (IIP) between January and May.

In the five months, industrial production value approximated 223.75 trillion VND (nearly 9.79 billion USD), up 9.1 percent from the same period last year.

Notably, the mining industry expanded by 7.5 percent while processing and manufacturing rose 7.9 percent. The production and distribution of electricity and gas and the water supply and waste and wastewater treatment sector respectively grew by 6.9 percent and 7.1 percent, according to the municipal Statistics Office.

In May alone, Hanoi’s IIP increased by 5.6 percent from April and 11.3 percent from a year earlier.

Industrial production value this month is estimated at nearly 46.75 trillion VND (more than 2 billion USD), up 5.9 percent month on month and 12.6 percent year on year.

The Statistics Office said businesses in the capital continued to recruit new employees in May. 

Compared to the same period last year, labour recruitment in May grew 9.6 percent in foreign invested companies and 3.2 percent in State-owned enterprises. Meanwhile, it fell 0.7 percent in non-State firms.

Supporting firms key to autos

The development of Viet Nam’s automobile industry depends a great deal on its supporting industry, which needs to be developed comprehensively, experts have said.

Speaking at a conference in HCM City on Thursday, Pham Tuan Anh, deputy director of the Ministry of Industry and Trade’s industrial department, said there are only around 300 manufacturers of car components out of the 12,000 supporting industry companies in Viet Nam.

Around 90 per cent of the 300 are foreign businesses, he said.

In the case of large vehicles, they are able to meet around 55 per cent of the component demand, but manufacturers of smaller cars have to rely heavily on part imports since they can only source around 10 per cent locally, he said.

The domestic companies mostly make simple components such as doors, wheels and wires, yet they are modest in terms of quality and variety and use inefficient machinery and production techniques, he said.

With their production size often being small, their prices are not very competitive either and so car manufacturers usually opt to buy from foreign-owned companies or import, he said.

Since the demand for vehicles in Viet Nam is still relatively low, large international components makers are not interested in investing in the country, he said.

Dr Truong Thi Chi Binh, director of the Supporting Industry Enterprises Development Centre, said with components costing more in Viet Nam, the cost of manufacturing vehicles is higher here than in most other ASEAN member countries.

The industry aims by 2020 to meet 35 per cent of local demand and achieve exports of US$4 billion. By 2035 it hopes to increase them to 65 per cent and $10 billion.

The speakers at the conference said the Government should focus on supporting these companies, help them invest in better technologies, provide more training and encourage them to acquire international quality certificates.

It should also help component and auto manufacturers link up and form partnerships, they said.

“The supporting industry is very important for the development of the automobile industry, and there is a lot more that the Government can do to facilitate their growth,” Phan Dang Tuat of the Ministry of Industry and Trade said.

HCM City to hold Industry and Trade Promotion Fair
     
The 2018 HCM City Industry and Trade Promotion Fair will be held from July 24 to 29 at District 11’s Phu Tho Stadium, according to the city’s Department of Industry and Trade.

The fair aims to attract 300 businesses and 450 booths, and will organise several events to help businesses promote their brands and products.

A wide range of businesses will take part in the event, including companies in food and beverages, clothing, technologies, shoes, accessories and supporting industries.

The fair plays an important role in improving firms’ competitiveness and brand promotion and the reputation of Vietnamese goods, according to Hoang Tho Vuong, director of the HCM City Centre for Supporting Industries Development.

The fair also helps businesses find potential partners and increase exports.

Vinafood 2 deep in losses after successful IPO

The outstanding loans of Vinafood 2 (Southern Food Corporation) from banks stood at nearly VND2.3 trillion ($101.25 million) at the end of 2017, including VND1.186 trillion ($52.25 million) owed by the parent company and VND1.113 trillion ($49 million) by the subsidiaries.

The parent company Vinafood 2 (code: VSF) conducted its initial public offering (IPO) successfully in last March, selling all 23 per cent of the total capital to investors to gain VND1.159 trillion ($51 million) in proceeds, and listed on UPCOM since April 23.

However, the business results of the company are not good as it announced a big loss of VND196 billion ($8.6 million), including VND146 billion from the corporation office, while the equitisation plan was meant to put the corporation VND209 billion ($9.2 million) in the green.

For the first time, in 2017 Vinafood 2 lost its leading position and moved to the third rank in rice exports with the volume of 230,000 tonnes, while the country’s rice exports rose by 29 per cent to 6.6 million tonnes. Vinafood 2 faced many difficulties in developing export and domestic markets, which resulted in poor sales. Sales during the year reached only VND17.546 trillion ($773 million), equivalent to 93 per cent of the annual target.

In addition to the output markets, loans and debts were also big problems affecting the business results of Vinafood 2 last year. CafeF.vn claimed that the outstanding loans of Vinafood 2 from banks was nearly VND2.3 trillion ($101.25 million) at the end of 2017, including VND1.186 trillion ($52.25 million) held by the corporation office and VND1.113 trillion ($49 million) by the subsidiaries.

The outstanding loans of the subsidiary Tra Vinh Food Company were VND367.4 billion ($16.2 million) and could not pay its loans. Thus, the bank also automatically deducted VND258.6 billion ($11.4 million) from the deposit account of Vinafood 2 to recover the debts and overdue interest of Tra Vinh Food Company. This is really a big amount and significantly affected Vinafood 2’s business performance last year.

According to Vinafood 2's financial statement in the first half of 2017, accumulated losses were more than VND900 billion ($39.6 million), liabilities were VND4.914 trillion ($216.5 million), while equity was VND3.885 trillion ($171 million). Thereby, the corporation was still able to balance its finances.

However, the sharp decrease in market share and business activities of its store chain are bad signs. According to the reports of the 12 subsidiaries operating 84 convenient shops, their sales in 2017 were VND2.28 trillion ($100 million), but profit was negative VND1.9 billion ($83,620), including VND5.9 billion ($260,000) of actual profit at eight subsidiaries and VND7.8 billion ($343,620) in losses at four.

This was because inventory in 2016 was too much, increasing production costs. Moreover, Vinafood 2’s subsidiaries failed to follow market trends and only depended on the Chinese market without developing other export markets. Sales volume was low, leading to high costs and losses.

Despite the losses in 2017, Vinafood 2 still set out rather high business targets for 2018, including a 15 per cent rise in sales revenue to VND20.156 trillion ($888 million) and profit of VND240 billion ($10.6 million). This plan is based on the assumption that the amount of export consignment will quintuple.

Achieving the 2018 plan set forth depends on many factors, including the performance of subsidiaries and reducing losses or interest costs for Vinafood II.

Mobile World denies closing thegioididong stores

Mobile World Group (MWG)’s announcement of closing of seven mobile stores this year took the market by surprise as this was the first time Mobile World had reneged on its aggressive expansion strategy. However, a company representative clarified that the affected units were transferred to the Dien May Xanh chain instead of being closed.

vnreview.vn quoted Dang Thanh Phong, Mobile World’s marketing and communications director , said: “We transferred some thegioididong stores to Dien May Xanh to expand the household electronic appliance business (refrigerators, washing machines, air conditioners). No shops have been closed by MWG.”

The firm’s financial report stated that during this year’s first four months, the number of thegioididong stores dropped from 1,072 to 1,065. The total revenue from the chain of mobile stores was VND12.4 trillion ($546.2 million), slightly up 5 per cent on-year.

According to the firm's website, MWG has a total of 168 mobile phone shops in Hanoi and 232 in Ho Chi Minh City. In fact, the number of stores is high in certain areas that it may lead to competition between thegioididong stores.

vnreview.vn also stated that MWG’s stores are crowding the streets in large cities, with three stores located on the same 3-kilometre street. According to the Ho Chi Minh City Stock Exchange (HSX) the firm’s huge branch network and its unreasonable distribution lead to competition between its own mobile stores. Therefore, the firm needs to restructure the system of its thegioididong stores and temporarily halted opening more stores in late last year.

According to HSX, the average revenue growth of each thegioididong store is nearly 0 per cent because the firm has to spend a lot on operating over 1,000 stores in prime locations of large cities.

Additionally, as e-commerce is becoming more developed in Vietnam with many popular names, such as Tiki, Lazada, and Shopee, the maintenance of traditional stores like Mobile World’s stores are becoming increasingly felt.

Reports of AC Nielsen and GFK identified that the market has reached the saturation point and will gradually go down. This January, the sales of the Mobile World's retail chain fell by 11 per cent on-year.

Parallel with the decreasing sales of its mobile phone retail chain, according to enternews.vn, MWG has turned to focus on the development of Dien May Xanh chain specialising in sales electric appliances, and Bach Hoa Xanh - the firm's convenience stores. 

“We want to develop these two chains into major business segments with their performance doubling that of the MWG chain. If it is successful, sales of the group will surpass the target of VND86.4 trillion ($3.8 billion),” confirmed the leaders of MWG earlier this year.

However, this seems a far off ambition as the Bach Hoa Xanh chain is currently deep in red. At the annual general shareholders’ meeting, MWG’s chairman Nguyen Duc Tai indentified that developing the Bach Hoa Xanh chain would be a bit early as the brand is not strong enough.Thereby, the store opening target in 2018 was revised to 500 stores instead of the initial target of 1,000 stores.

At the end of the first quarter, total pre-tax losses, loan interest, and depreciation of Bach Hoa Xanh amounted to VND60 billion ($2.64 million) and three shops were closed. This was the major reason behind MWG shares falling by 20 per cent since the beginning of the year.

Industry insiders said that MWG’s decision to develop Bach Hoa Xanh is a “step back.” It may be a mistake to apply Dien May Xanh's development strategy to Bach Hoa Xanh.

Mobile World Group operates under two distribution formats, including the “thegioididong” which means Mobile World, and “dienmay” which means consumer electronics. Thegioididong.com currently distributes digital mobile devices (mobile phones, tablets, laptops, and accessories) in all 63 cities and provinces of Vietnam. The first store was launched in 2004.

Dienmay specialises in the distribution of consumer electronics and digital products. On May 4, 2015, dienmay.com has changed its name to DIEN MAY XANH with 600 stores in its distribution network across 63 cities and provinces.

As MWG's business has been pulled down by Bach Hoa Xanh, on May 25, the two sisters of Nguyen Duc Tai, chairman of MWG, surprised the market by registering to sell a large number of MWG stocks for "personal purposes." Since focusing on Bach Hoa Xanh, MWG's stock price fell from VND130,000-140,000 ($5.7-6.1) to VND100,000 ($4.4) on May 24.

Ministry of Construction to divest from Viglacera

The Ministry of Construction (MoC)’s divestment from Viglacera Corporation JSC may be an opportunity for strategic shareholder VinaCapital to increase its holding in the leading company of the building materials industry?

MoC recently released its approved plans to divest 80.57 million shares, equaling 17.97 per cent of Viglacera’s charter capital, in the first phase. The offered stake makes up 33 per cent of MoC’s holding in the company. The sale will be conducted through the order matching method on the Hanoi Stock Exchange, expected to take place in two month's time.

After the sale, MoC will decrease its holdings in Viglacera to 161.4 million shares, equaling 36 per cent of the charter capital of the corporation.

The selling price will be equal to the ceiling price determined on the transaction session on the same date, but not less than VND26,100 per share or the average reference price of 30 consecutive trading days on the stock market prior to the date the information on the divestment is disclosed.

Previously, at the September 14, 2017 transaction, five investment funds under VinaCapital management, namely VOF Investment Ltd., Asia Value Investment Ltd., Vietnam Investment Ltd., Vietnam Investment Property Holdings Ltd., and Vietnam Ventures Ltd., purchased a total of five million shares, raising VincaCapital’s ownership in Viglacera from 16.36 to roughly 21.36 million shares, making it a strategic shareholder.

Thus, MoC’s divestment is an opportunity for VinaCapital to buy more shares to increase its holding in Viglacera if it has ambitions to do so.

Most recently, Viglacera and Kaisheng Group signed an agreement to establish Yen Phong Ultra-Clear Glass Co., Ltd. to develop an ultra-clear laminated glass factory with the daily capacity of 650 tonnes in the expanded Yen Phong Industrial Zone in the northern province of Bac Ninh. The construction of the factory is expected to kick off in the third quarter of this year and be finished by 2020.

Once completed, it will be the first ultra-clear laminated glass factory in the country. Its products will be used to manufacture solar panels.

Besides, Viglacera and its partners are accelerating the construction of a $106.4-million ultra-clear glass factory located in the southern province of Ba Ria-Vung Tau so that the factory can go into pilot operation in the second quarter of 2019.

In early May, Viglacera and Prodimat Corporation of Cuban Construction Material Company (Geicon) of the Cuban Ministry of Construction signed a contract to launch the 50/50 SANVIG joint venture manufacturing building materials.

The project has a total investment of $59.7 million and charter capital of $39.86 million. In the first phase, the joint venture will focus on renovating and upgrading its two existing ceramic tile factories to improve productivity, quality, and change product design in order to meet the designed capacity of three million square metres of tiles and 150 thousand sanitary ware products per year.

Then, in the second phase, the joint venture will invest in a brick factory with a capacity of three million sq.m and a sanitary ware factory with a capacity of 500,000 products per year.

Standard Chartered Vietnam asks Quang Minh Corporation to pay $4 million debt

At the first instance hearing, the representative of Standard Chartered Vietnam asked Quang Minh Corporation JSC (QMC) to pay its debts of VND89.9 billion ($4 million), and Standard Chartered Mauritius also asked for the repayment of over VND38 billion ($1.7 million).

In 2013 Standard Chartered Vietnam and Standard Chartered Mauritius granted letters of short-term credit for Quang Minh Corporation JSC (at No.1 Thanh Nien street, Ba Dinh district, Hanoi) limited at $20 million.

Then they signed contracts of mortgaging goods, receivables, insurance contracts, as well as all of QMC’s accounts and deposits in banks to secure the loans. Standard Chartered Vietnam lent VND60.9 billion ($2.7 million) at the annual rate of 7.6 per cent first (later adjusted to 8.3 per cent), and an additional VND5.1 billion ($225,000). These debts expired in April 2015, but QMC has only paid VND290 million ($12,775) to date.

In 2015, Standard Chartered Mauritius also gave $5.1 million and $0.522 million to QMC. These two debts expired in early 2015 but QMC has only paid $4.2 million, while $1.3 million remains left to be paid.

At the first instance hearing, the representative of Standard Chartered Vietnam asked QMC to pay VND89.9 billion ($4 million) to offset its debt and interests. The bank did not wish to take collateral to recover the loans.

The representative of QMC acknowledged the loan Standard Chartered Vietnam claimed. However, the corporation has been facing many difficulties and is unable to pay the debts. QMC asked the bank for a grace period to collect the money, but could not give a timeline of payment, and affirmed that the company’s situation is still very difficult.

The court identified that the letter of credit is in line with regulations, the agreements are voluntary and valid for all parties, thus accepted Standard Chartered’s lawsuit.

QMC will have to return VND89.9 billion ($4 million) to repay the original debt and interest to Standard Chartered Vietnam and VND38.4 billion ($1.7 million) to Standard Chartered Mauritius. QMC has to pay over VND128 billion ($5.7 million) in total.

Quang Minh Corporation JSC produces agricultural products, feed for husbandry, as well as processes and trades in cooking oil with the brands Mr Bean, OilLa, and Soon Soon.

The corporation had the charter capital of VND989 billion ($43.6 million) in 2010 and produced several accomplishments as one of the 500 biggest businesses in Vietnam. Some banks used to grant letters of credit limited at trillions of dongs (around half a hundred million dollars) for QMC’s large projects.

However, QMC ran on a rough patch in 2015 after being named on the list of tax debtors. The corporation closed its website and kept quiet on the market since then.

Related to the unrecovered outstanding loans of Standard Chartered Bank, Binh Dinh Sugar (Bisuco) may also not be able to meet its debt obligations. This company is carrying VND800 billion ($35.56 million) in unsettled accounts to creditors, local farmers, its employees, and local tax authorities.

A couple of years ago, Standard Chartered Bank was reported by local media to have foreclosed a factory mortgaged by Bisuco, following the company’s failure to keep up with its loan payments.

MoT conclusion: loose management and advance payments at ACV

A series of shortcomings in airport infrastructure projects developed by ACV (Airports Corporation of Vietnam) has just been uncovered by the Ministry of Transport's (MoT) Inspectorate.

The Ministry of Transport (MoT) has just completed the conclusions of its ten-month inspection on the mobilisation, management, and usage of capital in ACV. During the inspection all procedures of developing investment and construction projects were reduced since ACV’s establishment in 2012 through the merger of Northern, Central, and Southern Airports Corporation of Vietnam.

ACV manages projects using the greatest volume of state capital in the transport sector. Between 2012 and 2016, this corporation developed 85 projects which exceeded the VND15 billion ($0.66 million) of investment value each. The total investment of these projects was over VND42.14 trillion ($1.86 billion), including VND1.42 trillion ($62.6 million) from public capital, VND4.222 trillion ($186 million) from government bonds, VND12.443 trillion ($548.2 million) in ODA capital, and over VND24 trillion ($1.06 billion) from ACV’s counterpart fund.

In addition to reviewing the management of basic construction investment, the Inspectorate of MoT also highlighted ten projects and outlined particular conclusions for each. These are:

The 64-page inspection conclusion (No. 5045/KL-BGTVT) provides a list of shortcomings in the management of investment at airports developed by ACV. The first issue is the large number of projects that have been completed for a long time but have yet to finalise the balance sheet.

44 of the 85 projects with the total investment value of VND30.4 trillion ($1.34 billion) and total execution value of VND25.298 trillion ($1.11 billion), and total disbursement value of VND24.94 trillion ($1.1 billion).

Beside the normal reasons for slow settlement that every developer usually faces, some projects of ACV could not even complete basic construction procedures for a variety of unique reasons.

According to MoT’s Inspectorate, the firm was loose in paying in advance for building materials, so the advance payments exceeded the contractual value.

Also, the Inspectorate has mentioned another issue occurring at least three times in ACV’s investment management. Accordingly, ACV is a joint stock company, but state-owned capital captures 95.4 per cent of its charter capital. This means ACV’s investment capital is mainly state capital.

The Inspectorate said that ACV is an investment decision maker, the developer, and the recipient of the projects. Thus may not be completely objective throughout the management of construction investment.

BMW recall of 470 cars in Vietnam may be due to fire risk

German car manufacturer BMW’s sudden recall of 470 cars in Vietnam may be related to the car giant’s re-exporting of 88,000 vehicles in the UK due to fire risk.

AFP stated that on May 18, BMW expanded a British safety recall for another 88,000 vehicles because of a fire risk.

At the same time, BMW Asia Group made a press statement announcing to re-export 470 cars, 106 MINI vehicles, and 55 motorcycles (BMW Motorrad) from Vietnam back to Germany. Accordingly, these vehicles are still in containers at VICT (Ho Chi Minh City) and Cai Mep Port (Ba Ria-Vung Tau).

“The Vietnamese General Department of Customs approved BMW and BMW Asia to re-export these vehicles back to Germany. Currently, we are tightly co-operating with the Ho Chi Minh City Customs and the Ba Ria-Vung Tau Customs to complete procedures to recall these BMW vehicles,” stated BMW Asia’ press release.

However, the press release did not mention the reason of the recall. To clarify this issue, VIR contacted to representative of BMW in Vietnam who refused to immediately answer questions.

According to AFP, last Friday’s press release was BMW’s second press release in two weeks, expanding BMW’s initial recall of 312,000 diesel and petrol vehicles on May 9 due to a risk of the engines cutting out.

BMW will now examine another 88,000 cars, plus 200,000 cars that have already been checked.

“We are taking the opportunity of the existing recall to proactively check for other issues,” BMW’s spokesman added last Friday.

Previously, BBC also stated that BMW is focusing on recalling the BMW 1 Series, the 3 Series, the Z4, and the X1 cars that were produced between March 2007 and August 2011 to check speed brakes.

In 2013, BMW also recalled about 500,000 vehicles in the US, Australia, Canada, and South Africa.

VOF makes loss on newly-bought state-owned firms

VinaCapital’s Vietnam Opportunity Fund seems to have suffered a loss from purchasing a stake in Vietnamese state-owned firms BSR and PV Power after the big firms’ shares fell post-IPO.

In the first quarter of this year, VOF spent $45 million acquiring stakes in Binh Son Refining and Petrochemical Company Limited (BSR) and PetroVietnam Power Corporation (PV Power).

Both BSR and PV Power are large-scale state-owned firms and their initial public offerings (IPOs) broke records on the stock exchanges.

The starting prices for the IPOs were also very high. However, after the successful deals, the share’s value dropped, decreasing the value of VOF’s investment.

Notably, VOF spent approximately $25 million acquiring 10 per cent of BSR at VND22,000 per share.

Factors that made VOF invest approximately $25 million in BSR include the fact that it is the only operating oil refinery in Vietnam, commanding 33 per cent of the market share, with the remaining 67 per cent of refined products being imported.

The refinery business tends to be less affected by oil price volatility than other segments of the oil and gas sector.

Besides, the market cap of the company at the starting price was $2 billion, making it one of the largest companies in Vietnam. More importantly to the investment, the starting price was very attractive, at an estimated 2017 P/E of 5.6x and 2017 EV/EBITDA of 3.8x compared to the current market P/E of 20x.

However, according to the transaction session on May 22, BSR’s share was valued at VND19,700. Thus, VOF has suffered a slight loss.

In PV Power, VOF’s investment was more than $20 million. VOF also saw this as an attractive investment with an estimated P/E of 11.5x at the starting price of VND14,400.

However, after the first transaction session at the price of VND17,800, PV Power’s shares decreased by 25 per cent to VND13,300. Most recently, the share value increased to VND14,000, thanks to the impact of the positive business results of the first quarter.

VIR contacted VinaCapital to clarify information as well as enquire whether VinaCapital, through VOF, will sell its stakes in BSR and PV Power if the share values continue to decrease. However, VinaCapital declined commenting.