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Vietnam Air Petrol Company Limited (Vinapco) on Sunday received some 3,000 cubic meters of jet fuel produced by Dung Quat Oil Refinery to supply Vietnam Airlines and other carriers.
Vinapco general director Tran Huu Phuc told the Daily on the phone on Sunday that the company could have only 3,000 cubic meters of jet fuel as this first batch was the stocks available before the refinery was closed for scheduled maintenance until mid-September this year.
Phuc said the batch of jet fuel was part of the agreement signed last Friday by Vinapco and Binh Son Refining and Petrochemical Co., which operates the refinery in the central province of Quang Ngai.
Phuc did not detail the price of the jet fuel, but Binh Son Refining and Petrochemical Co. said the price was the same to the fuel that Vinapco imported to supply local air carriers as well as foreign airlines active in Vietnam.
Binh Son is expected to provide some 100,000 more cubic meters this year after the refinery’s maintenance. Phuc said Vinapco would be in further negotiations with Binh Son on prices and volumes.
Phuc said as Dung Quat Oil Refinery was able to meet over 30% of Vinapco’s demand for one million cubic meters a year, the company would have to import the balance from Singapore, Thailand and China.
Transport links suspended as storm bears down on southern China
Tropical storm Nock-Ten began bearing down on the southern Chinese rubber-producing island of Hainan on Friday, forcing the cancellation of dozens of flights, ferries and rail services, state media reported.
The storm has killed at least 41 people and caused more than 1 billion pesos (US$23.7 million) in infrastructure and crop damage in the Philippines.
Benito Ramos, executive director of the Philippines National Disaster Risk Reduction and Management Council, said 24 people were unaccounted for, most of them fishermen, in the central Philippines.
The storm is expected to make landfall on Hainan's northeastern coast on Friday evening, and will bring heavy rain to the island, and to neighboring Guangdong and Guangxi, before moving into Vietnam, China's weather bureau said.
At least 14 flights from Hainan's provincial capital Haikou have been cancelled, and the rail-boat ferry service to the mainland has been suspended, the official Xinhua news agency added.
All scenic spots on Hainan, which styles itself as China's answer to Hawaii or Phuket, have been closed for safety reasons, the report said.
Hainan is the country's second biggest natural rubber producer.
Banks flout dollar loan interest cap
Some commercial banks have been increasing the interest rates they offer on US dollar deposits beyond the current ceiling of 2 per cent per year imposed by the State Bank of Viet Nam – with some customers reporting that they have been offered short-term rates of 3-3.5 per cent and even above 4 per cent for larger sums.
Nguyen Bich Van of Nhan Chinh commune in Ha Noi's Thanh Xuan District, intended to deposit US$15,000 and was warmly offered 3 per cent interest by a credit institution on Lang Ha Street. Van eventually negotiated a rate of 3.5 per cent.
"Many depositors have told us that they would withdraw their deposits if we didn't raise the interest rate," said the director of one commercial bank who asked to remain anonymous. "The ceiling rate of 2 per cent is rarely followed."
To hide the unlawful levels of interest, many banks have launched promotion programmes and investment programmes that guarantee the additional payment to the depositor.
"Some banks are trying to call in dollars in anticipation of higher lending demand," said the bank director.
Pham Van Vinh, director of Van An Co Ltd, a water pipe distributors, said US dollar loans were now much cheaper than those in dong. A VND3 trillion ($145.6 million) loan would cost him monthly interest of approximately VND60 million ($2,910), while the interest costs on US dollar loans converted into dong would be only VND19 million ($920).
"Such a difference has been the principal driver in increasingly strong demand for US dollars in recent weeks," Vinh said.
According to State Bank statistics, deposits in foreign currencies have increased by 8.9 per cent since the end of last year, while outstanding loans in foreign currencies have shot up by 22.4 per cent. Private depositors account for 70 per cent of the total foreign currency on hand in commercial banks.
S Africa firms hope to boost co-operation
Over 200 Vietnamese and South African businesses attended the Viet Nam-South Africa business forum on agro-forestry and fisheries, held on Monday in Johannesburg.
Deputy Minister of Agriculture and Rural Development Ho Xuan Hung said at the ceremony that Viet Nam's agro-forestry and fishery exports had experienced a continued rise throughout the the past years which manifests in a total export turnover of over US$16 billion for the first half of this year, with seafood exported to 160 countries and territories world-wide.
Hung described South Africa as a potential market and gateway for Vietnamese commodities to penetrate the African market.
Last year, bilateral trade between the two countries reached almost $650 million, representing a year-on-year rise of 26.7 per cent and a three-fold increase since 2005. In the first half of this year, Viet Nam earned over $750 million from its exports to South Africa, he said.
Mayathula Khoza, head of the Gauteng provincial Agriculture and Rural Development Department, said that Viet Nam's quick transformation from a food-insufficient country into the world's second largest rice exporter was an invaluable lesson for agricultural development of Gauteng and South Africa in general.
She hoped the two countries would further promote economic and trade ties, as well as exchange experience in production and trade, especially in the field of agricultural development. At the event, representatives of businesses from the two countries shared their strengths and fostered co-operation opportunities.
Nghe An reviews slow-moving investment projects
The Nghe An Industrial and Economic Zones Management Board is reviewing the progress of planned projects with a view to revoking licences for those that are moving too slowly.
The management board was striving to improve land use efficiency in the province's industrial and economic zones and boost its investment environment, Phan Xuan Hoa, the board's deputy head, said.
"The board will consider extending the deadline for investors to launch their projects if they have proper reasons for the delays. But we are determined to revoke investment licences of those who have merely appropriated land to transfer to other investors," Hoa said.
Since 2007, the board withdrew investment certificates for 23 slow-moving projects. In 2010, six projects in sectors such as construction materials, plastics, steel and beverages had their licences revoked.
He added that slow-moving projects over the past few years had resulted in numerous land lots lying dormant.
Central Nghe An Province's limited resources could only afford to authorise essential infrastructure projects in the provincial industrial and economic zones, Hoa said.
"Thus, we are making sure there is sufficient cleared land for responsible investors," he said.
The province has eight industrial and economic zones, occupying a total area of 2,860ha, which were given Government permission to be established by 2015.
Three of these zones have attracted 80 projects, including nine that were foreign-invested and worth US$1.9 billion.
Other localities – such as Ha Noi, Bac Giang, Binh Phuoc, Hai Phong, Can Tho, Quang Nam and Hau Giang – have also revoked sluggish projects' investment licences.
Earlier, Dang Huy Dong, deputy Minister of Planning and Investment, said top priority this year would be given to enhancing the supervision of licensed projects.
Insurance sector gets new rules
The Law on Insurance Business was passed by the National Assembly in December 2000 and took effect on April 1, 2001. For the past 10 years, the law has created favourable conditions for the growth and international integration of the Vietnamese insurance industry and established a legal framework to regulate and prevent unfair competition in the insurance field.
However, the law has also demonstrated some unsuitable provisions which need to be addressed to meet the requirements of a rapidly developing insurance market.
For instance, when Viet Nam signed the Bilateral Trade Agreement (BTA) with the US and jointed the World Trade Organisation (WTO) with commitments to opening insurance market, the Ministry of Finance also joined the International Association of Insurance Supervisors (IAIS), requiring the insurance industry to comply with international standards and principles. These commitments and principles needed to be stipulated in the Law on Insurance Business.
Since the passage of the law in 2000, related laws have also been changed, including the Law on Enterprises (passed in 2005) and the Law on Investment (passed in 2005 and replacing the Law on Foreign Investment). As part of a unified legal system, the Law on Insurance Business needs to conform with these laws.
Insurance is a risky and sensitive field. For this reason, the law must also more clearly provide for principles of careful management and enhance oversight by State agencies.
In light of these factors, the National Assembly passed an amended Law on Insurance Business in November 2010. The new law took effect on July 1, 2011. New provisions in the law address such issues as the provision of cross-border insurance services, compulsory reinsurance, and types of insurance products, as well as provisions unifying the law with other relevant Vietnamese laws, including the laws on Enterprises, Investment, Tendering, and Competition.
Under Viet Nam's WTO commitments, Viet Nam is required to allow foreign insurance enterprises to provide cross-border insurance services here. The amended law recognises that right.
In addition to the two types of insurance products provided in the law 2000 – life and non-life insurance – the new law adds health insurance as a distinct category from non-life insurance, consistent with international practice.
In accordance with commitments in the BTA, the amended law removed provisions on compulsory reinsurance to allow insurance companies rights to reinsure with offshore insurance enterprises without reinsuring a part of their covered liability with domestic reinsurance entities. However, in order to ensure the financial stability of the insurance market, there is a new provision that foreign insurance entities accepting reinsurance must hold a credit rating from an international credit evaluation enterprise approved by the Ministry of Finance.
Addressing the business forms under which foreign insurance enterprises can operate in Viet Nam, foreign insurance companies and foreign insurance brokerage companies can operate under the forms of limited liability companies, branches of foreign non-life insurance companies, instead of joint venture enterprise and enterprise with 100 per cent foreign capital forms as before. Article 10 of the amended law also provides requirements for complying with the laws on Tendering and Competition.
The new law promises to create a more open competitive environment and foster sustainable development of the Vietnamese insurance market, although implementation of many of its provisions continue to await detailed regulations from a guiding decree whose draft is undergoing a period of public comment.
Singapore firms to boost investment in Da Nang
Singaporean companies wish to make long-term investments in the coastal city of Da Nang, announced a representative of International Enterprise Singapore, the agency driving this country's external economy.
Reportedly, the Singapore Cruise Centre and the Da Nang Port are taking steps to build a terminal for tourist ships in the Tien Sa Port.
The Da Nang People's Committee has also invited Singaporean companies to establish an industrial zone of their own on 1,200 ha in the city, based on existing infrastructure in the Da Nang Hi-tech Zone.
Military Bank, PTI win prestigious ASEAN awards
Military Bank (MB) was given the title "ASEAN famous brand name" and Post-Telecommunication JS Insurance Company was awarded "Outstanding ASEAN Enterprises" in Vientiane, Laos last Saturday.
The annual "ASEAN famous brand name" award aims to honour innovative entrepreneurs who have produced high-quality products and contributed to economic development in the region.
"Outstanding ASEAN Enterprises" is awarded to a business that has performed well and has made remarkable social contributions.
Payment service ties up with Malaysian firm
A centralised authentication and payment centre will be soon set up following the signing of a Memorandum of Understanding between VietUnion Online Services Corporation, the owner of e-payment intermediary service Payoo, and Secure Metric, a Malaysian provider of digital security technologies.
Under the MoU signed in Ha Noi on Monday, the two sides will jointly develop a safe and convenient transaction system that will act as a single authentication and payment platform for e-commerce, e-bill, e-government, e-tax, e-banking and others in Viet Nam.
This system will also provide solutions for online public services at the fourth level, the highest in the e-government system, including solutions for tax declaration, payment and refund online.
Brokerages adopt new survival strategies
Securities companies have been opening increased numbers of local branches and transaction offices despite a declining stock market and a lack of profits.
Around 61 out of 105 securities firms have posted accumulated second quarter losses, according to the State Securities Commission. Around 20 firms, including Thang Long Securities, ACB Securities, Sacombank Securities, SME Securities and Wall Street Securities, closed their local branches due to shrinking market shares and the loss of broker and customer accounts.
Some companies did manage some profits. They continued efforts in increasing their market shares while promoting investment in preparation for a new market rally.
Saigon Securities Inc suffered losses during the first quarter and yet managed to crawl back to No 1 position in terms of its brokerage market share. The company is set to focus on brokerage services by opening two more transaction offices in Ha Noi and a new branch in HCM City.
The Kim Eng Viet Nam Securities Co opened three more branches in Da Nang City, Can Tho and Vung Tau, bringing its total number of offices to nine.
"We see great potential in the Vietnamese stock market. We are not dealing in an adventurous paradox, but in long-term competitive strategy," company CEO, Le Minh Tam, said.
In order to expand operations without risk, Tam suggested securities firms focus on core functions while letting banks manage their customer accounts instead.
Expanding the network of branches and transaction offices was an effective way of attracting more customers, since only a few securities companies operated in key economic areas such as Da Nang City, Can Tho and Vung Tau, he said.
Kim Eng was one of the few securities companies to supply investors with information via a series of seminars on economy, corporate management and market trends.
Most other securities firms usually only managed to produce superficial analysis reports, according to Le Hai Tra, a board member of the HCM Stock Exchange, who responded to a Dien dan Doanh nghiep (Enterprises Forum) interview.
Dearth of loans to knee-cap social housing
According to the Ministry of Construction (MoC), of the 300 registered projects for building residential areas for lowly-paid people, just five projects obtained loans worth VND740.3 billion ($35.7 million).
Viglacera, developer of a low-end residential complex in Hanoi’s Gia Lam district Dang Xa new urban area, reportedly got VND391.3 billion ($19 million) in preferred loans from the Vietnam Development Bank (VDB) for executing the project. However, it could only disburse VND10 billion ($48,000) from the loans.
“We completed building three floors with investment costs of over VND200 billion ($9.6 million), meanwhile just around VND10 billion was disbursed from VDB’s loan. Low capital disbursement was due to mechanism-related problems. Besides, as Hanoi authorities did not grant land use right certificates to social housing projects, developers could not mortgage the project’s land at banks to borrow loans,” said a Viglacera representative.
Another developer, the Vietnam Housing and Urban Development Holding Corporation (HUD), has a development pipeline of scores of social housing projects covering 400,000 square metres with 5,000 housing units at Thanh Lam-Dai Thinh 2 residential complex in Hanoi’s Me Linh area, Dang Xa complex in Gia Lam district, and many other low-end residential blocks across the country.
According to HUD’s general director Nguyen Dang Nam, the largest hurdle to social housing developers was getting access to preferred capital sources as regulated by the government. In his mind, there were a bunch of factors why it was so difficult to be eligible for VDB preferred loans. Some of them were lack of collateral or legal procedure entanglements.
To help address the capital dilemma at social housing projects, the MoC’s Housing and Property Market Management Department has proposed two schemes for submission to the MoC.
In the first scheme, the government helps subsidise 4 per cent of the loan interest earmarked for social housing projects in two years with capital taken from the national foreign currency reserves with support amount of around VND717 billion ($34.6 million).
Besides, trusted local banks will raise VND7.6 trillion ($367 million) for social housing projects in addition to developers’ capital of VND1.3 trillion ($62.8 million).
In the second scheme, social housing projects are eligible for specific credit packages with payment terms of at most 10 years.
In respect to housing projects to lease industrial zone workers and students the loan duration will be 15 years at most, with the lending terms of each project to be defined by commercial banks and fund management councils.
Of 110 registered housing projects for industrial zone workers for 2009-2015 worth VND25.554 trillion ($1.23 billion) only 24 projects got off the ground with a total capitalisation of VND2.6 trillion ($125.6 million).
Of 189 registered housing projects worth VND28.550 trillion ($1.37 billion) for low-paid people from 2009-2015, just 37 projects began construction valued at VND3.6 trillion ($14 million).
Firms want higher salt imports
Enterprises have called for an increase in salt imports in order to maintain production output.
However, the Ministry of Industry and Trade, after considering a Ministry of Agriculture and Rural Development proposal, has decided to halt salt imports temporarily in order to adjust domestic salt prices.
Halting salt imports is expected to encourage enterprises to use domestic salt while pushing up domestic prices.
The ministry's suspension measures have been met by negative responses however.
"Halting salt imports might put enterprises at risk of decreased production due to a shortage in material," said the Director of the South Basic Chemical Company, Le Van Hung.
Hung added that domestic salt was of such low quality that it was unable to meet the quality demands associated with industrial production.
Salt import quotas, granted to the company to date, have only been capable of meeting 33 per cent of the total yearly demand, he said, adding that although his company has approached local salt companies in the past, it has received little in reply.
Director of the Viet Tri Chemical Company, Dao Quang Tuyen, agreed with Hung regarding the low quality of domestic salt, which makes importing salt a necessity.
The Vedan Company, which produces seasoning, has also petitioned for permission to import salt in order to meet its 78,000 tonne demand for the rest of the year.
Domestic salt, dependent on weather and outdated technology, failed in successfully servicing production, said the Vice Director of the Ministry of Industry and Trade's Chemical Department, Luu Hoang Ngoc.
A shortage in high quality salt has raised the demand for salt imports, Ngoc confirmed, adding that the ministry has only allowed the import of 100,000 tonnes of salt for industrial production purposes and 2,000 tonnes for medical use this year.
To date, half of salt import quotas have been granted already, while granting the rest may be suspended to the end of this month at least, according to the Director of the Chemical Department, Phung Ha.
"Improving the quality of domestic salt would be of huge advantage in sating local demand," Ha emphasised, adding that the ministry has additionally encouraged foreign investment in domestic salt production for industrial purposes.
Domestic salt output reached 543,000 tonnes during the first half of the year, 114,000 tonnes used in industrial production, 46 per cent of which is still in stock, according to a Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production report.
The suspension of salt imports has helped increase salt prices by VND200 – 300 (US$0.01 – 0.015) per kilogram, which is currently fluctuating from VND4,000 ($0.19) to VND5,000 ($0.24) per kilogram, double that of the same period last year.
According to the Ministry of Trade and Industry, the country's estimated demand for salt for the whole year is set to reach 1.35 million tonne while the estimated domestic output has been set at nearly 1 millions tonnes.
Dubai investor ready to flex its muscles
Concerns about delays in the dredging of the Soai Rap channel in Ho Chi Minh City have been raised by investors in the Saigon Premier Container Terminal project.
The project is backed by Dubai-based DP World and Tan Thuan Industrial Promotion Company (IPC).
William Khoury, CEO and general director of the Saigon Premier Container Terminal (SPCT) joint venture project told VIR the firm was concerned that the dredging of Soai Rap channel in Ho Chi Minh City had been delayed for so many years and that this had negatively impacted investment in terminals and other projects in this area.
“I understand the people’s committee of Ho Chi Minh City is further evaluating other ways to make this project a reality, including legal, technical and financial concerns. However, every day that passes brings more uncertainty to the actual and future investors of the interested areas for development,” Khoury said.
“Even though we understand we own a good project, and we studied it very carefully before deciding to invest in this project, with the current delay of the channel, we still are operating below capacity,” said the SPCT CEO, adding that SPCT was looking at other ways to expand its investment portfolio to hit its business targets.
Lack of investment capital was the main reason for the delay, according to Tran The Ky, deputy director of Ho Chi Minh City’s Transportation Department.
The dredging of Ho Chi Minh City’s Soai Rap channel was first mooted in the early 1990s when the city recognised the potential of dredging in terms of supporting trade and generating revenues. The city then mandated IPC to invest in the project and dredge the Soai Rap channel.
In January 2008, Vinamarine officially opened the Soai Rap channel for vessels up to 15,000 dead weight tonnage (dwt). In November 2008, the Ministry of Transport approved phase 2 dredging to 12 metres for 50,000 dwt vessels.
The terminal then was inaugurated and put into operation for smaller vessels in January 2010, along with a dredging plan.
But there has been no further progress. IPC recently withdrew from the dredging plan and it was transferred to the Ho Chi Minh City’s Transportation Department, which is now raising funds and reopening the dredging plan’s bidding process.
Ky confirmed that the city’s people’s committee was in discussions with the Ministry of Finance as it sought investment capital for dredging plan. One possible solution was the use of overseas development assistance for continuing implementation of this plan. The dredging of Soai Rap channel is a key project for Ho Chi Minh City in its bid to ensure that large ships can access Hiep Phuoc port. Soai Rap channel is the shortest and widest gateway between the East Sea and Ho Chi Minh’s ports.
Honeywell wins $3 million assignment to automate offshore gas platforms in Vietnam
Honeywell (NYSE:HON) announced that it has been engaged by PetroVietnam Technical Services Corporation (PTSC) and the Bien Dong Petroleum Operating Company (BDPOC) to supply an integrated process control system for their new central processing platform currently under construction in Vietnam southern.
When fully operational by the end of 2012, the platform is expected to contribute significantly to meet Vietnam’s increased gas demands by providing two billion cubic meters of gasoline each year and up to 20,000 barrels of condensate daily. BDPOC is a subsidiary of state-run Vietnam Oil and Gas Group (PetroVietnam).
Honeywell Process Solutions (HPS) will implement its award-winning Experion® Process Knowledge System (PKS) with C300 Controller and Foundation Fieldbus capabilities to fully automate the facility.
Safety Manager will also be installed to improve process-safeguarding protocols, such as emergency shutdowns, fire and gas monitoring, and critical application control. By increasing efficiency and reducing downtime, the platform should be able to reach its optimal production volumes.
“In looking for the best automation system, we knew it was important to look not just at cost-effectiveness, but also the best technology that can survive a really tough environment where it is literally exposed to the elements,” said Phan Thanh Tung, PTSC MC director.
“HPS’ solution offered us the perfect partnership of economy and reliability while positioning us favorably for future expansion and development efforts because we’ll be building on excellence.”
“Given Vietnam’s rising gas demand, the country’s oil producers appreciate the importance of enhanced energy efficiency,” said Kelvin Tam, sales manager, Honeywell Process Solutions.
“Using HPS’ technology, BDPOC's gasoline production and storage capacities can be improved and at the same time they should save quite a bit on maintenance costs.”
Nghi Son refinery getting breathing space
The $6.2 billion Nghi Son petroleum refinery last week received a two-month extension to negotiate a key contract.
Previously, refinery investor PetroVietnam risked being forced to reopen the engineering, procurement and construction (EPC) contract if a winning bidder could not be found before July 12.
PetroVietnam general director Phung Dinh Thuc said negotiations had taken longer than expected, because it was the biggest EPC contract to be negotiated in Vietnam’s petroleum industry.
Thuc strongly emphasised the participation of Kuwait Petroleum International, as Kuwait would provide crude oil to the refinery.
Thuc said PetroVietnam and proposed partners were parallel asking for Vietnamese government guarantee and negotiating with capital investment donors.
Thuc hoped that the refinery could start construction within 2011’s third quarter.
PetroVietnam initially planned to sign off on the EPC contract in the second quarter of this year, but failed to find a suitable partner.
It is now conducting negotiations with a consortium led by Japanese JGC Corporation, Japanese Chiyoda Corporation, French Technip SA, Korean SK Engineering and GS Engineering.
The major factor hindering the outcome was that partners were still waiting for more favourable conditions from the government, according to industry experts.
Thanh Hoa province’s $6.2 billion Nghi Son refinery will be Vietnam’s second refinery and the first with involvement of foreign partners. It is expected to go live in 2014.
PetroVietnam holds a 25.1 per cent stake in the project, while Kuwait Petroleum International has 35.1 per cent, Japan’s Idemitsu Kosan 35.1 per cent interest and Mitsui Chemicals 4.7 per cent.
When finished, the project will have a design capacity of 10 million tonnes of crude oil a year, or 200,000 barrels a day, 1.5 times more than the capacity of the existing Dung Quat oil refinery.
Petrolimex ‘suddenly’ makes profit prior to IPO
In its latest financial report, the Vietnam National Petroleum Corporation, or Petrolimex, posted a whopping profit of VND913 billion ($46.555 million) in 2008, taking the public by surprise as it was also in 2008 that the giant state firm reported a loss of over VND10 billion.
The sudden profits make one curious as the state-owned corporation is set for an IPO (Initial Public Offering) in the next 10 days. In the past, its loss-making track records helped strengthen its plea for state subsidies and price hikes.
Now, Petrolimex’s chairman cum CEO Bui Ngoc Bao told Tuoi Tre that it switched from losses to profits due to different calculations.
In 2008, the global fuel prices hit record high, resulting in losses for all domestic petrol wholesalers, he said.
The government then set aside VND1.4 trillion to make up for the losses borne by petrol companies which were to receive VND1,000 on every gasoline liter sold.
“[In this new report] we do not count the losses that have been made up by the government [via subsidy policy], hence profits in the new financial report,” Bao explained.
He also admitted that Petrolimex incurred losses in the first five months of this year, and earned profits between June and mid July.
Petrolimex has foreseen losses in the upcoming months until September but the government would cover the losses of VND1.2 trillion in the first five months of this year since Petrolimex has joined in the fuel price stabilisation program, he said.
In an introduction about Petrolimex’s IPO in Ho Chi Minh City on July 14, Bao said the firm expected its pre-tax profit to be VND648.5 billion in the fourth quarter this year and VND2.68 trillion in 2012.
Bao said this prediction was made in line with the Decree No.84, which stipulates that the petrol market would be managed under market principles as asserted by the government and the petrol wholesalers could dictate retail prices.
“We base on the sales, annual growth rate and the required profit of VND300 per liter to forecast that profit,” he said.
As scheduled, Petrolimex will launch its IPO on July 28 at the Hanoi Stock Exchange, a move that marks the first step of its equitisation scheme and restructuring process as approved by the Prime Minister in early June.
Petrolimex plans to auction more than 27.4 million shares to the public with an initial price of VND15,000 per share.
Petrolimex is Vietnam’s largest fuel distributor, which accounts for 55 per cent of the country’s fuel distribution network with 42 affiliates, warehouses, over 2,100 retail fuel outlets and over 4,000 agents across the country.
Businesses bemoan loan-shark interest rates
Many businesses are facing exorbitant interest rates from loan sharks having failed to access bank loans.
After a government resolution in February adopting anti-inflation measures, banks have tightened business loans, leaving many facing severe operating capital shortages.
At a recent national meeting of young business associations held in Ho Chi Minh City, chairman of Nam Dinh Province’s Young Business Association Tran Xuan Mai said that his firm, which specialises in producting handicraft products for exports, was in dire need of capital but they were unable to access bank loans.
“Despite winning an export deal worth millions of dollars, we’ve had to take out loans at 9 per cent per month – an annual rate of 108 per cent,” Mai added.
Nguyen Thi Hue from Kon Tum province’s Young Business Association, said urgent measures needed to be adopted to save companies from borrowing from loan sharks, if not, a range of businesses would face bankruptcy.
Chairman of the Vietnam Young Business Association Vo Quoc Thang, was cited by Tuoi Tre as saying that the tightened credit policy for non-production sector (mainly real estate, personal consumer loans and securities) was having a negative impact on as many as 200 industries in the production sector, including those in the fields of glasses, cements, brick production, and wood.
“Many factories have to cut production, or even shut down, and a lot of workers have lost their jobs,” he noted, adding that a remarkable number of Vietnamese companies have had to sell stakes to foreign partners, putting them at risk of being bought out.
In April, the State Bank of Vietnam instructed that all commercial banks needed to restrain credit growth below 20 per cent in an effort to curb inflation. But in the first six months of this year, total credit growth has only topped 7 per cent. Many enterprises are demanding more flexibility, saying that the government should employ market instruments instead of administrative policies.
Huynh Cong Thich from Bac Lieu province’s Young Business Association said: “The highest disparity between deposit and lending interest rates is just 0.3 per cent, therefore the maxim lending interest rate should be 17 - 18 per cent per annum, however, companies are having to pay much higher rates.”
Too many banks have been listed as one of the causes of the increased interest rates, Thich claimed.
According to deputy chairman of Dak Lak Young Business Association Phan Dinh Tue, the central bank should lift the credit ceiling on certain banks to enable effective enterprises to access bank loans to maintain production.
“The central bank should also monitor the bank lending, to make sure that loans go to the production and export sectors,” he said, emphasising the necessity to create an equal business environment for both private and state-owned firms.
Investors look to push up Lach Huyen port
Japanese investors want to expand Lach Huyen port’s investment threshold.
Itochu Corporation, which represents the group of investors including Mitsui O.S.K Lines and Nippon Yussen Kaisha, last week proposed to the Ministry of Planning and Investment (MPI) to invest into berth numbers 3 and 4 at the key northern port project in Haiphong.
The investment expansion proposed by Itochu Corporation, could help shorten the time for the port’s completion which will ease the port congestion in the northern region.
“Lach Huyen seaport is one of our important projects in Vietnam. We are trying our best to implement this project,” said Eizo Kobayashi, chairman of Itochu Corporation.
The port will handle a majority of import and export cargo in the northern key economic zone, able to accommodate vessels up 100,000 dead weight tonnes.
Itochu Corporation, Mitsui O.S.K Lines and Nippon Yussen Kaisha early this year established Molnykit Company to join hands with state-owned Vinalines for developing the first two berths at Lach Huyen.
The Japanese consortium, which got approval from Prime Minister Nguyen Tan Dung to be involved in the port project, hopes to establish a joint venture with Vinalines next month. The project will be formed under public-private partnership (PPP) model.
“We are in the last stage of the project preparation. The port will be operational by 2015,” said Kobayashi.
In upcoming months, the Japanese consortium will discuss the government’s project development, including the government’s guarantees for risks of natural disasters and political issues, for land-use rights certificate and the construction process of official development assistance (ODA) funded works relating to the port.
A senior Itochu Corporation official said, the land-use rights certificate and ensuring the construction process of ODA-funded works were essential to start the construction at the two first berths.
Meanwhile, a preparation for expansion at berths number 3 and 4 was needed, he added.
Foreign players brew up coffee market dominance
Capital shortages are behind local coffee exporters’ less competitiveness to foreign rivals.
Nguyen Minh Duong, vice director of Central Highlands’ Dak Lak province-based, leading coffee exporter Tay Nguyen Coffee Investment Export-Import Company, said Vietnam-based foreign coffee processors had used their big pockets to buy up a large volume of coffee beans from farmers.
“Shortages of coffee beans in the market have squeezed local exporters. Many of them have had to borrow capital outside banks at high lending rates to purchase foreign processors’ coffee stock at higher prices to fulfill their contracts with partners overseas,” Duong said. “But, foreign firms are waiting for more market scarcities to sell the stock and then grind local rivals.”
He said foreign processors could borrow preferential loans from foreign banks at average lending rates of 3-4 per cent, per year. Meanwhile, many local coffee exporters were cash-strapped as they could not seek bank loans.
The National Assembly Economic Committee reported that the commercial banks’ lending rates had been 22 per cent and even 25-27 per cent per year, which had been strangling local enterprises.
At present, exported coffee prices have touched a record level of over VND50 million ($2,500) per tonne averagely, up from $2,400 per tonne early this month. “Thus, local exporters’ losses are bigger than ever. This high price can benefit foreign firms only,” Duong said.
According to Vietnam Coffee and Cocoa Association (Vicofa), local exporters often inked contracts with their overseas partners before they had coffee beans. If the contracts were not fulfilled, local exporters would face punishments from foreign partners and even lose such partners. Moreover, if the situation continued, the local coffee sector might soon be controlled by foreign firms.
According to Vicofa, about 10 foreign coffee firms had established branches in some coffee-planting Central Highlands’ provinces of Dak Lak, Dak Nong, Lam Dong and Gia Lai to purchase 60 per cent of Vietnam’s coffee from farmers.
Nguyen Van Thao, a coffee farmer in Lam Dong province’s Lam Ha district, said thousands of coffee farmers in his locality had sold coffee to dealers who then resold the coffee to foreign firms from India and Singapore at higher prices.
“Farmers like us are interested in high prices only, not who buyers are,” said Thao who owns a two hectare coffee plantation.
“If local firms cannot keep themselves alive until the new coffee crop, which will take place in October, they will go bust soon,” Duong said.
Vietnam exported 913,000 tonnes of coffee beans in the 2011’s first half, with turnover of $1.93 billion, up 38.6 per cent in quantity and more than double in turnover against last year’s corresponding period.
Vietnam, home to 146 coffee exporters, is the world’s largest robusta and second largest arabica coffee exporter. Some 40 per cent of the exporters are foreign ones.
Cashews a hard nut to crack
The Ministry of Agriculture and Rural Development (MARD) has adopted a flexible approach towards stuck cashew import shipments at ports as affected by MARD’s Circular 13/2011/TT-BNNPTNN dated March 16, 2011.
Accordingly, shipments with import contracts signed before July 1, 2011 would go through custom checks if they have food sanitation certificates granted by the food quarantine agencies.
The shipments with import shipments inked after July 1, 2011 could pass custom checks only if their foreign partners domiciled in countries which completed registration procedures with relevant Vietnamese authorities besides meeting quality standards.
According to the Circular 13, from July 1, 2011 all vegetation import shipments must show food sanitation certificates. Besides, the countries with vegetation products exported to Vietnam are obliged to register with Vietnamese agencies. The circular also said from 10 to 100 per cent of import shipments will be checked depending on their risk degree.
In light of the Circular 13, 400 raw cashew import shipments were stuck at ports as they failed to meet requirements.
In this context, on July 5, 2011 the Vietnam Cashews Association (Vinacas) sent a claim to the MARD asking for delay to the new regulations. Vinacas also proposed competent agencies remove raw cashews from the list of vegetation products subject to food sanitation checks since raw cashews are just an input production material for export.
“Delay of the Circular 13’s enforcement or removal of some agricultural products from the list of items subject to quality checks is all impossible,” MARD’s National Agro-Forestry-Fisheries Quality Assurance Department deputy chief Phung Huu Hao said.
According to the MARD, as of July 13 only five countries were accepted to export vegetation products to Vietnam. They were the US, Canada, Australia, Thailand and China. Of them, the US and Thailand had finalised relevant procedures with Vietnam while Australia, Canada and China are in the legal setup stage. The deadline for these three countries to finalise procedures is August 1. After that date, they must strictly abide by Circular 13 regulations.
Around 20 countries currently export vegetation products to Vietnam.
Inflation threat hangs over market
Shares rose on the HCM City Stock Exchange but declined on the Ha Noi market, with trading volumes continuing depressed on both bourses.
On the southern exchange, the VN-Index closed at 415.77, a gain of 0.25 per cent over Friday's close, despite declines in value by a majority of codes.
The value of trades dipped by 8.4 per cent from Friday's level to just VND346.2 billion (US$16.8 million) on a volume of 19.3 million shares.
"This is the second consecutive session that trading volume has held below 20 million shares, and this will likely continue in the next few sessions," said Dang Anh, a securities analyst for a Ha Noi-based financial media company.
Of the 10 leading shares by capitalisation, five advanced, helping lift the VN-Index into positive territory. Real estate developer Vincom (VIC) hit its ceiling price of VND124,000 per share, while insurer Bao Viet Holdings (BVH), software giant FPT, Eximbank (EIB) and Sacombank (STB) all closed up by 0.2-2.9 per cent. STB was the most-active share with around two million traded.
Vietcombank (VCB) also rose to its ceiling price as it reached the ex-date for shareholders to participate in VCB's dividend payout. The dividend will be paid in shares, increasing the overall number of VCB shares listed on the HCM City bourse, currently at around 163.2 million shares.
On the Ha Noi Stock Exchange, the HNX-Index fell by 0.7 per cent yesterday to close at 71.02 points. Market value jumped by 35.6 per cent compared to Friday's session to VND228.8 billion ($11.1 million), while the volume of trades also rose by 51.2 per cent to 24.2 million shares.
"However, this figure was mostly attributable to the bulk of 7.2 million Habubank (HBB) shares traded through the negotiation method," Anh said.
Kim Long Securities Co (KLS) was the most-active share, with 1.4 million shares changing hands. It closed the day down 1.9 per cent, while losers outnumbered gainers overall on the northern bourse by 165-71.
VN pushes domestic products
Deputy Prime Minister Hoang Trung Hai has said that the national programme on promoting domestic goods should combine the power of State offices and private enterprises to create high-quality products with competitive prices.
The Ministry of Industry and Trade has been building the programme in order to reduce industrial imports and stabilise the macro economy.
Last Saturday, Hai said that the ministry should work with other relevant sectors to finish a detailed report on the situation, assessing the demand for imports and the ability of domestic products to replace them.
The ministry would then find suitable solutions and determine policy based on the report, Hai said.
Imported industrial products that were currently most valuable to Viet Nam were goods that have not been produced locally, including machinery, mechanical equipment and computers, the ministry said. In order to become competitive in these areas, the Government must help producers improve their work force, capital, and production technology, the ministry said.
Businesses decry high land-use fees
Businesses are voicing concerns over substantially higher land use fees being applied under a new Government decree that took effect in March.
Government Decree No 121/201/ND-CP, which took effect in early March, pegged land and water surface use rates to market prices.
However, at a meeting held in Ha Noi last week by the Viet Nam Chamber of Industry and Commerce (VCCI), the Ministry of Finance, the Ministry of Natural Resources and Environment and the Government Office, the general director of Hong An Co Ltd, To Ngoc Thach, complained that his company was paying land use fees 18 times higher than last year's.
About 300 participants at the meeting argued that the increases were too dramatic under current economic conditions, with enterprises already struggling against high inflation, high interest costs and a sluggish global economy.
In the city of Hai Phong alone, Thach said, about 23 enterprises were paying significantly higher land use fees under the new regulation. He said businesses needed a more gradual road map of increased costs rather than abrupt increases that threaten to throw them into difficulties.
Truong Thuy Nga, a representative of the State-owned Khuyen Luong Port Co Ltd, said that her company's site lay along the banks of the Red River in Ha Noi with poor infrastructure. Yet the company's land use fees for the site have surged dramatically, from VND1.34 billion (US$65,000) last year to VND4.9 billion ($237,864) this year, nearly four times 2010 levels.
Meanwhile, her company's net profit for last year was only VND500 million ($24,300), she said.
VCCI general secretary Pham Gia Tuc said that the domestic real estate market has developed too quickly over the past few years, causing commercial land prices to skyrocket. Businesses already faced difficulties finding affordable sites for their operations.
Dao Xuan Binh, a representative from the Business Association of Le Chan District in Hai Phong, suggested that a 30 per-cent increase over the previous year would be more appropriate for manufacturers setting up factories outside of industrial parks.
Pham Van Tho, deputy director of the Department of Economics and Land Fund Development under the Ministry of Natural Resources and Environment, agreed that land use fees shouldn't be pegged to rapidly rising market prices of land but to overall business input costs.
Deputy Minister of Finance Do Hoang Anh Tuan said that the ministry would request the Government reduce land use rates by 30-50 per cent for manufacturers and SMEs for the first several years of their operation, which would create favourable conditions for them to be established while sharpening their competitive edges.
Need for VN to create top brand rice
The best quality among existing rice seeds in the country should be chosen and developed to create a Vietnamese brand that is recognised in international markets.
The development of a national rice brand should go alongside research into developing new, high quality varieties of the grain, said Duong Van Chin, deputy director of the Cuu Long (Mekong) Delta Rice Research Institute.
He was speaking at a forum on rice seed production and supply in southern provinces held last week in An Giang Province.
The forum was jointly organised by the National Agricultural Extension Center, the An Giang Department of Agriculture and Rural Development and the An Giang Agricultural Extension Center.
"Seed plays a very important role as they decide productivity and quality of the rice crop," Chin said.
Although rice cultivation area in the Cuu Long (Mekong) Delta region has reduced over the past 10 years, new varieties have helped raise output from about 16.7 million tonnes in 2000 to 21.5 million tonnes in 2010, according to Pham Van Du, deputy head of the Cultivation Department under the Ministry of Agriculture and Rural Development.
Viet Nam now ranks number one in rice productivity in Southeast Asia and the quality of rice is not much different compared to other countries.
Du said the increase in rice yield enabled the country to ensure food security and increase exports.
The country exported 3.5 million tonnes of rice in 2000. It reached 6.75 million last year and is expected to top 7 million tonnes this year.
About 200 rice varieties had been created and recognised by the Ministry of Agriculture and Rural Development so far, Chin said.
However, the country had not selected any special seed to plant on a large area in order to build a brand for it as Thailand and India had done, he said.
He suggested choosing the best rice variety and selecting some prestigious companies to develop concentrated material sources (to produce homogeneous grains) and a national brand.
Pham Van Tinh, deputy director of the National Agricultural Extension Centre, said most of the rice seeds under cultivation fail to produce grains of uniform quality and size, reducing the competitiveness of Vietnamese rice, especially when compared to Thai rice.
To make Vietnamese rice more competitive, provincial agricultural sectors should gradually reduce cultivation of many rice varieties, he said.
Du said that seed supply in the market remained "complicated" at present. With many varieties of rice seeds available in the market, farmers were sometimes confused about choosing the right one to cultivate, he said.
Huynh Van Nghiep, head of the Cuu Long Delta Rice Research Institute's Division of Seed Technology, said localities should increase investment in seed production and supply to satisfy farmers' demands.
Currently, many farmers in remote areas could not access seeds because of high prices. So they produced seeds for their own use, exchange seeds with others, or bought them from their neighbours, he said.
The seed is accessed through both formal and informal supply systems. The former consists of research institutions, seed companies and agriculture breeding centers, while farmers and farming communities form the latter, according to Nghiep.
The contribution of the informal system was very important because it enable many provinces to meet their seed demand. However, it needed a better inspection regime to ensure seed quality, Nghiep said.
Some experts at the forum called for the development of rice varieties that can withstand the impacts of climate change.
The forum also suggested the Government devise support policies for rice seed producers.
Forum participants also called for an improved information dissemination system that would enable farmers to select rice seeds that are suitable for their region and sow them at the right time to achieve high efficiency. The system should also strengthen links between production, consumption and exports, they said.
Viet Nam has 33 million ha of land, of which 7.5 million ha are under rice cultivation.
With 3.9 million ha of rice fields, the Cuu Long (Mekong) Delta region is the country's largest rice granary, accounting for more than 90 per cent of the country's total rice export volume.
Cane growers get some sweet news
Sugar production soared by 29 per cent to 1.15 million tonnes this sugarcane season, the Department of Agriculture, Forestry and Fishery Products Processing and Salt Industry said.
Its deputy director, Doan Xuan Hoa, told a review meeting held in HCM City last Friday that the country had 271,400ha under sugarcane now, an increase of 6,300ha since the last crop.
Output in the 2010-11 crop topped 16.4 million tonnes, an almost 20 per cent rise, thanks to an average yield of 60.5 tonnes per ha.
The yield and quality had both improved.
Sugarcane prices in the Cuu Long (Mekong) Delta region and central Khanh Hoa and Ninh Thuan Provinces had risen by VND250,000-400,000 per tonne since last year to VND1.05-1.2 million and VND1.1-1.14 million.
The higher prices had encouraged farmers to expand sugarcane cultivation.
The strong growth in the domestic food processing and soft drink industries which used large volumes of sugar had led to an increase in demand to around 98,000 tonnes a month compared to 94,000 tonnes last year.
Sugar imports this year had been 93,000 tonnes, almost a third down from last year.
Nguyen Van Hoa, deputy head of the Cultivation Department, said a Government plan for the sector's development through 2020 had set targets for area under sugarcane, average yield, and sugarcane and sugar output.
But most of the targets, except processing capacity, had been missed.
The country's 39 sugar mills had a total capacity of 112.2 million tonnes, 6.8 per cent higher than the target.
He blamed this on the small scale of farming and poor infrastructure, which prevented farmers from mechanising and adopting intensive farming techniques.
There had been some unfavourable weather that had adversely impacted sugarcane output.
Moreover, some localities had not focused on zoning plans for sugarcane cultivation.
He urged provinces to make plans for sugarcane development and sugar mills to invest in developing their own cropping zones.
New cultivation techniques should be adopted to increase productivity.
Nguyen Thanh Long, chairman of the Viet Nam Sugar and Sugarcane Association, suggested establishing close links between farmers and sugar mills as well as between the mills themselves to develop the industry in a sustainable manner.
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