PetroVietnam Construction in strife financial crisis

PetroVietnam Construction Co (PVX) is facing a number of financial problems due to unwise investment in subsidiaries and non-core businesses that caused huge losses in the first half of this year.

Auditors raised PVX's first half loss from VND254 billion (US$12.1 million) to VND468 billion ($22.3 million) after the report review, while its shares were excluded from margin trading across the entire market. In addition, officials from a subsidiary were arrested for alleged economic violations.

According to the firm's second quarter report, the main losses were caused by Petroleum Machine Executing Co (PVC-ME). PVC-ME lost nearly VND457 billion ($21.7 million) during the period, almost equal to its charter capital.

Four officers from PVC-ME are also facing arrest for allegedly contravening State economic regulations.

Since 2008, operations at PVX have been unstable. While it earned VND630 billion in 2010, profits dropped to around VND200 billion last year, and in the first half of this year, it posted a huge loss of more than VND470 billion ($22.3 million).

According to the audit, as of June 30, PVX also had an overdue guarantee worth VND558 billion ($26.5 million) for 10 subsidiaries that borrowed from five banks.

The company's borrowing costs have increased over the years, from less than VND27 billion ($1.2 million) in 2008 to VND309 billion ($14 million) in 2011. During the first six months of this year, the figure reached VND240 billion ($11.4 million).

Whether PVX could continue operations, according to the company's managing board, depended on its ability to settle debts. One of the causes of PVX's current situation is its investment in non-core business, using short-term funds to facilitate long-term financial investment in subsidiaries and associated companies.

Notably, PVC ME, Petroleum Internal and External Equipment Co and Sai Gon Petroleum Construction and Investment are facing bankruptcy due to heavy investment in real estate.

Agricultural exports grow by 10.2%
 
The value of agricultural exports reached US$20.4 billion in the first nine months of this year, an increase of 10.2 per cent over the same period last year, the Ministry of Agriculture and Rural Development announced yesterday.

So far this year, seven of Viet Nam's cash crops have entered the so-called "billion-dollar club", with exports totalling at least US$1 billion annually. These products included seafood, rice, coffee, rubber, wood, cashews, and cassava. Exports of these staples continued their stable trend and reached a combined estimated value of $11.1 billion during the nine-month period, a 6.2-per-cent increase.

Viet Nam exported 6.2 million tonnes of rice during the period, worth $2.78 billion – an increase of 4.5 per cent. China became Viet Nam's biggest rice importer during the period, while other regional customers such as the Philippines, Indonesia and Malaysia all reduced their buys.

The average price of Vietnamese rice has fallen by 9.2 per cent since last year to $452 per tonne.

Coffee exports weighed in at 1.36 million tonnes during the first nine months of the year, for a total value of $2.85 billion,a 36.8-per-cent increase. Germany and the US continued to be the leading importers of Vietnamese coffee, while Indonesia has become an emerging market with its imports of Vietnamese coffee a whopping nine times higher than last year.

Belgium, the leading consumer of Vietnamese coffee last year, meanwhile, have seen decreases in both volume and value of up to 50 per cent this year, noted Viet Nam Coffee and Cacao Association chairman Luong Van Tu.

Coffee export volumes were projected to decline overall due to shorter supplies but would increase again at the next harvest later this year, Tu said.

The US remained the biggest importer of Vietnamese seafood during the nine-month period, accounting for 19 per cent of the total export value, followed by Japan at 15 per cent and South Korea at 7.9 per cent.

Company chosen to manage rare earth mine

The Government has approved Lai Chau - Vimico Rare Earth Co to manage Dong Pao rare earth mine, the largest in Viet Nam, says the company's director Bui Van Huyen.

The mine covers a total area of 11sq km with estimated reserves of 5 million tonnes.

Circular N7263/VPCP-KTN permitted the company to apply for a mining licence from the Ministry of Natural Resources and Environment.

Huyen said Viet Nam Coal-Mineral Industries Holding Corporation Limited (Vinacomin) would assist the company with its licence application.

HCMC economy shows signs of recovery

The economic growth rate of Ho Chi Minh City is gradually showing signs of recovering after a long spell of dormancy, with the GDP rate touching VND404.72 billion in the first nine months, up by 8.7 percent.

The City also solved its unemployment rate and created jobs for more than 200,000 people, sending 2,400 laborers abroad and approved 313 projects valued at VND28.3 billion.

Local authorities have spent VND56.932 billion to grant health insurance cards, free bus tickets, tuition fee exemption to the poor, disabled and disadvantaged students, as well as offered preferential treatment for people credited as war revolutionaries.

However, a report said that Vietnamese enterprises still face a lot of difficulties. Many businesses have halted production or dissolved due to lower purchasing power, surplus inventory and high production costs. In addition, it’s hard to borrow capital from banks suffering from bad debts and economic downturn.

In the last three months of this year, the City government will focus on containing inflation, stabilizing macro-economy, enhancing competitiveness, supporting enterprises through loans at lower interest rates, limiting bad debts, and suspending ineffective projects.

According to the HCMC Center for Human Resources Forecast and Labor Market Information, workers who graduated from vocational training schools and colleges have not yet met the requirements of recruiters. In the fourth quarter, HCMC is said to require 65,000 additional workers.

Small apartments a solution to stagnant property market

At a meeting organized by the Department of Construction in Ho Chi Minh City on September 25, many measures were discussed to revive the stagnant property market, which is seeing the worst slump in decades.

Construction companies are left holding on to 70 percent of unsold inventory of apartments and are now asking management agencies to allow them to build smaller apartments of 50-60 square meters for lower income group people, so as to recover back some of the capital invested.

These smaller apartments, valued at around VND1 billion (US$48,000), could help in recovering costs as there is more demand for affordable housing.

According to the Department of Construction, property construction companies have  greatly contributed towards raising the standard of living of people, but so far focused on people in the higher income bracket and neglected people in the lower income group.

Of the 45,000 apartments completed, only 40 percent of them were made for lower income groups, who are in a vast majority and in urgent need of housing.

Le Hoang Chau, chairman of the HCMC Real Estate Association (HoREA), said some new kinds of apartments have appeared in the market such as long-term rental houses and those with lease duration of 40 years. These apartments are cheaper than permanently owned houses and are stirring the market at a time when the property market is stagnant.

In order to resolve the current problem, Do Thi Loan, HoREA’s general secretary, said there should be a policy to encourage foreigners to purchase deluxe apartments or the larger apartments.

City authorities are now considering buying unsold commercial apartments to supplement the municipal resettlement housing scheme, that will still take a couple of years for completion, because of site clearance and other such delays, said Chau.

The Department of Construction in HCMC also plans to purchase mid-sized apartments of 40 to 70 square meters to ease the ongoing task of resettling hundreds of households from important project sites.

EU FTA brings hope

Firms are pinning hopes on the outcome of Vietnam-EU free trade agreement (FTA) negotiations slated to take place early next month.

Addressing a forum in Hanoi on September 21 to discuss Vietnam and ASEAN’s trade integration with the EU, head of Ministry of Industry and Trade (MoIT)’s Multilateral Trade Policy Department Luong Hoang Thai said the FTAs, either setting on regional or country basis, looked at fostering international integration and bringing practical benefits to relevant countries and enterprises.

“If the FTA between Vietnam-EU was inked, at least 90 per cent of Vietnam’s export items bound to EU market would become tax free, paving the way for made-in-Vietnam products to strongly make inroads in EU’s 27 member countries’ markets,” Thai said.

MoIT figures show that in 2011, Vietnam was EU’s firth largest trading partner among ASEAN countries, with bilateral trade turnover reaching 18 billion euros, of which Vietnam exported to EU12.8 billion euros and imported from EU 5.2 billion euros.

In the year ending July, the EU was Vietnam’s second largest export market with a total export value of $11 billion, making up 17.1 per cent of the country’s total export value.

According to head of EU delegation in Vietnam Franz Jessen, the signing of FTA would have positive impacts on both sides’ economies. Vietnamese export firms would step into EU market more easily whereas EU products flowing into Vietnamese market would fuel competition in the home market and consumers would be major beneficiaries.

“The signing of the FTA with EU will help the textile clothing sector deepen presence in EU market since current 12 per cent tariff will be reduced to zero per cent,” said Vietnam National Textile Garment Group’s deputy general director Le Tien Truong.

The footwear industry is in a similar situation as 12.4 per cent average tariff EU imposed on made-in-Vietnam footwear items would be cut to zero per cent, bettering the footwear sector’s competitive edge as well as export value.

As for seafood sector, zero per cent tax rate instead of current average 10.8 per cent once the FTA with EU was signed could help Vietnamese seafood better cope with similar export items from other countries into EU markets.

However, the FTA would not only bring advantages and both policy-makers and businesses were well aware of this.

Vietnam mainly exports food and raw products into EU market, so that if some products drop food sanitation requirements it would have chain effects on export of other items. Besides, EU levies high technical and quality standards on imported items which may be out of reach to many local firms, according to deputy head of MoIT’s European Market Department Tran Ngoc Quan.

“The FTA bringing opportunities or challenges chiefly depends on firms’ initiative and competence, so that Vietnamese firms need to map out suitable integration trajectories,” Quan affirmed.

For whom the toll bells

Vietnam’s first roadway toll collection rights transfer contract expects a smooth ending.

Mid this month highway developer Vietnam Expressway Corporation (VEC) as seller and Hai Chau Group as buyer reached an agreement on extending the toll collection contract deadline they signed on June 16, 2007 to October 19, 2012, some 108 days more after the contract expired on June 30, 2012.

The aim was to help buyer cover part of losses due to unexpected factors during contract implementation which hurt buyer’s capital recovery efforts.

“The bottleneck, which may trigger conflicts between relevant parties, will now be addressed albeit we still need approval from the Ministry of Transport,” said VEC’s deputy general director Luong Quoc Viet.

Earlier Hai Chau Group reportedly still incurred VND17.9 billion ($855,000) losses at the time the contract expired. In reality, during the five-year implementation period some factors arose hurting the buyer’s revenue, including first-phase modern expressway Cau Gie-Ninh Binh opened to traffic from November 15, 2011.

When the toll collection right transfer contract, the first of its kind in Vietnam by that time, was signed on June 16, 2007, seller and buyer had agreed to extend toll collection duration when there arose unexpected factors adversely affecting contract implementation.

But the contract had yet to include the method of calculating toll collection extended time so that each party had its own argument. Hai Chau Group said it would need 261 days more after the contract expired (June 30), whereas VEC said the additional time would be 39 days only.

When agreement was yet to be reached, the ministry sent Document 5362/BGTVT-TC dated July 12, 2012 requiring Hai Chau Group to hand-over Nam Cau Gie toll station for it to give it to other investor in a bid to source capital for the toll station’s build-operate-transfer expansion project. The move had heated up negotiation process.

“Parallel to further studies to consolidate relevant regulations in toll collection contracts in later period the process of dealing with arising issues at Nam Cau Gie toll station’s toll collection contract would provide valued lessons to state management agencies and also investors in handling similar cases,” said Viet.

PPP to drive highway forward

A new 98.7 kilometre highway project linking Dau Giay and Phan Thiet will run parallel to National Highway 1 under a plan to enhance the financial feasibility of Vietnam's first public-private partnership (PPP) highway project.

Under the plan, National Highway 1 will not be widened and construction is expected to start later this year and completed within four years.

The PPP Project Management Board under the Ministry of Transport (MoT) said that the design conformed to the financial requirements of Bitexco group, the developer of this project. Moreover, long-term loans from International Bank for Reconstruction and Development (IBRD) of the World Bank have been secured, increasing interest in the project.

Hai asked the MoT to work with World Bank to minimise the investment capital which the state will pour in this project. In accordance with international PPP practices, the Vietnamese government has already approved the use of state funds to pay for site clearance, compensation and resettlement worth VND2.15 trillion ($102.4 million).

According to the government's directive, the MoT also will have to accelerate completion of the trial management structure and deployment of the highway project in accordance with PPP model.

In mid-May 2012, the MoT submitted to the Vietnamese government the trial management structure and deployment plan for the Dau Giay-Phan Thiet project in accordance with PPP model. The MoT also asked the government to solve difficulties related to investment method and capital for the highway project.

To date, there have not yet any PPP highway project in Vietnam. The Dau-Giay-Phan Thiet highway, if successfully executed, could represent a model for more such projects in the future.

The project's total investment has been scaled up to VND23.2 trillion ($1.12 billion) for two phases of investment. The project includes a main highway of 98.7km crossing the southern provinces of Dong Nai and Binh Thuan and an access road of 2.58km. First phase of construction calls for two lanes each way, with later expansion to three lanes each way.

The new highway is expected to shorten travel from Ho Chi Minh City to the south-central region and significantly ameliorate traffic conditions on National Highway 1, as well as encourage development of industrial zones along the route and ecological seaside resorts in Binh Thuan, Ninh Thuan and Khanh Hoa provinces.

VietinBank continues to slash lending rates

Vietnam Bank for Industry and Trade, or VietinBank, has continued to launch preferential loan programs for both corporate and individual customers, offering lending rates from 8.95% and 4% per annum for dong and U.S. dollar loans respectively.

For enterprises, VietinBank applies the lowest rate of 8.95% per annum to a VND10 trillion credit package while small and medium-sized enterprises (SMEs) enjoy a rate of 9.5% in another VND5-trillion credit program. Meanwhile, wholesale firms importing fuel products are subject to rates of 9% and 4% on dong and U.S. dollar loans respectively.

The lender has also offered individual customers a credit line of VND5 trillion with an annual lending rate of 10.99% to help them expand business. Clients buying homes at projects supported by VietinBank can access a VND5 trillion lending package with a rate of 12% per annum.

The bank also quotes a rate of 9% in a VND6-trillion lending package for new individual clients.

Besides, the bank’s rates for prioritized sectors such as agriculture, export, supporting industries and SMEs range from 8.95% to 12%.

Japan funds upgrade of 84 weak bridges

The Japanese government has agreed to loan 29,266 million yen in official development assistance (ODA) for Vietnam to upgrade 84 weak bridges in the national road network.

According to the Directorate for Roads of Vietnam, Vietnam and Japan have discussed and agreed on including 84 weak bridges in the national road network improvement list for evaluation.

Currently, the pre-feasibility study of 41 weak bridges has been approved by the Ministry of Transport. The directorate is preparing the pre-feasibility for other bridges which will be submitted to the ministry next month.

The national road network improvement project consists of two components. In the first component, 84 weak bridges will be upgraded and eight new bridges will be built while the surface of Thang Long Bridge will be repaired in the second component.

The total investment for these components amounts to 35,150 million yen, with 29,266 million yen borrowed from the Japan International Cooperation Agency (JICA) and 5,923 million yen sourced from Vietnam as reciprocal capital.

In HCMC, there are 36 weak bridges among a total of 1,031 bridges in the city, according to the city’s Department of Transport.

Challenges remain for businesses, say experts

The business community will continue to face difficulties in as many months to come since the global economic outlook remains dreary next year and the local economic growth will slow down during the restructuring process, experts said.

Economist Pham Chi Lan said the number of dissolved and suspended businesses in the first eight months of this year had reached 36,000, doubling the annual average figure in the last 12 years.

In the coming years, businesses will find it more difficult to mobilize capital due to the impact of the local macro-economic uncertainty. Moreover, they will cope with stronger pressure from competition as Vietnam continues to execute the bilateral and multilateral trade agreements with China and ASEAN countries, Lan told the Daily on the sidelines of the Vietnam CEO Forum 2012 held in HCMC last week.

Exporters will also encounter problems with declining demand overseas, protectionism and fierce competition in export markets.

Cao Si Kiem, chairman of the Vietnam Association of Small and Medium Enterprises, said financial distress is not the only problem of businesses, although the Government’s policies on interest rate cuts and tax breaks have helped relieve difficulties for them. However, such supports should be provided more quickly and efficiently.

To help businesses surmount difficulties, Kiem suggested the State should focus on solving the problem with weak consumer demand through price stabilization and demand stimulus measures.

Mercedes-Benz launches the new GLK at Vietnam Motorshow 2012

The three-pointed Star shines its “The best or Nothing”-motto as it unveiled a star-studded line-up of its Mercedes-Benz and AMG products at the key Vietnam Motorshow 2012, taking place from September 26 – 30 at Hanoi’s Giang Vo Exhibition Centre.

A total of 10 models are displayed on the exhibition center’s largest lifestyle booth (600 square metres) underlining the leading position of the brand, full of diverse theme spaces, showcasing the automaker’s top-notch outlook in Vietnam’s luxury car market. Young dynamism and exemplary efficiency are key factors of all the new Mercedes-Benz products and accessories on show.

“Our presence at this year’s Motorshow is the clear interpretation of our brand style, young and dynamic, combining the art of futuristic architecture with progressive ideas and exquisite elements. It comes as no surprise that we are proud to have both ‘Tiger’- customers who are young and moving up the career and social ladder fast, besides our strong, traditional ‘Dragon’-group who have already reached the top,” said Michael Behrens, CEO of Mercedes-Benz Vietnam.

The focus of attention at the show is on the Vietnam premiere of the new GLK - a newly designed SUV with upgraded dynamism that represents a unique “Strong Character” within this segment.

“Thanks to our new GLK and the Motorshow, we will develop further momentum in the luxury car segment from the 4th quarter this year, onwards,” said Dirk Adelmann, sales & marketing director of Mercedes-Benz Vietnam.

Another model that is bound to appeal is the new SLK roadster – which takes driving pleasure and open-air enjoyment to a new level. And, shortly before being introduced in Ho Chi Minh City a few months ago, the “Golden Steering Wheel” and “AUTO Build Design” award-winning M-Class sport utility vehicle is now being showcased at Vietnam Motorshow 2012.

The German “Auto Motor und Sport” magazine’s “best saloon” in luxury class, top-of-the-line S-Class series - the S500 and S300L – on front stage - also received the largest possible interest by business customers. Thanks to its super luxury form, high level of comfort and innovative technologies which are unrivalled.

In addition to the new GLK, the new M-Class, the SLK, and the flagship S-Class which symbolise respective segments of: luxury SUV, sporty roadster and top-level saloon, Mercedes-Benz Vietnam also highlights the spirit of its professional tuning arm AMG with the E300 AMG and C300 AMG.

Moreover, the most popular entry-level luxury car models are also being represented: the best-selling E250 saloon and a young, red C200 sedan.

DHL Express announces annual general price increase for 2013

DHL Express, the world’s leading international express services provider, has announced its annual general price increase, amounting to 4.9 per cent on average in Vietnam for 2013.

The adjustment will be effective from January 1, 2013.

DHL’s annual rate increase is based on a number of factors. One of its principal considerations is the impact of general price inflation on input costs for the express industry. It also takes into account costs that are specific to the express industry, which are not directly linked to inflation, including the impact of regulatory measures, such as additional security requirements. The industry has absorbed costs in order to comply with these externally imposed requirements whilst ensuring that delivery times and service quality continued to improve.

In fact, a recent ATKearney study states: “Volumes for the industry have increased consistently in recent years, while revenue per shipment has not yet returned to 2008 levels.”

“The price increase that DHL Express is putting in place globally for 2013 is aimed at offsetting rising costs, including external costs that are out of our direct control and cannot be compensated through productivity improvements or economies of scale,” said Ken Allen, CEO, DHL Express.

“We are introducing our rate adjustment for 2013 with a clear focus on maintaining our value proposition. Our annual price increase is an important factor in maintaining the significant investments we make in our global network, which offers world class delivery performance for the benefit of our customers.”

The price adjustment will apply to all customers where contracts allow.

Ezaki Glico enters confectionery market

Kinh Do Corporation (KDC) and Japan’s Ezaki Glico on Tuesday signed a strategic cooperation agreement and KDC will exclusively distribute Glico’s snack Pocky in Vietnam.

To enter the Vietnamese confectionery market, Glico has become a strategic shareholder of KDC since February through an acquisition of 14 million shares worth around VND700 billion, or a 10 pct stake. In addition, Glico and KDC have plans to cooperate in trading activities and distribute Glico’s products via the distribution network of KDC.

Under the cooperation, KDC will at first distribute Pocky and then other snack products including Pretz, Collon and chocolate Alfie. Sales of Glico’s products in Vietnam are estimated to reach VND1 trillion after four years.

According to Tran Le Nguyen, CEO and vice chairman of KDC, his firm will distribute more products of Glico at its 120,000 retail outlets. Besides, if the business runs smoothly, the two sides will consider opening a production plant in the country.

Meanwhile, Katsuhisa Ezaki, President and CEO of Ezaki Glico, said the cooperation between Glico and KDC was part of the business expansion plan to foreign countries, especially in Asia.

Ezaki Glico is a Japanese confectionery firm having 90 years of experiences. The firm obtained over $3.5 billion in sales last year.

September inflation causes concern

Economists are concerned about the risk of inflation rising in the remaining months of this year.    

According to Dr Vu Dinh Anh, the consumer price index (CPI) hit a record high in September, equal to the figure recorded in the first seven months of this year.

Economist Nguyen Thi Hien says the 2.2 percent increase in the CPI (as reported by the General Statistics Office in September) is much higher than expected.  

Hien warns that inflation could raise its ugly head again if there were no effective measures to control it.

One reason, she mentions, is ineffective investment which has led to slow progress in the restructuring of State-owned enterprises in the economic pattern of Vietnam.

Hien attributes the CPI increase in September to a price hike in petrol and healthcare and educational services. She insists the State should keep the cost of healthcare services, especially in localities, under control.

Inflation, in her opinion, should be kept at around 8 percent. If it reaches 9 percent or more at the end of this year, the CPI will continue to grow into 2013.

Hien says it’s also crucial to reduce credit growth as consumer demand tends to be greater in the closing months of the year.

Last year saw a price hike in the group of meat products because animal breeders found it difficult to access credit for production. This year, however, what has mattered much more than credit is the rising cost of animal food and the threat of bird flu epidemic.

Doan Trong Ly, Director of APROCIMEX Joint Stock Company, agrees that high input costs have discouraged many farmers from investing in animal husbandry.

He wonders what will happen when the local market is flooded with imported meat products.

Dr Anh also cites some other factors that may affect the CPI in the remaining months of this year, such as the loosening of monetary policy, credit growth, falling interest rates, government spending, disbursement of investment capital, and adjustment in the prices of essential goods like petrol and gas.

He says loosening monetary policy is one way to rescue businesses but it must go along with tightening fiscal policy to prevent inflation.

Vietnam’s economic picture in 2013, as Hien puts it, is not much brighter than in 2012. So, it’s no good throwing caution to the winds when inflation is looming.

Tuna exports on the rise

The Vietnam Association of Seafood Exporters and Producers (VASEP) reports tuna exports to the European Union (EU) continue to rise despite a recent decline in shrimp and tra fish exports.    

The VASEP values Vietnam’s tuna exports over the past eight months at nearly US$74 million, a rise of 51.5 percent compared to the same period last year.

Vietnam currently ships tuna to 20 countries within the EU bloc. Germany and Italy lead Vietnamese tuna imports, experiencing growth of 73 percent and 118 percent respectively compared to the same period last year. Spain’s 113 percent rate of growth helped it surpass Belgium and secure third place.

Canned tuna products (HS16) earned a total of nearly US$ 26 million, the most lucrative kind of tuna exported to the EU.  

Among 16 tuna importers, Germany took the lead, consuming US$19 million worth of the fish from Vietnam, accounting for 73 percent of the total tuna exports to the EU. Austria, Greece, and Holland were the next largest importers.

Raw tuna exports (HS03) also increased by more than 56 percent, earning US$49.9 million.  

According to many tuna export and processing businesses, however, the increase in these products’ value is merely the result of a worldwide price hike.  

Europe’s economic crises have impacted the consumption of high value tuna products and forced the EU to expand tuna product imports from developing countries including Vietnam. Vietnam’s tuna processing businesses may capitalise on this opportunity to increase export earnings in the near future.

Telephone exports earn nearly US$8 billion

Telephones and spare parts ranked second among Vietnam’s top ten export earners in the first eight months of this year.   

The General Department of Customs’ latest statistics showed they enjoyed a record year-on-year rise of 123 percent to US$7.977 billion in export revenue.

For many months, they have been listed among export items earning more than US$1 billion each, fetching US$2.69 billion in the first quarter, up 161.9 percent compared to the same period last year, and US$5.03 billion in the first half of this year.

Such impressive results are owing to foreign businesses, including Samsung, Intel, Cannon, Compal and Foxconn, operating in Vietnam, which make up 80 percent of the domestic market share and 90 percent of total export turnover.

Vietnam’s key export markets are the European Union (EU), Russia and Saudi Arabia.

Vietnam’s electronic sector is likely to earn an export turnover of US$15-16 billion by the end of 2012, the Vietnam Electronic Industries Association (VEIA) forecasts.

Vietnam, Malaysia boost cooperative development

Vietnam and Malaysia will strengthen bilateral cooperation in developing the cooperative movement on an equal and mutually beneficial basis.

To this effect, a memorandum of arrangement (MoA) was signed by representatives from the Vietnamese Ministry of Planning and Investment (MPI) and the Ministry of Domestic Trade, Cooperatives and Consumerism (MDTCC) of Malaysia in Kuala Lumpur on September 26.

Under the MoA, the two countries will boost trade between their cooperatives through import-export activities or joint venture projects as well as expanding markets for cooperatives’ products and services.

They will promote the exchange of information and experts, and organise training courses to improve the capacity of cooperative managers.

The two sides decided to set up a joint working group to realise the MoA.

At the signing ceremony, MDTCC Minister Ismail Sabri Yaakob affirmed that cooperatives are one of the important sectors which greatly contribute to the economic development of countries, including Malaysia and Vietnam.

MPI Deputy Minister Dang Huy Dong expressed his belief that the MoA will play an important role in the development of the cooperative movement in each country.

Vietnam now has about 19,500 agricultural and non-agricultural cooperatives.

Trade ministry refuses to list fuels as consumer goods   

The Ministry of Industry and Trade disagrees with the Ministry of Finance on listing imported fuels as consumer goods.

In a document sent to the trade ministry in mid-August, the finance ministry asked the receiver to include fuels in the list of consumer goods to define the time for import tax payment. Specifically, the ministry proposed immediate payment on arrival at ports instead of a 30-day grace period under the current regulation.

The finance ministry reasoned that fuels are mainly imported to meet the demand for consumption and transport of citizens.

In a written reply sent to the finance ministry last Thursday, deputy trade minister Nguyen Cam Tu deemed the proposal of the finance ministry unreasonable and groundless. The ministry explained fuels are not only imported for consumption, but also for production and trading activities, such as tourism and goods and passenger transport.

The trade ministry added fuels contribute high payments of taxes, including import tax, value-added tax, and excise tax. Immediate tax payment upon import will cause more troubles for fuel traders, especially in the context that fuel trading is facing difficulties.

“This will push up costs, affect import schedules and the ability to ensure domestic supply,” stressed the trade ministry.

Industrial output rises 4.8% in first nine months; vehicle parts skyrocket 148%
 
The nation's Index of Industrial Production (IIP) increased 4.8 per cent in the first nine months of this year, compared to the same period last year, the General Statistics Office (GSO) reported.

The index rose in September 4.6 per cent over the previous month and 9.7 per cent over the same month last year, the GSO said. In the third quarter, the IIP rose 2.5 per cent over the second quarter of the year and 5.5 per cent over the third quarter of last year.

In specific industrial sectors, electrical generation and distribution grew 12.8 per cent during the nine-month period, while water supply and treatment grew 8.4 per cent. Manufacturing and processing rose 4.2 per cent, while the mining industry saw growth of 4 per cent.

In specific manufacturing industries, car and motorbike parts production skyrocketed by 148.4 per cent during the period, while telecommunications equipment production grew by 57.3 per cent. Shipbuilding and floating tanks saw a 44.5-per-cent increase, while production of electronic components rose by 22.3 per cent.

Growth in industrial production has slowed due to global economic instability and domestic shortcomings, including high inventories, said the GSO, which noted that the IIP has risen between 10 to 17 per cent in stable periods during previous years.

Manufacturing and processing, which represents up to 70 per cent of all industrial production value, saw a 6.4-per-cent increase in the consumption index during the nine-month period, while inventory levels were at 20.4 per cent as of September 1.

Some industries with high inventory indicies included plastics, up 50.6 per cent; cement, up 50.2 per cent; steel and iron, up 40.6 per cent; other non-classified metals, up 41.1 per cent; tobacco, up 40.3 per cent; and garments, up 39.4 per cent.

Around the country, the northern province of Bac Ninh posted the highest IIP growth during the nine-month period, rising 23.5 per cent, following by southern Binh Duong Province, up 7.9 per cent; Dong Nai, up 6.9 per cent; the central city of Da Nang, up 6.1 per cent; the northern city of Hai Phong, up 5.1 per cent; and Ha Noi, up 4.3 per cent.

Vinh Phuc and Hai Duong provinces saw declines of 4.7 and 1.7 per cent, respectively.

Firms face long road to listing shares in London

Vietnamese enterprises face some significant challenges before they will qualify to list shares on the London Stock Exchange, the Lord Mayor of London, David Wootton, told a meeting in HCM City on Wednesday.

The London stock market – with around 600 non-British enterprises and accounting for 30 per cent of international foreign exchange trading – would offer an opportunity for Vietnamese companies to list shares abroad, Wootton said.

But there were many challenges facing Vietnamese enterprises, including their current inability to meet the market's auditing and accounting standards, said a representative of London-based accountancy firm PricewaterhouseCoopers at the meeting. Poor corporate governance and a lack of transparency would also scare investors away from the stocks, he said.

Claire Suddens-Spiers, director of independent financial advisory firm Rothschild, said that Vietnamese companies needed to demonstrate stable equity which grew over time. Vietnamese businesses seeking to raise capital on the London market also needed to pay attention to legal requirements regarding company structure, financial statements and corruption.

Although British management rules were not applied to non-British companies, investors always expected listed companies to be governed by similar standards, said lawyers from the online Vietnamese firm thoimocua.com.

"They need separation between the company chairman and CEO and at least two independent directors," they said.

Apart from listing shares, Vietnamese companies could raise capital through issuing bonds or global depository receipts (GDRs). Last year, over 23.3 million GDRs from property developer Hoang Anh Gia Lai (HAG) were listed on the London Stock Exchange.

S&P lifts outlook for nation's banks

Operating conditions are improving for the Vietnamese banking system, according to the Standard & Poor's Ratings Services on Wednesday.

The rating agency revised its Banking Industry Country Risk Assessment (BICRA) on Viet Nam from 10 to 9, or ‘very high risk' to ‘high risk'.

"We have revised our economic risk score following the change in our assessment of economic imbalances," said S&P. "Our revision follows moderation in loan growth and asset prices subsequent to the Government's stabilisation policies."

The ratings services also revised Viet Nam's economic risk score to ‘9' from ‘10'. It explained policy actions that the Vietnamese Government initiated in 2011 to stabilise the economy have moderated the pace of loan growth and improved asset price stability. This has reduced the risk of economic imbalances.

A tight credit policy slowed loan growth to 14.5 per cent in 2011 from 28 per cent on average during the previous four years. Lending restrictions on ‘non-productive' sectors – mainly property lending and securities lending – contributed to a reduction in real asset prices.

The agency said that these developments have halted or reversed a deterioration in key risk indicators. Inflation has retreated to 6.5 per cent as of September 2012, from a peak of 23 per cent in August 2011, which helped the central bank reduce policy rates and led to a moderation in lending rates.

"As a result of the revision of our rating on Viet Nam, the anchor for a commercial bank operating only in Viet Nam is revised from ‘B' to ‘B+'. We also raised the stand-alone credit profiles (SACP) of all rated banks in Viet Nam by one notch," S&P said.

S&P also upgraded its counter-party credit rating for Vietcombank, Sacombank and Techcombankfrom B+/Stable/B to BB-/Stable/B.

It affirmed the ratings of the Bank for Investment and Development of Viet Nam, and Vietinbank at B+/Stable/B.

Kinh Do appoints Japanese partner

Confectioner Kinh Do (listed on HOSE as KDC) announced yesterday that Japanese company Ezaki Glico has become a strategic shareholder.

The foreign partner holds 14 million shares, or 10 per cent of KDC total's equity, which were acquired in the local firm's private placement earlier this year. The deal's value was not disclosed.

Also yesterday the two companies signed an agreement for KDC to distribute the partner's Pocky snack in Viet Nam. Other Glico products are planned to be sold by KDC to reach a sales turnover of VND1 trillion (US$46 million) within four years.

Firms explore business in Sudan, Egypt

The Ministry of Industry and Trade announced that it would organise a business trip for domestic enterprises to seek business opportunities in Egypt and Sudan from November 16-24.

The trip, to be led by deputy minister Le Duong Quang, would be a good chance for local firms to better understand demand in these markets, meet directly with native businesses to advertise their products and exchange co-operation opportunities, the ministry said.

Egypt is one of Viet Nam's most important export markets. Viet Nam's exports to the country hit $256 million in 2011, up 47 per cent year-on-year. Sudan, meanwhile, is considered an emerging market for Vietnamese exporters even though two-way trade reached a modest $24.6 million in 2011 and Viet Nam enjoyed a trade surplus of $20.4 million.

Kien Giang licenses $13.8m animal feed plant

The Kien Giang Economic Zone Authority has recently granted an investment licence to Kien Giang Animal Feed Limited Co to develop a VND290 billion (US$13.8 million) animal feed plant in the provincial Thuan Yen Industrial Zone.

Covering a total area of 2.8ha, the plant will provide 150,000 tonnes of products annually when it comes into operation in 2015. Its construction is expected to begin in April next year.

VN-India trade picks up in first eight months

Two-way trade between Viet Nam and India reached over US$2.49 billion in the first eight months of this year, representing a modest increase of 2.2 per cent over the same time last year, according to the General Department of Customs' statistics.

Viet Nam earned above $1 billion from exports to India, up 12.9 per cent, while its imports from the country fell by 4.5 per cent to $1.44 billion.

Among Viet Nam's key export items were mobile phones and components, machinery and other accessories, natural rubber, computers, electronic products and spare parts, and coffee.

Exporters urged to insure
 
The number of enterprises buying export credit insurance has remained modest two years after the Government urged companies to use it, Vice Minister of Industry and Trade Nguyen Thanh Bien said during a conference held in HCM City yesterday.

Bien said that export credit insurance, which helped to reduce risks, was still a new concept in Viet Nam, although it was used in many other countries.

The conference, organised by the Ministry of Industry and Trade and Ministry of Finance, was held to provide further information about the insurance to Vietnamese exporters as well as to listen to feedback from exporters and relevant agencies.

Export credit insurance protects exporters' foreign receivables against commercial and political risks that could result in foreign buyers' non-payment of export invoices.

Understanding the necessity of this kind of insurance, the Prime Minister in late 2010 signed a decision to pilot the implementation of export credit insurance, Bien said.

Under the decision, exporters of two groups of products featuring 23 items — including seafood, rice, coffee, fruits and vegetables, rubber, pepper, cashew nut, tea, garment and textile, footwear, electronics and computer components, ceramics, glass, iron and steel products, machinery and transport vehicles — are encouraged to apply for the insurance.

The Government said it would aid domestic businesses with a 20 per cent export credit-insurance premium, and support insurers in installing software and building up import databases, as well as design export credit insurance products and train staff.

The Government targeted total premiums paid to reach 3 per cent of the country's total exports after three years of implementation.

But as of today, the total premiums paid for the insurance were only 0.02 per cent of the country's total exports, said Pham Dinh Trong, deputy director of the Ministry of Finance's Insurance Management and Supervision Department.

Trong said that, despite the Government's support and the advantages of this kind of insurance, few businesses had paid attention to it.

He added that many companies said they could manage well without it, and some were worried about the high cost of insurance and its effect on their profit margins.

Vo Thi Phuong Anh of Coface Services Viet Nam Co Ltd said that many insurance providers hesitated to promote this kind of insurance because it was more complex than traditional insurance products.

Many participants at the conference said this was the first time they had heard about export credit insurance.

Tran Thi Minh Nguyet of the Long Nguyet Coffee Export Co said she had previously not known about it, but thought it would be useful for coffee exporters. However, companies would find it more attractive if the Government offered more support for businesses, she added.

Pham Hong Minh of Petec Coffee Co said that involved ministries and agencies would improve communications about this kind of insurance to the business community so the latter could understand its advantages.