British investments in Vietnam to surge: diplomats

British diplomats have painted a bright future for trade and investment between the United Kingdom and Vietnam as major investments and commercial deals by companies from their country have started coming or are in the pipeline.

The new achievements were highlighted by Kate Harrisson, deputy head of Mission at the British embassy in Vietnam, and British Consul General Tim Brownbill at their meeting with reporters in HCMC on Tuesday, or more than a year after the two sides inked strategic partnership.

Brownbill, who is also director of the UK Trade and Investment in Vietnam, put the UK investments in Vietnam at US$2 billion and expected the number to exceed US$3 billion by the end of next year.

Harrisson confirmed UK investors were very keen to come to Vietnam and a number of British companies were very active in this country. Brownbill named a list of areas in this country attractive to British investors, from oil exploration and development, financial services, and infrastructure to education, retail and other sectors that they have strengths.

“We see a number of big investments start to come online,” Brownbill said. He proved that Premier Oil was going to invest over US$1 billion in Vietnam in an oil project which will be the biggest British-led investment in this country.

Soco is another energy company that is also planning major investment in Vietnam, according to Brownbill. But he said British companies were also looking for projects in infrastructure development, including the Long Thanh International Airport that they wanted to share know-how and invest in as well.

The diplomat said British companies were exploring the opportunity to get involved in the country’s upcoming biggest international airport in Dong Nai Province, about 40km from central HCMC.

The first phase of Long Thanh Airport project requires more than US$6.74 billion, including US$696.5 million for site clearance and compensation. Work on this project is scheduled to begin by 2015 and this 5,000-hectare airport is planned to start servicing international flights by 2020.

Vietnam’s determination to draw funding from different sources and via forms of investment, including public-private partnership (PPP), is opening opportunities for British companies, Brownbill said.

Brownbill said transport, power, running water supply and flood prevention were among the areas that British companies wanted to support.

The British embassy’s Deputy Head of Mission Harrisson said there would be a strategic dialogue in London next week on enhancing relations between the two countries as well as regional and global issues.
 
Rice price increase shows no sigh of abating

The price of rice has continued to rise unabated despite quiet trading on the local market since the Thai government started delivering on its rice farmer support promise on October 7.

Thailand’s scheme to buy unmilled and fragrant rice at a fixed price of 15,000 baht and 20,000 baht a ton respectively has left a huge impact on Vietnam’s rice market.

Local rice rose to a three-year high on October 9 and since then the surge has continued in the Mekong Delta, Vietnam’s key rice growing region.

Dried rice IR50404, which is bought directly from farmers, has edged up to VND7,400-7,500 per kg, according to traders in Tien Giang Province. Meanwhile, wet rice has reached the VND6,400-6,450 per kg range, up VND200.

IR 50404 rice in An Giang and Dong Thap provinces ranges from VND7,350 to VND7,500 per kg for the dried type and from VND6,300 to VND6,400 for the wet type, said Duong Van Men, a local rice trader.

Long-grain paddy has gone up by VND100-200 per kg to an all-time high of VND7,700-8,000 at Ba Dac rice market in Tien Giang Province’s Cai Be District, he added.

At Ba Dac market, unhusked and husked rice are up by VND100-150 per kg. Especially, husked brown rice IR 50404, and paddy for producing 5% broken rice and 25% broken rice sell for VND9,750-9,800, VND10,100-10,150 and VND9,600-9,750 per kg respectively.

Husked rice last week increased by VND150-200 to VND11,900-12,000 for 5% broken, VND11,200-11,300 for 15% broken and VND10,800-10,900 for 25% broken.

Local rice trade remains quiet and a food crisis similar to that in 2008 is not in sight despite the price spike since early this month

Nguyen Thi Anh, director of rice trading firm Tan Tai III in Tien Giang Province, told the Daily that during the previous food crisis, her business sold 25-30 tons of rice each day to clients in HCMC and central provinces but now the daily volume was 5-7 tons.

Rice supply has slid 60-70% at Ba Dac market in Tien Giang since early this month, making it hard for local traders and exporters to stock up on large amounts, said a local food processing firm.

Besides, rice exporters and retailers might have bought the food staple before, making trade this month not as active as in late July and early August, according to traders in Tien Giang’s Cai Lay District.

The retail price at markets in the Mekong Delta has climbed by VND1,000-1,500 per kg to VND13,000-18,000 compared to August.

Husked rice IR 50404 at markets in Cay Lay and Cai Be districts and My Tho City in Tien Giang is priced at VND13,000-13,500 per kg while that of the long-grain category is VND14,000-15,000. Some high-grade types such as OM 4900 and Jasmine are quoted at VND16,000-18,000.

Rice suppliers have marked up the price, forcing vendors at markets to follow suit, said a rice vendor at My Tho market. However, domestic consumption is still normal, she added.

Similarly, the retail price in Dong Thap and Vinh Long provinces has moved up by VND1,000-1,500 from mid-August.
 
Stock market still mired in uncertainty

Cash has yet to find its way back to the stock market as investor confidence remains dampened by the fragile macroeconomic situation, said Vu Thanh Tu, head of the research and analysis department at Viet Capital Securities (VCSC).

There is no sign of the macro economy getting out of the woods, Tu told the Daily in an interview. Inflation, high interest rates and the volatile exchange rate have thrown investors into confusion over what is the best investment channel.

Though the gold price has basically stabilized following the central bank’s moves, the yellow metal seems to be not as appealing to investors as before.

In the past two months, the Government has taken a raft of measures to intervene in the foreign exchange market, including selling U.S. dollars, increasing the refinancing rate and flexibly adjusting the exchange rate.

Although the exchange rate has been revised several times, changes have been insignificant, from VND20,628 per dollar on September 1 to VND20,678 on October 13, said Tu. He predicted the central bank would likely use its rising foreign reserves to intervene in the market when needed.

Despite the hard time, Tu said, some industries like rubber, sugar, foodstuff, seafood and medicine have still managed to make stable profits, equivalent to or higher than their targets. Meanwhile, the steel, property and transport sectors may see business results lower than expected in the third quarter.

Regarding many stock codes having been excluded from margin trading, Tu said it would not greatly impact on liquidity because of the tightened stock lending and the lack of instructions about margin trading activities. So far 153 stocks have been removed from margin trading, making up 22% of the 690 listed securities on the two bourses.

Tu forecast the market would remain flat in the final months of this year if there was no clear-cut macroeconomic measure. The pessimistic viewpoint of investors will pull the market down, he said.
 
Small-scale exporters struggling at year-end

Despite a huge rise in the total export revenue in the first nine months of the year, local exporters, mainly small and medium-sized firms, are predicted to face great difficulties from now to the year-end.

Vietnam’s export revenue in the January-September period amounted to an estimated US$70 billion, up 35.4% year-on-year.

In particular, farm produce accounted for 21% of the total export revenue in the first nine months and fetched US$14.9 billion in export revenue, up 40% year-on-year. Export revenue of coffee rose 64%, rice 20%, rubber 60% and other goods 93%.

In a meeting recently held in HCMC, Industry and Trade deputy minister Nguyen Thanh Bien pointed out a price hike primarily led to such high achievements. This is seen in exported unprocessed goods which contribute more than half the total export turnover, Bien noted.

Since the beginning of the year, the price of input materials and costs of many industries have soared but thanks to the price hikes in finished products, local enterprises have enjoyed good export prices.

“A price hike fosters local exporters to make more effort for the rest of the year,” said Bien. However, he admitted the global economy was exposed to a rising volatility. Consequently, the U.S. economic woes and the euro zone’s sovereign debt crisis are forecast to badly affect Vietnam’s export activities in the fourth quarter and the first quarter next year.

Thus, representatives of business associations have urged more effective solutions to ride out the tough market conditions.

The woodwork industry’s export turnover in September fell by 7% month-on-month, said Tran Quoc Manh, vice chairman of the Handicraft and Wood Industry Association of HCMC (Hawa).

“Given global economic turmoil, small companies have had to transfer their factories or refuse to take new orders,” Manh said.

Dang Hoang Giang, general secretary of the Vietnam Cashew Association (Vinacas), said due to credit tightening, small businesses are most vulnerable when the market goes unstable.

A spike in input costs has forced a number of small cash-strapped firms to close. “The Government should focus on supporting small firms or they will be mired in woes and the market will fall into chaos,” suggested Giang.
 
Ford welcomes 1,000th Fiesta customer in Vietnam

Ford Vietnam on Wednesday greeted its 1000th all-new Fiesta customer at Saigon Ford and celebrated the sales milestone since the compact car was launched in May.

Managing director of Ford Vietnam Laurent Charpentier joined Phan Duong Cuu Long, dealer principal of Saigon Ford, to hand Vu Thi Kim Mai the key to her new grey 5-door 1.6L Fiesta.

“We’re thrilled to have reached this milestone so soon after launch of the Fiesta,” said Charpentier in a statement, adding the car is known for its design, fuel efficiency, quality, safety and smart technology.

Launched in May, the Ford Fiesta assembled at the company’s Hai Duong plant has quickly become one of the clear leaders of Vietnam’s small car segment in just five months of availability.

Ford Vietnam reported September retail sales that surged more than 51% year-over-year to 825 units, representing an overall industry share of 7%. Ford’s strong performance in September was boosted by the success of the Ford Fiesta with 314 units delivered in that month alone.
 
Aussie bank ups stake in VIB

Viet Nam International Bank (VIB) and Commonwealth Bank of Australia (CBA) yesterday announced CBA had taken an increased stake in VIB as a strategic shareholder.

CBA invested an additional VND1.15 trillion (US$58 million) to strengthen the capital base and capital adequacy ratio (CAR).

This lifted CBA's stake from 15 to 20 per cent. VIB's shareholders' equity is now more than VND8.2 trillion ($390 million).

Previously, CBA invested capital in VIB and also conducted a "capability transfer" programme to help improve business, management, and risk management and strengthen competitiveness, said Wayne Hoy, general manager of International Financial Service Division of CBA-Sydney.

Hoy said the number of CBA staff working at VIB would be 40 in 2012 and gradually rise in following years. The exchange of people between VIB and CBA would also accelerate as VIB continues its quest to become a best-practice financial services organisation.

"Both VIB and CBA share the objective of being number one bank for customer experience in our respective countries. With CBA's increased investment in VIB, we have expanded our commitment to capability transfer to help the bank implement its business and operation plans and to grow sustainably." said Hoy

Han Ngoc Vu, chairman of VIB's board of directors said that for many years, VIB was determined to lift customer service and finance and risk management capabilities to international standards. He said CBA's involvement for more than one year was part of the roadmap.

Recently, Fitch Ratings, one of the world's leading rating agencies, said Vietnamese banks needed to raise capital to increase their capital reserves and expand operations.

Power cuts ruled out this year
 
Power demand for production and daily use in the last quarter of this year is estimated to be over 28 billion kW per hour, 9.9 per cent higher than the same period last year. But it can be met, according to the Electricity Regulatory Authority of Viet Nam.

The body under the Ministry of Industry and Trade has also reported that in the 3rd quarter, power output including domestic production and import was nearly 28.8 billion kW per hour, 7.2 per cent higher than that of last year.

Despite a 15-day gas supply halt in Nam Con Son Gas Pipeline Company in late September, power supply was still ensured thanks to mobilised diesel-fuelled generators.

To ensure power supply in the last quarter, the ministry continues supervising and directing Electricity of Viet Nam (EVN) to operate power grids safely.

Detail measures are being taken to maintain or fix emerging problems of generators and the gas supply pipeline to minimise maintenance time.

The National Load Dispatch Centre has been asked to develop a power supply and water storage scheme, especially in the central and southern regions, to ensure the water volume for power generation in the dry season next year.

Coal and gas suppliers for power production including Vinacomin and Petro Vietnam are urged to provide sufficient fuel. Dispatch units are urged to ensure the process of power projects that add power, and thus meet an increased demand.

The ministry calls on people to save electricity and take energy-efficient measures, which is considered key to safe power operation.

Distribution maps available in Mekong Delta provinces

The Business Studies and Assistance Center (BSA) has finished drawing maps of distribution networks in six provinces in the Mekong Delta, comprising Tra Vinh, Can Tho, Vinh Long, An Giang, Tien Giang and Long An.

Vu Kim Hanh, director of BSA, said a map for each province would be sold at VND40 million. Any firms wanting to buy maps of six provinces will be offered a preferential price of VND200 million, Hanh said.

First buyers, including ten HCMC-based firms and five firms in the northern region, will be provided free consulting on how to use the map effectively. Information showed on the maps will be regularly updated and adjusted.

Besides, BSA is not planning to sell its study to multinational firms who are interested in it but may provide for small enterprises for free, she said.

The maps indicate detailed information concerning Vietnamese consumer goods situations and scales of each locality with the numbers of retailers, storehouses or lists of distributors and suppliers.

Can Tho City, for example, has around 18,000 stores in all markets, streets and residential areas while Tra Vinh has about 20,000 stores.

BSA will continue to study and draw a distribution map for Vietnamese products in HCMC.

Studies of distribution maps will also be transferred to each province, helping them fully understand the whole distribution system to carry out suitable development plans.

Many traditional handicraft businesses lack access to bank loans  

Vu Quoc Tuan, chairman of the Vietnam Handicrafts Village Association, said at an online meeting on Thursday that only a mere 30 percent of traditional handicrafts businesses have access to bank loans.   

The meeting was held to review five years of development of traditional rural crafts villages.  

Traditional crafts villages have borrowed VND53,200 billion (US$2,5 million), an increase of 2.6 percent compared to the same period in 2006.

However, 30 percent of the enterprises received capital while most of the other businesses found it difficult to access capital due to bureaucratic red tape and complicated conditions laid, such as collateral mortgages and outline of pay back plan to banks.

Deputy Minister of Agriculture and Rural Development Ho Xuan Hung said the Ministry of Agriculture and Rural Development (MARD) will liaise with the Ministry of Finance and the State Bank of Vietnam to adopt measures to resolve this shortcoming.

Hung added that the country has 4,575 traditional handicrafts villages which attract more than 11 million labourers, creating lucrative employment for local residents. 65 different kinds of traditional handicrafts are made, some of which date back 100 years.
 
Vinpearl to build five-star luxury resort in Da Nang  

The People’s Committee of the central coastal city of Da Nang signed a US$5 billion contract on October 19 with Vinpearl Joint Stock Company to build the Lang Van five-star luxury resort complex on the sea coast.
 
The first phase of the project will begin in 2012 at a total investment of US$1 billion. The resort will open to visitors by 2015 and the entire complex will be complete by 2020.

The Lang Van resort complex will cover 1,065 hectares of land area and 500 hectares of sea. It will be the largest five-star international property project Vinpearl has ever developed.

The resort and entertainment complex will comprise of a five-star hotel with over 1,000 luxury rooms and a large compound with premium apartments and villas.

The resort will also feature a commercial and service complex, an entertainment theatre, an international convention hall, a helicopter pad and many other sports and recreational facilities, including a golf course.

Lang Van, situated on a small peninsula at the foot of Hai Van Pass, with white sand beaches and crystal clear water, is an ideal location for developing a luxury resort.

Gov't sets stricter penalties for financial violations

The government has increased fines for violations in the financial sector in a new decree issued on Friday.

For instance, the penalties imposed on quoting prices of goods and services in foreign currencies are increased by 7 times to VND500 million (US$24,300).

Making payments in foreign currencies or gold and other violations of gold trading regulations are now subject to a fine of VND50-100 million while in the past, these violations didn’t receive any penalty
.
Fines for the illegal importing and exporting of gold are also increased by 7 times, from VND40-70 million to VND300-500 million.

The acts of illegally transporting foreign currencies out of Vietnam and paying foreigners for goods and services in foreign currencies will also be imposed higher fines of VND50-100 million compared to the previous figures of VND5-12 million.

Vung Tau’s tourism projects get stuck

Though they have been licensed, many tourism projects worth billions of dollar in Vung Tau city are yet to get off the ground either because of the investors themselves or local authorities.

For instance, the US$1.3-billion project of Good Choice USA – Vietnam Co. Ltd. to build an amusement park was licensed in 2008 but the investor has failed to proceed with it.

Named Wonderland World Vung Tau, the complex is expected to have a five-star hotel with 2,500 rooms, 4 four-star hotels with 1,000 rooms each, and an entertainment complex in Nguyen An Ninh Ward.

But none of the above construction has ever been done and the investor has simply disappeared after getting the license.

The city administration thus decided to cancel the investor’s license early this week.

An official from the city’s Center for Land Development said the investor hadn’t contacted his center to discuss site clearance and other tasks to proceed with the project.

Phan Hoa Binh, Chairman of the municipal People’s Committee, said Vung Tau had many times urged the investor to begin working on the project, but received no responses.

Nguyen Tu Quy, director of the Centre for Technical and Professional under the Ba Ria-Vung Tau Province Department of Natural Resources and Environment, said Good Choice USA – VN owed the center VND400 million for surveying.

“We do not know where to find this investor,” he said.While the investor is hiding somewhere, locals have been squatting on the land plot zoned for the project.

While most of the long-delayed or stalled projects are mainly caused by the investors’ incapability, other plans too are being delayed by local authorities.

The $4.1-billion Saigon Atlantis Hotel project, for instance, is yet to get started because local authorities haven’t completed site clearance.

Though it expected to receive 100 out of 1,000 hectares of land zoned for this project by the first quarter of 2009, Winwest Vietnam Co. Ltd., the project’s investor, has so far received only 90 hectares, even though it has provided VND98-billion to aid the city.

Dang Minh Thong, deputy director of the provincial Department of Planning and Investment, said site clearance was the main obstacle for many projects in Vung Tau city since local authorities didn’t have enough money.

Many other projects including the $900-million Skybridge Dragon Sea and a project to build a hotel, trade center and apartment complex of OSC-Duxton Co. Ltd. have also been delayed since the investors haven’t received their land.

Investors are less confident about Vietnam

The latest EuroCham Business Climate Index shows that business confidence and outlook among European companies in Vietnam has dropped for the fourth consecutive quarter as a result of macroeconomic troubles, high inflation and other concerns.

The European Chamber of Commerce in Vietnam (EuroCham) commented in a report on the quarterly business climate index (BCI) released on Thursday that that its member participants in the survey turned even more cautious about their business prospects in Vietnam.

When compared to previous survey results, EuroCham highlighted a decrease of 11 points to 52 points in the new business climate index survey, conducted in early October.

About half of the 200 respondents were in the services industry, a third in manufacturing and the rest in trading or other sectors.

EuroCham Chairman Alain Cany said the latest BCI indicated a declining confidence in Vietnam as an investment destination.

“Coupled with the 28 percent drop in FDI through the first nine months of 2011 and high inflation rates, it is fair to say that European companies are increasingly concerned about the business and investment environment in Vietnam,” he said.

In addition to inflation, EuroCham Executive Director Matthias Dühn attributed the further index fall to slow progress in many other old and new issues, including lack of adequate infrastructure, administrative burdens, a number of new "market access" issues, such as restricting the importation of goods into Vietnam.

The survey witnessed the number of respondents who assessed their current business situation as “good” or “excellent” drop to 32 percent from 46 percent in the second quarter and 64 percent in the first quarter of 2011.

On top of that, no respondents stated their current situation as “excellent” but shifted their opinions toward a neutral assessment.

The number of businesses with a negative view on their situation also rose to 22 percent from 16 percent.

A large number of businesses joined the survey with a bleak view as the findings revealed only 27 percent ticked the “good” or “excellent” option. This was poorly compared to 42 percent last quarter and 72 percent with a positive business outlook in the first quarter of this year.

In terms of investment plans, the respondents also expressed more caution as the survey reflected that 38 percent wanted to maintain their level of investment and 36 percent were looking to increase their investments in Vietnam, down from 52 percent last quarter.

The result also indicated that 22 percent were looking to scale down their overall investment in the country, up from 13 percent last quarter.

In the current situation, EuroCham members have a mixed view of their revenue and orders in the medium term.

EuroCham said for the first time since it launched the BCI, the majority of respondents expected their revenue to remain the same, but 34 percent projected a slight increase in revenue in the medium term.

When asked about their concerns and the challenges, the respondents pointed out high inflation and 48 percent of them expected this to have a significant impact on their business, though this percentage went down from 56 percent last quarter.

The latest survey showed two-thirds of the respondents thought of a further deterioration of an already difficult economic situation when talking about the macroeconomic outlook for Vietnam over the next 6 months.

Only one-third have a positive view that the situation will stabilize and gradually improve.

Government expects lower credit growth

Credit and money supply growth this year will be the lowest in years, said a report on 2011 socio-economic performance delivered by Prime Minister Nguyen Tan Dung to the National Assembly.

The premier told the second session of the 13th National Assembly on Thursday that total outstanding loans are expected to rise by 12 and money supply, by 12.5 percent, this year.

From the beginning of the year to October 20, money supply rose by 9.14 percent and total outstanding loans by 8.2 percent compared to last December, according to official statistics.

PM Dung said the lower-than-expected credit growth is caused by the government’s rigorous monetary tightening policy.

While loans are prioritized for agricultural production, exports and supporting industries, lending to non-manufacturing sectors will decline.

Under Resolution 11 issued by the government earlier this year, credit growth was capped at below 20 percent, money supply at 15 percent to 16 percent, and credits for businesses in non-manufacturing sectors at 22 percent of total outstanding loans in the middle of the year and 16 percent by the end of this year.

However, several major socio-economic targets have yet to meet the government’s expectation.

The macro economy has yet to stabilize, inflation and lending interest rates have remained high, bad debts at banks have risen, liquidity at banks has been low, foreign reserves have stayed low, and stock and property markets have been in bad shape.

Under current economic uncertainties, industrial production is still on track. In January-September, agricultural production increased by 4.1 percent, industrial production rose by 7.8 percent and the service sector was up 6.24 percent.

Trade deficit is expected to reach US$10 billion this year, which is 10 percent of export value, lower than the targeted 18 percent.

Vietnam needs higher forex reserves

Vietnam’s foreign exchange reserves are estimated to be higher than earlier this year but are yet to reach the safe threshold, said the National Financial Supervisory Commission.

The forex reserves may be equal to 7.5 weeks of import cover compared to 3.5 weeks earlier this year, but they should cover 12 to 13 weeks of imports, Le Xuan Nghia, vice chairman of the commission, said this week.

After the central bank sold a large volume of foreign currencies within the past two weeks to cool down the exchange rate, financial experts are concerned that the move could pile pressure on foreign reserves and the central bank’s commitment to keep the exchange rate fluctuation under 1 percent from now to the end of this year.

However, Nghia said the government would be able to stabilize the exchange rate as pledged.

The balance of payments is expected to see a surplus of US$4-5 billion this year, which is the first time since 2007.

This is an important foundation to keep the exchange rate at the pledged level, Nghia said.

“As the nation has a drastic fight against inflation, we cannot let the exchange rate rise as sharply as in previous years. Local businesses can feel secure as mild revisions of the exchange rate don’t really matter,” he said.

One of the factors pressuring the exchange rate in recent days is that foreign currency deposits have been $7 billion lower than the amount lent out as of the end of September.

Local corporate borrowers are trying to buy dollars to repay their foreign currency loans.The central bank, however, is willing to sell dollars to meet the high demand.

The bank will keep only the balance of payments surplus to stabilize the forex market, Nghia said.

Vietnam’s trade gap has fallen sharply, remittance is positive and capital accounts have a surplus of around $9 billion.

Vietnamese rice competes well in Hong Kong

With improved quality and reasonable prices, Vietnamese rice has been competing well with Thai rice in the Hong Kong market.

Pham Van Bay, Deputy Chairman of the Vietnam Food Association (VFA), said Vietnamese rice exports to Hong Kong have been increasing rapidly.

He said in the first nine months of this year, Vietnam shipped a total 110,000 tons of rice to this market.

Even Thai rice exporters admitted that they had lost this market to Vietnam, Bay said, adding that Hong Kong has become Vietnam’s 11th largest export market by value.

He said domestic farmers and businesses had recently switched to jasmine rice to increase their export quality.

“Vietnamese rice may be of lower quality than Thai rice, but it can still meet customers’ demand,” he said.

“Moreover, we can win customers thanks to our more competitive prices.”

He said Thai jasmine rice was sold at more than US$1,000 a ton, while Vietnamese jasmine rice only cost more than $700 a ton.

Bay said the quality gap between Vietnamese and Thai rice had been gradually narrowed, and so had the price difference.

According to VFA, besides Hong Kong, Vietnamese jasmine rice has also entered Singapore, China and other important markets.

Pham Quang Dieu, director of market researcher Agromonitor Co., said jasmine rice had become more important to Vietnam’s rice exports in the past few years.

In 2008, only 2.2 percent of total rice exports was jasmine rice but the figure has risen to 4.5 percent recently, he said.

PV