Vietnamnet global

03/03/2011 11:09 (GMT+07:00)

BUSINESS IN BRIEF 3/3

Registered FDI down, disbursement still up; Phu Quoc Island steps up tourism infrastructure; Vietnam achieves great growth in agro-forestry export; Construction of first ever fish oil refinery begins; Firms eye new way to attract capital

Registered FDI down, disbursement still up

Foreign investors registered US$1.56 billion by February 23, representing 68 percent of the figure in the same period last year, according to the Ministry of Planning and Investment’s Foreign Investment Agency.

The investment includes US$1.47 billion in 93 newly licensed projects and US$86 million of additional capital for 14 existing projects.

The ministry reported FDI disbursement continued to rise. During the period, about US$1.15 billion of FDI has been disbursed, posting a year-on-year increase of 4.5 percent.

Processing and manufacturing industries topped FDI attraction with registered capital of US$1.2 billion in the two-month period, followed by construction with US$71.7 million and retail and wholesale, US$48.8 million.

Ho Chi Minh City led the country in terms of FDI attraction with US$1.1 billion, a more than three-fold increase compared to the same period last year (US$328.3 million).

According to the Chairman of the municipal People’s Committee Le Hoang Quan, by February 18, 34 foreign-invested projects were granted licences, including a US$1 billion solar cell plant in Cu Chi district, while 13 valid projects were permitted to raise capital.

The economic hub was followed by Da Nang city with US$180 million of FDI attraction, Ba Ria-Vung Tau province, US$81.4 million and Dong Nai province, US$47.2 million.

Vietnam's VIB gross profit soars 72 pct y/y in 2010

Vietnam International Bank (VIB), 15 percent owned by Commonwealth Bank of Australia, said on Friday its gross profit last year surged 72 percent to VND1.06 trillion (US$50.8 million).

VIB, the country's eighth-largest partly private bank by assets, also said in a statement that loans jumped 57.6 percent to VND41.7 trillion.

The bank's total assets at the end of 2010 jumped 65.9 percent from the previous year to nearly VND94 trillion.

VIB's loan growth last year is well above the 27.65 percent expansion in the whole banking system.

The VIB statement reiterated that, pending government approval, Commonwealth Bank of Australia will raise its stake in VIB to 20 percent early this year, the ceiling for a foreign strategic investor in a domestic bank. ($1=VND20,885).

Phu Quoc Island steps up tourism infrastructure

Most of the nearly 2,000 hotel rooms on Phu Quoc Island in the Mekong Delta Province of Kien Giang have been fully booked since the end of last year.

Mr. Pham Quoc Thai of the Sao Bien resort revealed that the island sees a great number of local and international tourists. Almost 95 per cent of these visitors are foreigners and rooms in the resort would only be available in March.

The numbers of travelers to the island have increased by 30-40 percent as compared with last year.

According to the Phu Quoc Investment and Development Management Board, Phu Quoc has a total investment capital of more than VND3, 400 billion (US$ 162 million).

Phu Quoc international airport covers an area of over 900 hectares and a new road system has been laid out. An Thoi Port has also been made operational and the Ha Tien-Phu Quoc 110kV Underground Cable System is expected to be completed by 2012.

Vietnam achieves great growth in agro-forestry export

Vietnam’s export turnover of agricultural, forest and aquatic products achieved a vigorous growth rate of 50.7 percent year-on-year in the first two months of this year to nearly US$3.6 billion.

According to the figures announced by the Ministry of Agriculture and Rural Development, in the period, Vietnam exported 1.1 million tonnes of rice, for a turnover of US$592 million, higher by 55.6 percent in volume and 44.5 percent in value against the same period last year.

Higher export prices contributed to an increase of over 40 percent in coffee export turnover and more than 55 percent in cashew nuts export turnover. Major markets that consumed Vietnam’s coffee include the United States, Belgium and Italy.

This year, the export of rubber, green tea and pepper also achieved a consistent growth rate.

Apart from agricultural products, wood and wood products also brought a large increase to the sector’s export growth. Wood exports achieved US$548 million, up 17.6 percent, while aquatic products earned US$835 million, up 54.4 percent over the same period last year.

To promote export, the Ministry of Agriculture and Rural Development asked businesses to speed up promotional activities aiming to consolidate popular markets and extend into new markets.

Construction of first ever fish oil refinery begins

Construction of the country’s first ever fish oil refinery began in Binh Thanh commune, Lap Vo district, the Mekong Delta province of Dong Thap, on Feb. 23.

The project has a total capital of US$15 million invested by the Sao Mai An Giang Group with equipment provided by the Belgium-based Desmet Balesstra.

The refinery will refine fat of “tra” and “basa” fish, which is available in the Mekong Delta, to oil for use in cosmetics, pharmaceuticals and foodstuffs.

The plant is expected to be put into operation by the first quarter of 2012 to produce 100 tonnes of refined fish oil and increase its capacity to 200 tonnes/day from its third year of operation.

The project is aimed at reducing import of cooking oil and then for exports.

Enterprises, banks can help City lower CPI

Joint efforts from enterprises and banks can help HCM City maintain prices for goods under the price-stabilisation programme at 5 to 10 per cent lower than market prices, thus lowering the consumer price index (CPI), the chairman of the HCM City People's Committee has said.

Le Hoang Quan said that despite hikes in prices of materials and essential goods on the world market, the city's price-stabilisation programme had helped control the CPI, which was 2.63 per cent for the first two months of 2011 compared with 2.97 per cent in the same period last year.

Quan issued his statement in response to the Government's Thursday announcement on measures to control inflation and maintain economic stability.

He noted that the HCM City price-stabilisation programme initially covered nine essential goods, and this year's programme would include pharmaceutical products.

"We agreed with the Government's resolution on combating inflation. As prices of major goods have risen, we'll have to take greater efforts to curb inflation," said Quan.

He said the city leaders agreed with the Government's package of measures, which also aims to ensure social welfare.

He said in the first two months of the year HCM City maintained high economic growth and ensured social welfare.

The city recorded a 13.4 per cent growth rate in industrial production, 24 per cent growth in retail and service turnover, and export turnover growth of 19.7 per cent to US $3.3 billion.

Registered capital of $1.2 billion was seen in foreign direct investment.

Despite global economic woes, HCM City, as a financial hub, had total capital mobilisation amounting to VND798 trillion (US$38 billion), and debts reached VND730 trillion ($35.2 billion).

The deposit interest rate, which was capped at 14.5 per cent annually, rose to 14.5-19 per cent annually, forcing lending interest rates to 20-22 per cent annually.

To assist poor families with new electricity prices, Quan has asked the Government to allow HCM City to deduct VND30,000 per month for each household instead of repaying the amount at the end of a quarter or a year.

"The city authorities will be responsible for this issue," Quan said.

He said the city would also try to lower State investment, to save electric power, and to increase tax collection by 7 to 9 per cent.

As the world's food prices have risen and many countries are purchasing more food to enhance their granaries, the Government should enhance the nation's food security, he added.

Quan also asked the Government to urge the public to reduce spending on luxury goods as a way of helping to control inflation.

"Through departments, agencies, districts and wards, HCM City will urge the public to reduce this kind of spending. The results of such a campaign will help us to save capital, narrow the trade deficit, and ensure a balance in demand and supply in foreign currencies," said Quan.

Firms eye new way to attract capital

Depository receipts could become helpful tools for many Vietnamese enterprises that want to attract foreign capital to help expand their business operations.

Depository receipts (DRs) are financial instruments that represent an ownership interest in the securities of a foreign issuer typically trading outside its home market, and they have become a primary channel for raising capital worldwide, according to Citibank.

Domestic enterprises might access foreign capital by issuing DRs, but they must be able to demonstrate attractive industry dynamics, visible revenue trends, strong growth drivers, and a strong financial position, said Citibank's Viet Nam managing director Brett Krause.

"The prospect for DRs is quite strong given the level of offshore interest in Vietnamese companies, but the most important hurdle is around the need for clear regulations," Krause said. "Transparency is critical."

Compliance with disclosure requirements remained a major challenge for Vietnamese companies, he noted.

DRs could also help bridge technical differences between stock markets, allowing local companies to attract international capital as well as help investors easily diversify their portfolios with foreign securities, commented HCM City Securities Co managing director Johan Kruimer.

HCM City-listed real estate developer Hoang Anh Gia Lai Co (HAG) is the first Vietnamese company to have stated an intent to issue DRs and list them on the London Stock Exchange. To that end, it recently issued 16.2 million shares to strategic partner Deutsche Bank Trust Company Americas.

The foreign partner was conducting necessary procedures under overseas regulations, said HAG deputy director Vo Truong Son.

Experts explore potential products for securities market

The release of new products for the domestic securities market and related legal frameworks were discussed at a meeting held in Ha Noi on Thursday.

At the meeting held by the State Securities Commission of Viet Nam (SSC), Nguyen Thanh Ky, general secretary of Viet Nam Association of Securities Business suggested that Ministry of Finance (MoF) and SSC should consider policies to help create more new products for the stock market. Suggestions include allowing an investor to sell and trade shares during the same session while being able to open more than one transaction account at different securities firms.

Tran Thanh Tan, chairman of Club of Fund Management Companies proposed the SSC and MoF help develop the fund management sector.

The MoF and SSI should issue a legal framework relating to an open-end equity fund model as this is considered a prerequisite to help fund management firms develop new products, Tan said

Other policies are needed regarding other fund models, including exchange-traded funds, real estate investment trusts and pension funds.

In response, Deputy Finance Minister Tran Xuan Ha said that the ministry would review the suggestions and disclose a route-map for the introduction of new products in the near future.

According to the SSC, the domestic securities market faced difficulties last year due to unfavourable macroeconomic factors in both inside and outside the country. The market revealed the domestic financial system's low liquidity, trade deficit, inflation and high lending interest rates.

However, the stock market still had experienced a significant increase, with 187 new companies listed, amounting to 30 per cent of the total companies listed over the past decade.

In contrast to foreign investor withdrawals from the securities market in 2008-2009, Viet Nam lured US$1 billion through foreign indirect investment last year, Ha said.

The number of new accounts rose by 38 per cent in comparison with 2009. Of this, foreign investors owned 1,300 accounts, a 50 per cent rise compared to the previous year.

The commission also announced that the value of transactions in the securities market reached VND620 trillion (US$29.9 billion) with a total of 20.6 billion of shares last year, equivalent to 85 per cent of the market capitalisation which was quite high in comparison with the global stock market.

However, nearly 50 per cent of listed companies were small- and medium- sized firms worth VND100 billion ($4.8 million) in charter capital, while the remainder had an average capital of around VND50 billion ($2.4 million), according to SSC.

Corporate governance among listed companies also remained poor.

Ha announced that the MoF and relevant bodies were implementing several tasks this year in order to boost the domestic securities market.

Of this, the equitisation process of State-owned enterprises (SOEs) would continue to be hastened with a significant adjustment to Government Decree 109/CP on transforming SOEs into joint stock companies.

The MoF and SSI were also reviewing all guidelines for firms relating to listing, declarations and securities company operations, Ha added.

Defensive market posture leads to consolidations

Mergers and acquisations will increase sharply in the real estate sector this year due to expected difficulties in obtaining financing for projects, says Troy Griffiths, national director of research and valuation for Savills Viet Nam.

The need to raise capital through the securities market, as well as to streamline and restructure operations, would also drive M&A activity in the real estate industry, Griffiths suggested, adding that the market would no longer be able to thrive on simple land transactions or the wholesale development of apartment projects.

According to research and consultancy company AVM Viet Nam's report M&A Viet Nam 2010-11, real estate was one of the three sectors which witnessed the greatest number and highest value of M&A deals last year, ranking behind only the industrial and financial sectors.

The largest M&A deal in terms of value last year was Sacomreal's transfer of a 60-per-cent stake in Sai Gon Thuong Tin Tan Thang Investment Real Estate Joint Stock Co, worth US$82.4 million, to Gamuda Land. Gamuda Land now is the developer of the Celadon City project in HCM City's Tan Phu District.

Since mid-2010, the real estate market has seen at least five other major M&A deals. Late last month, VinaCapital's VinaLand Real Estate Co sold all of its holdings in a housing project in HCM City for $10.9 million. Earlier, Korean Vina Development Inc sold its 60-per-cent stake in HCM City's $120 million Blooming Park apartment project (now known as Imperia An Phu) to Prudential Viet Nam.

Kinh Do Corp also transferred a 50-per-cent interest in Sai Gon Kim Cuong Joint Stock Co, an investor in the SJC Tower in HCM City, to another domestic investor, while PetroVietnam Finance Land Joint Stock Co transferred its Diamon Tower project in Ha Noi to Petro Imico Construction Investment Joint Stock Co.

Many property firms see M&A as an effective tool to boost revenue growth. Kinh Do executives said their deal brought them a profit of VND425 billion ($20.2 million).

Can Tho aims to be hi-tech hub

Can Tho City plans to invest VND4 trillion (US$192.3 million) in hi-tech development by 2020 to become a hi-tech hub of the Mekong Delta region.

Seventy per cent of the capital will come from outside city funds.

The city plans to build research centres and laboratories, and conduct projects to apply research results to businesses. It will also transfer new techniques to farmers.

Initially, the city will build three hi-tech agricultural centres focusing on bio-technology, creation of new varieties and provision of high-quality products that meet international standards.

The centres will apply advanced agricultural techniques to produce high-quality rice, develop plant varieties, and promote key agricultural and fishery product processing and preservation.

In addition, the city will support enterprises in technology renovation in the fields of food preservation and processing, mechanical engineering, construction materials, chemistry, biology and automation.

IT applications in State offices will also be increased.

The hi-tech scheme calls for14 projects on urban agricultural and ecological development and aquatic-product quality management.

Quang Tri calls for investment

The central province of Quang Tri has asked for HCM City enterprises to invest more in the province.

As Quang Tri witnessed a lot of fighting during the war 35 years ago, it has been

a long road to recovery and it has had many achievements in its economic and infrastructure development, chairman of the provincial People's Committee Nguyen Duc Cuong said at a conference in HCM City yesterday.

Cuong said the province, however, is still considered underdeveloped and invited HCM City enterprises to invest there.

He said he hoped the municipal government and businesses would also support it by calling investment from other localities and foreign countries.

At the conference, provincial deputy chairman Le Huu Thang gave a brief on the opportunities there and announced a list of 108 projects that the province needed investors for the 2010-15 period.

The top 29 projects, mostly in industrial manufacturing, urban-residential development, tourism, service-trade and agriculture, require about US$11 billion in investment capital.

"The province lies on important communication axes of the country, of which National Road 9 is part of the East-West Economic Corridor running through Lao Bao International Border Gate, creating opportunities to develop trade, tourism, investment and co-operation with ASEAN countries," Thang said.

"With about 15,000ha of land under rubber plantation and nearly 6,000ha under Arabica coffee, Quang Tri needs investment in processing and brand development," he said.

With over 75km of coastline, beautiful landscapes and special revolutionary war relics, there's potential for a strong maritime economy and tourism, he added.

Beside Nam Dong Ha and Quan Ngang Industrial Zones, the Government has just approved to set up the Tay Bac Ho Xa Industrial Zone which needed investors, he said adding the investors would find the conditions and incentives very attractive.

Deputy Chairwoman of the HCM City People's Committee Nguyen Thi Hong at the meeting called on HCM City enterprises to expand their investment to the province.

Province pulls plug on economic zone project

Authorities in the south-central coastal province of Phu Yen have asked the Government to halt a United Arab Emirates's project to build a large special economic zone.

The provincial People's Committee chairman, Pham Dinh Cu, said the UAE-based Sama Dubai group planned initial investment capital of US$250 billion that could likely double to $500 billion.

The global financial crisis in recent years affected the company's plan to implement the project, according to the statement.

The mammoth project was expected to cover 300,000ha or 60 per cent of the province's total area, including Tuy An and Dong Xuan districts, Song Cau Town and Van Hoa plateau of Son Hoa mountainous district bordering Binh Dinh Province.

The project owner has asked permission from the Vietnamese parties to lease the land for 70 years, and to renew the lease twice, each term lasting 70 years.

Chairman Cu said another big project, Southern Tuy Hoa Creative City, with a registered capital of $11 billion also had problems.

The provincial People's Committee was considering revoking the investment licence in case the investor, US-based Galileo Investment Group, did not sign onto the investment fund, he added.

The $11.4-billion undertaking that would cover 7,656ha was registered by the US group in 2007.

The group was supposed to deposit $1.68 billion in the investment fund, which it had yet to do after three project extensions.

Chu Lai aims to attract $500m in new investments

Chu Lai Open Economic Zone (EZ) in the central province of Quang Nam aimed to attract US$500 million in investment this year, according to the EZ Management Board.

A recent report by the board revealed that it had granted licences to 12 new projects capitalised at over $556 million in 2010, up 102 per cent year-on-year.

"Investment was fairly good in 2010 and we managed to attract new projects to our prioritised sectors," said deputy head of the board Do Xuan Dien.

"These projects are expected to contribute to provincial economic growth," Dien said.

The projects included a $390 million solar panel plant, a $32 million automobile assembly factory and a $10 million electric generator manufacturing plant.

The latest additions have brought the total number of licensed projects up to 64, worth a combined $1.5 billion. Of the total, 38 are already operational.

However, insufficient infrastructure, sluggish land clearance and a shortage of skilled personal resources remained major challenges for the zone, he said.

During a recent meeting with the board, provincial leaders emphasised the importance of further improving the zone's infrastructure with a focus on transportation and the establishment of an adequate land fund for large projects and speeding up resettlement.

People's Committee Chairman Le Phuoc Thanh said the board should pay more attention to investment promotion.

In the context of a shortage of investment capital, the board needed to focus on key projects, ensure good infrastructure and complete the construction of resettlement areas, he said.

Local authorities would consider revoking investment licences of slow-moving projects, Thanh said, adding that top priority should be given to key projects and investors with adequate financial capacities.

"The board is encouraging investors with experience in infrastructure development to come and invest in the EZ," Dien said.

"We are also developing incentive policies for sectors where there is potential for investment attraction such as automobiles, electronics and electrical components, wood processing and paper production and tourism," he noted.

Overseas investment promotion, mainly in Japan, South Korea, Taiwan and Singapore, was also planned for this year, he concluded.

Late last year, the board organised investment conferences in the two Taiwanese cities of Taipei and Gaoxiong with the participation of 100 Taiwanese businesses.

Fuel price hike to drive up transport costs

The cost of land transport is expected to rise following an increase in petrol and oil retail prices on Thursday.

Nguyen Manh Hung, chairman of the Viet Nam Auto Transport Association, said according to the association's calculations, the increased cost of petrol and oil would translate into a 15 per cent price hike for land transport.

The devaluation of the Vietnamese dong against the US dollar would also have an indirect effect on prices, Hung said, adding that increased prices were inevitable.

Transport enterprises must carefully calculate how much they would raise prices in order to avoid operating at a loss or losing customers, Hung said.

Ta Long Hy, chairman of the HCM City Taxi Association and Deputy General Director of Vinasun Taxi, said with the increase of VND2,900 per litre of petrol, taxi charges would increase by 8-10 per cent.

Thai Van Chung, general secretary of the HCM City Cargo Transport Association, said cargo enterprises planned to increase prices by 15-20 per cent.

Huynh Hai Oanh, deputy director of the Western Bus Station, said large coach companies would be able to retain customers due to their reputations, but the increase would be a challenge for smaller firms.

Meanwhile, Bui Danh Lien, chairman of the Ha Noi Transport Association, expected prices in Ha Noi to increase by at least seven per cent in the near future.

The increased charges are expected to be applied to the domestic market within the next two weeks, following approval from the Ministry of Finance, Lien said.

The increase in petrol and oil prices will have a knock on effect on the costs of other goods, including building materials and consumer goods.

Do Duy Thai, deputy general director of Viet Steel Trading Ltd Company, said his company's steel prices would increase by VND400,000 per tonne due to the exchange rate and high electricity and petrol prices.

Le Thi Thanh Lam, deputy director of SG Fisco Joint Stock Company said the cost of transporting his company's products to the north would increase by 30 per cent and retail prices were likely to follow suit.

Saigon Co.op Mart will try and come to an agreement with transport enterprises over a reasonable increase in distribution costs in the interests of our customers, the supermarket and also the transport enterprises, said Tran Thi Mai Trang, a representative from Saigon Co.op Mart.

On Thursday, the domestic retail price jumped by between VND2,110 and VND3,550 per litre to VND19,300 for petrol, to VND18,300 for diesel oil, to VND18,200 for kerosene and to VND14,800 for fuel oil.