Experts concerned about fragile economic recovery

Economic experts, speaking at the opening of a two-day forum in Quang Ninh Province on April 28, expressed concerns over the country’s economic recovery that remains fragile due to huge public and bad debts, poor consumption and improper allocation of resources, among others.

Tran Dinh Thien, director of the Vietnam Institute of Economics, told the Spring Economics Forum 2014 that Vietnam had seen higher economic growth, a record-low inflation rate in years and an improving financial system this year. In addition, there has been little volatility of Vietnam dong.

However, Thien said there were few positive factors and that the nation was still mired in hardship, with gross domestic product (GDP) growth in 2013 dropping to a 13-year low.

The economy is dogged by the bottlenecks related to low budget collections, high public debt and a struggling State corporate sector. The financial system is still facing challenges like bad debt, cross ownership and slowing capital flows.

According to Thien, the biggest challenge is the exchange rate stabilization policy has been in place for so long but it has encouraged imports rather than domestic production and export.

This year, the Government will have to pay debt worth over VND208 trillion, or 26.7% of budget collections and much higher than the VND129 trillion last year and VND134 trillion in 2012.

The ratio may rise to 30% next year. This is really worrisome, Thien said.

Nguyen Dinh Cung, acting director of the Central Institute for Economic Management (CIEM), pointed out that there had been a serious imbalance in resources distribution.

More resources have been allocated to the State corporate sector than the private sector. This is a problem with the current economic structure, Cung said.

The Government, for the sake of boosting GDP growth figures, has increased public spending and investment, and government bond sales. More borrowing for State spending purposes means taking away resources from the private sector which is now struggling with a host of challenges, Cung explained.

The nation is confronting fiscal risks while shortcomings of the financial system have yet to be fully addressed. As a result, banks have been sitting on huge cash piles as they have been unable to find anyone to lend to.

“If we go on with current policies, the possibility of high inflation returning and GDP growth slowing is high in the medium term and uncertainties may recur as in previous years. Therefore, we need to change our macroeconomic policies,” Cung said.

NA deputy Tran Du Lich suggested the NA should hold a private discussion over public debt-related issues.

“Public debt, especially in the medium term, is not as light as we think. We may fail to pay debt upon maturity,” he said.

According to a report at the forum, total State budget spending in 2013 surged nine times against 2000, with routine spending jumping 10.7 times, investment increasing 5.9 times and debt payments soaring 4.1 times.

The Government issued bonds to raise capital but the State Treasury failed to disburse it, so the agency deposited money at the central bank to earn the interest. The central bank then bought the bonds back, meaning that capital could not run into the economy, Lich said.

The Government often chooses to boost tax revenue, thus pushing enterprises into greater hardship, Cung said.

Cung said it was necessary to impose discipline on State budget and cut overspending immediately. If spending remained high, the Government should sell assets, such as speeding up equitization of State-owned enterprises to fund its spending instead of borrowing.

JETRO: Japan food favored by locals

Around 38% of 500 respondents in HCMC said in a survey that they like eating Japanese food, according to the Japan External Trade Organization (JETRO).

The survey, which was conducted by JETRO in a major city in each of six countries with the highest food imports from Japan, indicates Japanese food is most favored by 38.4% of 3,000 respondents (500 respondents in each city).

HCMC ranks third in the number of people who prefer Japan cuisine with 37.8% compared to 66.6%, 50.4% and 35.4% in Bangkok, Jakarta and Moscow respectively.

For Japanese dishes, 31.8% of the respondents in HCMC like sushi and sashimi most.

HCMC residents favor Japanese food as it has pleasant flavors (34.2%), is healthy (15%) and demonstrates sophistication (14.2%).

According to the survey, Vietnamese food takes the 12th position among 16 typical dishes chosen for the survey.

JETRO carried out a similar survey in countries having the highest imports of farm produce and seafood from Japan.

HCMC economy shows signs of recovery

Major economic indicators have posted positive growth in HCMC, showing the city’s economy has begun recovering.

The city achieved export sales this month of nearly US$2.5 billion, up 22% over the same month last year after a 7% downturn in the first quarter, said Thai Van Re, director of the city’s Department of Planning and Investment, at a meeting last week.

The good export performance in April sent the total in the first four months soaring 0.6% year-on-year to US$8.85 billion. Meanwhile, the city’s import bill in the period was US$7.87 billion, thereby leaving a trade surplus of nearly US$1 billion, Re said.

He said manufacturing was also picking up after a long period of hardship.

Since early this year, the city has attracted VND78.33 trillion (US$3.71 billion) in domestic investment, up 31% from a year earlier, and US$765.4 million in foreign investment, up 120% year-on-year, he said.

Dao Thi Huong Lan, director of the city’s Department of Finance, said with manufacturing, retail and export picking up, the city’s budget revenues in the first four months grew 18.7% to VND85.8 trillion (US$4 billion).

Budget revenues from domestic sources accounted for 60%, or VND49.2 trillion, up nearly 18%, VND10.6 trillion from crude oil, the same as the first four months of last year, and VND26 trillion from export-import operations, up 30.2%.

Lan ascribed the strong rise in budget revenues from export-import operations to the significant increase of imports subject to high tariffs such as fuels (up 36%), automobiles (up 49%), and household appliances (up 15%).

Chairman of the city Le Hoang Quan said the VND25 trillion budget revenue attained in April was the highest monthly figure in three years and that the key economic indicators were pointing to an economic recovery in the city.

However, Tran Anh Tuan, deputy head of the HCMC Institute for Development Studies, said despite some positive signs of the economy this month, problems had remained to be solved.

The 0.14% pickup of the consumer price index (CPI) this month versus December last year in HCMC reflects weak consumer demand, he said, adding bad debt accounted for 4.85% of outstanding loans, up by 0.16 of a percentage point over late last year.

Domestic rubber prices seen falling further

Local rubber producers and exporters have projected that domestic prices market will decline further in the coming days due to an oversupply on global markets.

Rubber prices in the southeastern provinces of Vietnam range from VND36 million to VND38 million a ton, contracting nearly VND1 million compared to early this month.

The first days of last week saw prices down to 201.7 yen per kilo, or around VND40 million a ton, and to 199.9 yen per ton at a trading session on April 28 for May delivery.

Local rubber processors and exporters attributed the price decreases to higher-than-projected output in the world’s major rubber growing countries like Thailand, Malaysia and Vietnam.

In previous years when rubber prices stayed high, other nations like Laos, Cambodia and Myanmar raced to grow rubber trees on large areas. These farms have now entered their harvest season.

The oversupply has sent inventories surging to 652,000 tons worldwide, up by 286,000 tons from last December. Notably, China alone is said to hold an inventory of some 360,000 tons, up by 40,000 tons versus end-2013.

In spite of the rising inventory, Chinese companies are increasing purchases to take advantage of low selling prices. However, Chinese companies only buy Malaysian material to produce tires rather than one from Vietnam due to lower prices.

For the reason, local firms forecast further declines in domestic prices in the near future. With Chinese and Malaysian traders buying up to 70% of Vietnam’s total output, local exporters have found themselves in hot water as their customers have already signed contracts but have not opened letters of credit to postpone imports.

Experts explained that as prices fell on a daily basis, importers did not want to carry out the signed contracts for fear that they would incur losses.

Vietcraft, SDC help ethnic groups improve income

The Vietnam Handicraft Exporters Association (Vietcraft) is joining forces with the Swiss Cooperation Office (SDC) to provide assistance for 1,000 families in mountainous regions to increase their income.

Thai, H’mong and other ethnic groups are being assisted in farming, and designing and weaving ethnic brocade as part of a four-year project, which costs US$600,000.

Vietcraft chairman Le Ba Ngoc told the Daily that the funding of SDC was also for the families of ethnic groups in Hoa Binh, Nghe An and Thanh Hoa provinces to upgrade their production tools, build teamwork capacity and find markets, among others.  

Vietcraft and SDC expected that their partnership would enable the beneficiaries to increase their income by 50% in 2016, when the project is scheduled for completion.

Tech Thi Sua from Mai Chau District, Hoa Binh Province said that with the assistance of SDC and Vietcraft, weavers in this northern province could establish a cooperative specializing in brocade production next month. They will also promote their traditional technique of decorating the ethnic brocade with bee wax.

Brocade and linen products on display at LifeStyle, a trade fair on handicraft, furniture and gift items in HCMC last week, attracted a large number of Vietnamese and foreign visitors.     

Ngoc from Vietcraft said that at the 4-day LifeStyle fair, exhibitors struck deals worth more than US$ 17 million, up 30% compared to the same event of last year.

Local and foreign companies exhibited their products at more than 800 booths of the fifth LifeStyle.

Texhong licensed to develop IP infrastructure

Texhong Hai Ha Industrial Park Co., Ltd under China’s textile group Texhong has been licensed to develop infrastructure for the first phase of Hai Ha Industry Park (IP) in Quang Ninh Province.

The industrial park covers 660 hectares in the first phase and is considered the biggest foreign-invested industrial park development in the northern province.

Texhong Hai Ha Industrial Park Company and Hai Ha International Investment Co., Ltd. will jointly develop the integrated industrial park into an environmentally friendly venue for enterprises, particularly apparel producers. The project has total registered capital of VND4.52 trillion (some US$215 million).

The project is slated to get off the ground in July this year. This project is part of a cooperation agreement signed by representatives of Quang Ninh Province and Texhong Group in August last year.

The project was licensed 15 days after its application was filed. This is the second big project of Texhong Group after its multi-million-dollar textile project in the province.

The investors have pledged to complete the industrial park as fast as possible, with five plants and three storehouses to be finished in September this year. They will also build a thermal power plant, a wastewater treatment system and roads among others in the park.

Texhong Hai Ha Industrial Park is expected to attract enterprises in different sectors, particularly in the garment and textile industry.

Earlier, leaders of Texhong said the group decided to invest over US$300 million in the textile project in Quang Ninh in hopes of cashing in on the Trans-Pacific Partnership (TPP) agreement, which Vietnam has been negotiating. Vietnam will enjoy a 0% tariff when exporting apparel to other TPP member countries.

Fresh FDI approvals fall, disbursements inch up

New foreign direct investment (FDI) approvals in the first four months of this year have plummeted by more than 40% against a year ago while disbursements by operational projects have risen 6.7% year-on-year.

The Foreign Investment Agency under the Ministry of Planning and Investment said that Vietnam attracted around US$4.85 billion in FDI from both new and operational projects from January to April. The agency put FDI disbursements at US$4 billion in the period.

According to the agency, 390 new FDI projects with total registered capital of US$3.22 billion had been licensed in the year to April 20 and an extra US$1.62 billion pledged by 140 operational projects.

More than 74% of the fresh investments in the period have gone to 204 projects in processing and manufacturing sectors, followed by real estate with 8.1% for seven new projects and construction with 4.9% for 37 projects.

In the period, companies from 36 countries and territories have committed to investment in Vietnam. South Korea is the leader with some US$1.12 billion for new and operational projects, 23.1% of the total.

Japan is second with US$531 million, or 10.9% of the total, and Singapore third with more than US$479 million.

The multi-million-dollar FDI projects licensed in the first four months include Thang Long cement project worth over US$352 million in the northern province of Quang Ninh, Dai An Vietnam-Canada international hospital project valued at US$225 million in the northern province of Hai Duong, and a property project capitalized at US$200 million in HCMC.

Exporters urged to take new approach

Though Cambodia is a potential market for Vietnamese companies, it poses several restrictions for entry, heard a business matching Viet Nam – Cambodia info session organised in HCM City on Saturday.

The session focused on how to approach the market, which Vietnamese exporters in the past viewed as an easy market to penetrate.

"Do not have such high expectations about the market," Tran Ngoc Khanh, office manager of the Bee Logistics Corporation in Phnom Penh City, told seminar attendees.

Khanh, who has more than three years of experience in doing business in Cambodia, said that many Vietnamese companies had chosen Cambodia as a market to clear stock.

He said their attitude about Cambodia needed to change and urged them to abandon the idea that it was a place for surplus goods.

In an interview with Viet Nam News, Khanh said that fixed costs such as transport and logistics were quite high in Cambodia, and that Vietnamese goods were now under strong competition with high-quality but affordable Thai products that are well-designed.

The Cambodian distribution system was also challenging, he said, explaining that it was small and not as professional as Viet Nam's system.

To enter the market, seminar participants said that domestic companies should set up representative offices in Cambodia and register their trademarks as soon as possible.

They also urged exporters to devise long-term plans, improve designs, and find ways to cut prices.

In the first 10 months of 2013, bilateral trade turnover between Viet Nam and Cambodia reached more than US$2.5 billion, increasing by nearly 9 per cent year-on-year.

With a population of 15 million, Cambodia is the 12th biggest export market of Viet Nam.

Viet Nam's main exports to Cambodia are steel, consumption goods, agricultural machinery, rubber and technological products.

Farming, forestry, seafood exports see value increase

The total export value of Viet Nam's agricultural, forestry, and seafood products increased 5.8 per cent year-on-year to US$10 billion during Jan-April this year, noted Agriculture and Rural Development Ministry.

Of the reported increase, the total export value during these months was estimated to reach $2.63 billion.

In the initial four months, the fisheries industry reported a year-on-year surge of 31.2 per cent to reach $2.2 billion.

The ministry pointed out that the US remained the leading export market for Vietnamese seafood products, accounting for 24.59 per cent of the total seafood export value, reported the Thoi bao Kinh te Viet Nam (Vietnam Economic Times) newspaper.

The seafood export value to the US in the first four months showed an increase of 85 per cent to reach $547.49 million against the same period last year.

Viet Nam's fisheries industry noted an increase in export value of seafood to all its export markets, including Japan (up 19 per cent), South Korea (up 56.1 per cent), and China (up 16.6 per cent).

Viet Nam became the third-largest shrimp exporter and the largest tra fish exporter in the world. Vietnamese seafood products were exported to 156 countries and territories, the ministry claimed.

According to the ministry, the wood processing industry also reported a year-on-year increase of 21 per cent in the total export value to reach $479 million during the initial four months of this year.

The US and China were the two largest export markets for Vietnamese wooden products, accounting for 51.9 per cent of the total export value. The two markets saw a year-on-year surge in export value of 23.32 per cent to the US and of 38.59 per cent to China.

The Viet Nam Wood and Forestry Product Association has forecast Viet Nam's total export value of wooden products to exceed $6.5 billion for this year and to reach $10 billion within the next five years.

However, in the first four months, the industry will have to shell out $861 million for importing wooden products for export processing, doubling against the same period of last year.

Meanwhile, the agricultural sector saw growth in exports of coffee, cashew, and pepper, but reduction in exports of rice, cassava, tea, and rubber.

During the first four months, the ministry remarked that the export value of coffee rose 39.6 per cent in volume to 826,000 tonnes and 30 per cent in value to $1.65 billion compared to the same period last year. Germany and the US were the two largest export markets for Vietnamese coffee products.

According to the Viet Nam Coffee and Cacao Association, the nation will experience a year-on-year increase of 20 per cent in export value of coffee to reach $3 billion for the entire year. — VNS

The products saw a year-on-year drop in export value at 4.7 per cent to $931 million for rice, 17.9 per cent to $429 million for cassava, 10.7 per cent to US$51 million for tea, and 38.4 per cent to US$378 million for rubber.

Rubber export products saw the largest reduction in export value during the first four months of this year, since the average export price of rubber dropped 25.1 per cent to around US$2,000 per tonne against the same period last year, the ministry noted.

Masan plans to invest in fixed assets

Masan Group (MSN) will spend about VND3-3.5 trillion (US$142-166 million) on fixed assets this year. This money will not include funds for potential merger and acquisition (M&A) deals. This decision was approved at a shareholders' meeting on Friday in HCM City.

MSN chairman Nguyen Dang Quang said M&A was the engine for the group's growth. It had raised $1.5 billion long-term capital from partners, including International Finance Corporation, KKR, JPMorgan and TPG to fund its business and investments.

"The group's core of success is how to allocate capital, not in raising capital," said Quang.

Of the amount, Masan spent $964 million on business, $174 million in M&A and about $350 million stored in cash.

Quang listed the four outstanding achievements of the group last year. Masan Consumer (MSF) acquired Vinh Hao Mineral Water; KKR continued to pour another $200 million into MSF, raising its total investment to $359 million; TPG Capital invested $50 million in Masan Agri; and Masan signed with HC Starck to form a joint venture to produce value-added tungsten.

Last year, total revenues of the group reached VND11.942 trillion ($566 million), but after-tax profit was just VND451 billion ($21.4 million). Masan continued not to pay dividends to shareholders, even though its undistributed profit reached VND6.357 trillion ($301.3 million).

This year, the group has set a revenue target of VND21-22.5 trillion ($995 million to 1.1 billion) while the net profit is projected at VND3-3.8 trillion ($142-180 million).

Masan is the leader in consumer goods, especially in the spice industry, food and beverages. MSF was the chicken that laid the golden egg for the group.

MSF performed strongly last year with a total revenue of VND11.942 trillion ($566 million) and a net profit of nearly VND3.1 trillion ($147 million).

The company plans to use VND5.8 trillion ($275 million) to pay cash dividends for 2013 and 2014 with a rate of 110 per cent.

The payout will be made in the second quarter of this year.

Profits rise with large-scale fields

Large-scale rice production has helped raise farmers' incomes by lowering production costs and increasing yields as well as quality, the Ministry of Agriculture and Rural Development (MARD) has reported.

MARD's report, issued at a seminar held in Can Tho City on Friday, said that large-scale rice fields covered 100,000 ha in the Mekong Delta for the 2013 - 2014 winter - spring crop.

Farmers are earning VND2.2-VND7.5 million profit per ha compared with profits earned by other farmers not taking part in the large-scale production programme, the report said.

In addition to rice, the large-scale production fields have also contributed to higher profits for other crops.

For example, Tran Thanh Tuan, a farmer from Chau Binh Commune in Ben Tre Province's Giong Trom District, said that owners of coconut farms in the region had to sell their products at lower prices because traders had forced coconut prices down to earn more profits.

In 2013, the situation improved when the Mekong Coconut Co. signed contracts with Chau Binh farmers to create a large-scale coconut cultivation model in the commune.

Under the contracts, Mekong Coconut provided farmers with capital, fertilisers and production technology, and at the same time purchased coconuts at prices VND500 higher per coconut.

These contracts have helped Chau Binh farmers increase their profits from coconut cultivation.

The representatives of Departments of Agriculture and Rural Development in the Mekong Delta said the large-scale cultivation model should be applied to other crops such as fruits, vegetable and aquaculture in the Delta.

However, businesses are still reluctant to invest in the large-scale production model.

MARD's report said that small-scale fields in the Delta had also hindered the new production model, with each family in the region cultivating only 0.6 ha of land.

It recommended that families work with others to form larger areas for specific cultivation.

In addition, MARD suggested that farmers join cooperatives, which would make it easier for them to sign contracts with companies on large-scale production.

Authorities, scientists and banks were also asked to help farmers replicate the production model for the cultivation of other produce.

Sci-tech research emphasised

Deputy Prime Minister Vu Duc Dam urged representatives from ministries and agencies to work harder at promoting science and technology research at a meeting last week.

In 2010, Viet Nam launched a programme to develop key national products and another to promote high tech development. In 2012, the country launched a programme on technological innovation. However, few ministries or agencies approved or implemented relevant projects, said Ha Minh Hiep, head of the national office for the National Science and Technology Programme, adding that the country also faced a shortage of technology experts.

Minister of Science and Technology Nguyen Quan said that due to decentralisation, ministries and agencies were empowered to approve national-level projects.

"The State budget cannot afford all approved projects," he said.

Representatives from the ministries of Industry and Trade, Agriculture and Rural Development and Health said that project approval, funding and implementation mechanisms were not the same across ministries, resulting in a lot of wasted time.

Quan said that it was important to identify the role and responsibility of each ministry and agency for project content and funding, which would be disbursed directly from the State budget to ministries.

Deputy Prime Minister Dam asked the Finance Ministry to arrange funding for technological programmes during 2014-15, as this would help the Technology Ministry to select suitable projects and mobilise other resources if needed.

Dam emphasised that all projects approved in the two years must be completed and demonstrate practical results before others were launched.

VN draws $4.85b as FDI inflow reduces

Viet Nam has attracted US$4.85 billion in foreign direct investment (FDI) in the first four months of the year, equivalent to 59 per cent of what it attracted during the same period last year.

The figure released by the Ministry of Planning and Investment's Foreign Investment Agency also showed that of the total, $3.32 billion went into 390 newly-licensed projects, while 140 existing projects added $1.62 billion to their capital.

The manufacturing and processing sectors took the lead in attracting FDI with 204 new projects at $3.6 billion, accounting for 74.3 per cent of the total.

The real estate sector ranked second with seven projects with a total investment of $392.3 million, accounting for 8.1 per cent share, followed by the construction sector with $237 million (4.9 per cent) and health care and social support sector ($225.93 million).

While FDI levels slowed down, the country's FDI disbursement reached $4 billion during the January-April period, representing a year-on-year increase of 6.7 per cent.

Of the 36 countries and territories investing in Viet Nam in this period, South Korea was the largest investor, with both newly-registered and additional capital totalling $1.12 billion, followed by Japan and Singapore with $531 and $479.1 million, respectively.

The southern Province of Binh Duong topped the list of FDI destinations, attracting $792.9 million, accounting for 16.3 per cent of the country's total, followed by HCM City ($749.1 million) and Dong Nai ($537.8 million).

The Thang Long Cement Factory with investments made by Indonesia in the northeastern Quang Ninh Province has been the largest FDI project so far this year, with a total registered capital of $352.6 million. It was followed by the Dai An Viet Nam - Canada hospital project worth $225 million in northern Hai Duong Province.

Mobile phones top exports list

Mobile phones and components have garnered the top position in Viet Nam's exports with a turnover of US$7.7 billion during the first four months of this year.

As reported by Dau Tu (Vietnam Investment Review) newspaper, the General Statistics Office of Vietnam has forecast export turnover of $12.2 billion in April, a 23.2 per cent increase as compared to the same month last year.

Exports of the foreign direct investment sector, including crude oil, alone reached $30.4 billion, recording a 17.2 per cent increase as compared to the same period last year.

The statistics showed that processed and assembled products are still the main exports. Textile ranked second with a turnover of $5.9 billion, followed by footwear with $2.9 billion.

Exports of other products have also shown an increase in comparison with the same period of 2013. Seafood reached $2.2 billion, up 32 per cent as compared to the same period last year.

Coffee gained $1.6 billion, a 29.5 per cent increase, while wood and wooden products reached $1.9 billion, with an increase of 22.4 per cent in comparison with the same period of 2013.

In the first four months of 2014, the total export turnover is estimated to reach $45.7 billion, experiencing an increase of 16.7 per cent in comparison with the same period of 2013.

Meanwhile, Viet Nam's imports are forecast to reach $12.6 billion in April, contributing a total amount of $45.1 billion in the first four months of this year. It has seen an increase of 13.7 per cent as compared to the same period last month.

Imports of foreign-invested sector are forecast to reach $26.3 billion, experiencing an 18.2 per cent increase in comparison with the same period last year.

April's trade deficit is forecast to reach $400 million, and the trade surplus in the first four months of 2014 is estimated to reach $683 million.

Trade surplus of foreign-invested sector, including crude oil, reached $4.1 billion, experiencing an increase of 11.5 per cent in comparison with the same period last year. However, the trade deficit of domestic enterprises is $3.4 billion, recording an 18 per cent decrease as compared to the same period in 2013.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR