EU urges Viet Nam to focus on green growth

The European Union (EU) will remain one of the leading providers of development assistance to Viet Nam with a total of US$1.01 billion in official development assistance this year, Ambassador and Head of EU delegation to Viet Nam Franz Jessen said.

Speaking at the launch of the Blue Book 2012, the EU's annual report on Viet Nam's economic situation this morning, Jessen said the ODA support from other donors would decrease in the next several years due to impacts of the global economic crisis as well as Viet Nam becoming a middle-income country.

Thus, the support, US$324 million of which was grant money, highlighted the importance of the Viet Nam-EU relationship and should be used for Viet Nam's sustainable development.

Jessen said although the country's economic growth rates were impressive with millions of people coming out of poverty, the quality of growth became a concern after challenges such as inequality, high and persistent poverty rates among ethnic minorities, environmental degradation, and the effects of climate change emerged.

The book, which focused on ‘green growth', would help Viet Nam re-direct socio-economic programmes and secure new investments and jobs that ensure inclusive growth and efficient resource utilisation, he said.

Green growth, to quote from the book, means investing in the environment to drive economic growth.

Through green growth, the value of Viet Nam's products and services increases, international markets can be accessed, clean technologies develop at reduced costs to the environment, and climate change's impact is mitigated. Viet Nam is on its way to become a modern industrialised country by 2020.

Currently, Viet Nam is embarking on restructuring its economic activities with a focus on green strategies.

The 14th edition of the Blue Book, a yearly publication by the EU, provided an overview of Viet Nam's economic policies and co-operation between the country and the EU in 2011.

The EU- Viet Nam Partnership and Co-operation Agreement will be signed this year. Negotiations of a bilateral free trade agreement between both sides will soon commence.

The EU is currently Viet Nam's second most active trading partner with Viet Nam's exports to the EU having increased by 33.5 per cent last year.
 
Personal loans rise amid rate cap slump

Banks are offering lower interest rates on personal loans as interest-rate caps have fallen to 11 per cent.

The Viet Nam International Commercial Joint Stock Bank (VIB), for instance, has launched a credit package of VND1 trillion (US$47.8 million) with an interest rate of 14.2 per cent per year for the first three months for loans to purchase, build and repair houses.

The bank will provide loans of up to 70 per cent of the value of collateral for a maximum 25-year term.

The Joint Stock Commercial Bank for Foreign Trade of Viet Nam (Vietcombank) has set aside VND2 trillion (US$95.7 million) to provide preferential loans for individual customers and business households.

The bank will offer loans of up to a 12-month term at 14 per cent per year for loans to buy, build and repair houses to live in or lease.

In addition, HSBC Vietnam is offering loans with collateral to buy houses at zero interest rate for the first month and 15.5 per cent from the second month.

Borrowing demand has increased as interest rates have fallen, Godfrey Swain, head of retail banking and wealth management for HSBC Vietnam, was quoted as saying in the Saigon Tiep Thi newspaper.

Richard Harris, head of retail banking for VIB, said one of the reasons that the bank offered such preferential interest rates was to attract new loans from existing customers and new customers from other banks that cannot provide big loans. — VNS

The interest rates for property personal loans at many banks stand at around 17.5-19 per cent per year, he said, adding that with the downward trend of interest rates, banks should cut rates further if they want to attract customers.

Wood product exports set to increase

Viet Nam's wood and wooden products exports are expected to increase by 11-12 per cent this year, a conference heard in the city yesterday.

Last year exports were worth US$3.95 billion.

Global demand for wooden products is forecast to rise by 3.3 per cent this year, thank to higher demand in emerging economies in the Asia-Pacific, Middle East, Africa and South America, according to Vo Truong Thanh, chairman of the Binh Duong Furniture Association.

Demand in Japan would remains high, while wood processing factories there had not returned to normalcy after the early 2011 tsunami and earthquake, giving Vietnamese firms an opportunity to expand market share, he told the conference organised by the Viet Nam Chamber of Commerce and Industry and the financial date services Dun&Bradstreet.

"The US also offers Vietnamese firms much opportunity to boost exports since many kinds of wooden products the US imports from China, the largest exporter to the US, face anti-dumping tariffs," he said.

The appreciation of the Chinese yuan and rising labour costs already pushed up prices, he pointed out.

Many US importers want to find other sources like Viet Nam and other ASEAN member-countries instead of putting all their baskets in the China basket and face the risk of the yuan appreciating, according to Thanh.

"With supply falling, especially from China, Thailand, and Malaysia, global prices of wooden products are on the rise, so local firms should negotiate with importers to raise export prices in the latter half of the year," he said.

William M.Gadd, chief representative of the International Housewares Association, said foreign buyers were looking for chemical-free products, those made of sustainable and environmentally friendly materials, unique items, and those made in certified factories in compliance with international standards.

Besides price and quality, they were also concerned about delivery reliability and timely quotations, something Vietnamese companies should pay attention to, he said.

Thanh said because of the economic downturn exports were more difficult since importing countries had raised barriers to protect their domestic industry, and Vietnamese exporters must remain abreast of new rules to avoid risks.

Local firms also faced hurdles posed by the rising costs and interest rates, he added.

Business earnings fall in Ha Noi

Enterprise revenues in Ha Noi in the first four months decreased 5-15 per cent against the same period last year, said the city's Department of Industry and Trade, which met with about 100 business representatives.

The business performance of the firms was down due to lower consumption caused by the global economic crisis, the department was told.

The total turnover from agricultural products went down 31.4 per cent over the same time last year, owing to lower prices of the products.

The combined turnover of other goods such as plastic products, steel and iron, minerals, construction materials, fertiliser, chemicals, pulp, wood and wooden furniture, toys and construction glasses was down 8.7 per cent.

A series of small and medium enterprises had to close doors or reduce scale, the department said. Some large trade centres had to reduce the space they were renting by 10-30 per cent.

Other trade centres, like Hang Da and Cua Nam, did not have customers and shopowners had to sub-let their premises.

Many enterprises had been landed with large inventories. Two examples were the Ha Tay September 2 Co Ltd which had an inventory valued at VND25 billion (US$1.19 million) and the Agricultural Investment and Development Co Ltd which had about VND4 billion ($190,476).

Many businesses said they faced biggest difficulties in the areas of capital resources, taxes and labour.

Bui Thanh Nam, director of the Ha Noi Plastics Joint-stock Co, said: "Most companies faced problems in the first quarter of the year and are expecting to face more in the second quarter.

"Besides rising prices of raw materials, it has not been easy to access capital resources and we also face problems with human resources."

Import-Export and Feed Processing Co management chairman Doan Trong Ly said: "Enterprises need a specific remedy rather than a tonic. Deposit interest rates dropped quickly while borrowing rates went down slowly. It is so difficult for the firms to access commercial loans."

Cau Duong Co management chairman Ngo Van Cham said: "We talk about rescuing businesses but how can we bail out firms who have to take out bank loans to pay taxes?"

In the face of difficulties, the value added tax reduction from 10 to 5 per cent was essential, Cham said.

Deputy director of the State Bank of Viet Nam's branch in Ha Noi Hoang Viet Trung said credit organisations had lent a total outstanding loan at VND59 trillion ($2.81 billion), whereas bad debts accounted for 5 per cent in the first four months compared to a bad debt rate of 2 per cent for the whole of last year.

The outlook was likely to worsen, so bad debts might increase, Trung said.

With its careful and tightened policy on credit, the Government and State Bank had reduced lending interest rates, he said.

"With the current rate at 15 per cent for loans, enterprises could only hope to maintain production, let alone make a profit.

"If companies registered for loans with comprehensive conditions and documents and any credit institutions made it difficult for them, they could inform the State Bank and it would intervene," he said.

The department has collected enterprises' comment to submit to the municipal People's Committee for consideration before the official meeting.

Decree being drafted to govern e-customs

The Ministry of Finance is preparing a draft decree to implement provisions of the Law on Customs regarding electronic customs procedures. The decree would succeed regulations applied in the electronic customs pilot programme, including Decision No 149/2005/QD-TTg, Decision No 103/2009/QD-TTg and Circular No 222/2009/TT-BTC.

Under the provisions of the draft decree, electronic customs declarations would take priority over paper declarations in cases in which customs authorities inspect declarations or examine goods. Customs declarations will also be able to be filed electronically 24 hours per day, seven days per week.

The draft decree would require electronic customs declarants to archive records under the Law on Electronic Transactions and its implementing regulations and present them to customs authorities upon request to examine them. The electronic customs declarant must use a digital signature that has been registered with the customs authorities.

HCM City property firms fail to meet green commitments

Several property developers in HCM City have used the mandatory green space meant for planting trees and building parks for other purposes, and authorities have warned that they would be penalised if they do not set it right.

An inspection team from various agencies recently verified 55 projects developed between 2006 and 2009 in Districts 7, 9, 12, and Binh Chanh and found 15 of them violating green space norms.

Him Lam in District 7, a 583,291-square-metre apartment block built by Him Lam Joint Stock Company, for instance, should have earmarked 47,000sq.m, but has instead used this space to build staff houses, toilets, an exhibition centre, and a parking lot.

At the luxury Hoang Anh apartment in District 7, developed by the Hoang Anh Housing Construction and Development Joint Stock Company, there is a swimming pool of 160sq.m in the area meant for green space.

The inspection team, which had officials from the Departments of Construction, Planning and Architecture, Transport, and Natural Resources and Environment, also found 17 other projects completed and ready for sales but without the green space.

They include Ngoc Lan, Huynh Tan Phat and BMC apartments in District 7, and Hiep Phu Ward and Pho Dong Hoa Sen apartments in District 9.

Developers who violated the rules would be penalised and have to restore their projects' green space, Nguyen Tan Ben, director of the Department of Construction, warned.

Some of the alleged offenders told Sai Gon Tiep Thi (Sai Gon Marketing) newspaper that they would restore the green space when ordered to do so.

Le Hung, general director of Hoang Anh Housing Construction and Development Joint Stock Company, said his company has sought permission to retain the pool and would find another piece of land to build a park.

"But if the inspection team orders the construction of the park at the originally designated place, Hoang Anh would carry it out," he added.

The inspectors also found 16 other real estate projects remaining on paper because their developers lacked funds, and Ben said the department would evaluate their financial capacity and recommend revocation of their licences if required.

HOSE to apply market order in July

The Hochiminh Stock Exchange (HOSE) will apply market order system on a trial basis within three months from July 2 to give a new tool for investor to place orders.

A market order is an order to buy or sell a stock at the best available price. Once the order is placed, this type of order will be executed immediately, allowing a purchase order to be executed at the lowest price and the sell order to be executed at the highest price.

If the volume of the order is not met at the first prices, it will be automatically considered an order at the next best price available on the electronic board.

If the volume of order is not met while that of the counter side has been fulfilled, a buy or sell market order will become a limit order with price higher or lower than the last-traded price by one quotation unit.

HOSE said market order system has been provided in detail in trading regulations of the bourse. HOSE and its member securities enterprises have been ready to apply the market order system.

Application of market order system aims to boost liquidity for the continuous matching phase, which now accounts for 80% of the total transaction time.

HOSE also noticed that the last-traded price is not necessarily the price at which a market order will be executed. Therefore, investors should be cautious while using this tool.

M&A deals aimed at long-term investment

Merger and acquisition (M&A) used to be a channel for financial investment, but now many foreign companies use this channel as a shortcut to jumpstart their business in Vietnam, said an expert.

Nguyen Cong Ai, deputy general director of KPMG Co. Ltd., said that many foreign investors want to make long-term investments in Vietnam through M&A deals rather than through the traditional foreign direct investment form.

According to data of KPMG, the total value of M&A transactions in Vietnam reached US$4.4 billion in 2011, versus US$3.2 billion in 2010.

The number of transactions also increased significantly, with 262 successful deals last year compared to 236 in 2010 Such a figure shows that the total M&A value last year did not pick up sharply, Ai told the Daily on Monday.

Notably, apart from the financial investments of private funds, there are investments of strategic investors.

Among the investors in Vietnam via M&A activity last year, there are many large and well-known enterprises. Many of them, especially those from Japan, are seeking investment opportunities to do long-term business in Vietnam.

M&A deals with involvement of Japanese investors used to take 2-3 years, but such transactions only took nearly a year to complete in 2011. These positive signs are predicted to carry on into 2012, said the representative of the experienced company in M&A consultancy.

Giving explanation for the higher number of M&A deals last year, Ai said local business owners have felt the need of cooperation for mutual development. M&A transactions are not simply selling businesses but actual cooperation between related parties, he stated.

“In addition, in 2011, due to the general economic woes and the troubled stock market, Vietnamese enterprises did not demand unreasonably high prices as before, but compromise to find a common voice with investors. To foreign investors, the retail market with 90 million people in Vietnam is really attractive, given their long-term strategies for risk allocation,” said Ai.

He informed Japanese investors show interest in acquiring real estate projects, such as the operational office buildings.

In 2011, 29 takeover deals were successfully conducted, compared to 18 in 2010. Ai said he did not know how many of these transactions had involvement of Japanese investors, but it must be quite a few.

He noted Japanese are not speculators, but long-term investors. They only invest in the sectors whose potentials are considerable to them.

Ai predicted Japanese investors would boost investment in the property sector, especially the office building projects at reasonable prices.

Many foreign airlines eye Vietnam

Several international airlines are flocking to Vietnam amid the International Air Transport Association estimate that the country would become the world’s third fastest growing market by 2014.

Emirates from the Gulf will launch a Dubai – Ho Chi Minh City daily service on June 4, making the southern Vietnamese economic hub its 124th international destination.

The non-stop flight, with 27 Business Class and 251 Economy Class seats, will depart Dubai at 9:25 am, arriving at Tan Son Nhat Airport at 7:20 pm.

From that day, travelers from Kenya will be able to fly from Nairobi to the Vietnamese city via the UAE carrier’s Dubai hub. Emirates will begin daily flights to Ho Chi Minh City using an Airbus A330-200 aircraft in a two class configuration, which would change to a Boeing 777-300 ER aircraft late this October.

“Emirates will offer tourists and business travelers from Kenya a convenient and comfortable option to access the fascinating and diverse country of Vietnam. Ho Chi Minh City is one of the most vibrant places in South East Asia and we are convinced that this will prove to be a highly popular route,” Emirates Regional Manager for East Africa Essa Sulaiman Ahmad said when announcing the new route in Nairobi on May 15.

“Vietnam is full of fascinating history and culture, from the UNESCO World Heritage Site of Hoi An to the islands of Halong Bay, to the beaches of Nha Trang and the floating markets of the Mekong River Delta.

Now, thanks to Emirates’ new service, this must-see destination is within even easier reach for Kenyans,” he added.

Vietnamese Deputy Minister for Trade Le Duong Quang, while receiving Kenya’s Ambassador to Vietnam Richard Ekai mid last year, said Vietnam was keen on working closely with Kenya and promised to pursue opportunities for high level trade visits to the African country.

Starting June 4, Emirates SkyCargo of Emirates will also offer belly hold cargo capacity on the passenger flights between Ho Chi Minh City and Dubai.

Etihad Airways, another fast-growing Gulf carrier, has plans to include Vietnam in its new routes in the next 18 months.

Etihad CEO James Hogan said his carrier was looking forward to a “significant” expansion, which would include a new service to Vietnam and flights to South America. Services to Etihad’s first South American destination would begin next year. Additional frequent flights to Asia and Australia are also in the works.

Meanwhile, Air Hong Kong, Jeju Air of South Korea, Saudi Arabian Airlines and Air China Cargo, have registered with the Civil Aviation Administration of Vietnam (CAAV) to open new routes to Vietnam by the end of the year, bringing the number of foreign airlines operating in the country to 48.

Jeju Air said it would operate daily flights between Seoul and Ho Chi Minh City, but has not announced the launch time.

According to CAAV, Silk Air of Singapore is eyeing a route to Hanoi in addition to its current service to Da Nang on Vietnam’s central coast.

In early May, Finland’s Finnair, a member of international airline alliance One World that provides more than 800 flights daily worldwide, announced its official presence in the Vietnamese market by naming Bien Dong Travel as the general sales agent.

Retteri Kostemaa, South East Asia business director of Finnair, said with 11 destinations, Asia now brought 65 percent of the carrier’s total turnover, and Vietnam was one of its most important markets. He said the airline was considering opening a direct route from Helsinki in the near future. From Vietnam, Finnair would team up with other carriers such as Vietnam Airlines, Cathay Pacific and Jetstar to create transit points connecting with Finnair flights to the Finnish capital.

Thailand’s Bangkok Airways has also just appointed Transviet Promotion Co., Ltd. as its general sales agent for Vietnam.

In late March, America’s United Airlines and Japan’s All Nippon Airways announced the expansion of their trans-Pacific joint venture to enable them to cooperate in terms of airfare and network on the Vietnam-US routes starting in April.

Earlier on March 23, Cebu Pacific of the Philippines launched its Manila-Hanoi services, operating two weekly flights.

Also in March, Saudi Airlines Cargo launched its new freighter flights from Ho Chi Minh City, operating twice a week linking Vietnam with the Middle East and Frankfurt in Germany.

In late April, Vietnamese Prime Minister Nguyen Tan Dung approved a new aviation transport pact between Vietnam and the UK signed last December to enhance air transport ties between the two countries as well as investment and cooperation relations.

The agreement highlighted a significant increase in flight frequency between the two countries. British and Vietnamese transport officials agreed to bring the number of weekly services between the two countries up from only three flights a week in their first aviation agreement inked in 1994 and revised in 1999 to 14.

Last year, the International Air Transport Association (IATA) predicted that Vietnam would become the third fastest growing market in the world by 2014 after China and Brazil, with a growth grate of 10 percent compared to the current world average of 5 percent.

CAAV said the Vietnamese market posted a 14 percent growth rate last year. It estimates Vietnam would see 34-36 million air passengers a year by 2015, and 52-59 million passengers by 2019. Meanwhile, cargo transport would witness a rapid increase to 850,000-930,000 tons by 2015 and 1.4-1.6 million tons by 2019.

ODA road projects hit top gear

Transport contractors are accelerating ODA-funded transport infrastructure projects.

The Ministry of Transport’s (MoT) acceptance allowing contractors to get a 10 per cent contract value and count price depreciation in advance is benefiting contractors at new National Highway 3’s Hanoi-Thai Nguyen section.

Accordingly, from late March 2012 productivity at the project’s four major construction packages almost doubled against the previous months, bringing the productivity value from debut in late 2009 until present to more than 30 per cent of project’s total work volume.

If this pace continues, contractors will be able to put the 61.3 kilometre road into temporary use before 2012’s rainy season.

“This manifests a great deal of efforts from the Project Management Board and contractors since foundation work often takes much time and energy, while reporting low productivity,” said the MoT’s Transport Engineering Construction and Quality Management Bureau (TCQM) chief Tran Quoc Viet.

After a long delay, construction of the VND10,332 billion ($492 million) Hanoi-Thai Nguyen section using Japanese ODA sources has been accelerated to finalise the project in late 2013.

Also, National Highway 3 project is just one of many transport sector’s ODA projects beating disbursement progress.

It is almost certain that Hanoi beltway 3 second phase’s bidding package 3 involving a 3.2km road will be open to traffic in June 2012.

Project developer representative PMU Thang Long’s director Vu Xuan Hoa revealed the Hanoi beltway 3 second phase project would exceed contract progress from 5-15 months.

In fact, projects with good disbursement pace rose sharply compared to one year ago. Most typical ones are the Cai Mep-Thi Vai international terminal construction, Ho Chi Minh City-Long Thanh-Dau Giay expressway or upgrading national road networks using transport sector credit.

MoT statistics show that by early May 2012 disbursed capital at MoT’s ODA-funded projects mounted to VND1,241 billion ($59.1 million) out of VND3,818 billion ($181.8 million) projected, tantamount to 35.2 per cent of the year’s projection.

“This is the best ODA disbursement achievement for the transport sector,” Viet noted.

However, ODA-funded transport infrastructure projects face a dearth in Vietnamese reciprocal capital, such as the Nhat Tan bridge or T2 terminal in Noi Bai airport.

“ODA projects could manage better progress if reciprocal capital was arranged,” Viet asserted.

Hanel to complete hotel investment

The Ha Noi Electronics Corporation (Hanel) has completed procedures to acquire a 70 per cent stake in Daewoo, a Ha Noi-based five-star hotel, from South Korea's Daewoo Engineering and Construction Co Ltd (Daewoo E&C), acording to the local press.

Mentioning the deal with economic news website vneconomy.vn on the condition of anonymity, a Ha Noi Department of Planning and Investment official said the move was "normal in the current context" and the market was likely to see several new deals involved in hotels in the coming time.

The official reportedly added that procedures were simple as this was not an entire-project transfer and authorities would only need to modify the current investment licence without granting a new one.

Over the last two months, while no official deal value has been revealed, there were rumours that Hanel was going to acquire the 70-per-cent stake at a price of US$100 million. Some media reports said the company had successfully implemented the acquisition.

Hanel's office staff Nguyen Tuyet Mai, who is in charge of the press, confirmed with Viet Nam News yesterday that the deal was still underway and its developments hadn't been in the state for publicity.

The municipal planning department's deputy director Nguyen Van Tu told Viet Nam News yesterday that he would introduce a person who "knows more clearly about the deal" to give further information, but the source couldn't be reached later.

Hanoi Daewoo Hotel is located in downtown Ba Dinh District.

Many cement companies running at loss

According to the Vietnam Cement Industry Corporation, many cement companies are running at a loss and facing high inventory since the beginning of the year, some even having wound up manufacturing and others at risk of bankruptcy.

In the first five months of the year, cement production reached around 19 million tonnes, down by 16.8 per cent compared to the same period last year, while consumption was at 19 million tonnes, down by 7.8 per cent over the same period last year. However, manufacturing rose by 10 per cent year-on-year.

Cement companies have been struggling after coal and power prices rose by 19 per cent and oil price surged 40 per cent. Moreover, most cement companies have low owner equity; hence their manufacturing depends on loans.

Recently, the Ministry of Finance set up 16 inspection teams to check 17 cement factories which used government ensured loans.

Russian tourists bring both joy and worry

The first flights of Turkish Pegas Touristik carrying tourists and FAM trip delegations from Russia Far East to Danang City in mid-May bring both joy and worry to tourism and service enterprises in the central region during the off-season. While strong arrivals from Russia promise bustling business for hospitality players in the central region, the lack of Russian-speaking staffs to cater to these guests put many under tenterhooks.

All the members of Quang Nam’s tourism association catering to Russian tourists during the two weeks from May 12 to 25 expressed joy at a surge of Russian tourists at their facilities in a quick poll conducted by the association.

Palm Garden Resort along Cua Dai Beach in Hoi An last year catered to 486 Russia tourists, accounting for 1.73% of the total inbound tourist arrivals, but in the first five months of 2012, the five-star resort welcomed 286 Russian visitors, 2.91% of the total arrivals.

Cam Tu, sales and marketing director of the resort, said Russians stay for the longest time among international tourists and do not set high requirements on services. However, the biggest problem is most Russian tourists cannot communicate in English, she noted.

Golden Sand Resort recorded a significant growth in the number of Russian tourists, from 70 arrivals in the whole last year to 200 visits in the first five months of this year. Similarly, Hoi An Beach Resort of Hoi An Tourist Service Co. welcomed 119 Russian tourist arrivals in Jan-May, versus 226 in the entire 2011.

Russian visitors besides using high-end accommodation service do not hesitate to pay for other services such as dinning, healthcare and river tours. Service providers in Hoi An have seized such an opportunity to attract this new market.

Fullmoon Towns Restaurant in Hoi An is where a gala dinner was held to welcome the Russian FAM trip delegations. The restaurant manager said his restaurant had fully prepared to serve Russian tourists, such as printing menus, brochures in Russian and adding new dishes suiting the taste of Russians.

Furthermore, Russian tourists also enjoy spa service in Hoi An. Minh Luan Co. Ltd., or NA SPA, was chosen by Anh Duong Co. as partner to cater to Russian tourists opting for this service.

Phung, manager of the spa center, said she is very happy with the new customers, especially during the off-season of the tourism industry. However, she expressed concern that most Russian tourists do not use English, while her staffs have not been trained to comprehend the Russian language as well as Russian culture.

Sharing this view, Nguyen Thi Nhung, deputy director of the culture and information center in charge of coordinating Russian FAM trips, said due to the lack of tour guides that can speak Russian, most tours for Russian tourists are operated by Anh Duong Co., so quality management is beyond the reach of her agency.

The opinions above spark the need for local managers, especially the tourism authority of Quang Nam, to timely adopt solutions, both short-term and long-term, to assist enterprises in developing the Russian tourist market, which should be considered as an important market during the off-season.

The governments of Hoi An City, Quang Nam Province and the tourism authority should hold talks with enterprises after three weeks serving Russian tourists brought by Anh Duong Co. to promptly remedy the shortcomings.

Quang Nam-based enterprises also hope management agencies to launch tourism promotion programs and organize trade-tourism fairs to introduce images and information of Quang Nam to Russian tour operators.

Lao-Viet Bank to spur capital by US$32 million

The Vientiane-based Lao-Viet Joint Venture Bank (LVB) will raise its chartered capital from US$37.5 million to US$70 million this June and become the second largest bank in terms of capital in Laos.

Bank for Investment and Development of Vietnam (BIDV) and the Foreign Trade Bank of Laos (BCEL), the two partners in the joint venture, reached this decision at a meeting on Tuesday in Quy Nhon City, Binh Dinh Province.

In its press release, BIDV said LVB will use the additional capital to expand its business in Laos.

The bank plans to expand its network to the key economic areas in Laos, improve the CoreBanking system and finance the Vietnam-invested projects in Laos and efficient Lao enterprises.

LVB’s chartered capital was originally US$10 million, which was later increased to US$15 million in 2005. In February this year, the bank continued to spur its capital to US$37.5 million.

At the same time, the ownership structure of the two parent banks was changed from the initial 50-50 to 65-35, in which BIDV holds a 65% stake. In addition, LVB officially became an affiliate of BIDV abroad.

The 65-35 ownership structure will remain the same when the chartered capital is almost doubled to US$70 million this time, with BIDV holding US$45.5 million.

LVB is currently among the top three banks in Laos in terms of assets, deposits and outstanding loans. The bank has continuously made profits since being established.

The growths in total assets, mobilized capital and credit of the bank have always been over 30% since 2008 to date.

At present, Vietnamese enterprises have high demand to invest in Laos. As of the end of the first quarter, there had been 213 Vietnamese projects in Laos worth a total of US$3.46 billion, making Vietnam the second biggest foreign investor in the neighboring country.

Many large-scale projects will be carried out soon, such as the projects of Hoang Anh Gia Lai Group (US$410 million), Vietnam National Chemical Group (US$450 million), Hoa Phat Group (US$150 million), BIM Group (US$70 million) and An Phu (US$45 million).

Austrian firms want strengthened presence in Vietnam

A mission of 50 Austrian enterprises on Wednesday joined the Austria-Vietnam business forum organized in HCMC to sound out business opportunities on local market in the occasion of an official visit by Austrian President Heinz Fischer to Vietnam.

Some participating Austrian enterprises have established representative offices in Vietnam or done business with local peers. Others showed their keen interest in opening representative offices or starting joint ventures with local partners.

For instance, Gebruder Weis Gesellschaft m.b.H active in logistics industry plans to launch a representative office in Vietnam while Graz-Koflacher Bahn und Busbetrieb specializing in train services is seeking partners to start a joint venture.

The Austrian Federal Economic Chamber reported Vietnam is home to some 25 Austrian firms.

Austria had 20 investment projects in Vietnam at total registered capital of US$60 million as of May 20, according to the Foreign Investment Agency.

Trade remains modest. Vietnam earned US$460 million in exports to Austria in 2011, and spent US$165 million on Austrian imports with key items such as pharmaceutical products, machines, equipment and spare parts.

The business forum in HCMC followed a similar event in Hanoi the previous day.

The two countries on Tuesday signed a set of memorandums of understanding in the fields of trade, industry, power generation and tourism worth over 150 million euros, said Gustav Gressel, the Austrian trade commissioner. Austria also pledged several ODA projects in the sectors of healthcare, firefighting and vocational training.

Travel firms say discount air tickets hard to obtain

One month after Vietnam Airlines (VNA) launched promotions to boost domestic tourism, tour operators are still complaining about tough conditions to acquire discount tickets that hinder their tours for visitors.

The national air carrier demands that travel firms book tickets for the whole promotion period lasting until the end of this year, while tourism companies said they could not ascertain the number of tourists to meet the tough condition. They suggested that easing this bottleneck would help lift up domestic tourism.

The He Tre Travel Co. will arrange 4-5 tours to the North next month but the travel agency can not obtain sufficient discount air tickets, said Tran The Dung, deputy director of The He Tre Travel Co.

In previous promotion campaigns, the national flag carrier requested tour operators to book ticket a half month ahead of the departure day, which made it favorable for tour operators to arrange their trips.

However, VNA this year requires firms to book air tickets prior to launching tour promotion programs. The air carrier will only confirm the number of tickets with travel agencies once every two months and will not offer tickets for those who want more than what they have booked.

The conditions have sent tour operators into tailspin as they do not know the specific number of tourists taking the tour so as to book air tickets in advance. Moreover, tourists in groups often book tours at the last minute, said Dung.

If travel firms want to organize tours for individual customers, it is also hard to handle as they do not know whether air tickets are fully-booked or not, he added.

Other travel companies reported the same scenario and suggested VNA to allow ticket bookings 15-20 ahead of departure days, helping tour operators to sell more discount tours. The 2009-2010 promotion campaign saw 24,000 air tickets sold to HCMC-based travel agencies each year, two-thirds for groups of tourists.

The promotion program was launched by VNA in coordination with the HCMC Tourism Association (HTA) so that local tour operators can arrange low-cost package tours in an effort to boost domestic travel. Under the program, VNA will offer discount of 40% on several domestic routes linking HCMC to Hanoi, Danang, Hai Phong and Phu Quoc Island.

Thanks to big cuts on air fares, tour operators launch discounts on domestic package tours which are 30% lower than normal level.

Rice export stagnant on slowing China purchase

Vietnam’s rice trade, having faced tough competition from India’s low-price commodity, has become stagnant now due to slowing demand from China, which has this year leapfrogged others to become Vietnam’s largest rice buyer.

Le Truong Son, general director of Docimexco Dong Thap, admitted his firm is having difficulties in rice export. Slowing demands in China have made Son’s company unable to deliver rice of many already-signed contracts to Chinese buyers on schedule.

Similarly, general director Nguyen Van Tien of An Giang Import Export Co. said the number of export contracts that his company has signed is quite large but the prices are low. His enterprise is even suffering higher costs to store rice due to failure to ship rice to China as scheduled, with one ton charged with US$5 a month, Tien stated.

According to the Ministry of Agriculture and Rural Development, the volume of rice export of the country in the year to date has reached an estimated three million tons worth US$1.4 billion. The average export price stays at US$470 a ton.

Rice import markets have changed substantially this year, with China emerging as the biggest buyer of Vietnam, ousting the Philippines and Indonesia. The rice volume to be shipped to China has risen by 4.4 times in volume and some four times in value against the year-ago period.

Local rice exporters have been trying to seek new buyers. Africa, including Ivory Coast, Ghana and Senegal, has become a major market for low-grade rice of Vietnam.

The fact that India has lowered rice prices makes it more difficult for Vietnamese exporters to win the hearts of foreign buyers, Son of Docimexco noted.

Indian offers one ton of 25% broken rice for export at around US$360 on average, thus winning a major market share in Africa, which used to be a key consumer of Vietnam rice before.

Many Vietnamese traders have explored a new haven market in a few West African nations by shifting to the 5% broken rice category, but this higher-grade rice also faces tough competition from India that is priced at  US$10-20 lower than that of Vietnam for one ton.

Furthermore, local exporters are now suffering a shortage of good input materials to produce high-quality rice for exports at home.

On Tuesday Thailand still maintained the price of 25% broken rice at US$510-520 per ton while Indian rice prices rose to US$355-365 a ton. However, Vietnamese rice prices slightly tumbled to US$370-380 a ton compared to the preceding day.

Bank capital finds no viable outlets

Overnight lending rate in the inter-bank market hit the nadir of 0.5% on Wednesday, showing that banks are struggling to find outlets for their capital.

The trivial overnight inter-bank rate of 0.5% per year was seen at few transactions, but the popular annual rate is 1%, which is also the lowest level since 2006.

Meanwhile, as of mid-May, credit growth was still minus 1%, said an authoritative source, while deposits increased by around 5%. That means a huge amount of capital still get stuck among banks.

Bank for Development and Investment of Vietnam (BIDV) said the imbalance between supply and demand in the inter-bank market is dragging on. Most of the loans given out on Tuesday were for one night to two-week terms with interest rates at around 1.5% a year.

“There is hardly any transaction in longer terms than one month. The market supply is abundant, mostly for one to three-month terms, while demand stays low, mostly for loans of under one month. The lending rates for 2-3 week terms range from 1.2% to 2.5% per year, and 2.2-2.7% per annum for three-month term,” said a report of BIDV.

Besides offering loans in the inter-bank market and buying government bonds, lenders are looking to pour their capital into the economy by further trimming their lending rates.

Bank for Foreign Trade of Vietnam (Vietcombank) has announced an interest rate of 14% a year applied to loans for buying, building or repairing homes.

Meanwhile, BIDV offers an interest rate of 12-13% per annum for short-term loans and has revised the lending rate ceiling down to 13%, starting this Monday. This is currently the lowest lending rate in the market.

According to analysts at Bao Viet Securities Company (BVSC), the Government needs to adopt other solutions than interest rate cuts to relieve the hardship of the economy.

“Though the central bank has lowered the key interest rates for three times since the year’s beginning, the average lending rate is still high, at 15-17% for agriculture and over 19% for other sectors. As such, most enterprises have difficulties accessing bank loans or have no desire to borrow,” said a report of BVSC.

Moreover, given weak consumption coupled with surging inventories in the early months of 2012, banks are concenrned about the overdue debts and limit credit to ensure loan quality. This explained why credit growth remains negative in the first five months.

“The important issue at present is not only interest rate reduction, but the central bank and the Government also need to have synchronous solutions to restructure bank debts and stimulate demand in the economy to tackle inventories, reducing difficulties of enterprises. Once this core issue is resolved, enterprises will be more willing to take out loans to invest in production, and banks will improve their credit growths,” said BVSC analysts.

* As of September last year, the total bank debts of State-owned enterprises had reached over VND415 trillion, 17% of the total outstanding loans, with a half of which is owed by State-run groups and conglomerates.

This rings a bell of alarm on the financial situation of the State conglomerates. Many of them are incompetent, lacking financial balance and constantly running into losses, says a report on Vnexpress.

Of the total VND415 trillion owed by State-owned enterprises, more than VND218.7 trillion falls on twelve State economic groups. They are State giants such as Vietnam Oil and Gas Group (PVN), who owes VND72.3 trillion, Electricity of Vietnam (EVN), owing VND62.8 trillion, and Vietnam Coal and Mineral Industry Group (Vinacomin), VND19.6 trillion.

Thirty out of the total 85 State groups and corporations have debt-to-equity ratios exceeding three, said the report for State-owned enterprise restructuring of the Ministry of Finance. Alarmingly, the ratios are higher than ten at seven State firms, including the Vietnam Industrial Construction Corporation, Civil Engineering Construction Corporation No. 1, No. 5 and No. 8, and Vietnam Expressway Corporation.

While burdened with debts, the State groups and corporations also record lackluster business results. The average loss of State-owned enterprises is 12 times higher than businesses in non-State sectors.

The accumulated losses of the State sector totaled VND26.1 trillion by last year’s end. Notable loss-making State businesses are EVN, who incurred a loss of VND12.3 trillion in 2010, Vinashin, with a loss of VND5 trillion in 2009, and Vietnam Post, VND1.02 trillion in 2009.