Excess inventories hinder real estate market growth    

More than 60 real estate firms listed on HCMC HOSE and Hanoi HNX stock exchanges have confirmed that they have excess inventories worth over VND83 trillion (USD4 billion).

Inventories have increased 6.69% compared to the end of 2011. Currently housing inventories account for 45.84% of othe total assets of these enterprises.

However, 69.4% of all cash is in the hands of the six biggest companies. Revenues during the second quarter were insufficient to cover interest, payments for contractors and other expenses; revealing the reality that most of the enterprises don't have enough cash to operate.

In order to be able to pay debts and continue working, the property enterprises have to reduce their inventories and wrap up their non-core investments.

Excess inventories that have accumulated in the last three years threaten the market's balance. In some companies, the ratio of inventory to assets has reached 70-90%.

Vietnamese beverage company to be dissolved   

Saigon Beverages Joint Stock Company (Tribeco) will hold an irregular shareholders meeting on August 24 to dissolve after a long period of consecutive losses.

The news was made public by Vietnam Securities Depository (VSD).

The company will also vote on issues such as liquidators to deal with assets and liabilities.

VSD has announced Tribeco's ex-rights date to be August 8, however, the company has already requested the cancellation of its listing, TRI, on April 9.

Tribeco, once a very well-known brand in the beverage industry in Vietnam, started to incur big losses after it fell in the hand of Kinh Do and a foreign partner, Uni President, in 2005.

Power was transferred in June, when three senior executives of Kinh Do left the board of directors, giving up their seats to representatives from Uni President at the annual shareholders’ meeting.

Tribeco's revenue in 2011 was VND763.3 billion (USD36.5 million), but they reported a net loss of VND92.45 billion (USD4.4 million). In 2012, the company also posted losses of VND139.5 billion (USD6.7 million), much higher than expected.

By the end of 2012, its accumulated losses amounted to an estimated VND312 billion (USD15 million) and had VND26 billion (USD1.3 million) of negative equity capital.

Investors profit from land misuse

Investors are earning large amounts of money from illegally leasing the land of stagnant projects.

Hanoi authorities plan to start fining investors who use allocated land for other purposes. According to the local Department of Natural Resources and Environment (DNRE), the properties in question are mostly leased for football fields, garages or street vending areas.

At the end of 2006, Hanoi municipal authorities had granted permission to Industrial Construction JSC and Hanoi Urbani Architecture Consulting JSC to be main investors of Dong Nam Tran Duy Hung urban area project. Part of the agreement was that they were responsible for leveling the site and building adequate infrastructure. However the two companies leased out 19,416 square metres of land for parking garages, mini football fields and scrap collection shops.

Many other investment firms have been found to be in violation of the same regulations.

The project management board of Cau Giay District leased a 1,198 square metre plot of land for restaurants and parking lots. Hanoi Housing Investment and Development Corporation, along with the management board of Lang Ha-Thanh Xuan project, used total 11,225 square metres of land for parking lots, football fields and spaces for street vendors.

Even the area for five stars hotel and the Thang Long Opera House project in Tu Liem District were used for football fields and small businesses, though the site had been walled off.

The local DNRE reported one case in which the Vietnam Housing and Urban Development Group in My Dinh urban area illegally transferred the project land to three other companies to build headquarters, stores and restaurants.

The DNRE proposed to withdraw the land and take the money collected in rent for the State budget.

Gov’t OKs personal tax law amendment

The government has given a go-ahead for the proposal to amend the personal income tax law, which is now set to take effect on July 1, 2013, Deputy Minister of Finance Vu Thi Mai announced Tuesday.

The new law, which will be submitted to the National Assembly this October, will increase the personal tax threshold to VND9 million a month, up from the current VND4 million. (VND1 million = US$48)

Taxpayers will be allowed to deduct VND3.6 million for each dependent they have to take care of, while the current rate is VND1.6 million.

Dependents are those who earn less than VND500,000 a month.

“Under the new tax rules, individuals whose monthly income fetches VND12.6 million and who have to take care of a dependent will not have to pay taxes,” said Mai in a media meeting.

The Deputy Minister added that the amendment also stipulates that in case prices fluctuate by more than 20 percent, the government will adjust the personal tax threshold to match the market development.

Earlier the finance ministry stated in its draft law on personal income tax collection that the tax threshold would be lifted to VND6 million, and the new rule would become effective in 2014.

“This means the adjusted threshold approved by the government is far higher than that recommended in the bill,” said Mai.

“We asked for public opinion, and we did listen.”

Mai said around 70 percent of the current taxpayers will not have to pay taxes under the new law.

The personal tax collection in 2013 is also expected to drop by VND5.2 trillion from the current figure, and VND13.3 trillion in 2014, she added.

Squid boats stay ashore as China cuts imports

A number of squid fishing boats in the central city of Da Nang have been kept docked as prices have rapidly fallen.

Fisherman Ho Van Doi, owner of a fishing boat coded DNa – 90315, says it is now the harvest season, but he cannot sail his boat as revenues are not enough to cover expenses.

“Prices have revolved around VND60,000 a kg over the last six months, which is less than half of the rate we enjoyed in the same period last year,” he says.

There are some 30 boats sitting dormant, and some fishermen have considered switching to another job to make ends meet. Some are even putting their boats on sale.

They say the crisis was caused after China, the sole consumption market for their squid, has ceased importing the product.

“Many Chinese importers unexpectedly vanished and prices slumped dramatically due to the surplus supply,” they say.

The situation is quite common in Vietnam, where Chinese traders are often the sole importers of certain products, and their disappearance usually leaves local farmers stuck with losses and unsold stocks.

Last April saw a similar case in the Mekong Delta province of Vinh Long, when Chinese traders unexpectedly cancelled their sweet potatoe purchases, sending prices into a steep plunge -- from VND800,000 for 60kg down to only VND250,000.

It was these same foreign traders who ignited a wave to grow the vegetable in the locality, as in mid-2010 they came to Vietnam to plant the potatoes at attractive prices.

Elsewhere, in the northern province of Bac Giang, farmers also reaped no profits from their bumper litchi harvest, thanks to a heavy dependence on Chinese traders for output.

Litchi nuts in Luc Ngan last year fetched only VND5,000 a kg, a price which farmers said is only enough to buy two glasses of iced tea from street vendors.

Chinese traders used to buy 60 percent of the 100,000 tons of litchi harvested in Luc Ngan on an annual basis, and their cancelled purchase understandably sent prices to bottom.

Bad debts weigh on local banks and businesses

The high ratio of bad debt is a heavy burden on the national economy, requiring Government measures to prevent it from slowing down, according to a leading economist.

Dr. Le Xuan Nghia, Deputy Head of the National Financial Supervisory Committee, says out of concern for bad debt many banks are hesitant to offer loans, despite the fact that businesses are running short of capital for their operations to make a profit. As a result, the number of companies going bankrupt has increased, from 3.07 percent in 2011 to 4.5 percent so far this year, he notes.

As a case in point, Dr. Nghia cites Japan’s bad debt crisis in the 1990s which hit around JPY2,000 billion. Instead of settling bad debts and focusing on capital construction, the Japanese government focused on public investment but failed to promote economic growth. It then recognized the bad debt issue as one of the main factors in preventing economic growth as bad debts reached as high as JPY40,000 billion. Its inappropriate solution resulted in 16 years of inflation and zero economic growth.

Dr. Nghia warns that Vietnam should learn from this lesson when it is also confronted with a high bad debt ratio.

He stresses the need for urgent measures to deal with the bad debt issue. Usually, he says, it will take commercial banks and local businesses at least five years to settle their bad debts but the national economy cannot wait that long to survive.

Dr. Nghia proposes two groups of measures to settle bad debts. The first group requires the State budget to inject cash into commercial banks so that they can offer loans to local businesses. However, if these banks do not strictly follow the Government’s guidelines, they will face risks, he adds.

The second but more practical one includes establishing a national debt trading company (AMC) that is responsible for purchasing bad debts from commercial banks at negotiated prices to boost the liquidity of credit institutions. The company will then auction off the debts or list them on the stock exchange to mobilize capital.

Although it is no easy task to run the AMC effectively, Dr. Nghia believes the Government will be able to handle the bad debt situation one way or another.

Vietnam’s footwear exports to Brazil soar

Vietnam exported over US$121 million worth of footwear products to Brazil in the first six months of this year, up 55 percent against the first half of last year.

This is an impressive increase for the sector despite the negative impact of the global financial crisis.

According to economic experts, the greater penetration of Vietnamese footwear into the Brazilian market will create an opportunity for Vietnamese exporters to expand their operations in other markets in South America.

Commentators also highlighted the opportunity and potential for Vietnam to continue exporting its footwear products to Brazil in the future, as recently the country removed Vietnamese footwear from the list of commodities on which anti-dumping taxes are imposed.

They said that this action will help Vietnamese businesses expand their export markets in the country.

Brazil is now one of the five biggest manufacturing and exporting countries in the world. It has also just decided to impose a 182 percent tax on Chinese footwear exports to limit the amount of footwear imports into the country.

Vietnamese footwear exporters should take advantage of this opportunity to establish an even larger market share in Brazil, say economic analysts.

Vietnam enjoys trade surplus with Indonesia

Vietnam earned US$1.131 billion from exports to Indonesia in the first half of this year, US$60 million more than its import from the island nation.
 
Most notably, Vietnamese coffee exports gained US$78.2 million, up 7.5 times compared to the same period last year, while ore and minerals fetched US$0.61million, up 3.86 times; mobile phones, US$134.7 million, up 155 percent; and electric wires and cables, US$5.8 million, up 151 percent.

Vietnam and Indonesia have agreed to strengthen bilateral trade and investment, aiming to raise two-way trade to US$5 billion by 2015.

Both countries are preparing to upgrade their relationship to a strategic partnership in the future.

Singapore-Malaysia JV invests in flour mill in Quang Ninh

The Singapore-Malaysia joint venture enterprise VFM Wilmar began construction on a US$47-million wheat flour mill on July 31.

The mill, covering more than 3.4 hectares, is located in Cai Lan Industrial Zone, Ha Long city, Quang Ninh province. It will employ 200 workers and produce 500 tonnes of flour and flour-based products each day.

This is one of three projects that were granted licenses by the province at the Quang Ninh Investment Promotion Conference last February.

The mill is expected to contribute over VND200 billion per year to the provincial coffers.

Peru eyes Vietnamese market

The Foreign Trade Association of Peru (ComexPeru) affirmed that Vietnam is considered a potential partner for Peru to boost its foreign investment.

ComexPeru also said that a trade agreement with Vietnam will foster multifaceted bilateral cooperation, and especially attract investment from the Southeast Asian nation.

In a press release published by the national press agency Andinas, ComexPeru said that Peru needs to grasp all opportunities to improve ties with Vietnam, which is a member of the Asia-Pacific Economic Cooperation (APEC) forum and the Trans-Pacific Partnership Agreement (TPP).

Two-way trade between Vietnam and Peru has trebled from US$55.3 million in 2006 to US$165 million in 2011.

In the first half of this year, Vietnam has imported US$50 million worth of commodities from Peru, mainly flour and fish oil, an increase of 79 percent against the same period last year. It has mainly exported footwear to the South American nation.

US imposes 60 percent tariff on Vietnamese wind turbines

The US Department of Commerce has decided to impose anti-dumping taxes of 53-60 percent on made-in-Vietnam wind turbines.

According to a DOC decision on July 27, the CS Wind Corporation will have to pay 53 percent tax for its products and other companies 60 percent.

The DOC claimed that Vietnam and China dumped their wind turbines worth US$201 billion on the US market in 2011.

It will also impose anti-dumping taxes of 21 – 73 percent on similar products imported from China.

Its final decision will be made on December 16.

HCM City hosts VietAd 2012

The third Vietnam international advertising equipment and technology exhibition (VietAd 2012) will take place in HCM City from August 2-5.

The exhibition is held by the Vietnam Advertising Association in coordination with the HCM City Advertising Association and Dong Nam Advertising and Commercial Promotion Jsc.

It is expected to draw the participation of 80 enterprises with 200 booths showcasing different kinds of machinery and equipment (digital printers, offset printers), LED technology (LED decoration, LED lighting) and advertising & display equipment (standee, panel).

During the exhibition, there will be two seminars on the application of LED technology in advertisement and new packaging trends in the world.

Many auto firms sell products for no profit

Many auto firms are applying non-profit sale mode to maintain production and reduce inventory, said Laurent Charpentier, chairman of the Vietnam Automobile Manufacturers Association (VAMA).

The written reply of the Ministry of Transport saying it would need a couple of years until the scheme on personal vehicle restriction fee comes into practice has sparked a ray of hope for the auto market. Local media, social organizations and many auto forums agree that the scheme should undergo more consultations before it could go ahead.

In just a few weeks after the reply was given, it is unclear whether auto sales have picked up or not since most traders and importers do not post their sales figures, said Charpentier, who is also managing director of Ford Vietnam.

He forecast Ford Vietnam’s sales would inch up in the third quarter against the second quarter and increase further in the last quarter.

He proposed the Government should further boost economic growth and stimulate the market in the rest of the year by injecting money into the economy after the GDP growth had slowed down sharply year-on-year in the first six months.

The fact that lending rates are going down will offer more chances for consumers and enterprises to access credit capital, Charpentier told the Daily. Vietnamese people still has demand for cars, he stressed, and automakers are launching new products to serve the peak season at year-end.

He said Ford Vietnam had launched many promotion programs since the year’s beginning, yet its sales performance did not improve much. The auto firm has to prolong its promotion programs and offer car buyers more supports.

Moreover, the company has been selling its products for no profit over the past few months. Many auto traders are doing the same in order to maintain production and tackle rising inventory, said the VAMA chairman.

“Car prices are very good now and can hardly drop further,” he added.

Though there are no official statistics, Charpentier said auto firms were now suffering from high volumes of unsold products. Several auto producers have reduced production and cut down on labor.

Charpentier predicted consumption of locally-assembled and imported vehicles would reach 90,000-95,000, versus the initial forecast of 85,000 units due to the unfavorable signals.

Kim Eng Vietnam renamed Maybank Kim Eng

Shareholders of Kim Eng Vietnam Securities Joint Stock Company (KEVS) approved the change of its corporate name to Maybank Kim Eng Securities Joint Stock Company during its general meeting last Friday.

The new name reflects Maybank’s acquisition of Singapore’s Kim Eng Holdings Ltd. after Nomura Singapore Limited, a subsidiary of Maybank, had bought a 44.6% stake in the financial service firm on January 6.

The board of directors has been reshuffled, with Shahrul Nazri Bin Abdul Rahim replacing Lam Hoang Loc as chairman of the enterprise. Meanwhile, Tan Pei San and Soon Su Long have replaced Ronald Anthony Ooi Thean Yat and Nguyen Thi Thanh Hien in the board.

The enterprise at last year’s general meeting also agreed to double its chartered capital to VND600 billion to supplement capital for operations in the coming time.

In related news, KEVS on Monday was awarded with the Best Retail Broker title by Alpha Southeast Asia magazine.

The enterprise was selected following a survey among 450 investors, allowance funds, investment fund managers, analysts and brokers. Each enterprise was evaluated following criteria of management seniority, relation with investors, management methods and commitments for product and service quality.

Liquidity runs dry despite market rebound

Despite a slump in liquidity due to investors’ cautious sentiment, the local market managed a modest rise at the end of Monday’s session as many large caps bounced back, lifting the VN-Index up 1.84 points, or 0.45%, against last Friday to close at 415.

The market opened several points in the red and hit a low of 410.08 before climbing into positive territory. Then after a brief second, it moved higher to end the morning session almost two points above the line. In the afternoon, trading saw a brief dip in prices before a late recovery saw the market close just below the highs.

Liquidity on the southern exchange was worrisome, dropping 30.3% in volume and 25.6% in value to 26.7 million shares worth VND461 billion. The put-through market was quiet despite a fairly large deal of DHG shares.

Decliners slightly outnumbered advancers by 127 to 98, including 24 stocks hitting the ceiling prices and 31 others dropping to the floor prices. Blue-chips were mixed with gainers led by VNM, MSN and GAS while losers were led by VCB and DPM.

Sacombank (STB) took the lead in terms of liquidity with over 4.1 million shares changing hands, followed by Tan Tao Investment Industry Corporation (ITA) and Ocean Group Company (OGC) with around 1.1 million traded each.

Foreign participation stayed low although they did turn net buyers, making up 13.6% and 11.8% of the market’s buying and selling value respectively.

The Hanoi market inched up slightly although turnover tumbled 38.5% in volume and 25.6% in value to 25 million shares worth VND248 billion. The HNX-Index added 0.1 point, or 0.14%, from the session earlier and ended the day at 69.45.

There were 87 advancers against 110 falling stocks, of which 21 stocks went to the ceiling prices and 24 stocks dropped to the floor prices. Foreigners accounted for 1.8% of the buying value and 0.9% of the selling value.

Viet Capital Securities Co. said it started to observe some positive signals on Monday. With 8.9 million and 5.8 million unmatched bid orders on the southern and northern exchange respectively, it looks like buyers have found back interest.

“Though liquidity has not allowed us to confirm a short-term uptrend, we believe the next two sessions would be important to watch, which also means it might not hurt starting picking up your favorite tickers,” it said.

Minh Phu heads top ten seafood exporters

Minh Phu Seafood Corp. remained the country’s leading seafood exporter during the year’s first half making up 6.11% of total market share, followed by Vinh Hoan Corp with 2.5%.

The country earned US$113 million in seafood exports in June, up 13% from last year, bringing total seafood export value up to US$2.9 billion in the six-month period, a 10.6% year-on-year increase, according to statistics from the Vietnam Association of Seafood Exporters and Producers.

The U.S., EU and Japan have retained key importers of Vietnamese seafood over the past six months. Seafood exports to the U.S. increased 14.4% to US$574 million while the seafood export value obtained from the EU dropped 12.7% to US$555 million.

In particular, seafood exports shipped to Japan hit US$512 million, surging 35.5% year-on-year despite facing more stringent technical barriers in recent times.

Vietnam posted rising seafood export value in other markets during the period. For instance, it gained US$236 million worth of seafood imports from South Korea while China and Hong Kong contributed US$180 million to total value.

Aqua-products delivered to ASEAN reached US$156 million while seafood export value generated from Australia fetched US$81.7 million.

In the list of top ten seafood exporters for the first half of this year, Minh Phu Seafood Corp was named as the leading firm when recording US$176.7 million in export value, followed by Vinh Hoan Corp and Hung Vuong Corp with respective values of US$72.4 million and US$60.2 million. Other major seafood exporters in the period were Quoc Viet Co. with US$53.4 million, Agifish with US$49.1 million, Stapimex with US$48.8 million, and Anvifish with US$44 million.

Honda and Ford drive ahead

Auto joint ventures Honda Vietnam and Ford Vietnam are taking brave steps to bolster sales amid a hostile business climate.

Albeit setting a modest sales figure of selling 40,000 new SH scooters both 125i and 150i cylinder capacity versions, just a tiny proportion in the company’s 2012 projection of producing two million motorbikes, Honda Vietnam (HVN) general director Masayuki Igarashi decided to choose Vietnam for launching these two brand-new SH scooter lines.

“The Vietnamese market will be highly vibrant in the forthcoming time based on our studies covering population structure, economic situation, motorbike popularity, transport system and availability of public means of transport. This was why HVN came to the decision to set up its third factory in Vietnam’s Ha Nam province,” said Igarashi.

In the past SH scooters were imported into Vietnam and incurred high import duty. Now, the scooter’s 93 per cent localisation rate helped pare down costs significantly, according to Igrashi.

HVN is scaling up efforts to expand autorised sales dealers (HEAD) network to reach 630 units by the year’s end from current 599 units.

In 2011, HVN sold 2.03 million motorbikes of multiple types in the Vietnamese market, making up 12 per cent of Honda Motor’s global sales.

Several other auto firms are also making great strides to boost sales, with Ford Vietnam being a prominent example.

Ford Vietnam’s managing director Laurent Charpentier said the company just pressed into service a parts store in northern Bac Ninh province with $2 million investment to boost the quality of its guarantee and maintenance services.

The company came up with special customer service programmes to propagate latest technology innovations in its products in collaboration with its agents.

The company efforts were duty rewarded. Its sales volume in June 2012 was almost doubled that in May with 437 car units being sold, a record since the year’s debut, paving the way for the company to grab 6.7 market share in June whereas general car consumption shed 4.6 per cent during the period.

As part of the company’s globally well-known Once Ford strategy Fiesta and Ranger new versions and in the coming period Focus new version were and will be launched with suitable versions matching Vietnamese conditions in a manner much more faster than it was some years ago.

“To roll out Focus newest version in late 2012, Ford Vietnam has spent almost two years to partake in this global project, with careful preparations in workshop, human resources and technology,” said Charpentier.
 
Noi Bai IP getting set to roll out a new phase

Hanoi-based Noi Bai Industrial Park’s second phase is expected to start as soon as site clearance is completed late this year.

Hanoi Industrial and Export Processing Zones Authority (Hiza) vice chairman Nguyen Xuan Linh said site clearance would be finalised this year.

Noi Bai Industrial Park’s (IP) developer, a joint venture between Malaysia’s Renon Group and Vietnam’s Hanoi Industrial Construction, was licenced to invest $5.1 million in developing Noi Bai IP-phase II in 2008 on 14.1 hectares in the capital’s Soc Son district.

The joint venture in 1994 was permitted to pour $29.95 million in the first phase on 100ha. The 100ha Noi Bai IP, with a duration of 50 years, is now fully occupied with 44 projects, of which 43 are foreign-invested ones, capitalised at $465 million.

“Site clearance costs in Hanoi are too high. This is the biggest difficulty during carrying out the second phase,” Linh said, adding that site clearance compensation reached VND1 million ($48) per square metre of agricultural land.

“IPs in general are currently finding it difficult to attract investors because prices of land in the city are too high as compared with those in neighbouring localities, and when operational, Noi Bai IP-phase II will be no exception,” said Linh.

“Land for lease at IPs in provinces of Hai Duong or Ha Nam, which are not far from Hanoi, stand at around $50-70 per square metres while the prices are some $125-130 at Hanoi’s IPs,” he cited.

According to Hiza, Hanoi is currently home to eight operating IPs which have attracted more than 500 projects worth $3.9 billion of foreign direct investment and VND12 billion ($576.9 million) of domestic investment. Till 2020 and an orientation to 2030, the capital plans to raise the total number of local IPs to 33, covering 8,000ha.

Kyoei stuck in long-delayed port project

Kyoei Steel’s 15-year delayed port project in southern Ba Ria-Vung Tau province shows no sign of being resolved.

A recent provincial Department of Planning and Investment inspection showed that construction of Thi Vai International Port, jointly developed by Japan’s Kyoei Steel, Vung Tau Shipping and Service Company and state-run Vietnam Steel Corporation, was dragging the chain.

Even though the developer had committed to push the construction after receiving a renewed investment certificate for the $56 million project a year ago, administrative procedures have yet to be actioned.

Funding and port development spats between shareholders have held the 46 hectare project back, located in Cai Mep-Thi Vai port complex, supposedly an important southern key economic region gateway.

The port project was initially licenced in 1997 with total investment capital of around $56 million, but due fund contribution disagreements, the construction of the port has not started yet.

Based on the Investment Law, the provincial authorities could revoke the investment licence of the joint venture, but they decided to grant the project a renewed investment certificate. Under the new investment certificate, the port’s developer committed the project would be operational by 2015. However, it seems that the shareholders have not found a way to remove the long-lasting disagreements, meaning the long-delayed project remains standstill.

Ryoichi Matsuno, general director of Thi Vai International Port Company, confirmed with VIR that the project “is unfortunately not in line with the timeline we indicated.”

In a proposal sent to Ba Ria-Vung Tau Provincial People’s Committee, the provincial Department of Planning and Investment asked Thi Vai International Port’s developer to begin constructing the port within the third quarter of this year.

Instant coffee’s bitter aftertaste

High interest rates, costly investment and low consumption are discouraging Vietnamese enterprises to process instant coffee.

The processing capacity of raw coffee has exceeded demand, according to a newly released coffee processing and storage system draft planning to 2020 with orientations towards 2030.

Specifically in 2011, the total designed capacity of 97 coffee bean processing enterprises is 1.503 million tonnes per year against 1.2 million tonne demand in 2011.

Meanwhile, ground coffee total designed capacity is 51,664 tonnes per year against actual capacity of only 50.51 per cent. Vinacafe Bien Hoa Joint Stock Company just run at 2.63 per cent of its designed capacity and many member companies worked only one shift in 30 days per year.

Therefore, experts said new enterprises should not come on board and existing plants’ designed capacity should not be hiked during the period from now to 2020. Instead, firms had better invest in making instant coffee on the back of available materials and ever-increasing demand in the domestic market as well as in other emerging countries. This will enhance the added values of Vietnamese coffee.

Nevertheless, Thang Loi Dak Lak Coffee director Nguyen Xuan Thai said the building an instant coffee processing plant was very costly whereas consumption was unclear. High bank interest rates were also a deterrent.

In short, without government support the target of producing instant coffee to improve Vietnamese coffee added value would be hard to achieve.

There were several instant coffee processing companies in the country by the end of 2011 such as An Thai Company, Vinacafe Bien Hoa Joint Stock Company, G7 Instant Coffee Joint Stock Company and India-backed OLAM Company.

Ministry to limit licences for rice exporters
 
Strict new conditions for rice exporters that take effect on October 1 are set to result in 50 enterprises losing export licences, according to The Ministry of Industry and Trade's Import and Export Department.

Decree 109 on rice export businesses will require enterprises to meet criteria such as having a warehouse with capacity of at least 5,000 tonnes of rice in stock, at lease one rice husking workshop with a minimum capacity of processing 10 tonnes of rice per hour and export volume of at least 10,000 tonnes of rice each year.

The Import and Export Department reported the nation has more than 150 rice exporters currently, with either one-year or five-year export licences.

With 50 out of the 150 rice exporters expected to fail to meet the new criteria, the ministry has asked the Viet Nam Food Association (VFA), rice export management teams and provincial authorities to ensure solutions for enterprises that lose export licences.

Truong Thanh Phong, VFA chairman, said the association asked firms not to race to build new storehouses as this may result in unused facilities and be a waste of money.

Rice trading firms do not necessarily have to export rice directly and instead can sell their rice to export firms, Phong said. "That would still ensure a high turnover," he said.

Nguyen Thanh Bien, deputy minister of industry and trade, said balancing supply and demand in rice exports was an important factor in the success of these enterprises.

"So, they should not produce too much rice and build many storehouses only to be left with this stock if they are unable to export it," he said.

The VFA and provinces should review the number of storehouses and rice husking factories that were built since Decree 109 was publicised in January 1, 2011, Bien said.

The ministry asked other ministries and provinces to submit feedback on the new regulations for rice exporters during the next five years, Bien said.

The Ministry of Agriculture and Rural Development reported rice exports fell by both volume and export value, seeing a year-on-year decline of 2 per cent in volume to 4.6 million tonnes and a decline of 8.7 per cent in value to US$2.1 billion. The average export price also dropped by 6.6 per cent to $458 per tonne.

Phong said that despite difficulties, Viet Nam is likely to achieve its yearly target of exporting 7 million tonnes of rice if the country focuses on tapping its strength and retains its existing markets.

Additionally, the country should boost its export of high-quality products, Phong said, adding that China has been importing all high-quality and fragrant rice found in the domestic market.

The VFA recommended that Viet Nam focus on higher quality rice, as cheap Vietnamese rice is failing to compete with low-priced rice from India and Myanmar.

SHB buys debt-ridden Bianfishco

Debt-ridden Binh An Seafood JSC (Bianfishco) has been rescued after signing a co-operative agreement with two banks on Sunday to restructure the company.

Bianfishco had signed agreements with Saigon-Hanoi Commercial JSC (SHB) and the Viet Nam Development Bank (VDB) to stabilise production and ensure the rights of workers, farmers and other shareholders, according to Tran Van Tri, general director of Bianfishco.

Under the agreement, SHB will guarantee payment of Bianfishco's loans from VDB. VDB has also committed to releasing Bianfishco's mortgaged property of which 50 per cent is owned by CEO Pham Thi Dieu Hien.

The agreement stipulates that SHB is recognised by the Can Tho Planning and Investment Department as taking control of a 50 per cent stake in Bianfishco from Hien.

Last month, SHB asked Can Tho City People's Committee to purchase debts and deal with financial issues and the restructuring progress of Bianfishco. In documents sent to the committee, SHB said it wanted to organise the entire restructuring of Bianfishco, including financial arrangements.

Bianfishco has also pledged to co-ordinate with the two banks to fulfil administrative procedures for SHB to be recognised as its major shareholder with a 50 per cent stake.

Bianfishco was established in 2007 and operated strongly until the middle of last year until banks refused to extend its financing arrangements.

 Park fells cajeput trees despite lack of any market for timber

U Minh Ha National Park in the southern province of Ca Mau is home to 15,000ha of cajeput trees aged seven years or over which are ready for felling, but the park has been unable to find markets for the trees, said deputy director of the park Nguyen Van Dau .

"Construction companies prefer alternative materials such as cement and steel, which cost less than cajeputs, while most processing manufacturers have started to use different types of timber, causing enormous economic damage of up to VND10 billion (US$480,000) annually. A hectare of cajeputs was previously worth up to VND50 million," added Dau.

As a result, hundreds of households are earning less or no money at all.

"Demand for cajeputs has fallen, so I've replaced half of my crop with robinias," said local farmer Nguyen Van Sau. Sau added that there was a large amount of cajeput timber in storage.

Many local processing manufacturers have stopped using cajeputs.

Vu Ngoc Hoang, sales manager at the Local Forest Products No 2 Company, said it was not economically efficient to use cajeputs.

Dau predicted that 2,000ha of cajeputs would go unsold every year if a solution was not found.

To solve the problem, a processing plant is being built in Ca Mau to prepare the timber for export, and this should be operational in the next two to three years.

The forest in U Minh Ha covers an area of 78,000ha, including 38,000ha of cajeput trees, and is aimed at contributing to regional environmental protection.

 Companies resist pressure to buy export insurance

Many exporters remain unfamiliar with export credit insurance two years after the Government introduced it, according to the Viet Nam Insurance Association.

Cash-in-advance and letters of credit are no longer competitive in the international marketplace, said Phung Dac Loc, the association's general secretary and buying on credit was a common trend nowadays, especially in developing countries where importers usually had limited access to capital.

Export credit insurance would boost the country's exports and help exporters reduce their risk, he said.

"Banks will provide loans to exporters without demanding collateral if they have export credit insurance, thus improving their borrowing capacity," he said.

But despite these advantages, Vietnamese businesses were not keen on it, he told a conference in HCM City yesterday.

The total premium paid for the insurance last year was only VND1.3 billion (US$62,200), or just 0.1 per cent of the country's total exports. The Government targets a rate of 3 per cent next year.

Businesses on the other hand said they did not need coverage because they have managed smoothly without the insurance, with some also worrying about the high cost of the insurance and its effect on their margins.

Loc said in the current situation, when most companies have high inventories, they should get export credit insurance and explore new markets.

Seven insurance companies are part of the Government's two-year-old pilot programme - Bao Viet, Petro Viet Nam Insurance, Bao Minh Joint Stock Corporation, Bao Viet Tokio Marine, QBE Viet Nam, Chartis Viet Nam, and United Insurance Co.

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

Nguyen Hong Ha, deputy general director of the Viet Nam Chamber of Commerce and Industry's HCM City office, said Vietnamese exporters faced high risk of losses since foreign buyers transfered money only after receiving shipments.

"Thus, even if it means lower profit margins, buying export credit insurance is imperative," she said.