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BUSINESS IN BRIEF 5/2

 Opportunities await local firms to boost exports stateside; Fuel price stabilization fund hits record high; CBU imports from China triple last year; Industrial production up 10 per cent; Minister seeks to calm producers as Vietnam opens markets

Chinese electric cars, not yet licensed for use, available in Hanoi

Despite not yet being licensed for circulation, the first electric cars have been imported from China to Hanoi and sold to consumers.

At a shop of motorbikes and bicycles on Thai Phien Street in Hoan Kiem District, H., the shop’s owner, confirmed with Tuoi Tre (Youth) newspaper’s correspondents said he had sold the first Chinese electric car to a customer.

“We don’t lack supply but we import such cars only when customers pay deposits to us to purchase them,” H. said.

He also said the price of electric cars ranged from VND50 million ($2,340) to VND70 million ($3,280) per vehicle, depending on models, number of seats, color and weight.

He added that an electric car imported from China has from one to four seats, runs on electrically rechargeable batteries, and weighs 500 kilograms at maximum.  

After hearing Tuoi Tre report about the appearance of such Chinese cars, Colonel Dao Vinh Thang, head of the Traffic Police Office under Hanoi Police Department, said his agency will first collect information about the consumption and sale of cars of this kind in the capital city.

The agency will then propose solutions for the management of import, trade and maintenance of electric cars, Colonel Thang said.

He added that this kind of vehicle has a potential of causing congestion and traffic accidents, so competent agencies must tighten their control over such vehicles to prevent them from being imported randomly into Vietnam.

In related news, early this month, the Ho Chi Minh City Department of Transport said it will launch an electric car tourist service in the downtown area on a pilot basis in April.

The department has said that 10 eight-seat electric cars will be deployed for this service in its initial stage.

The cars will carry visitors to the city’s major tourist attractions in the downtown area, including Ben Thanh Market, the Municipal Theater, People’s Court Mansion, Saigon Notre-Dame Cathedral, Saigon Central Post Office, Reunification Palace, and Saigon Zoo and Botanical Gardens.

The cars, to start running on a pilot basis on April 30, will operate from 8:00 am to 5:30 pm every day, with intervals of 30 minutes.

There is not yet information about the origin of these electric cars.

Market enters peak Tet shopping time

Ho Chi Minh City market has entered peak shopping time for the upcoming Tet holidays which falls in February 17. Businesses of the price subsidization program have completed preparations of Tet goods and affirmed that prices will be kept stable in weeks near Tet.

Businesses have fulfilled their goods preparation plans. They said total goods value stockpiled for two months before and after the holidays has reached VND15,849 billion (US$745 million), up VND8,268 billion over the same period last year.

Beer & beverage consumption demand is forecast to reach from 40 to 45 million liters in the New Year Festival, up 30-50 percent. Producers have said that selling prices would not increase in the Tet holidays.

Cake, jam and candy demand is expected to reach 18,000 tons. Confectionary companies have launched several new products with good designs and quality. Most of them have kept the prices stable.

Those attending the price subsidization program will not be permitted to hike goods prices despite of input material cost increase in two months before and after Tet.

The Department of Industry and Trade and the Ministry of Finance have set up teams to intensify price inspection. The former and businesses have arranged mobile outlets, which will move to any district where prices are found unreasonably increase during the holidays.

HCMC has also signed an agreement to work with provinces in the southern region to implement the price subsidization program.

The city leaders said that Lunar New Year which is the best business time every year, accounting for 30 percent of a business’ annual revenue. Many companies and traders usually take advantage of surging purchasing power in this phase to sell counterfeits and low-quality goods and create a scarcity to rig the prices.

The price subsidization program will ensure abundant goods supply and rational prices to create best conditions for residents to celebrate Tet festival.

Supermarkets and subsidized-goods stores will open up to midnight on the 29th day of the 12th lunar month. They will resume operation on the second day of the lunar New Year.

In related news Prime Minister Nguyen Tan Dung instructed authorized agencies to tighten market management, prevent smuggling and stabilize prices of essential items in Tet holidays at a cabinet meeting last weekend.

The PM instructed the Ministry of Finance to studying transport fee subsidization. Domestic gasoline prices should be kept in accordance with that in regional nations to prevent smuggling.

HCMC steps up bio gasoline sales

Ho Chi Minh City People’s Committee has promulgated a plan to boost selling traditional gasoline and ethanol blend E5 in the city.

According to the plan, the blend will be sold to replace traditional gasoline at 115 stations in HCMC by June 30.

The city strives to sell gasoline E5 at all 510 stations at the end of December this year.

The committee has instructed the Department of Industry and Trade to work with relevant departments and businesses to implement the plan.

From December last year gasoline E5 was available at 58 filling stations in HCMC.

Import sales suffer after deadly US apple scare

Sales of imported apples have been serious damaged by a contamination scare involving a recall order on two US apple varieties feared to be affected by a potentially lethal virus.

Imported apples at a supermarket in Hanoi. Sales of imported apples drop after virus scare

Vietnamese authorities have confirmed there were no direct imports from Bidard Bros. Co. of the US, found to have been responsible for the release of contaminated apples onto world markets. But shops and supermarkets have cuts orders for all overseas apples as consumers continue to avoid them.

A representative of Hanoi's Vinmart Supermarket said it had quarantine certificates for every apple sold on its shelves, but sales have dropped sharply. Another major supermarket in Hanoi, Co.opmart, said sales of apples from overseas were down 50 percent since the contamination scare.

Ho Quoc Nguyen, head of public relations at Big C Supermarket, said the company had reviewed all import records, and suppliers had checked stocks in line with warnings from the Vietnam Food Administration, and they had confirmed all apples were free of contamination. Despite assurances, sales of imported apples fell 30 percent.

The owner of a company specialising in distribution of imported fruits in Hanoi said orders were down 40 percent since the contamination recall. No contaminated apples were found in Vietnam.

Vietnamese authorities in early January began a nationwide recall of US-grown Granny Smith and Gala apples, shipments of which from Bidard Bros. Co. were feared to be contaminated with the Listeria monocytogenes virus. Authorities were concerned that apples sourced from the US company may have indirectly reached Vietnam.

Listeriosis can be fatal, with symptoms including fever, severe headache, nausea and a stiffness of the neck. The US Food and Drug Administration said the US company may have exported contaminated apples to Vietnam, Canada, Hong Kong, India, Indonesia, Malaysia, Philippines, Sri Lanka, Thailand and the United Arab Emirates and ordered a global recall.

The director general of the Plant Protection Department, Nguyen Xuan Hong, said ambiguous information from one company may have encouraged consumers to avoid all imported apples.

"Consumers are very concerned and sensitive about food safety," Hong said.

Many local firms unaware of AEC

A lot of domestic companies remain unaware of the key contents of the ASEAN Economic Community (AEC) and the challenges they will face after the community is established later this year.

The fact is proven by a recent survey conducted by the University of Economics and Business under the Vietnam National University in Hanoi with nearly 700 small- and medium-sized enterprises (SMEs) in Hanoi, Haiphong, HCMC, Danang and Can Tho cities taking part.

The majority of respondents do not know when AEC comes into existence and its key pillars, as well as the AEC scorecard, which is a monitoring mechanism for the integration process of each member of the bloc.

The survey also found that companies in industrial, construction, trade and services sectors have better knowledge of AEC than those in the agricultural sector. In general, large enterprises know AEC better than SMEs do.

Nguyen Hong Son, head of the University of Economics and Business, said most of the respondents recognized the opportunities of the single market of the 10 ASEAN nations but they also worry about fiercer competition triggered by goods producers and services providers from other countries of the bloc.

Enterprises are not fully aware of opportunities and challenges from the AEC establishment as they do not pay much attention to this. Only 40% of respondents said they will not adjust their business plans ahead of Vietnam’s further integration into the region.

The survey found local businesses attend more to the World Trade Organization, the Trans-Pacific Partnership (TPP) and the Vietnam-European Union free trade agreement (FTA) than the forthcoming birth of AEC.

According to the Ministry of Finance, with the establishment of AEC later this year, Vietnam will integrate further into the region this year than before and exempt tariffs on more groups of items imported from ASEAN and other markets as committed to FTAs.

The ministry said 72% of the groups of items imported from ASEAN were entitled to tariff exemptions last year and the percentage rises to around 90% in 2015. This year, Vietnam has committed to exempt 37% of the groups of commodities from import tariffs under seven FTAs the country has signed.

However, many domestic enterprises do not know about the commitments, according to Nguyen Thi Thu Trang, director of the WTO Center under the Vietnam Chamber of Commerce and Industry (VCCI).

The center wrote to the Ministry of Industry and Trade asking for the disclosure of Vietnam’s commitments to FTAs but the ministry said it would need more time to adjust tax codes.

Vo Tri Thanh, vice president of the Central Institute for Economic Management (CIEM), said disseminating information about Vietnam’s commitments to FTAs is slow. He added that not only businesses but also Government officials know little about AEC.   

When AEC is in place, Vietnam will open its doors to investors as widely as other ASEAN countries but will exclude labor and service markets.

Thanh highly appreciates the Vietnam-EU FTA and TPP, both under negotiations. TPP requires 90% of the tariff lines to drop to 0% immediately after it takes effect while it will take seven years to bring 90% of tariff lines to zero in the FTA with the EU.

Opportunities await local firms to boost exports stateside

Rising demand in the United States, fueled by its recovering economy, is offering more opportunities for Vietnamese firms to step up sales there this year, according to experts.

Giovanni Rojas, director of sourcing services at Target Group, told a conference on trade and investment chances in the U.S in Dong Nai Province on Wednesday that the company is expected to increase imports from Vietnam this year.

The U.S. retail giant, which now has more than 1,800 stores stateside, imported US$800 million worth of goods from Vietnam last year, with most of them apparel, footwear, furniture, toys, photo frames and stationery.

The Vietnamese trade counselor in the U.S., Dao Tran Nhan, said the U.S. is a major importer of many Vietnamese products. It imported US$9.8 billion worth of garments, US$3.3 billion of footwear, US$2.2 billion of furniture, US$1.7 billion of seafood, US$1 billion of bags, suitcases and hats, US$636 million of cashew nuts, and US$255 million of pepper from Vietnam last year.

Nhan said the U.S. economy grew 3.2% last year and is projected to expand 3.7% this year. A recovery of the economy will prop up consumer spending and this is a good chance for Vietnamese companies to boost exports to the U.S.

Negotiations over the Trans-Pacific Partnership (TPP) agreement are expected to be concluded some time this year. This multilateral trade pact will contribute to fueling Vietnam’s economic growth and exports.

However, Nhan pointed out limited production capacities, slow goods delivery and poor competitiveness as the weaknesses of Vietnamese companies. On top of that, local exporters have to meet high criteria for food safety and face technical barriers in the U.S.

Nhan called for local enterprises to sell their products to the U.S. market via retailers and importers such as Walmart, Kroger, Target, Tyson Foods, Sysco and US Foods.

However, Rojas of Target said in addition to food safety, Vietnamese firms should meet multiple requirements for product quality, packaging, environment, labor safety and anti-bribery before they can partner with Target.

Rojas said suppliers from Vietnam should provide transparent and verifiable information about their factories, social welfare, and impacts on the environment, especially for the companies in the dyeing and garment sector.

Thomas Jandle of TJMR Asia Consultant suggested Vietnamese firms rely on local supplies to turn out their export products, instead of imports from the countries which are non-TPP members.

Nguyen Phu Cuong, vice chairman of Dong Nai Province, said the southern province earned US$3.6 billion from exporting apparel, footwear, wooden products, steel products, machines and equipment, cashew nuts and coffee to the U.S. last year, up 14.7% year-on-year.

Cuong acknowledged that the province has shipped goods to the U.S. via intermediaries and has not diversified importers due to the limited capacities of local enterprises.

Cuong added leaders of Dong Nai Province traveled to the U.S. last November to explore trade opportunities and find investors for infrastructure development projects.

Speaking at the conference, Chris Neeley, executive vice president at Made in USA Works, said the company can support Vietnamese firms to find funding and develop products in the U.S. At the conference, representatives of Made in USA Works and business associations in Dong Nai Province inked cooperation agreements.

According to the General Department of Customs, two-way trade between Vietnam and the U.S. last year neared US$35 billion, accounting for 11.7% of Vietnam’s total foreign trade.

Vietnam’s exports to the U.S. stood at US$28.6 billion in 2014, with key products including textiles and garments, footwear, furniture, seafood, handbags and hats, with apparel making up half of Vietnam’s apparel exports.

Fuel price stabilization fund hits record high

The Ministry of Finance said more than VND4 trillion (US$187.5 million) had remained unused in the fuel price stabilization fund by the end of last year, the highest level ever since the fund was established.

According to the ministry’s report on the fuel price stabilization fund released on January 29, consumers contributed a total of more than VND1.72 trillion to the fund when they bought fuels in the final quarter of last year alone. The sum was the largest ever because fuel wholesalers set aside VND500-800 for each liter of fuel sold for the fund last year when fuel prices fell sharply.

The ministry did not have to use the fund to keep fuel prices stable on the local market thanks to the decrease in retail fuel prices last year.

All fuel wholesalers reported a cash surplus in their fuel price stabilization funds, with the highest amount of VND2.16 trillion recorded for Vietnam National Petroleum Group (Petrolimex), followed by PetroVietnam Oil Corp. (PV Oil) with more than VND590 billion.

In 2013, the national fuel price stabilization fund has tens of billions of dong and the amount rose from more than VND840 billion in the first quarter to VND1.5 trillion in the second quarter and VND2.3 trillion in the third quarter.

Experts discuss ways to raise incomes for rice farmers

Agricultural experts have underscored the urgent need to help farmers improve their incomes as this is an important factor for the success of a restructuring scheme for the rice sector in 2015-2030.

The urgency was raised at a seminar held on Wednesday by the Institute of Policy and Strategy for Agricultural and Rural Development (IPSARD) to collect comments on the scheme.

IPSARD director Nguyen Kim Son said the scheme is aimed to enhance the effectiveness, competitiveness and sustainable development of rice production, and ensure interests of farmers.

Nguyen Dinh Cung, head of the Central Institute for Economic Management, said Vietnamese farmers are hard-working but their life is still difficult though Vietnam can export millions of tons of rice a year. What matters most is to find a right policy for farmers to live well on their paddy fields.

Tran Van Lam, a member of the Vietnam Farmers’ Union, said in support of Cung that the country has managed to improve rice productivity and quality in recent years, and achieved some good results. To improve farmers’ incomes, State agencies should figure out ways to reduce production cost and increase rice prices.

The restructuring scheme, according to Son of IPSARD, is to help farmers earn profits of at least 30% from paddy production. However, many experts told the Daily on the sidelines of the seminar that the target has been virtually realized and if this is the only purpose, the rice sector does not need to be restructured.

“The 30% profit target has been achieved but farmers cannot live on paddy farming. We should set a target that farmers can lead a good life from producing paddy (unhusked rice),” a delegate said.

On the other hand, many experts are concerned that a 15-year period starting from 2015 is too long for a restructuring scheme and it will not bring as good results as expected if it is implemented by the Ministry of Agriculture and Rural Development only. The reason is that the ministry is strong in measures to improve output and productivity while exports are managed by the Ministry of Industry and Trade. Therefore, close cooperation between the ministries is a must.

CBU imports from China triple last year

Completely built-up (CBU) autos imported into Vietnam from China increased by more than three folds to US$538 million last year, according to the latest figures of the General Department of Customs.

Vietnam imported 13,805 vehicles from the northern neighbor last year compared to only 4,266 autos worth nearly US$165 million in 2013.

Auto imports from China ranked third in volume after Thailand and South Korea, but led in value last year when they made up almost 34% of the country’s total auto import value.

Auto dealerships explained that trucks took the majority of auto imports from China in 2014 thanks to lower prices than other markets and the local manufacturers of trucks failed to meet rising demand as the Ministry of Transport tightened controls on loads of vehicles.

Dealerships said enterprises had to wait for 3-4 months to have their orders for trucks fulfilled by local manufacturers and this forced them to buy Chinese-made trucks to enjoy quick delivery and lower prices. Trucks imported from Japan and South Korea are more expensive than local vehicles.

Last year, Vietnam imported more than 71,000 CBU units valued at more than US$1.58 billion, the General Department of Customs reported. Of which, South Korea accounted for 16,794 autos worth nearly US$317 million and Thailand made up 14,416 units with nearly US$243 million.      

Vietnam spent more than US$43.8 billion on imports from China last year. The products with import revenue of US$1 billion or higher included machines and equipment; telephones and parts; cloth; computers, electronics and components; steel; fuel; and materials for apparel and footwear.

Quang Nam attracts US$5.09 billion in FDI

The central province of Quang Nam has attracted US$5.09 billion in foreign direct investment (FDI) so far, ranking 13th among 63 cities and provinces nationwide, the Foreign Investment Agency said.

In 2014 alone, the province attracted $87 million in FDI with $72 million from 11 newly-licensed projects.

Real-estate trading was considered the most attractive sector by foreign investors, absorbing $4 billion or accounting for 80 per cent of the FDI registered in the province till date. It was followed by processing and manufacturing, with $515 million or 10 per cent and the restaurant and catering sector with $328 million or 6.5 per cent.

During the period, Singapore was the province's largest source of FDI, with more than $4 billion or 80 per cent of the province's total FDI.

Review large investment plans, MPI says

Most ministries and localities have submitted huge investment bdgets that do not correspond to the State's limited resources, and these need to be reviewed, Planning and Investment (MPI) Minister Bui Quang Vinh said yesterday.

Addressing a seminar held in Ha Noi to guide agencies and localities on implementing the national mid-term public investment plan (2016-2020), he said obstacles that come up will have to be overcome through better co-ordination between all stakeholders.

He said the plan's implementation should abide by the revised Law on Public Investment, which took effect on January 1 this year.

The law is expected to provide a comprehensive legal framework for restructuring the public investment process, he said, adding that a Decree dealing with this will be submitted to the Government for approval by March this year.

The ministry will also present specific data on investment demand and report on total investment – sourced from the State Budget as well as Official Development Assistance (ODA) - needed for the next five years, he said.

Top priority will be given to capital disbursement for public-private partnership (PPP) projects followed by ODA projects, he said. Repaying capital construction debts will come next followed by funding for unfinished projects. The ministry will also consider reviewing new projects, Vinh said.

Some provincial representatives pointed out that the MPI was yet to notify them about budget allocations from the centre as well as Government bond proceeds for the 2016-2020 period. This has delayed project implementation, they said.

Vinh responded that the preliminary perusals show that most ministries and localities have proposed huge investment budgets that should be reviewed and submitted to the Ministry before the end of this month for further consideration.

Regarding total investment capital for the next five-year plan, localities should review their budgets towards eliminating "sudden" increases in investment capital that have been seen in the last few years, he said.

He noted that capital disbursed from the State budget to ministries and localities as well as supplemental capital for national programmes has risen 10 per cent on average from a year ago.

Vinh acknowledged the need for proper regulation of public investment by the Ministry in order to ensure that capital is channeled into the right projects. This was needed for more efficient use of State Budget funds, he said.

Representatives from Yen Bai and Bac Giang said that provisions of the draft decree on public investment have been adapted to the current situation, easing many obstacles.

However, Vinh said it appears that due preparations have not been completed for both locally and centrally-funded projects.

He noted that for implementing the five-year plan, each locality will be asked to submit at least one to three large-scale projects to the ministry for consideration.

He assured that the ministry will take into consideration the problems raised by localities as well as the recommendations they have made, and include them in the draft decree on public investment.

Industrial production up 10 per cent

The country's industrial production sector posted a 10 per cent growth rate in January, compared with the same period last year, the Ministry of Industry and Trade said yesterday.

At a press meeting held in Ha Noi to review the country's production situation, the ministry said that the beverage and paper industries took the lead in terms of inventory last month, with a 59.5 per cent and 100 per cent increase, respectively. Other sectors that reported high inventory included food processing (11 per cent), medicine (15 per cent), metal production (32 per cent) and electronics and computers (38 per cent).

The ministry said the high inventory was a result of the upcoming Tet holiday.

Sectors that reported a reduced inventory included tobacco production (34 per cent), leather (8 per cent), chemicals (15 per cent) and electricity equipment (13 per cent).

The ministry also said the prices of beer, alcohol and beverages rose by 5 to 6 per cent due to higher purchasing power.

Beer output in January was estimated to be 261.4 million litres, rising 4.4 per cent in comparison with the same period last year.

Deputy Minister Do Thang Hai said at the meeting that the Electricity of Viet Nam (EVN) will not raise power price during the Tet holiday. However, they will review reports from EVN submitted to the Government for adjustment in March.

Previous reports from EVN showed that the group had reported a loss of more than VND8 trillion ($373.8 million) due to foreign exchange fluctuations in 2009-10.

Answering the question on who will benefit from the increasing electricity prices, Hai said the Government, people and businesses will stand to benefit.

He said electricity and petrol prices should be adjusted under the market mechanism. Petrol prices follow the market price as per a Government Decree, issued on September 3, on petrol and oil trading, fuel traders.

This is the reason that cheaper input prices will benefit businesses and the public.

He added that the World Bank has warned that electricity prices in Viet Nam are lower than production costs, resulting in no one wanting to invest in power production.

In addition, the Government has not benefited as foreign invested sectors, which use considerable power, such as cement and steel, enjoy cheap price, he added.

The Government will base its decision on reality and consider the EVN's proposal of a 9.5 per cent increase in power price.

Deputy Prime Minister Hoang Trung Hai has also approved the adjustment in electricity retail prices in principle.

Data showed that Vietnamese' average income is much lower than other countries in the region, even though the country's power prices are at such a low level.

Specifically, the electricity price in Viet Nam is equivalent to Malaysia and Indonesia, while its income in 2013 was $1,911 per capita per year. The average income in Malaysia was $10,538 per capita per year, while that of Indonesia was $3,475 per capita per year.

Banks to be allocated credit growth rates

The State Bank of Viet Nam (SBV) will continue to allocate credit growth rates for commercial banks this year, based on the banks' health and business performance.

The move is aimed at controlling credit quality and restricting the generation of new non-performing loans (NPLs).

SBV Deputy Governor Nguyen Thi Hong announced the policy late last week, saying that the quota allocation for this year will be announced soon.

The allocation is aimed at not only ensuring that credit growth serves the economy, but also to control credit quality and restrict new NPLs arising in the future, Hong said.

SBV will divide commercial banks into four groups, depending upon their performance in the previous years to allocate the credit growth quota. The division will be: Group 1 (healthy banks), Group 2 (average banks), Group 3 (below-average banks) and Group 4 (weak banks). Group 4 might not be allocated credit growth rates.

Hong pointed out that to boost lending safely, the central bank's Credit Information Centre is also building a system to monitor the credit history of borrowers so that commercial banks can base their actions on the information, and thereby step up lending to good firms, while ramping up scrutiny of the ailing firms.

The central bank will also streamline a model for risk governance, inspection and supervision, especially in a number of industries and sectors, to ensure that banking performance remains under control, Hong stated.

SBV Governor Nguyen Van Binh said the central bank this year is targeting a credit growth of 15 per cent to limit lending and forecast that credit demand this year will be higher than last year. The central bank in 2014 targeted credit growth of 12 to 14 per cent to boost lending as last year's credit demand was too low.

Lending this year should be restrained at only 15 per cent to ensure the safety of the banking system, Binh said, adding that commercial banks in 2015 must pay due attention to credit quality, rather than credit growth as in 2014.

Some banks have also announced credit targets for this year. However, they might be adjusted by the middle of this year according to the central bank's credit quota allocation, as well as market demand. Both Vietcombank and BIDV targets credit growth of 16 per cent this year, while the figures for Vietinbank, Military Bank are 13 to 15 per cent, and 15 to 17 per cent.

The central bank had decided to apply the credit quota allocation policy in 2012 when many banks accelerated their lending by up to 50 per cent, causing a sharp rise in NPLs.

To date, some experts have recommended that the central bank withdraw the policy, saying that it is not necessary as the monetary market is stable. However, industry insiders have remained guarded about their view on the withdrawal.

Head of the Business Development Institute Dr Le Xuan Nghia told Thoi bao ngan hang (Banking Times) newspaper that the monetary market has only recently gained normalcy after many years of volatility. The central bank should therefore consider lifting the policy as the banking industry has good liquidity, while the Government is applying strict measures for handling NPLs and cross-ownership at banks.

The Deputy Director of the Central Institute for Economic Management Vo Tri Thanh also suggested the removal, saying banks are currently being cautious about lending themselves, as they are well aware of the consequences, including generating a large number of NPLs that they will be burdened due to rapid credit growth.

Besides, Thanh said, the central bank should not continuously use administrative measures to intervene in the monetary market, but allow it to operate under the market mechanism.

However, industry insiders recommended that the central bank scrutinise the withdrawal.

Deputy Director of HD Bank, Le Thanh Trung, said that in theory, the central bank should reduce its administrative intervention and allow the monetary market to operate under a market mechanism. However, in the current context, a withdrawal of the policy too early might not be good, and might even lead to negative consequences.

Though the economy has become better, it will take more time to see whether the economy is really healthy and is able to run smoothly, Trung said, adding that therefore, the central bank's role in leading the market and guiding the policy is very important.

Trung added that the time for policy withdrawal will depend much on the progress of the economy, suggesting that there should be no adjustment made at least during the first half of 2015.

Echoing Trung, deputy director of Orient Commercial Bank Nguyen Dinh Tung, also said the improvement of the banking industry and the entire economy as well, are not really sustainable so being cautious is necessary.

Tung said the central bank is required to control credit growth for the past years so that it does not withdraw the policy, unless it feels really secure about the stability of the entire banking system.

RoK investment outlook solid for 2015

The past financial year saw strong investment in Vietnam by RoK companies and the outlook for 2015 looks to be another sound year, according to a recent survey by the Planning and Investment Ministry’s Foreign Investment Agency (FIA).

According to the FIA, last year investment certificates were issued to 505 new RoK projects, while 179 others increased their investment, for a combined total investment for the year of US$7.32 billion.

RoK investors accounted for 36.2% of the worldwide foreign investment in Vietnam as of the end of 2014 with investments concentrated in the processing and manufacturing industries.

In total there were 4,063 projects with cumulative investment of US$36.7 billion throughout the country.

A recent survey by the Korea International Trade Association (KITA) also showed that most RoK firms operating in Vietnam in 2014 have plans to expand operations in 2015 underscoring the confidence they have in business prospects.

A number of big Korean-invested projects received license in January 2015, including Taekwang MTC (US$43.2 million) in the southern province of Dong Nai, specializing in sport shoes for export.Vietnam enhances industry cooperation with Japan

Deputy Prime Minister Hoang Trung Hai called upon relevant Ministries and agencies to rapidly implement the action plan for the Vietnam Industrialisation Strategy (VIS), a part of the Vietnam-Japan cooperation framework through 2020.

The ministries involved include that of Finance; Science and Technology; Labour, Invalids, and Social Affairs; Foreign Affairs; Education and Training; Natural Resources and Environment; Construction; Industry and Trade; Agriculture and Rural Development; Planning and Investment; and Transportation, as well as the State Bank of Vietnam.

They have been asked to carry out their assigned tasks in a timely fashion, including submitting reports to the Deputy Minister, who is also head of the Steering Committee for VIS, by April of this year.

Under the strategy approved by the Prime Minister on July 1, 2013, priority is given to developing the electronics, agricultural machinery, agricultural and seafood processing, ship building, environment and energy saving, and automobile and spare parts manufacturing industry.

The development of these industries is expected to nurture high value-added products, boost technological innovation and productivity, and improve global competitiveness of local firms.

The Ministry of Planning and Investment was assigned to supervise the implementation progress of the action plan and conduct research on potential products or areas for cooperation with Japan.

Additionally, it will collaborate with the Ministries of Foreign Affairs and Finance to seek support from foreign partners and enterprises for the projects stipulated within the plan.

Meanwhile, the Ministry of Industry and Trade will work with the Japanese Embassy to finalise an action plan for the development of the automobile and spare parts manufacturing industry in March 2015.

Electricity, oil, gas supply prepared for Tet

Stable electricity supply will be available for all localities, especially island districts recently connected with the national grid, during the traditional Tet holiday.

Speaking at an online meeting on February 2, Deputy General Director of the Electricity of Vietnam (EVN) Duong Quang Thanh said the electric sector has reviewed its entire network to detect and repair any potential threats to avoid power-outages during the occasion.

Meanwhile, Pham Duc Thang, Deputy General Director of the Vietnam National Petroleum Group (Petrolimex), said the sector has stored and fully prepared for the national demand, ensuring stable prices and full availability.

During the event, Minister of Industry and Trade Vu Huy Hoang urged concerned organisations to keep a close watch on the market to prevent smuggling, counterfeit goods, low-quality goods and trade frauds during the holiday.

According to EVN, in January this year, the sector produced 12.3 billion kWh of electricity and roughly 11 billion kWh of commercial power output, up 24.5 percent and 12.6 percent, respectively, from the same period last year.

The same month, crude oil production of was estimated at 1.62 million tonnes; natural gases at 0.9 billion cubic metres; and oil and petrol at 570,000 tonnes, all representing increases between 4-9 percent.

Electricity price to remain unchanged until Tet

The electricity price will remain unchanged from now to Tet (Lunar New Year which falls on February 19 this year), said Deputy Minister of Industry and Trade Do Thang Hai.

The deputy minister told the media at a press briefing on February 2 that if Electricity of Vietnam proposes a price hike after Tet, the ministry will consider the situation before making any decision.

Regarding the petrol price, Deputy Minister Hai said the price is managed under the market economy control in line with Decree 83, which means when the world price drops, the domestic price will be adjusted accordingly.

However, the level of adjustment should take into consideration domestic situation, including purchasing power, people’s income and businesses’ competitiveness, the official said.

He also affirmed that goods supply is abundant from now to Tet, and market inspection is being intensified to prevent price manipulation, smuggling and the trade of banned goods in the biggest shopping season of the year.

Banks are to set up funds for bad debts

Domestic banks will have to establish provisional funds for bad debts this year with a total value of about VND37.6 trillion (US$1.79 billion).

The funds will help reduce the overall non-performing loan (NPL) ratio to less than 3 per cent.

These funds' combined value equals nearly half of the pre-provision profits that banks are set to earn in 2015.

The Tien phong (Vanguard) online newspaper reported estimates by Saigon Securities Inc. researchers, who said these figures are based on the bad loan handling situation and current regulations.

National debt dealer Viet Nam Asset Management Company (VAMC) plans to buy NPLs worth VND100 trillion ($4.76 billion), or 2.5 per cent of banks' total outstanding loans, this year.   

Last year, the company bought NPLs worth about VND96 trillion ($4.57 billion), raising the total bad debts it had purchased from 38 credit institutions to VND135 trillion ($6.43 billion), or 3.4 per cent of the total outstanding loans.

By September 30, 2014, the average NPL ratio that banks listed on domestic stock exchanges as resolved was 0.2 per cent of their total outstanding loans. The Military Bank, with a resolved rate of 1.25 per cent, and the Bank for Investment and Development of Viet Nam with 0.82 per cent, were the exceptions.

State Bank of Viet Nam (SBV) Deputy Governor Nguyen Thi Hong confirmed on January 30 that resolving bad debts will be among the key tasks this year, and a revised decree on NPL resolution had been submitted to the Government for consideration.

On January 27, the SBV urged credit institutions to step up resolution of bad debts, aiming to lower NPLs to less than 3 per cent of outstanding loans in 2015, from the 4.7 per cent recorded at the end of the third quarter of last year.

The central bank asked the institutions to submit monthly plans and reports about the progress of the debt-handling process, including specific schemes to use risk provisional funds and sell debts to the VAMC.

The lenders have to resolve by June 30, at least 60 per cent of the total number of bad loans that they are supposed to handle in 2015. They have to transfer at least 75 per cent of the total debts that they register for sale to VAMC this year, within that deadline.

The SBV said Prime Minister Nguyen Tan Dung is expected to adopt a plan that will enable VAMC to trade debts through market mechanisms this year.

It has also asked the company to enhance its financial capacity and tighten links with credit institutions for recovering and restructuring debts, and create advantageous conditions for investors in debt and mortgage transactions.

These measures should be closely associated with efforts to accelerate credit institution reorganisation, it noted.

The Standard Chartered Bank said in its recently published global research report that the success of structural reforms is delivering tangible economic benefits for Viet Nam, and further progress on reforms is expected in 2015.

Minister seeks to calm producers as Vietnam opens markets

Opening Vietnam's market to more imports from ASEAN and other trade partners will be done in a gradual and measured manner to limit the impact of more competition on local producers, the Minister of Industry and Trade, Vu Huy Hoang said.

Vietnamese producers should not be too worried about market share as the government has a roadmap for opening the country to more imports, he told the weekly television programme "People Ask, Ministers Answer", broadcast on February 1.

Hoang said that when Vietnam opens its market, it has to comply with certain rules that will see a boost in exports of certain products in tandem with more imports.

“When the government of Vietnam decides to start free trade agreement with any country, attention has already been paid to ensure the advantage (of exports) as well as a roadmap to protect local production,” Hoang said.

Vietnam's key exports include garments and textitle, leather shoes, fisheries and agro production, as well as some processed products.

Hanoi has negotiated seven free-trade agreements, including the Trans-Pacific Partnership (TPP) with the US and a free-trade agreement with the Custom Union of Russia, Belarus and Kazakhstan (VCUFTA).

Hoang said Vietnam works out its own roadmap for market opening and seeks an agreement with trade partners to allow local producers time to improve their competitiveness.

“Thanks to such roadmaps, it would be groundless to be worried too much about fierce competition or any threat to local production,” Hoang said.

Concerning the recent flow of foreign retailers into the Vietnamese market, the minister said this is a sensitive sector and Vietnam will only gradually open its markets.

He said foreign product imports were tightly controlled in terms of quantity and category, and, with "suitable policies and enough attention to the protection of local producers and consumers, we should be not scared about opening market to the ASEAN communities.”    

Aquaculture exports exceed US$8 bln in 2015

Aquatic exports in 2015 are expected to increase and reach more than US$8 billion, according to the Viet Nam Association of Seafood Exporters and Producers (VASEP).

In 2014, Viet Nam exported aquatic products to 166 markets, gaining US$7.84 billion, a year-on-year increase of 16.5% and exceeding 12% compared to the goal set for the year (US$7 billion).

The exports of shrimps witnessed the highest increase, posting the growth rate of 27% and accounting for 50.4% of the total export turnover.

The shrimp shipment value of US$3.95 billion included US$2.3 billion from white-leg shrimps, up 46% and US$1.4 billion from common tiger prawns, up 4%.

When Decree No.67/2014/ND-CP dated July 07, 2014, several policies on fishery development took effect, more investments and preferential policies in shipbuilding, insurance and tax have created forces for aquaculture development.

January CBU imports triple last year

The number of completely built-up (CBU) autos imported into Vietnam in January increased 3.2 times against a year ago to around 10,000 units, according to the General Statistics Office (GSO).

GSO data showed Vietnam spent US$156 million importing CBU autos in the first month of 2015, up a staggering 144.5% over a year ago.

Industry sources said the strong growth of CBU imports is not surprising because January is the month in which people normally buy new cars for the Lunar New Year holiday, or Tet.

CBU imports are forecast to keep rising strongly this year because most auto-assembly joint ventures in Vietnam import CBU autos for domestic distribution while they have no plan to assemble those models locally, while import tariffs on CBU vehicles are falling.

Even Mercedes-Benz, the only luxury automaker which has an assembly factory in Vietnam, might be less affected by Vietnam’s tariff reductions on thousands of items imported from Southeast Asian countries as committed to the ASEAN Trade in Goods Agreement (ATIGA), as it is switching from car assembly to CBU auto import.

Under ATIGA, the duty on CBU autos of under 10 seats imported into Vietnam from other ASEAN countries will go down to 0% in 2018, which will affect sales of popular car models assembled domestically because Toyota, Honda, Ford and Mazda all have factories in other ASEAN countries.

Leaders of Mercedes-Benz Vietnam said the company would introduce 20 new models on the market, most of them CBU autos. The first four auto models that the firm presented on the market this year are all imported.

Several other domestic auto joint ventures said they will shift to importing CBU vehicles.

Vinastar, an automobile joint venture with Japanese firm Mitsubishi, recently announced a plan to import CBU autos because their tariffs will fall gradually until 2018.

It said it would import CBU cars, citing the ad hoc nature of Vietnam’s policy change for the auto sector.

Imports of CBU autos have grown strongly since early last year. The country imported 72,000 CBU units worth a combined US$1.57 billion during the year, up a staggering 103.8% in volume and 117.3% in value against the previous year.

The number of CBU cars accounted for nearly half of the local car market. According to the Vietnam Automobile Manufacturers Association (VAMA), auto sales hit 157,800 units last year, soaring 43% against 2013.

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

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