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BUSINESS IN BRIEF 6/1

 Ministry urges bank listings to boost transparency; MSN sells Masan Agri, divests from Mivipack; Domestic firms brace for tough competition; Leaders insist public debt increases no cause for alarm

Ministry urges bank listings to boost transparency

The Ministry of Finance will cooperate with the State Bank of Viet Nam to encourage commercial banks to get listed to increase transparency and reduce cross-holding in the system.

This resolution was made a year ago and included a roadmap aiming to have all commercial banks listed by 2015. However, the stock market has been sluggish, and bank stocks have been immensely unstable. Therefore, watchdogs have not issued a clear direction for the listing of the banks.

While non-performing loans (NPLs) and cross-holding remain challenges in the system, there are still 26 commercial banks staying out of the stock exchanges.

The Bank for Investment and Development of Viet Nam (BIDV) was the only bank to become listed last year. It was one of the most anticipated listings of the year, offering more than 2.8 billion shares. However, its trading volume remains low at a few hundred thousand units as the state still holds a dominant stake of nearly 96 per cent.

In addition to BIDV, there are currently eight listed banks, including Vietcombank (VCB), Vietinbank (CTG), Asia Commercial Bank (ACB) and Eximbank (EIB). Rounding up these banks are Military Bank (MBB), Sacombank (STB), Sai Gon – Ha Noi Bank (SHB) and Nam Viet Bank (NVB).

Nam Viet Bank planned to delist in October 2013 due to high NPLs and operational losses.

Unlisted banks avoided going on the exchanges because they believed that the unfavourable conditions of the stock market would drag down their share prices. Some banks prioritised other goals, such as mergers and acquisitions.

Among the criteria for banks to get listed is the requirement to have an NPL ratio under 3 per cent. This will be difficult to achieve by the end of this year.

Untapped potential in Turkey awaits VN plastic exporters

There remains untapped potential for Vietnamese plastic exporters in Turkey due to the high demand for plastic materials needed by a wide range of sectors.

According to the Import-Export Department under the Ministry of Industry and Trade, Turkey has imported more than US$10 billion worth of plastic materials annually. This is because its plastic material production only meets 15 – 20 per cent of the amount required by its market and foreign importers. The sectors with high demand for plastic materials include construction, automobiles, packaging and household goods production.

Turkey currently purchases plastic materials from more than 100 countries and territories around the world. Of the total amount purchased by the country, 63 per cent comes from Saudi Arabia, Germany, Belgium and the Netherlands, as well as South Korea, Spain and Italy.

The department noted that Viet Nam is also one of Turkey's plastic material providers. However, Vietnamese exports accounted for a modest 0.1 per cent of the total import turnover of the product.

The department suggested that Vietnamese firms increase their market research and trade promotion as well as seek new Turkish trade partners to accelerate exports to this lucrative market.

After posting a positive export turnover of $20.7 million in 2013, Viet Nam's shipments of plastic materials to Turkey reached only $6 million over the past 10 months of this year, showing a 43 per cent decline year-on-year.

Processing, manufacturing industry performs well in 2014

The processing and manufacturing industry was the highlight of the industry and trade sector in 2014, with a growth rate of 8.7 per cent and an 11.1 per cent increase in sales index, the Ministry of Industry and Trade (MOIT) reported.

The ministry's 2014 trade and industry performance review showed that the national industrial production index recorded a 7.6 per cent rise, and the export value of the industrial sector rose by 13.6 per cent from that recorded last year to US$150 billion. This surpassed the set target by 3.6 per cent.

Such positive outcomes will boost the development of the sector in the coming years, Minister Vu Huy Hoang affirmed.

Furthermore, Deputy Minister Nguyen Cam Tu noted that besides the processing and manufacturing industry, the production and distribution of electricity also saw a high growth of 12.1 per cent, which reflected the solid recovery made by production-related activities.

Minister Hoang acknowledged that the domestic industrial production sector fully met the local demand for goods ranging from normal to essential ones. This helped stabilise supply and demand in the markets of electricity, petrol, coal, chemicals, and food, thereby preventing "price fever" due to shortage of items.

In addition, the minister pointed out that the under-developed supporting industry was a major weakness of the sector. Domestic manufacturers have to import most of their required materials, spare parts, and components, which affects the competitiveness of their products in terms of prices.

Director of the Heavy Industry Department of the MOIT Truong Thanh Hoai said that the growth of some industries, particularly those of textile and garment, footwear, automobile, and electronics, is still based on scale, with most enterprises engaging in sub-contracting or assembling. As a result, their products have low added value and local content ratio.

This year, the ministry aims to see a 7.8 to 7.9 per cent growth in industrial production and to earn $165 billion in export revenue. Also, the retail sales of goods and services should increase by 11 to 12 per cent and consumer price index be maintained at around 5 per cent.

To achieve these targets, the trade and industry sector needs to exploit its advantages in every sector. Enforcing concerted measures to stabilize the economy, raising the quality, effectiveness and competitiveness of human resources, strongly boosting scientific applications, and enhancing information dissemination are important measures that should be taken into consideration for the benefit of the trade sector, Minister Hoang emphasised.

Customers hold on to cash as bank lower interest rates

Cash flow into the banking sector will likely fall as lenders have reduced their interest rates, according to independent market observers.

Early last week, Vietcombank cut its deposit interest rate for the fifth time in 2014.

As of December 22, the bank's highest deposit interest rate fell from 6.3 per cent to 6.2 per cent per year.

In particular, Vietcombank's interest rate on deposits with terms of between 24 and 60 months is 6.2 per cent, while the rate of 12-month deposits is down by 0.2 per cent to 6 per cent.

After Vietcombank, many other commercial banks have also cut their deposit interest rates.

BacABank has reduced its highest deposit interest rate from 8.2 per cent to 7.9 per cent per year. Meanwhile, Techcombank's highest deposit interest rate has fallen from 7.1 per cent to 65.96 per cent per year.

Analysts have attributed the banks' deposit interest rate cut to several reasons, one of which was low inflation.

According to the National Financial Supervisory Committee's latest report, the country's inflation in 2014 was estimated at around 3 per cent.

Such a low inflation index has allowed the banks to cut their deposit interest rate to minimize costs, particularly as many of them have had rather plentiful sources of funds.

The deep reduction in the deposit interest rates has affected cash flow into the banking sectors, according to bank executives.

Le Quang Trung, deputy general director of VIB, told Dau Tu (Investment) newspaper that "in the first 11 months of 2014, the banking sector's mobilised capital increased by 13.3 per cent, lower than the 15 per cent rate recorded in the same period last year."

"With such a low interest rate, people's idle money would likely be injected into other investment channels," Trung said.

Many leaders of commercial banks also said the current deposit interest rates have nearly touched bottom, so some deposits would likely be moved to and invested in other sectors such as securities, real estate and foreign currencies.

According to Deputy Governor of the State Bank of Viet Nam Nguyen Thi Hong, the deposit interest rate level in 2014 decreased by between 1.5 and 2 per cent per year, and the lending interest rate level was down about 2 per cent per year compared with the rates in 2013.

These reductions have also made these two kinds of interest rates lower than those recorded in 2005 and 2006.

Analysts, however, said that a big gap was seen between deposit and lending interest rates, thus creating opportunities for banks to make profits.

Before deciding to cut its deposit interest rate on December 22, the difference in the interest rates of short-term deposits and loans in Vietcombank had been only 2.5 to 3 per cent.

But for long- and medium-term loans and deposits, the interest rate gap may climb to 3.8 and 6.8 per cent. This is because the popular interest rate of medium- and long-term loans on the market are about 10 and 13 per cent.

MSN sells Masan Agri, divests from Mivipack

Masan Group Corporation (MSN)'s board of directors has announced it will transfer Masan Brewery's charter capital to Masan Consumer Holdings.

MSN will sell Masan Agriculture which holds 40 per cent stake of the country's largest cattle feed manufacturer Proconco.-  Photo cafef

The board also made public its decision to sell its 51 per cent stake in Masan Agriculture, which holds a 40 per cent stake of Vietnamese-French Cattle Feed JSC or Proconco, the largest cattle-feed manufacturer in the country.

Further, MNS revealed its divestment in HCM City-based Minh Viet Packaging Company(Mivipack), which produces packaging for the corporation, adding that money from the divestment will be used for new packaging factories in areas with high product sales, in a bid to reduce operation and transportation fees.

After the sales and transfers, Masan Consumer Holdings (MCH) will include Masan Consumer, which specialises in food and beverage, and Masan Brewery, which produces the beer brand "Su Tu Trang".

MNS currently holds a 75.9 per cent stake in Masan Resources and 30.4 per cent in Techcombank.

In November, MSN reported revenues of VND10.833 trillion (US$508.5 million) in the first nine months of 2014, an increase of 44.3 per cent over the same period last year.

On December 31, MSN shares closed on the HCM City Stock Exchange at VND83,000 ($3.9) each.

Domestic firms brace for tough competition

Domestic firms will have to face tough competition as thousands of goods from other South East Asia countries have been exempted from duty tax in accordance with the ASEAN Trade in Goods Agreement (ATIGA) on January 1.

Do Phan Thanh Bao, director of Dona Newtower Food and Beverage JSC, said even though some of their materials were exempted from tax, others still have high import duties. That's why the prices of their products are still high and they will be at disadvantage compared to other tax exempted products.

According to Van Duc Muoi, General Director of the Vissan Company, the productivity of Vietnamese farms is low and the cost for animal feed is high. Food companies will be in difficulties, especially when frozen meat will not have to bear import duty.

If the Trans-Pacific Partnership (TPP) also took effect, domestic firms would not only have to face competition from South East Asian countries but also from large agriculture industries such as the US.

Foreign firms are carrying out strong promotion programmes in Vietnam. Thailand have hold various fairs and opened a number of convenient stores. Thai products are also favoured by Vietnamese customers.

Meanwhile, a retail company showed optimism and said customers would have more choices but it's unclear what products they would stick with. The retail companies only choose to import products that suitable with their targeted customers.

Domestic firms should upgrade their product's appeal and quality as well as other customer services for future competition.

The ATIGA was signed in February 2009, replacing earlier Agreement on Common Effective Preferential Tariff of the ASEAN Free Trade Area. ATIGA aims to establish an integrated market and production base with a free flow of goods by 2015.

Since then, the government have reduced the import duty of some products to 5% or eliminated the duty completely. Starting from January 1, 1,715 tariff lines have been exempted from import duty.

Leaders insist public debt increases no cause for alarm

Public debt has increased in recent years, but remains within the safety zone set by the National Assembly.

In a report issued by the NA last October, Prime Minister Nguyen Tan Dung said that public debt would account for 60.3% of GDP by late 2014, compared to 51.7% in 2010. This rate is expected to reach 64% by the end of the year.

According to the PM, the total public debt would account for 64.9% of GDP in 2016, a record high. However forecasters expect it to fall to 60.2% of GDP in 2020.

Prime Minister Dung added that, despite the annual increases, public debt is still at a safe level, as it has not reached 65% of GDP, the limit set by a National Assembly resolution.

Nguyen Duc Kien, vice chairman of the National Assembly's Committee for Economic Affairs, said that, although Vietnam always discloses public its debt, there has been concern about the accuracy of its reported figures.

Inaccurate accounting of public debt would affect the government's ability to take measures in dealing with the problem and possibly forestall needed actions which might be spurred on by increased pressure to settle debts. Faulty figures could also blindfold public servants as to their responsibility in dealing with a looming problem.

According to The Economist's Global Debt Clock, Vietnam’s public debt was estimated at more than USD86.267 billion as of December 28, or 47% of the country’s GDP. If this were spread out evenly, each Vietnamese citizen would owe USD950.62, a figure which is up 10.3% from last year.

Gov’t determines to fight trade fraud, counterfeit goods

The Government will focus on realizing socio-economic development targets, restructuring the economy while making more resolute efforts to defend national sovereignty in 2015, according to its latest resolution.

It will step up efforts in fighting smuggling, trade fraud and counterfeit goods, especially in economic hubs and border provinces.

The Cabinet members must ensure the progress of promulgating legal documents guiding the implementation of new laws, the resolution says; mull the draft versions of the Law on Information and the Law on Information Access.

The Government will also continue the realization of the Resolution 19/NQ-CP dated March 18, 2014 on major tasks and solutions to improve business environment and national competitiveness in a bid to reach the average level of the ASEAN-6 countries by the end of 2015.

Meanwhile the National Council for Sustainable Development and Competiveness Improvement will coordinate with the Ministry of Planning and Investment to submit a new resolution on improving business environment and competitiveness in February this year.

State-owned enterprises must drastically carry out their restructuring plans approved by competent agencies so as to complete the process by 2015. The Ministry of Finance is assigned to comprehensively review this process in the last quarter of 2015./.

New preferential import tariff for FTA

The Ministry of Finance has issued five circulars on preferential import tariffs to implement Viet Nam’s commitments on tariffs in free trade agreements (FTAs) for the period 2015-2018.

Accordingly, imported goods shall be subjected to new special preferential import tariffs since the beginning of 2015 if they meet all the conditions stated in the circulars.

Specifically, the five circulars are: Circular No.165/2014/TT-BTC for the implementation of the ASEAN Trade in Goods Agreement (ATIGA); Circular No.166/2014/TT-BTC for the implementation of the ASEAN-China Free Trade Area; Circular No.167/2014/TT-BTC for the implementation of the ASEAN-Republic of Korea FTA; Circular No. 168/2014 / TT-BTC for the implementation of the ASEAN-Australia-New Zealand FTA; and Circular No.169/2014/TT-BTC for the implementation of the ASEAN-India FTA.

Forestry production value hit VND24 trillion in 2014

The forestry production value reached about VND24 trillion (over US$1.12 billion) in 2014, a year-on-year 7.09% increase, according to the  

General Department of Forestry under the Ministry of Agriculture and Rural Development.

The value of forestry product exports reached US$6.3 billion in 2014, marking an increase of 14% compared to 2013.

The country's forest coverage also reached 41.5% in the past year.

The whole industry has grown nearly 220.000 hectares of concentrated forest, fulfiling 105% of the annual plan.

In 2015, the forestry sector set a target of reaching VND25 trillion in production value, increasing the value of forestry production from 7% to  

7.2%, raising the proportion of the forestry production value in agriculture, forestry and fisheries sector from 3.9% to 4%.

Forestry product exports are expected to reach US$6.7 billion; while forestry coverage is expected to increase to 42%.

HCM City banks offer VND40-trillion preferential loans

Over 1,400 small and medium-sized enterprises (SMEs) and family-run businesses took out preferential loans worth around VND40 trillion (US$1.87 million) in the bank-business matching program in HCMC last year.

Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch, said the program has enabled enterprises to access bank loans to improve their financial capability and competitiveness over the past two years.

In 2014, banks lent around VND40 trillion to enterprises, three times higher than the previous year. Over 1,200 enterprises (up 516 firms against 2013), including over 1,100 SMEs, 58 family-run businesses and six cooperatives, received support from the program.

Corporate borrowers were offered lower lending rates than normal on the market by one to two percentage points. Most banks applied short-term interest rates of 7% per annum and medium- and long-term rates of 9-10% per annum.

Pham Ngoc Hung, vice chairman of the HCMC Union of Business Associations, said that enterprises taking parting in the program could enjoy low interest rates while the loan approval process is made simple. The program also helps enhance the relationship between banks and enterprises.

However, enterprises must meet requirements of the program for asset collateral, good credit ratings and having no bad debts.

Some businesses and traders at traditional markets said that they can take out loans from banks easily but still join the program to benefit from lower lending rates.

Last year, HCMC-based banks mobilized over VND1,200 trillion (over US$56 billion), up 10.3% against 2013. Their outstanding loans were over VND1 trillion, with loans in Vietnam dong rising around 9.9% and those in foreign currency jumping 16.9%.

The city’s banking system posted credit growth of 11%, well below last year’s target of 12-14%. Loans for the business and production sector accounted for 80% of the total outstanding loans.

Medium to long-term loans were estimated at VND532 trillion at the end of 2014, rising by 5% from 2013 and accounting for 50% of the total outstanding loans.

HCM City enterprises prepare ample goods for Tet

Enterprises in HCMC have stockpiled goods worth some VND15.85 trillion for the upcoming Lunar New Year holiday (Tet) which falls on February 19, a whopping increase of 109% compared to the previous holiday.

The HCMC Department of Industry and Trade said of the total supply, local enterprises will sell more than VND8.3 trillion (some US$387.8 million) of goods under the city’s price stabilization program during the biggest holiday in Vietnam, up nearly 69.5% in value over last Tet.

Particularly, local companies have stored a total supply of goods valued at VND9.26 trillion for the peak sales period from January 20 to February 18, including items worth more than VND4.86 trillion for the price stabilization program.    

The department said the HCMC Union of Trading Co-operatives (Saigon Co.op) has stored goods worth over VND4.6 trillion, including VND1.92 trillion for the price stabilization program, Saigon Trading Group (Satra) with nearly VND9.82 trillion and VND742 billion, Pham Ton Co. Ltd. with VND411 billion and VND406 billion, and Vinatextmart with VND364 billion and VND164 billion.

Le Ngoc Dao, deputy director of the department, said participating enterprises of the price stabilization program have prepared sufficient goods to meet the soaring demand of residents in the city during the traditional holiday.

Dao said their goods supplies are 10-134% higher than the target of the city’s government and grow 18.4-260.4% compared to last Tet. Of which, vegetables and seafood are forecast to jump nearly 134% and over 103% respectively over the previous Tet.

The goods stored in large quantities include poultry, cooking oil, sugar, processed foods, cattle and eggs.

Three wholesale markets in the city have mapped out plans for Tet. They wholesale a total of 8,000 tons of goods daily on normal days but their supplies are predicted to surge by 50-70% in the several days prior to the holiday.

As usual, Binh Dien Wholesale Market will organize a flower festival from the 15th to 30th of December of Lunar Calendar (from February 3 to 18). The event will feature 480 stalls for pots of flower and ornamental trees, up 350 booths over last Tet.  

Dao said the logo of the price stabilization program will be printed on the packaging of all products chosen for the program this year.

There had been nearly 8,960 selling points set up for the price stabilization program as of December 1 last year, up 756 points against April when the annual program was launched. Participating enterprises plan to add 286 points between now and Tet.

Vietnam faces trade deficit this year

After three consecutive years of enjoying a trade surplus, Vietnam is forecast to face a trade deficit of US$6 billion this year as the demand to import materials and equipment will be high while exports may not soar.

At a review meeting on Wednesday, Deputy Minister of Industry and Trade Nguyen Cam Tu said this year’s exports are targeted at some US$165 billion, up 10% from last year, while imports are estimated to jump 15.2% to US$171 billion.

If the scenario comes true, Vietnam may run a trade deficit of up to US$6 billion this year, three years after the country enjoyed a trade surplus, including nearly US$2 billion last year.

Deputy Minister Tran Tuan Anh told the Daily that Vietnam would continue its integration into the world’s economy this year as a number of trade agreements the country joins take effect as planned. In addition to tapping into more markets, Vietnam will have to open its door wider to product and service imports.

There will be more opportunities for Vietnam to attract new projects and huge material and equipment will be imported for such sectors as textile and garment, supporting industries, mechanical engineering and electronics.

“This year’s import demand tends to rise considerably compared to previous years while exports will not spike this year given the country’s technology and added value and manpower” Anh said.

According to the ministry, Vietnam exported US$150 billion worth of products last year, up 13.6% and imports rose by 12.1% to US$148 billion.

The foreign direct investment (FDI) sector took a large proportion of the total exports with US$94.4 billion while domestic enterprises contributed only US$48.44 billion worth of products.

Besides, FDI enterprises accounted for over 57% of the total imports of last year with nearly US$84.56 billion.

This year, the ministry also targets to achieve industrial production growth of 7.8-7.9%, retail sales of goods and services up 11-12% and consumer price index at some 5%.

HCM City to have 10,000 more resettlement, social condos

HCMC will complete resettlement and social housing projects this year to provide 10,000 more apartments with a total usable area of more than 1.2 million square meters for the needed residents, according to the city’s Department of Construction.

The department said in its development plan this year that 13 resettlement projects with around 7,104 apartments and land lots will be completed in 2015. Five social housing projects with 3,573 condos will also be put into use this year.

Last year, the city government allocated more than 6,400 apartments and land lots to the citizens living in the riverside areas prone to landslides in districts 2, 6, 8, 9, 11, Go Vap, Tan Binh, Binh Tan and Binh Chanh.

The city handed over 2,460 resettlement apartments to beneficiaries, and 1,100 of which were part of the program to build 12,500 condos for the households affected development of Thu Thiem New Urban Area in District 2.

The construction department said the city had invested and bought 34 resettlement projects with 10,643 condos and land lots covering more than a floor area of one million square meters in 2011-2014.

In the past four years, the city has had 15 social housing projects with more than 2,400 condos covering over 228,000 square meters completed. These included 304 apartments developed by Thu Thien Joint Stock Co. in District 2 and 432 condos by Ha Do Corporation.

The city has sold 1,653 social housing apartments built by the funds of enterprises, including property developer Hoang Quan and Gia Phu Cooperative.

Last year, the city government approved transforming three commercial housing projects with 880 condos on 2.7 hectares into social housing developments.

Vietnam Air profitable despite woes

Vietnam Airlines Corporation (VNA) managed to earn profit last year though it was facing a host of challenges, including a decline in passenger numbers from certain important markets.

The corporation made consolidated revenue of over VND71.97 trillion (US$3.3 billion), up 2% year-on-year, and pre-tax profit of VND647 billion, up 28% against last year. Its seat occupancy averaged out at 80%, a rise of 0.5 percentage point versus 2013.

The corporation operated over 118,000 flights and transported around 15.7 million passengers, up 3.8% and 7% year-on-year respectively.

Last year was a difficult year for airlines due to unfavorable events, including political unrest in Thailand, the Ukraine crisis, and China’s illegal installation of an oilrig in Vietnamese waters in mid-May. As a result, Vietnam Airlines suffered significant falls in passengers on its flights from and to some key markets.  

Air incidents heavily affected air travels, and competition on home and foreign markets turned fiercer.

Late last year, Vietnam Airlines launched an initial public offering and will operate as a joint stock company this year. One of the corporation’s priorities is to expand its aircraft fleet and improve service quality.

This year, it is among the first carriers in Asia to operate the most advanced aircraft Boeing 787-9s and Airbus A350-900s, and plans more domestic and international air routes.

PVN to lose revenue on oil price plunge

The Vietnam National Oil and Gas Group (PVN) would lose over VND230 trillion (US$10.7 billion) in revenue this year if the world’s crude oil price hovers around US$60 per barrel.

PVN said in a report that if the oil price is US$60 per barrel, the State-owned firm would get total 2015 revenue of around VND515 trillion (US$24 billion), down from VND745.5 trillion estimated for 2014.

If the scenario is realistic, PVN will be able to pay VND104.2 trillion in tax this year, a year-on-year drop of VND74 trillion.

This year, PVN plans to pump 16.8 million tons of crude oil, 500,000 tons lower than last year, and exploit some 9.8 billion cubic meters of gas, down 400 million cubic meters against last year.

Local firms urged to mark down price-stabilized products

The HCMC Department of Finance has requested participating enterprises of the city’s price stabilization program to review costs and reduce prices of the products selected for the program following sharp fuel price cuts in recent months.

Nguyen Quoc Chien, head of the department’s price division, told a meeting with participating companies of the program late last year that fuel prices have gone down by 30% since July 7 and that transport cost accounts for 3-10% of prices of the products of the program.

Therefore, prices of the products should have fallen by 1-3%. “In reality, the drop could be deeper because not only transport cost but other input costs have declined after fuel price cuts,” Chien said.

The department urged participating enterprises of the program to slash prices of their products to share difficulties with consumers.

Representatives of the enterprises at the meeting said they are now in the process of recalculating their production cost and will report the adjustments to the department as soon as possible.

Chien told the Daily on the sidelines of the meeting that the department will have to delay the deadline for the enterprises to submit their reports until January 5 instead of December 30. Otherwise, the agency will work with them before announcing new base prices for the products of the program.

Chien said a number of local goods and passengers transport enterprises have registered with the department to revive down their fares but the suggested fares of some firms are not corresponding to sharp fuel price reductions in the past months.

“We have not approved fare reduction plans of some transport enterprises. Many transport firms have not announced their fares and the department will impose punitive sanctions on those which are late in fare adjustments,” Chien said.

The department also requested coach operators to slash their fares before applying new fares for their services during the forthcoming Lunar New Year, or Tet.

Nghe Tinh Port sells out 3.89 million shares

Nghe Tinh Port Holding Limited Liability Company, a subsidiary of Vietnam National Shipping Lines (Vinalines), sold out 3.89 million shares with the starting price of VND10,100 each (47 U.S. cents) at its initial public offering (IPO) on Wednesday.

According to the Hanoi Stock Exchange, 47 investors attended the IPO auction and registered to buy nearly 8.6 million shares, over two times higher than the volume put up for sale.

The biggest volume of shares investors wanted to buy was 2.2 million while the highest bid was VND12,500 per share, up over 23.7% against the starting price.

Closing the auction, all the shares offered for sale were acquired by nine investors with the average winning price of VND12,129. The enterprise raised VND47.2 billion (US$2.2 million) from the auction.

Nghe Tinh Port’s IPO was the most successful compared to other IPOs of Vianlines subsidiaries such as Nha Trang, Quang Ninh, Danang and Haiphong ports.

Nha Trang Port put up 5.5 million shares for auction but raised only VND3.5 billion from selling a mere 350,800 shares (6.3%). Quang Ninh Port sold only 854,500 shares, or 7.5% of the total 11.3 million shares put up for sale.   

Danang Port sold over 1.6 million shares, equivalent to 19.6% of the 8.3 million shares. Haiphong Port, the biggest port in northern Vietnam, found investors for only 17.6 million shares (47%) out of 37.6 million shares offered.

Cash-strapped vision

Worries among State agencies are increasingly piled up alongside the steady fall of oil prices over the months, and meetings are being called to look for solutions to cope with a huge shortfall of the State budget revenue due to diving oil prices. Ministerial agencies have calculated that if the crude oil price falls by one U.S. dollar per barrel, the State will lose some VND1 trillion, or nearly US$50 million. If the current price of around US$60 a barrel stays unchanged next year, as much as VND43 trillion, or over US$2 billion, would be evaporated.

The grave concerns among may State agencies are understandable, as the country has faced a huge, chronic budget deficit in recent years, and any further erosion to the State revenue will put the budgeting at stake. Such warnings have thus been repeatedly voiced aloud these days, viewing the oil price fall as a highly-menacing challenge although many economists have inversely considered the oil price fall as a precious opportunity for the national economy.

As covered in local media, measures are being weighed to minimize the negative impact – or even to neutralize it where possible – on the State budget. Such measures, if not taken into prudent consideration, may finally neutralize the precious opportunities ushered in by the low oil price, according to experts.

Vietnam is still a net oil importer, so any oil price drop will only benefit the country.

Data from the General Department of Customs show that as of December 15, the country had exported US$6.92 billion worth of crude oil plus US$890 million worth of oil products and US$500 million worth of coal, says Thoi bao Kinh te Sai Gon. During the period, the country also imported up to US$8.5 billion worth of oil products and other fuels. The fuel trade is fairly balanced, so to say.

But, says the weekly newsmagazine, Vietnam is also heavily reliant on various other imported oil-derived materials for domestic production, including nearly US$9 billion worth of plastics, over US$1.5 billion worth of synthetic yarn and fiber, US$6.2 billion worth of chemicals, over US$600 million worth of synthetic rubber, and some US$1 billion worth of other materials like asphalt. These materials will be much cheaper in sync with the oil price.

Vu Dinh Anh, a financial expert, says in Tuoi Tre that both negatives and positives exist in the oil price fall, but “overall, the positive impacts on economic development are quite strong.” He furthers that revenues for the State coffer from import-export and other business activities will outweigh the shortfall from the oil price fall.

In the same tone, Minister of Finance Dinh Tien Dung says that the national economy stands to benefit from the oil price fall, as all major inputs will be lower, which boosts the competitiveness of domestic enterprises and improve the country’s competitiveness on the international arena. “As such, the more the oil price falls, the greater we will benefit. We will only suffer in the short term,” the minister asserts in Vneconomy.

VietnamPlus under the Vietnam News Agency comments that the oil price fall will basically bring about huge benefits, since it has been ascertained that the high oil price is the killer, impeding all efforts to step up economic recovery.

Tran Hoang Ngan, a member of the National Assembly’s Economic Commission, recalls how high oil prices have devastated the economy. “When the crude oil hit a high of US$147 a barrel in 2008, inflation shot up to 20%, paralyzing numerous enterprises,” Ngan says in an interview with Tien Phong.

When oil prices stood high over a long period in the recent past, revenues for the State budget have always been fully realized, but enterprises went bust en masse, and the economy was in distress. Under such circumstances, the State had to spend huge to rescue businesses, according to Thoi bao Kinh te Sai Gon.

Minister of Planning and Investment Bui Quang Vinh observes in Baodautu.vn that in the medium and long term, the low oil price will bolster domestic businesses, and more importantly, it will support national economic development while lessening the economy’s reliance on crude oil.

Despite undisputable benefits from the oil price fall, worries over the frail State coffers have prompted State agencies to map out solutions to cope with the revenue shortfall. There have been proposals to slap higher tax and fee on oil products, there have been schemes to hike electricity tariffs now that inflation no longer poses concerns, and there have been other suggestions by State corporations to make the most from the oil price fall, including a latest suggestion by State-owned oil traders for the State to intervene in the petrol market to keep prices higher. Such proposals can be seen to have come from a cash-strapped vision.

Opportunities from the oil price fall are precious ones to spur growth, and it should be noted that the lost revenue from crude oil is not evaporated. Instead, it multiplies and only moves from the State budget to the economy, says Thoi bao Kinh te Sai Gon.

Top 10 major export products for 2014

Ten major products accounted for export value of over US$3.5 billion each in 2014, with telephones and components topping the list in overall value at US$24.08 billion.

In 2014, the country’s exports grew 13.6%, grossing US$150 billion in revenue compared against 2013.

In particular, the country reached a record high trade surplus of some US$2 billion.

The country’s ten key export products were telephones and components; garment and textiles; electronics, computers and components; footwear; seafood; machines and equipment; crude oil; wood and wooden products; means of transport; and coffee.

Vietnam domestic market gaining a foothold in high tech

Samsung, Intel, LG Electronics, Panasonic and Microsoft's handset units are just a few of the leading global tech firms to have relocated manufacturing to Vietnam over the past few years.

The movement represents one of the fastest economic transformations ever, as shipments of smartphones and computer parts have begun to overtake exports of coffee, garments and shrimp.

It marks a definite shift away from China and comes about as a result of tax benefits and a relatively lower cost labour force that makes Vietnam an appealing alternative to its northern neighbour.

Microsoft, which took over Nokia in a US$7.2 million deal last April, closed all its plants in Hungary, contracted production in China and Mexico, and shifted the bulk of phone manufacturing to Bac Ninh province.

Microsoft Mobile Vietnam Limited Liability Company began production of smartphones in August 2014 and has since exported more than 5 million Lumia phones to markets around the globe.

To date, Microsoft has moved 39 production lines from Komarom (Hungary), Beijing, Guangdong (China) and Reynosa (Mexico) to Bac Ninh province and the Vietnamese plant has become a key factor in its global supply chain.

Last November Samsung Electronics revealed a plan to invest up to US$3billion to create a new smartphone factory in the Yen Binh industrial zone in Thai Nguyen province.

The announcement came a month after Samsung Electronics revealed is set to construct a US$1.4 billion factory in Ho Chi Minh City, where it intends to make TVs, washing machines and air conditioners.

The new facility in Thai Nguyen would operate alongside another US$2 billion plant the company already runs in the country, which began production in March 2014.

Other divisions from the South Korean company are also expanding in the country, including Samsung Display and Samsung Electro-Mechanics.

According to the Yonhap news agency, the conglomerate as a whole has invested about $11 billion to date in Vietnam.

LG Electronics Vietnam Co. Ltd meanwhile has begun operation of its new US$1.5 billion plant located in the Trang Due industrial zone in

Haiphong city where it produces washing machines, microwaves, vacuum cleaners, televisions and smartphones.

Vietnam has advantages of taxes and human resources along with a Government that places high priority on assisting hi-tech enterprises, says General Director of LG Electronics Vietnam Co. Ltd Ko Tae Yeon.

Many Chinese companies have been moving into essentially higher value design and manufacture work in the high tech industry and, Chinese smartphone maker Xiaomi has also announced plans to shift some of its production to the Vietnamese market.

World’s large smartphone maker Apple has also announced it would cooperate with one of technology trademarks in Vietnam to increase its presence and competitiveness in over 90-million market.

Nguyen Mai, FDI Business Association President, says he hopes that Vietnam will become a key place in the world producing tablets, mobile phones, home electric appliances, and electronic chips.

Currently the sector accounts for about 16% of the nation's total exports, in terms of value - making it bigger than its textile and garment industry.

Korean giant Samsung alone accounts for more than 10% of Vietnam’s exports and the transformation sees no signs of abating in 2015.

Investors bullish on real estate in 2015

A new policy allowing foreigners to invest in real estate is forecast to attract higher overseas remittances in 2015.

According to Nguyen Hoang Minh, deputy director the State Bank of Vietnam (SBV) in Ho Chi Minh City, overseas remittances to HCM City reached US$5-5.1 billion in 2014, up US$200-300 million over 2013 as results of great efforts to better the macro-economy policy with lower inflation, good growth rate and increased state foreign exchange reserves.

Phan Huy Khang, Sacombank joint stock commercial bank general director in turn, says overseas remittances transferred through the bank hit a milestone surpassing US$2 billion last year, 15% higher than 2013.

Most of the remittances came sent from the US, Taiwan (China), Australia and Middle East, Khang added.

In 2014, the country attracted a total of US$12 billion of overseas remittances, setting a new high record. The figure in 2015 is expected to increase by 10%.

In Ho Chi Minh City, overseas remittances mainly were funneled into production (71.4%) and real estate (22.1%).

Khang forecasts with the change in policy, more and more overseas remittances will flow into real estate in the coming year.

Tran Van Trung, Director of Dong A Remittances Company noted the new policy permitting foreigners to purchase houses in Vietnam still consist of many complicated conditions, adding that the property and stock markets are the best choices for remittance recipients to earn profits.

 

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

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