Retail leader pushes transition
 
Building a modern and efficient distribution-retail industry is the only way to become a developed economy, according to Dinh Thi My Loan, vice president and general secretary of the Viet Nam Association of Retailers.
"Developing distribution channels should focus on infrastructure," she said.

However, challenges remain and include the transition from traditional definitions, structures, systems and business practices to an effective commercial industry with high productivity, modern technology and oriented-consumers.

According to the association, the small and ineffective market, coupled with poor purchasing power, offers additional problems. The modern market also makes up only 20 per cent of the national platform with figures ranging from 40-42 per cent in HCM City and 13 per cent in the capital.

Retail companies have also been weakened in terms of professional, long-term strategy, financial and logistic capacity and level of competitiveness.

However, Loan noted that distribution-retail was a potential service industry with high added value and wide spill-over effects.

The Government has implemented "the policy to encourage companies and individuals in all economic sectors to do business in distribution-retail areas and develop human resources".

As part of Viet Nam's Trade Development in 2011-20, the growth rate of overall retail sales and service revenues is expected to increase with an average of 20 per cent and 21 per cent per year during 2011-15 and 2016-20.

A relatively young population exposed to the internet, television and travelling would necessitate increased retail consumption, especially amongst those with modern life styles interested in high technological products.

Furthermore, urbanisation would also help increase the need for convenience and time saving, Loan said, asserting that the market still had much room for both overseas and domestic investors.

She said that Vietnamese consumers not only cared about reasonable prices but also freshness of products, promotion activities, safety, friendliness and caring.

According to consultancy and global market analyst RNCOS, total revenues will reach US$85 billion in 2012.

The Vietnamese retail industry has asserted its role in the country's economy.

Luong Van Tu, former deputy minister of Trade, said that the domestic distribution-retail industry had developed very fast and helped contribute to socio-economic development.

The contribution of wholesale and retail sales to the GDP has been increasing over the past few years, accounting for a big share in Viet Nam's economic sectors (13.32 per cent and 14.43 per cent in 2005 and 2010, respectively).

The establishment of supermarkets, shopping centres and convenience stores had modernised the habits of Vietnamese customers, he said.

In the past few years, modern retail models have continued to develop strongly in Viet Nam. By May last year, the country had nearly 640 supermarkets, 100 shopping centres and, by the end of 2010, nearly 8,600 markets.

The traditional retail channel has also changed in terms of quality under pressure from competition.

Seminar urges greater economic reform

The Government has been urged to boost reforms to comprehensively restructure the economy, with experts making the call at a seminar in Ha Noi recently.

Vo Tri Thanh, deputy head of the Central Institute for Economic Management (CIEM), said that as this year was the year of reforms, there was a need for wise and careful management of the macro economy. However, he added that the Government should have flexible policies, especially currency policies, to support enterprises.

Experts at the seminar on Government management of the economy held by the Viet Nam Centre for Economic and Policy Research (VEPR) voiced several other concerns.

Le Dang Doanh, an economic expert, said that despite the Government's many flexible solutions to reform the economy, these solutions had not been strong enough.

"This year the Government must drastically restructure the economy," Doanh said. "Ministries and economic sectors should abolish bureaucracy and weaknesses while enterprises should also adjust markets and stop investments in weak sectors."

Nguyen Duc Thanh, VEPR director, said the restructuring of State-owned enterprises and public investment should be promoted further this year.

However, the work might not achieve significant results this year and continue in coming years due to inadequate plans or specific schedules for the restructuring, said Thanh.

According to Truong Dinh Tuyen, former Minister of Trade, the liquidity was the immediate priority for monetary policies.

"The money supply should be increased to ensure liquidity, to extend the time for refunding and to create conditions for enterprises to expand production and business," he said.

VEPR Thanh said liquidity in the banking sector was complicated and required a long-term solution because the main problems were bad debt and high interest rates, which hinder enterprises.

CIEM Thanh said some large banks had cut the interest rates of loans for enterprises but the rates had not been reduced by much and were still a challenge for many enterprises.

VEPR Thanh said it was difficult to further reduce the lending interest rate this year even thought inflation was expect to hit 10 per cent for 2012.

PetroVietnam plans restructuring

PetroVietnam (PVN) is in the process of completing its draft restructuring plan for submission to the Prime Minister by the March 31 deadline.

Under its restructuring plan, in addition to improving corporate governance, PVN will scrutinise its business strategies to focus on key business activities and plan for divestment from non-core-business fields.

PVN will also boost the equitisation of its affiliates, exclusive of those involved in mineral resource exploitation, and list the companies on the stock market to minimise their dependence on bank credit.

The finance ministry said it would work with the PVN to streamline policies that would ease the securities market listings.

Deputy head of the Government Office and vice chairman of the Steering Committee on Business Renovation and Development Pham Viet Muon said the Government had requested economic groups to submit restructuring plans that were focused on core businesses and to plan for divestment from non-core business fields such as banking, real estate development, insurance and securities before 2015. Equitisation of companies was expected to be completed before 2020.

Once operations were totally focused on core businesses, with improved corporate governance, equitisation plans could be carried out more smoothly, Muon said

State-owned enterprises (SOEs) account for only 1 per cent of the total number of domestic businesses but they hold about 39 per cent of total State capital, 45 per cent of total fixed assets and 27 per cent of total outstanding bank loans.

This allocation of resources is not commensurate with their operational efficiency, meaning they have a lower return on capital than other sectors.

By 2015, the country is expected to have only 692 SOEs that remain wholly State-owned, mostly key economic groups, corporations and major companies involved in fields dominated by State investment. The figure is targeted to be reduced to 100 by 2020.

Habubank rumours set off feeding frenzy

Big trading volumes of Ha Noi Building Commercial Joint Stock Bank (Habubank) shares recently made many believe the bank is in the process of merger and acquisition.

Figures showed that an average of over 10 million Habubank shares (HBB) were traded in a single session on the Ha Noi Stock Exchange (HNX) in recent days.

Talk has circulated among the investment community that only VND1.2 trillion (US$42.8 million) – in accordance with the average price of VND5,500 per share – would be enough to purchase a controlling stake of 55 per cent in Habubank. Since 20 February, more than 100 million HBB shares were traded on the market, equalling 35 per cent of the bank's overall stock.

Market insiders, however, denied the rumours and warned investors to be careful, although the bank's current price range was considered good for investment.

Habubank CEO Bui Thi Mai said big trading volumes of HBB shares during the past days showed high interest in the bank.

"However, the Vietnamese stock market has only warmed up within the last two weeks, from which Habubank shares have benefited," Mai said.

"I believe investors are well experienced to make good decisions," she added.

There was another possibility that investors had counted on Habubank's good brand name and management system, she noted.

Facing takeover rumours, buying treasury stocks is an option that targeted companies often use to defend themselves. However, Mai affirmed that if the Bank had any plans to buy back the shares, they must get approval from their shareholders and make an announcement beforehand.

Investor Huy Vu, promoting the trade of HBB shares, said: "Rumours are bad because of the lack of any official announcement. Once news is made public, everything becomes obvious and the market returns to its routine development."

Vu bought HBB shares at VND4,200. The price has since increased to VND6,000.

"I believe that I have done the right thing," he said, adding investors simply needed to exercise a "rational pessimism".

During the period of rumours that Eximbank (EIB) had designs on Sacombank, STB shares rose by an astonishing 60 per cent, a rate very alluring to investors.

The central bank had initially assigned an 8-per-cent credit growth to Habubank this year, which was, Mai said, appropriate to the bank's prudent development this year.

Crack down on tax cheats
 
The General Department of Taxation has set a priority on battling fraud and other losses in tax collections in cases of cost transfers, cross-border trade, land use, online businesses, tax refunds and value-added taxes.
 
Speaking at a meeting in the capital city yesterday, Deputy Minister of Finance Hoang Anh Tuan asked staff working in the taxation sector to improve operations to ensure a level playing field for all enterprises.

He asked the sector to conduct further study and make proposals to bring tax policy closer to reality. While he reminded the sector to continue auditing enterprises to ensure compliance with tax regulations, he also urged tax agencies to assist enterprises to improve their performance.

To crack down on tax evasion in the practice of transferring cost, Tuan said the ministry had introduced new audit techniques. However, he admitted that the task remained difficult. In order for tax officials to make a finding that an audited enterprise had committed tax evasion, they needed solid evidence of failure to follow market prices in transferring costs.

According to a report delivered at the meeting, the amount of unpaid due taxes in 2011 rose by by 29.5 per cent over the previous year, while tax settlements pending increased by 7.7 per cent. Provinces with the highest past due taxes include An Giang, Bac Ninh, Binh Phuoc, Cao Bang, Lao Cai, and Tay Ninh.

According to the tax department, tax audits enabled the recovery of back taxes and penalties to the State Treasury totalling VND1.7 trillion ($81.5 million).

Participants at the meeting pinpointed weaknesses in the sector's data on taxpayers as a major hindrance in their work. They asked for software and technology to assist them in their tax audit functions.

In 2012, the General Department of Taxation plans to audit 1,500 enterprises – an increase of 140 per cent over the number of audits conducted in 2011. The audits would focus mainly on cost transfers in enterprises in the banking, real estate, electricity, petroleum, telecommunications and mining sectors.

Audits will also focus on foreign-invested enterprises and acts of cost transfers between parent companies and their subsidiaries and between State-owned enterprises and their affiliates.

Check on land-use rights

Deputy Prime Minister Hoang Trung Hai has ordered the Ministry of Natural Resources and Environment to inspect housing projects reporting delays in receiving land use rights certificates.

Hai's decision follows a recent report from the Department of Natural Resources and Environment in Ha Noi stating that only 10 per cent of 150 housing projects commenced in the city since 2001 had been granted land use rights or home ownership certificates.

Hai said that, while cities and provinces have strived to grant land use right certificates in a timely manner, the process has met with obstacles since some housing projects were found to be in violation of the Land Law and some individuals and households have transferred land use rights to these projects unlawfully.

The Ministry of Natural Resources and Environment was assigned to research and propose to the Government administrative penalties for violations related to the process of granting land use right certificates in order to improve land users' sense of responsibility. Hai said the ministry should propose proper penalties based on current regulations and announce the penalties in the mass media.

Hai also asked the ministry to co-ordinate with the ministries of construction, finance, and home affairs, as well as the People's Committees in Ha Noi and HCM City, to hasten the process of granting land use right certificates in the two cities as well as in other provinces. People's Committees should aslo co-ordinate with applicable ministries to inspect housing projects within their jurisdictions in order to resolve problems, he said.

Jetstar airlines appoints new Director-General  

Jetstar Pacific Aviation Joint Stock Company on March 1 announced the official appointment of its new director-general.  
 
Le Hong Ha, former deputy director-general of Vietnam Airlines will now take over as director-general of Jetstar Pacific Aviation Joint Stock Company.

Earlier, shareholders of the aviation company elected a new board of directors.

Duong Tri Thanh, deputy director-general of Vietnam Airlines was appointed as chairman of the board of directors and Le Hong Ha as director-general of Jetstar.

Under its new management, Jetstar will focus on developing domestic routes in face of growing demand, as well as open up more international routes within Southeast Asian countries in coming time.

Shareholders of Jetstar have agreed to an investment of US$25 million to switch from Boeing 737 aircraft to Airbus A320 with 180 seating capacity.

HCMC firm earns big by exporting leaves

While pandan, cassava , or banana leaves are normally considered by-products, or products of low value, a Ho Chi Minh City-based company has reaped hundreds of US dollars annually by exporting these leaves to the EU.

Few people think that certain foods require the use of cassava leaves, and Tran Thanh Phu, director of Tan Dong Co, used to be one of these people.

However, in 2009, Phu ran into a European businessman who was importing Vietnamese aromatic vegetables, fruits and other specialties.

The man then asked Phu if he had cassava leaves for sale.

“I learned that cassava leaves are a favorite among Europeans with an African background, who will use the leaves to cook soups and other dishes,” said Phu.

Phu stated that the company mainly sources the leaves from the southern province of Long An, with each kilogram of cassava leaves costing VND3,500, much higher than the rate for cassava tuber.

The leaves are washed, ground, packed into 500-gram packages, and deeply frozen at -40 Celsius degree before being exported. Each shipment also has to undergo a cyanide content test, he said.

Since first exporting small shipments, Tan Dong Co now exports more than 100 tons of processed cassava leaves, equal to 1,000 tons of fresh leaves, on an annual basis.

The company also exports leaves from banana, pandan, and phrynium plants to the EU market. Last year, it enjoyed an export turnover worth $150,000.

Tan Dong Co exports around 100 other agricultural and specialty products to the EU annually as well.

“Vietnamese fruits and vegetables are preferred over their Thai counterparts, thanks to the natural flavors that are favored by European consumers,” said Phu.

Chinese market not fully tapped by wood processors

The value of Vietnam’s 2011 wood and woodwork exports to China surged 62% year-on-year but for the most part the industry shipped low-valued items, said the Handicraft and Wood Industry Association of HCMC (HAWA).

The upsurge in wood and woodwork exports to China resulted mainly from raw materials and semi-finished products, said HAWA vice chairman Huynh Van Hanh.

Ministry of Industry and Trade statistics show the local wood industry last year fetched US$657 million from exports to China.

Last month saw the industry’s export turnover tumbling by 7.1% from the same period last year to nearly US$30 million, with raw materials accounting for up to 95%. The decline was ascribed to the long Lunar New Year holiday in the two neighboring nations.

The value of Vietnam’s wooden goods exports to China is way below expectations. Hanh said the taste of Chinese consumers was different from that of Americans, Britons and Europeans.

“Chinese consumers prefer products made from expensive natural wood,” Hanh noted.

Large industrial parks that are primarily home to wood processors in Binh Duong and Dong Nai provinces seldom receive export orders from China as Chinese importers are inclined to buy products from craft villages in the country’s north.

Most Vietnamese wooden products are shipped to Taiwan and some others to southern China, said Vu Van Quy, director of furniture and handicraft maker Hung Long Co. in the northern province of Bac Ninh.

In 2011, HAWA members planned to establish a Vietnamese woodwork center in China’s Guangzhou to further tap the Chinese market but financial constraints killed the plan.

“China is still a highly potential market for Vietnam and local woodwork makers need an appropriate strategy to exploit this market more effectively,” Hanh noted.
 
Transfer pricing remains hard nut to crack

Transfer pricing at foreign-invested enterprises is posing a great challenge to Vietnam’s tax authorities, though recent efforts have paid off to some extent, said Deputy Minister of Finance Do Hoang Anh Tuan at a recent conference in Hanoi.

According to Nguyen Xuan Son, head of the reform and modernization board under the General Department of Taxation, enterprises involved in transfer pricing are mostly multinationals, with experienced consultants capable of getting around the law - by reporting losses - to evade taxes.

For instance, after a year with rigorous inspections of FDI enterprises suspected of transfer pricing, the General Taxation Department found that the reported losses last year surged by 3.5 times compared to 2010.

In particular, the tax authority in 2011 inspected 921 FDI enterprises that had declared losses and had signs of transfer pricing. Overall, the inspectors disclaimed the losses of over VND6.6 trillion, which was 3.5 times higher than 2010, and collected tax arrears and penalties worth some VND1.6 trillion, 4 times higher than 2010.

“We have only inspected a small number of FDI enterprises, yet the collected tax arrears have reached trillions of dong. If inspections are launched into all FDI firms, tax frauds might be 10 times higher,” Deputy Minister Tuan said.

According to a survey of HCMC-based FDI enterprises conducted by the Ministry of Planning and Investment, enterprises claiming losses make up 70 percent. Only a few businesses reported modest profits.

The HCMC Tax Department said FDI enterprises only accounted for 3 percent of the total number of businesses in the city, but the losses claimed by these enterprises equaled to over 20 percent of the combined losses claimed by all firms based in the city.  

Up to 50 percent of FDI enterprises have reported losses for 4 consecutive years.
According to Le Thi Thu Huong, deputy head of the department, some enterprises have operated for 10 years but still reported losses every year.

She said foreign-invested companies in retail, supermarkets and beverage topped the list of those reporting losses.

In southern Binh Duong Province, for instance, up to 754 foreign-invested enterprises, or 51 percent out of the total number of 1,490 reported losses in 2010.

In southern Dong Nai Province, the figure was 52 percent.

On the national scale, Tuan said half of all FDI enterprises had reported losses. Many of them have continuously reported losses for 3 years.

He said the tax authority would now focus on inspecting those enterprises that are associated with one another to fight transfer pricing and fake loss declarations.

Vietnam will tighten price control of foreign-invested enterprises to avoid tax losses and ensure fairness for local firms.

Deputy Prime Minister Hoang Trung Hai has also assigned the Ministry of Finance to map out a general action plan to efficiently curb transfer pricing at FDI enterprises operating in Vietnam.

The General Department of Taxation under the Ministry of Finance has made a petition to the National Assembly (NA) on supplementing the advance pricing agreement (APA) mechanism to prevent transfer pricing at FDI enterprises.

Under APA, multinational taxpayers in Vietnam must take the initiative to suggest pricing measures or the price level when conducting trade between members of the same group before declaring taxes to local tax agencies.

On the other hand, tax agencies will supervise the price list of the items registered by enterprises either by themselves or in coordination with foreign tax agencies that have signed agreements on double taxation avoidance with Vietnam.

The application of APA to tackle transfer pricing is one of the contents of the draft on the amended Tax Management Law to be submitted to NA this May.

NA will consider approving this draft on October for the law to take effect in early 2014.

Jetstar Pacific invests in aircraft fleet expansion

Jetstar Pacific said on Thursday its shareholders have passed an initial investment injection of US$25 million into its fleet development in a move to strengthen this loss-making low-cost carrier.

The new investment, including A$7.5 million from the Jetstar Pacific shareholder Qantas Group, will also go to Jetstar Pacific’s fleet renewal, with its current Boeing 737-400s replaced with new Airbus 320s from the middle of this year. The shareholders support the airline’s fleet to grow to 15 Airbus 320s configured with 180 seats within the next few years.

Jetstar Pacific now operates seven Boeing 737-400s and Airbus 320s for 250 weekly flights on domestic air routes linking HCMC, Hanoi, Danang, Vinh and Haiphong. In the years to come, the airline will focus on busy routes as well as perform international services.

Jetstar Pacific will continue to follow a low-cost airline model as envisaged in its development strategy to support the carrier’s better performance, Jetstar Pacific’s chief executive officer Le Hong Ha said.

“The shareholders of Jetstar Pacific have approved a host of measures to help the airline operate and develop efficiently and sustainably in order to become a leading low-cost carrier in Vietnam, meeting rising air travel demand and development of the country’s aviation market,” Ha said.

Ha, who also serves as deputy general director of Vietnam Airlines Corp., worked as the new CEO of Jetstar Pacific from Thursday as a result of Vietnam Airlines replacing State Capital Investment Corp. (SCIC) to hold a 69.93% stake at Jetstar Pacific.

Last month, SCIC inked an agreement to transfer the majority state stake that it had been holding at the Vietnamese low-cost carrier to Vietnam Airlines as approved by the Prime Minister in January. This change made Vietnam Airlines the largest shareholder of Jetstar Pacific, followed by Qantas Group with 27%.

Vietnam Airlines said it would sell a further 3% stake to Qantas to bring the Australian group’s ownership at Jetstar Pacific to 30% in accordance with a deal that SCIC and the foreign group signed in Hanoi in April 2007.

At an extraordinary meeting in Hanoi in February, shareholders elected Duong Tri Thanh, deputy general director of Vietnam Airlines, as chairman of Jetstar Pacific and Le Hong Ha as CEO of the airline.
 
Piaggio launches motorcycle engine plant in Vietnam

The motorcycle maker Piaggio on Thursday launched a new engine manufacturing plant in Vinh Phuc Province to serve production of Piaggio Vietnam factory with an expected capacity of 300,000 units a year.

The newly-opened plant at Binh Xuyen Industrial Park will produce engines for scooters with initial output of 200,000 units per year, which will rise to 300,000 units in a future capacity expansion plan.

The engine plant will officially start operation this April with an assembly line for scooter engines, aluminum part processing machine and inspection conveyor. The new factory is located next to the modern motorcycle assembly plant of Piaggio Vietnam, where Vespa, Liberty, Fly and Zip scooters are being produced.

The Piaggio Vietnam industrial complex in Vinh Phuc comprises the research and development center for two-wheelers, the first of its kind in Asia of the motorcycle manufacturer, which will cooperate with Piaggio’s headquarters in Pontedera, Italy to develop motorcycle and engine lines for the Asia-Pacific market.

Roberto Colaninno, chairman and chief executive officer of Piaggio Group, said the engine plant would also produce the newly-developed global scooter engine line to serve manufacturing in Italy, Vietnam and India.

The line consists of four-stroke engines with cylinder capacity of 125cc and 150cc, and with fuel consumption of 60 kilometers per liter, which is the most fuel-efficient together with the lowest emission in the world.

Piaggio plans to invest some 70 million euros, or US$93.3 million, in Vietnam in the 2012-2014 period, over the total investment capital of 400 million euros of the group. The motorcycle maker’s strategy aims at strong growth in emerging markets so as to achieve the global sales volume of one million units and the total net sales of two billion euros in fiscal 2014.

Piaggio expected the Asian market will account for half of the group’s total revenue in 2014, versus 8% in 2003 and 25% in 2009. Vietnam is considered the group’s key production base in Southeast Asia.

Piaggio Vietnam last month launched the new version of Piaggio Fly, a compact scooter with a cylinder capacity of 125cc and 150cc.

Apart from the leading position the in the local deluxe scooter segment, Piaggio Vietnam helps the Italian group penetrate the important markets in the region like Indonesia, Thailand, Taiwan and Malaysia.

Central filling stations stop sales, speculation suspected

Many filling stations in the central cities of Da Nang and Hue have suddenly stopped selling fuel over the past few days, raising public suspicion that they are speculating for a rumored fuel price hike.

Specifically, fuel station No 2 of Nhat Khanh Co Ltd in Da Nang’s Hai Chau District with 12 gas pumps has been shut down since last weekend, hanging a banner that read “temporary close for repairing,” though there is no sign of construction at the station.

Meanwhile, customers coming to the filling station of Nui Thanh Co on Nui Thanh Street these days will receive the employees’ head-shake, saying they have stopped sales due to an electricity blackout.

Similarly, a fuel station on Duy Tan Street also announced a shutdown due to “power cut,” and “broken machines.”

For their part, certain gas stations on Ngo Quyen Street of Son Tra District, and Ton Duc Thang Street of Lien Chieu District, posted an announcement, saying they will reduce the opening time to only 10pm, since municipal authorities have restricted long-haul buses from entering the city.

Filling station No 10 of Petrolimex’s Fuel Co Zone 5 on Hai Van closes as early as 9pm.

Meanwhile in Thua Thien – Hue, several fillings stations have shut down over the past two days for various reasons, following rumors that fuel prices will be hiked.

Many gas stations in Quang Dien and Phong Dien districts have hung up their shutdown banners.

In Hue City, several fuel stations in Huong So Ward also put up the “blackout” banners, while many vendors selling fuel with unknown origins have appeared in streets throughout the locality.

Members of the public said filling stations are speculating products to welcome a new fuel price hike in the near future to earn profits.

Business acquisition on rise in economic gloom

Listed firms are on the hot seat after more merger and acquisition (M&A) deals have taken place amidst this year’s turbulent economy.

Their share prices have dropped so dramatically that they are afraid of possible takeovers by investors with deep pockets.

At a recent shareholder meeting of a commercial joint stock bank, regarding the time when the bank will issue more shares for the stock market, the bank chairman said the issue is still under consideration given the takeover concern.

The concern stems from the fact that another commercial joint stock bank headquartered in the northern region of the country has been rumored to be the next target of a banking M&A deal. About 36 percent of its shares have been traded on the stock market recently.

Existing shareholders and top officials of another commercial joint stock bank in southern Vietnam have been rushing to buy the bank’s shares to prevent the worst-case scenarios.

Two investors have publicly offered to buy the shares of TNG Investment and Trading Joint Stock Co at VND16,000 per share, up VND7,300 per share compared to their previous offering.

This has also happened to TRA-coded shares of Traphaco Joint Stock Co and TRI-coded shares of Tribeco Beverage Drink Co.

Previously, there have been many such transactions via the stock market, including the buyout of the shares of Vinacafe Bien Hoa Joint Stock Co by Masan Joint Stock Co and of Agrifish Joint Stock Co by Hung Vuong Joint Stock Co.

However, many experts said such M&A deals will make business costlier for investors.

The price of shares will surge when the information about the deal is publicized on the stock market, let alone the fact that the targeted firms will automatically erect protective measures and thus raise the costs for the deal.

As a result, many have chosen to form a temporary alliance of smaller investors to become a group with a decisive role, which can place pressure on the process of setting up of a new board of directors, and thus can redirect the firm’s operational strategies following their wishes.

However, if investors want to realize their M&A deal in such a form of unpublicized moves, they are often unwelcomed by the targeted firms.

The deal of DCC-coded Descon Joint Stock Co, in which a group formed by those owning less than 1 percent announced to hold 35 percent shares, has led to the delisting of the stock.

Such a form of acquisition will face strong opposition since it is unclear whether they will focus on improving the firm or occupying its assets only, said the general director of a securities firm.

The general director of a listed real estate firm said that as many realty developers have suffered hefty losses from the frozen realty market, their shares hit the floor though the value of their assets in the form of realty projects were still very huge.

“So, for us, if we have been targeted by those investors, we must brace for the worst case when the companies are suddenly under their control,” he added.

“It’s extremely difficult for us to be immune from such acquisitions, since we cannot buy more treasury stocks without money, and cannot issue more shares to the market without being profitable.”

“Even in the case that we can make a profit, it’s unpromising for our shares to be sold out since their prices are lower than their face value.”

Big firms with huge potentials in the form of assets and realty projects located in prime locations but facing the same problems are good targets for such deals now, said many experts.

The higher the outstanding shares, the higher the risk.

Vietinbank refuses to sell stakes to Nova Scotia

The Vietnam Bank for Industry and Trade, better known as Vietinbank, will not sell its stake to The Canadian bank of Nova Scotia in the first quarter of this year, said a senior official of the bank.

The deal will not be carried out as the latter will pay about VND19,000 per share, VND3,000 per share lower than the initial plan, said Vietinbank chairman Pham Huy Hung.

The Canadian bank has asked for more benefits, including dividend payment for 2011 and some capital surplus for the acquisition, which will reduce the real value of Vietinbank share, coded CTG, from VND22,000 to VND19,000 per share, he said.

Vietinbank sold 10 percent of its stakes to International Finance Corp (IFC), an investment arm of the World Bank Group, at VND21,000 per share early last year.

As a result, the bank cannot make such a deal for Nova Scotia at such a price right now, Hung added.

The commercial joint stock bank, in which the state owns over 80.3 percent of its stakes, is considering selling 15 percent of its stakes to other partners at a higher price, around VND28,000-30,000 per share, said Hung.

The offering price has been approved by the government and the State Bank of Vietnam, he said.

The bank in late June 2011 said it would complete the sale of 15 percent stake to Canada’s Bank of Nova Scotia in the second half of this year.

Chairman Hung then said necessary procedures would be completed in the third quarter, and Bank of Nova Scotia will become VietinBank’s strategic shareholder by the end of this year.

VietinBank announced to have worked with its consultant JP Morgan on the stake transfer.

The stake transfer is part of a plan to raise the bank’s registered capital by 41 percent, from VND16.86 trillion to VND23.8 trillion, via two share issues in 2011.

VietinBank in the first share issue will sell 337.2 million shares to existing shareholders at the face value, and in the second phase, it will issue 357 million shares to Bank of Nova Scotia, or a 15 percent stake, at a negotiated price decided by the bank’s board of directors.

Raising capital is a must for VietinBank to improve its capital adequacy ratio (CAR) regulated at 9 percent by the central bank.

The bank in December issued over 337 million shares to raise its chartered capital from VND16.85 trillion to VND20.23 trillion.

Among the newly raised capital worth VND3.37 trillion, the state contribution was VND2.7 trillion, making it the biggest shareholder withover 1.62 billion shares worth VND16.245 trillion, or over 80.3 percent of Vietinbank’s shares.

Domestic and foreign shareholders hold 10 percent, and the rest owned by IFC.

VietinBank is expecting to increase its charter capital this year from VND20.2 trillion ($963 million) to VND30.8 trillion ($1.4 billion), an increase of over VND10 trillion, said the chairman.

Currently, the State holds 80 per cent of shares in Vietinbank, while domestic and foreign shareholders hold 10 percent and the International Finance Corporation (IFC) the remainder.

Vietinbank’s total assets at the end of 2011 were worth VND460 trillion ($21.9 billion), and the bank has planned to increase this figure to VND550 trillion ($27 billion) this year and $50 billion by 2015.

The bank has set a credit growth target in 2012 of only 17 percent, down from 23 percent in 2011, Hung said, and it has been in the process of restructuring its investment portfolios in key State projects, government bonds and construction bonds.

Vietinbank has been approved by the government to issue $2 billion international bonds this year.

The bank will organize a road show for its $500 million bond issue in 6 or 7 countries this month. It planned to issue $500 million international bonds with 5-year and 10-year terms in November last year.

It is working with foreign and local partners, including Barclays Capital, HSBC, Allen and Overy, YKVN, Milkbank, and Mayer Brown JSM Vietnam, to complete necessary procedures for the issue.

All the proceeds will be channeled for Nghi Son Oil Refinery project in northern central Thanh Hoa province.

VN, EU push for free trade agreement

A Free Trade Agreement (FTA) between Vietnam and EU will boost economic reform and support development in Vietnam, David O'Sullivan, chief operating officer of the European External Action Service said at a press conference in HCMC.

More free trade and trade liberalisation are important for both economies, he stressed.

Against the backdrop of persistent macroeconomic challenges that Vietnam has been facing currently, it is important to keep the market open, he said.

The FTA can help both sides avoid trade protectionism, especially when Vietnam continues to increase exports in the coming years while waiting for an increase in domestic consumption.

Sullivan said he will press for progress in the negotiation of a mutually beneficial EU-Vietnam FTA, which would also act as a catalyst for Vietnam 's economic liberalisation strategy.

The EU is already an important trading and investment partner of Vietnam , but there is more potential to be realised. Towards this, "we would like to see negotiations progress for a comprehensive free trade agreement between the EU and Vietnam .

"We have been discussing with Vietnamese authorities for a number of years and we are now ready to move forward. We hope negotiations for the FTA between Vietnam and EU will be announced at the EU-ASEAN business summit taking place in Phnom Penh on April 1," he said.

Typically, the negotiation can take about 2-3 years. They will cover a full range of topics related to trade and investment relations.

With the ASEAN region in general and Vietnam in particular marked for dynamic economic growth, the EU is keen to strike a win-win cooperation deal with Vietnam , Sullivan said.

He said Vietnam is a country with enormous potential and significant economic achievements in recent times, and it can do better in the coming years.

"The EU's economic crisis does not restrict import-export, or reduce investment, but it has increased trade and engagement with the world, particular with ASEAN – a major source of economic growth – We want more trade and investment," he said.

While cheaper labor costs in Vietnam is a very important element for investment decisions, there are many other influencing factors such as corruption and investment guarantees.

" Vietnam needs to work on all elements if they wish to be an attractive destination to investors. What Vietnam wants to do is move up the value chain, so they need to use the labour cost advantage in the beginning to build up their capacity and added value to make their economy more competitive," Sullivan said.

Besides, Vietnam still faces challenges including high inflation and increasing exports of low cost items, which can damage the economy, he added.