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BUSINESS IN BRIEF 6/4

 Rice traders report losses in 2013; Rubber price plunges on scant buying from China, M’sia; Consolidated bank SCB posts up profit; First registry firm launches IPO; Livestock export potential untapped

Rice traders report losses in 2013

Most rice enterprises reported losses last year, and the gloomy outlook is spilling over into this year though the first quarter has yet to end.

High buying price, low selling price, increasing production cost, high interest rate and inventories were reasons making rice enterprises run into troubles last year.

Vinh Long Food Company suffered a loss of VND38 billion from business activities last year while it earned over VND4 billion in 2012, over VND41 billion in 2011 and VND46 billion in 2010.

Meanwhile, An Giang Import-Export Company (Angimex), whose main revenues are from rice export, reported only VND9.6 billion in net profit last year, declining by nearly VND42 billion from the previous year.

Similar situations seem to continue this year.

Early this month some importers agreed to buy 5% broken rice at only US$370 per ton, a fall of US$40 from the price late last month. Such a strong price decline has made enterprises hesitant to sell rice.

Lam Anh Tuan, director of Thinh Phat Food Company, said his company was confused at the price of 5% broken rice offered by importers at US$370 per ton, which is equivalent to the floor price of lower-grade 25% broken rice set by the Vietnam Food Association (VFA).

“The production cost of one ton of 5% broken rice is higher than US$370,” Tuan said.

The current rice supply is abundant while Thailand targets to sell one million tons of rice each month, which will push the rice price down. Therefore, rice importers are enjoying an upper hand negotiating deals, according to Tuan.

The rice export volume of Thinh Phat Food Company dropped by 50% last year and may decline more this year if the current supply-demand situation continues, he added.

“Normally at this time of the year, we buy 400-500 tons per day from traders but now only 100 tons for fear of deeper export price decline,” he said.

According to VFA, this year’s rice export will be similar to last year with abundant supply. Without careful considerations, rice traders will suffer from big losses this year.

“As rice enterprises endured losses or declining profits last year, they will be more prudent this year. I think enterprises will not decide to buy rice from farmers until they finish negotiating deals,” said a director of a rice exporting company.

VFA’s offered price of 5% broken rice was US$405 per ton early last month which fell to US$380 at the end of the month, which is among the lowest levels in Asia.

Rubber price plunges on scant buying from China, M’sia

The domestic rubber price has plunged as China and Malaysia as two major buyers of Vietnam’s natural rubber in previous years have lowered the buying volumes this year.

Vietnam’s rubber export price has plummeted to around US$2.000 per ton, a sharp fall of over US$300 per ton from last year’s average and over US$800 from the 2011 level.

Vietnam exported 1.078 million tons of rubber last year to obtain US$2.52 billion, up over 5% in volume but down nearly 12% in value year-on-year. China and Malaysia accounted for nearly 45% and 21% of Vietnam’s total export value respectively.

The decline export price is contrary to the Vietnam Rubber Association’s (VRA) forecast given early this year that the rubber price on the market would range between US$2,500 and US$2,700 per ton and be around US$2,500 in the whole year, equivalent to some VND52 million per ton.

The rubber price in southeastern provinces currently ranges from VND36.3 million to VND39.8 million a ton, dropping by VND1.2 million from two months ago. Meanwhile, the price of Thailand’s RSS 3 rubber for delivery in April stays at US$2,000 per ton and Malaysia’s SMR 20 rubber is priced at US$1,900, down US$75 from early this month.

The rubber price on Japan’s Tocom trading floor for delivery in May is US$2,272.5 per ton, declining by US$717 from March.

According to VRA, the average export price of Vietnam’s SVR 3L rubber was US$2,100 per ton in this month’s first two weeks, US$119 lower than last month’s average.

Vietnam’s rubber export volume in the January-February period totaled 104,000 tons worth US$215 million, down over 25% and 43% in volume and value from last year’s same period respectively.

Hoa Binh wins bid to build 45-floor tower

Hoa Binh Construction and Real Estate Corporation has won a bid to develop the second phase of the Saigon Centre complex in HCMC’s District 1.

Hoa Binh surpassed some giant partners from South Korea to win this huge contract for the project at 92-97 Nam Ky Khoi Nghia Street.

The firm will construct and finish infrastructure of the building comprising six basements, six floors of the podium and three successive floors as well as upgrade part of the existing Saigon Centre tower with a total value of over VND1.6 trillion. The package will be kicked off on March 26 for completion after two years of construction.

According to Hoa Binh, Saigon Centre is one among major projects it has won this year. Realizing the project’s high aesthetic requirements, Hoa Binh has introduced advanced and efficient construction technologies as well as optimal solutions in terms of transport to ensure construction safety and implementation progress.

Saigon Centre is invested by Keppel Land Watco Co., Ltd with its second phase consisting of a 45-floor building for commercial, food, office space and high-end apartments for lease. It will go up next to the existing Saigon Centre tower at 65 Le Loi Street in District 1 which has been put into use for many years.

Consolidated bank SCB posts up profit

Saigon Commercial Bank (SCB), the consolidated bank after the merging of former SCB, Ficombank and TinNghiaBank, reported a pre-tax profit of VND60 billion in 2013.

The lender during its annual general meeting on March 17 said that its pre-tax profit is aimed at VND121 billion this year.

There was shuffle in the bank’s board of directors with former chairwoman Nguyen Thi Thu Suong and vice chairman Tram Thich Ton resigning from their posts. Meanwhile, Vo Tan Hoang Van and Ta Chieu Trung were elected to the board.

Board members also elected Dinh Van Thanh as the chairman of the bank while Lee George Lam and Vo Thanh Hung were appointed as vice chairpersons. Vo Tan Hoang Van and Ta Chieu Trung will serve as board members while Nguyen Thi Phuong Loan is the independent member.

SCB’s report suggests clear improvements in asset quality. As of the end of 2013, SCB had total bad debt of over VND1.4 trillion, down 77.2% against early last year and accounting for 1.6% of its total outstanding loan.

The bank’s bad debt ratio declined sharply compared to 7.2% late 2012 as a part of bad debts was transferred to Vietnam Asset Management Company (VAMC). In addition, the lender recovered VND889 billion worth of debts.

Last year, SCB refunded VND11.9 trillion worth of refinancing loans, bringing to VND21.8 trillion the total value of refinancing loans SCB had returned to the central bank.

Its chartered capital stood at nearly VND12.3 trillion. The capital adequacy ratio (CAR) was 9.95%.

The bank’s total asset reached VND181 trillion, up 21.3% against early 2013. It is among five biggest domestic banks in terms of total assets.

First registry firm launches IPO

Tay Ninh Registry Company launched initial public offering (IPO) on March 17 with one-third of its shares purchased.

It is the first among around 100 vehicle registry enterprises in the country going public in line with the Government’s order to equitize State-owned enterprises.

According to the Hochiminh Stock Exchange (HOSE), the organizer of the IPO, the enterprise offered over 1.5 million shares to investors via public bidding, or 23.8% of total shares put up for sales, at the starting price of VND10,500 each.

Closing the bidding, 57 investors bought some 567,000 shares at the average winning price of VND10,500 each.

Established in 1996, the enterprise now has a chartered capital of VND65 billion.

HOSE said that two more firms will organize share bidding this month, including Vinacomin Southern Coal Company on March 19 and Civil Engineering Construction Corporation No. 6 on March 21.

Policy adjustment a must

Restructuring management policies during the international integration process is the key to a steady, healthy and prosperous economy, according to leading policymakers and economists.

Economic statistics in 2013 reflect that the global economy has turned the corner and is on the mend.

Lower inflation rates experienced by nations throughout the world along with prevalent reports of increased economic growth and stabilised exchange rates are all positive signs the long-awaited global economic recovery is on the horizon.

However, many obstacles remain for Vietnam if the goals of sustainable economic development are to be achieved and are going to require breakthroughs in implementing reforms.

Economist Nguyen Minh Phong said the difficulties and challenges Vietnam faced in 2013 are still a burden on the national economy and the business community, especially the increased non-performing loans and depressed market competiveness.

The economy cannot thrive unless business operations gather steam, he said at a recent workshop organized by the Hanoi Economics University.

More than 79,000 newly-established businesses and around 13,000 others resuming operation in late 2013 are positive signals.

However, there is growing concern that more than 61,000 businesses stopped operation or went bankrupt while roughly 400,000 others operated without profits.

Furthermore, most newly-established businesses are in the services sector, which reflects the reality that most production businesses are struggling to settle high inventory and maintain consumer markets.

Transfer pricing and “fake loss and real profit” among both domestic and FDI businesses badly affect State budget collection and healthy market competition.

Le Quoc Phuong from Industry and Trade Information Centre under the Ministry of Industry and Trade said the economy will confront with some disadvantages in 2014.

Weak purchasing power is not sufficient to stimulate businesses to invest in production, alongside inflation concerns.

Phuong warned high inflation is likely to return if monetary and fiscal policies are loosened to promote growth. Besides, the global economic recovery may fuel inflation, affecting Vietnam, he said.

There is room for Vietnam to go ahead with basic solutions, said Vo Tri Thanh from the Central Institute for Economic Management (CIEM), citing agricultural production as one of the country’s development advantages.

In a New Year message, the Prime Minister stressed the need to accelerate agricultural development, technological applications, and reform, considering agricultural restructuring a priority.

This year, three major issues of both the world and Vietnam are recovery, risks and reform. Vietnam has stabilized its macroeconomy, but it needs a comprehensive reform to achieve high, steady growth, and this is no easy task.

Nguyen Duc Thanh from the National Economics University likened recovery signs to “buds sprouting out on barren soil”, requiring the State to adjust economic management policies to fuel the growth.

Thanh warned the economy will suffer a setback if no further reform efforts are made, as growth is not steady in the longer term.

He proposed that the economic stimulus policy introduced in 2010 should be adjusted, explaining if the real estate bailout package and interest rate policy continues to be in place, capital will flow into a number of sectors, and a bubbling real estate market will be created eventually.

Lawmakers should adjust policies as soon as possible to support the short-term recovery period, he said.

Economic targets for 2014 are modest and basically feasible. The 5.8% GDP growth rate will be within reach if loose monetary and fiscal policies are strictly monitored. Economic restructuring and growth model shifting should be implemented through renovating technology and improving labour productivity and quality. This process needs specific plans and roadmaps.

Livestock export potential untapped

Viet Nam's livestock industry, while relatively well dev eloped, has not been able to take advantage of its export potential, experts say.

So far, the industry has only succeeded in exporting small volumes of fresh and processed livestock products, they told the Thoi Bao Kinh Doanh newspaper.

Nguyen Dang Vang, the chairman of the Viet Nam Livestock Association said export livestock enterprises have mainly exported suckling pigs and salted duck eggs to Hong Kong and Malaysia apart from several varieties of meat to China via border trade.

No official statistics on the volume of meat product exports are available, but Vang said that on average, Viet Nam exports 35,000 tonnes of pork to China every year, accounting for one per cent of the national total pork export.

Vang said some enterprises have developed large-scale farms with a self-contained processing system, but most of their output is for the local market and only a small volume is exported.

Vissan Ltd Company, one of the leading food processing and production firms in Viet Nam, has set an export development strategy, but it is yet to execute it well, industry insiders say.

Vissan General Director Tran Tan An said that his company has exported its products to some markets like Singapore, Australia, South Korea, Russia, and North America, but these did not make up big volumes.

Their export products include frozen meat, processed meat, sausage, lean pork paste and canned meat, An said.

Very few livestock industry products are being shipped to potential markets like Russia, the US and Australia, he said. So far, it has only sent grilled pork paste and lean port paste to these countries. Other key products of the company, including sausage and canned meat, can also be exported to regional countries, such as Cambodia and Myanmar, An said.

A livestock industry expert who did not want to be named said that Viet Nam has ample opportunities to export its products. He noted that the country used to export pork to Eastern European countries.

Now, markets across the world, particularly Japan and China, have a great demand for meat and egg products, he said. However, while the country has plentiful supply of these products, their quality and competitiveness present an export challenge, he added.

In Viet Nam, households constitute the main production unit in the livestock industry, supplying 90 per cent of domestic meat consumption. There are few enterprises engaging in large-scale production with quality standards that can satisfy importing countries, the expert said.

Vang noted that the production process in livestock enterprises is not self-contained, increasing costs significantly. The production cost of meat in Viet Nam is 1.4 times higher than in the US. Hence Vietnamese meat products are less competitive in the international market, he said.

An remarked that existing policies have failed to create favourable conditions for the livestock industry to increase its exports.

Viet Nam has been a member of the World Trade Organisation for a long time now, but regulations and standards related to veterinary care and food hygiene and safety in Viet Nam are not in accordance with standards set by the importing countries, An said.

The Thoi Bao Kinh Doanh report cited several industry insiders as saying the state should issue effective policies to encourage exports of fresh and processed meat and eggs.

Without this enterprises would not have the incentive to renew the production process with modern technology and seek export markets while reducing the less profitable border gate trade, they said.

Tra fish prices up, but exports unstable

Low supply has seen tra fish prices rise in the domestic market, but experts have cautioned farmers against ramping up production, saying the export market is still unstable.

Since mid-March, the purchase price of tra fish in the Cuu Long (Mekong) Delta region has risen to VND25,000-26,500 per kilo from VND20,000-21,000 just before the Tet (Lunar New Year) holiday in January.

A Nguoi Lao Dong (Worker) newspaper report yesterday quoted farmer Nguyen Van Tan of An Phu District in An Giang Province as saying that in the last 10 days, many traders and processing enterprises have rushed to buy the fish, pushing up prices.

His family was lucky to harvest 200,000 tonnes of the fish right at the time that prices increased, he said, adding that if he had done it earlier to cut losses, he would not have made any profit.

Nguyen Ngoc Hai, chairman of the Thoi An Trafish Co-operative in Can Tho City, attributed the sudden surge in purchasing prices to a lack of supply in the market as a result of households abandoning tra fish farming after three consecutive years of losses.

Nguyen Thi Ngoc Duyet of Cao Lanh District, Dong Thap Province, said she has reduced the number of tra fish ponds from 20 three years ago to a handful at present. She said the three years of losses meant they did not have any money to expand breeding area.

According to the Viet Nam Association of Seafood Exporters and Producers (VASEP), the area of tra fish farms has fallen in many provinces and cities including Can Tho City (reduction of 10 per cent), Vinh Long (10 per cent) and Dong Thap (4.7 per cent).

The Thoi bao Kinh Doanh newspaper reported recently that as many as 70 per cent of the tra fish breeding households have stopped production.

The supply shortage would continue until June when farmers harvest the tra fish they are breeding at present, the association said. In March alone, tra fish output has fallen year-on-year by 30 per cent, the report said.

While the current situation of high purchase prices and low output has enthused many farmers to resume tra fish breeding and farming, they are stuck with a shortage of funds to do so, said Pham Van Quynh, director of the Can Tho Agriculture and Rural Development Department.

However, Tran Van Hai, general director of the Phat Tien Seafood Ltd Company in Dong Thap Province, said the increase in prices "contained many factors of instability."

He noted that the increase was a result of short supply, not an increase in export prices. He said the situation of exporters facing many challenges and many facilities processing tra fish for export having to curtail or suspend production has not changed.

The An Giang Aquaticulture and Seafood Export Association has said that consumption markets are unpredictable at present. Many tra fish exporters have complained that importers have pressurised them to cut prices and some others have confirmed they are facing difficulties in the Russian, Ukrainian and Eastern European markets.

Therefore, farmers should not rush to expand tra fish production in large volumes so as to avoid a situation of oversupply and resultant drop in prices, the association said.

Nguyen Ngoc Hai, chairman of the Thoi An Trafish Co-operative in Can Tho City, said not many small households are breeding or farming tra fish these days. Those who have persisted are enterprises or households that have supply agreements with enterprises, he said.

Such agreements can bring about sustainable development of the tra fish industry, Hai said.

VASEP deputy chairman Nguyen Huu Dung said that for the long term, a balance should be maintained between supply and demand by imposing an output quota on each locality.

The government should also set up quality standards, fix minimum prices for tra fish, establish a proper distribution network in Europe first and expand it later to other markets, he said.

It should also manage inputs better, increase the variety and quality of tra fish as well as fish-feed, and collect market development fees of one to two US cents per kilo of tra fish fillet exports for trade promotion activities, he added.

Viet Nam-Cambodia fair openS in Phnom Penh

A Viet Nam-Cambodia Trade, Services and Tourism Fair will exhibit products made in Viet Nam in the Cambodian capital Phnom Penh from April 5 to 9.

At the Diamond Island Convention and Exhibition Centre, Vietnamese companies will showcase food, household appliances, plastics, apparel, shoes and leather, cosmetics, electrical devices, office products, construction materials, agricultural materials and interior design products.

The HCM City Investment and Trade Promotion Centre and the Cambodian Ministry of Commerce are organising the event.

Phu Yen needs investment in agriculture, fisheries

The central province of Phu Yen needs investment of VND5 trillion (US$227 million) to fund four agriculture and fishery projects in the 2014-20 period, said a leading local official.

The projects would improve the processing and exporting of tuna, fishery logistics service centres, salt-making zones and high-tech agricultural facilities, said Pham Dinh Cu, chairman of the provincial People's Committee. Investors will enjoy incentives such as lower land rent and corporate income tax for 50 years.

Big C seeks to increase sale of local goods

French supermarket chain Big C met with 39 small and medium-sized firms in Binh Dinh Province to discuss buying their products.

The companies specialise in indoor and outdoor furniture, handicrafts, processed foods, seafood and seafood products, beverages, meat and safe vegetables.

The supermarket is making efforts to increase its local sourcing. It signed deals worth around VND106 billion (US$5 million) with 110 small and medium-sized producers after similar meetings in Hue and Nghe An, Nam Dinh and other provinces.

Garment enterprises strive to take advantages of GSP

Being aware that it is not easy to take advantage of the Generalised System of Preferences (GSP) mainly due to the certificates of origin of input materials, Vietnamese textile and garment enterprises are trying to take every available opportunity to increase their market shares. A report by the Ministry of Industry and Trade's Vietnam Economic News.

To boost exports to the European Union (EU) market, Executive Director of Garment 10 Corporation Than Duc Viet said although the GSP offers many preferential treatments for Vietnamese textile and garment imports to the EU, it is not an easy opportunity to seize due to obstacles in the rules of origin of input materials.

To deal with this issue and increase market shares in the EU, with consignments in Free On Board (FOB) mode of payment, Garment 10 Corporation actively negotiates with its customers to import materials from regional countries that also enjoy the preferential system like Thailand and Malaysia. As for Original Design Manufacturer (ODM) projects that the company is building, Garment 10 Corporation will focus on expanding the network of suppliers from the Association of Southeast Asian Nations (ASEAN) to take advantage of the GSP.

Those enterprises that have not exported to the EU do not want to miss this opportunity. Director of the Thuy Dat Joint Stock Company Nguyen Van Chau said to take advantage of the GSP, his company had conducted market research for about a year and evaluated its product categories. Now many EU businesses have come to survey and made their orders. The first consignment of the company is scheduled to be exported to the EU in April this year.

Chau also said the company does not worry about its product quality as it has experience in exporting goods to Japan for many years. As for the material origin issue, the company has negotiated with its customers so that it can import materials from countries also enjoying the preferential system like Vietnam.

The Vietnamese textile and garment enterprises are racing against the clock to boost export to the EU. In the first month of 2014, the export revenue of Vietnam’s textile and garment industry to the EU increased by 26.4 percent over the same period last year, of which the export growth rates to some markets have jumped quite sharply like to the Czech Republic up 45.15 percent and England up 17.9 percent.

Enjoying the GSP in the EU market will surely create a big competitive advantage for Vietnam’s textile and garment products, especially when those of China - a big competitor - are imposed the Most Favoured Nation – MFN duties (on average 3.5 percent higher than the GSP). What’s more, as the graduation thresholds of Vietnamese textile and garment products increase to 14.5 percent, there will be more opportunities for exports to this market.

However, Viet also said to benefit from preferential tax treatments, Vietnam’s textile and garment products must meet the requirements about the rules of origin of input materials while being threatened by the graduation thresholds. Especially, once the EU-Vietnam Free Trade Agreement (EVFTA) is signed, the country's garments will no longer benefit from the GSP Plus. Therefore, not only Garment 10 Corporation but also other enterprises in the sector are striving to take advantages of benefits brought by the GSP.

To take full advantage of the GSP, deputy head of the Europe Market Department Tran Ngoc Quan recommended that Vietnamese businesses diversify their markets and avoid dependence on one single market, however big it is. They also need to be cautious in boosting their export to avoid falling into the protection or graduation thresholds in case the EVFTA does not proceed well as expected.-

B-WTO helps Vietnam improve its position: officials

Strengthening market economy institutions and improving the business environment is one of the important objectives of the Beyond World Trade Organisation Programme (B-WTO), reported the Ministry's of Industry and Trade's Vietnam Economic News.

The B-WTO Programme, funded by the Australian Department of Foreign Affairs and Trade and the UK Department for International Development, has been implemented for seven years and significantly contributed to boosting Vietnam’s integration into the global economy. International economic integration has brought positive outcomes and had a positive impact on the Vietnamese economy and society, but it also brought challenges.

“As soon as Vietnam became a WTO member in 2007, the government called upon international donors to support its efforts to manage the country’s integration into the global economy and its transition to a market economy,” Deputy Minister of Industry and Trade Nguyen Cam Tu was quoted by the newspaper as saying.

The B-WTO Programme's Phase 1 from January 2007 to March 2008 supported the development of a Government Action Plan and the action plans of ministries, sectors and localities, as well as a pilot multi-donor trust fund model to support the implementation of the Government Action Plan.

Based on the results achieved in Phase 1, Phase 2 has been implemented from September 2009 to March 2014 with the aim to implement priority policy actions mentioned in the Government Action Plan.

In Phase 2, it supports 48 projects with its beneficiaries including 28 departments and institutes under eight ministries and sectors, seven organisations and associations, and four local departments, businesses and farmers.

The deputy minister said that in Phase 2, the support had been relevant with the Vietnamese government’s priorities and its short-term objective had been achieved, paving the way for realising the long-term goal of “strengthening the government’s capacity to manage Vietnam’s integration into the global economy and its transition to a socialist-oriented market economy”.

For the last more than four years, Phase 2 has helped Vietnam learn from international experiences to improve the quality of amendments and supplements to policies and regulations, especially international economic integration-related policies.

Michael Wilson, Minister Counselor at the Australian Embassy in Hanoi, said: “B-WTO helped bring about policy, regulatory and institutional reform and helped boost the benefit gained from reforms. The cumulative impact of the programme is that Vietnam has a better understanding of the challenges and opportunities of economic integration and stronger capacity to deal with these challenges. This understanding can support an ongoing reform process that, if followed through, will see Vietnam continue to grow in strength and stature. This is a good outcome for Vietnam, obviously, but it is also a good outcome for Australia and the region more broadly.”

According to former Minister of Trade Truong Dinh Tuyen, one of the most important objectives of the B-WTO Programme is supporting efforts to strengthen market economy institutions and improve the business environment. This helps resolve three issues, namely creating a resource allocation mechanism and a highly competitive business environment, mitigating the adverse impact of international integration on vulnerable groups, and effectively managing the integration.

Of these, the first issue is pivotal and will be addressed through efforts to strengthen market economy institutions and improve the business environment in Vietnam. Only when the economy is functioned based on market mechanisms, resources can be allocated more effectively and a fair competitive environment created, he added.

Regarding the B-WTO Programme’s support for improving the integration management and coordination capability, Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, said: “It is essential to involve the whole government in planning and managing integration.”

According to him, this requires raising the awareness about new features of global production and business activities, and integration commitments – a pillar in development strategies – institutional reforms and economic restructuring, while strengthening the capability of implementing integration commitments and assessing their impacts (in conjunction with planning, making and improving policies).

This also requires focusing on relevant ministries/sectors and more challenging issues such as reorganisation of state-owned enterprises, competition and intellectual property rights; improving the integration coordination and inter-sector cooperation models to address integration-related issues; and setting up an efficient monitoring system with a high level of independence in making assessments, authority and resources for monitoring, and annual reports on integration-related issues.-

Dong Nai: 400 bln VND to develop power networks

About 400 billion VND (18.8 million USD) will be invested in developing electricity distribution networks in the southern province of Dong Nai in 2014.

Director of the Dong Nai Electricity Company Nguyen Ngoc Thanh said that with this investment, the company commits to providing enough power for the locality’s socio-economic development demands with a targeted output of 9.1 billion kWh.

The local sector will also improve the quality of power supply services and strengthen the maintenance of the system to prevent breakdowns.

To use electricity effectively, the provincial People’s Committee recently decided to set up a steering board to manage the power supply.

Accordingly, the board will put forth monthly power supply plans in order to best use the distributed output, save electricity and meet locals’ maximum demand for daily activities and production.

Last year, the company began construction on 21 110kV power grid projects with a total investment of more than 156 billion VND (7.33 million USD), five of which have been put into operation, serving the daily activities and production needs of local people and businesses.

The company’s output of commercial electricity was 8.4 billion kWh in 2013, up 8.63 percent from the previous year.

Lai Chau plant to generate power ahead of schedule

Deputy Prime Minister Hoang Trung Hai has ordered that Turbine No. 1 of Lai Chau hydropower plant must generate power by late 2015, one year earlier than originally planned.

To do this, he asked the northwestern provinces of Son La, Dien Bien and Lai Chau to focus on site clearance, making way for the 500kV power line running from Lai Chau to Son La.

At a working session with the State Steering Board for the Son La – Lai Chau hydropower plant project in Son La on March 23, he also called for the faster resettlement of local residents, and the provision of farmland to help them stabilise their lives.

A detailed master plan on five resettlement areas in Lai Chau’s communes of Nam Khao, Muong Te, Can Ho and Muong Mo has been ratified, accommodating over 1,900 displaced households. In the first two months of this year, 343 of them were relocated.

General Director of Electricity of Vietnam Pham Le Thanh suggested the Government directs the Bank for Investment and Development to provide a loan worth over 3.9 trillion VND (183 million USD) for resettlement work in the Son La hydropower project.

He also proposed the Finance Ministry acts as a guarantee for a foreign credit contract worth 108 million USD, which will be used to purchase equipment for the plant.

Agriculture to take advantage of external resources

Shortly after the coming into force early last month of a decree on preferences for businesses investing in agriculture, foreign capital inflows into this field has increased, in which Japan is emerging as one of the most active players, according to the Vietnam Business Forum, an English-language magazine of the Vietnam Chamber of Commerce and Industry (VCCI).

Recently, the Vietnamese and Japanese governments signed agreements to promote bilateral agricultural cooperation. Along with that, the Japanese government is considering the reduction of subsidies for domestic rice cultivation - meaning this country will start steering itself toward becoming an importer.

In fact, the "preparation" by Japan for Vietnam's agricultural development started a couple of years ago. Tsuno Motonori, Chief Representative of the Japan International Cooperation Agency (JICA) in Vietnam said that so far, Japan had supported the agriculture and rural development sector with more than 25 technical assistance projects, non-refundable aid, emergency assistance of about 120 million USD, and four big loan projects of about 450 million USD in irrigation and forestry to help Vietnam improve infrastructure and stimulate sustainable agricultural and rural development.

The increasing investment in agriculture from Japanese investors will open up an attractive prospect for Vietnam's agriculture which is facing many challenges under the impact of factors such as the market economy, technological weaknesses and unstable production output, the magazine said.

If everything goes smoothly, the current weaknesses in quality, branding and supply processes of the Vietnamese agriculture will soon be overcome by the use of advanced technology from the second largest economy. Then the Vietnamese agricultural products will become internationally well-known for high quality and reputable brand. Vietnamese farmers will enjoy a higher income; get rid of the "nightmare" of cheap agricultural sector.

The significant increase of foreign capital influx in Vietnam's agriculture will likely create a "momentum of integration" - as predicted in a study by Vu Thanh Tu Anh, Director of Research, Fulbright Economics Teaching Programme.

As analysed by the expert, out of the four "wheels" to promote economic development, including state-owned enterprises, private enterprises, agricultural sector and foreign investment enterprises, right now only the fourth wheel is running smoothly.

Vietnam's agriculture sector, at the moment, has both "benefits" and "opportunities" for foreign investors. "Benefits" means agricultural strengths including favourable climate and land conditions, abundant labour resources while "opportunity" refers to incentives toward foreign investors in agriculture.

Dang Kim Son, Director of the Institute of Policy and Strategy for Agriculture and Rural Development, said Vietnam cannot "close out" foreign investors if it wishes to develop. Sluggishness and slowness will only obstruct domestic businesses, even leads to bankruptcy, he said.

Therefore, the country should take advantage of the opportunity to develop its inherent strengths, he added.

To do this, Son believed that it's necessary to have breakthroughs in selecting strategic sectors along the value chain to create market products based on potential and strengths of each locality. These strengths are divided into three categories: national strength (competitive and exportable), regional strength (can deliver to other regions), and local internal strength (specialty and strengths of each commune, district and province).

Borrowing international strengths to develop is a strategy which the agricultural sector has been using for many years. Yet "potential and opportunity is one thing, it is important to take advantage of opportunities and potential to promote the sector's position to have a sustainable agricultural development" - Son affirmed.

In his recent speech, Minister of Agriculture and Rural Development Cao Duc Phat also said that with experience and valuable lessons of integration accumulated in recent years, "agriculture is totally capable of taking initiative to overcome new challenges in the integration process today,... and the agricultural sector will certainly reap even more successes in integration, performing the role of a pillar of the national economy in all conditions and circumstances."

APA – an effective remedy against transfer pricing

Enforcing the Advance Pricing Agreement (APA) mechanism is considered an effective solution for combating transfer pricing which has been reportedly increasing among multinational corporations (MNCs) in Vietnam.

At a recent seminar in Hanoi, Dang Tuan Hiep, a General Department of Taxation official, noted since 2000 MNC transactions have accounted for more than 70% of the global economic operations, with their annual revenue of approximately US$6,000 billion.

Transfer pricing is a hot issue that has garnered the great attention of taxation agencies throughout the world, because MNCs can directly affect the allocation of profits to individual countries by increasing or decreasing the price they charge each other, even though the profits of the group as a whole remain unchanged.

Many countries including the US, Japan and the Republic of Korea have formulated APAs as a special instrument for dealing with tax disputes for tax agencies and between tax agencies and MNCs.

In late 2013 the Vietnamese Ministry of Finance issued a circular, guiding APA implementation, creating an important legal corridor for preventing tax evasion and minimizing disputes about market price evaluation in related-party transactions.

Colin Clavey, a senior consultant on APA of the International Financial Corporation, and Sabine Wahl, an independent consultant, shared experience in reaching viable APA deals, saying both tax agencies and tax payers must prepare necessary conditions before negotiations.

Businesses should have meetings and consultations before submitting an APA dossier to the tax agency. Receiving the dossier, it is the tax agency’s task to study the payers’ economic, trading and tax payment reports in order to come up with proper negotiation plans.

When the two sides agree on price levels, provisions, and payment methods, they can then proceed to enter into agreements to apply the APA, Clavey and Wahl concluded.

Arcotia Hasidimitris, a World Bank expert, said to realize APAs, the General Department of Taxation should build databases, gain experience in transfer pricing, and train officials to better understand about the field and methods to negotiate with tax payers.

Hasidimitris suggested Vietnam consider Australia’s 3-tiered approach to APA (Simplified, Standard and Complex APA), making it easier for taxpayers to sign deals.

However, Yoshiyuki Nakagawa, a Japan International Cooperation Agency (JICA) expert, advised Vietnam to apply bilateral APAs, explaining these bilateral deals will bring benefits for both tax agencies and businesses when investing in the country.

He warned Vietnam should apply APAs to a certain number of economic sectors, taking into its personnel, capacity and databases. It then needs to draw experience and replicate the model to other fields.

Northern region launches power saving programme

A power saving programme has been launched in 27 northern cities and provinces to raise public awareness about the importance of saving electricity.

At a ceremony held in the central province of Thanh Hoa on March 26, representatives from the provincial People’s Committee, the Electricity of Vietnam Northern Power Corporation (EVN NPC) and its 27 affiliates, and the Rang Dong Light Source & Vacuum Flask Joint Stock Company signed a commitment to working together in the drive.

Speaking at the function, EVN NPC Deputy General Director Nguyen Thanh Le said that by turning off electrical equipment during the forthcoming Earth Hour, each person can contribute to saving power and energy.

“This action is very significant for not only us but also for our families and the entire society,” he stressed.

Meanwhile, the Rang Dong Company presented energy-saving light bulbs to 300 local households in financial difficulty.

According to EVN NPC, between 2009 and 2013, the corporation broadcast power-saving adverts 28,790 times on radio stations and nearly 5,700 times on TV. It delivered close to 8.6 million power-saving leaflets and manuals.

The company also guided more than 41,500 customers through how to save electricity and encouraged them to use solar energy water heaters and compact lamps.

Thanks to these efforts, a total of 1,970 million kWh of electricity was saved during the period.

In 2014, EVN NPC set a target of saving at least 10 percent of power used in its offices and 1.5 percent of total commercial electricity.

Reed Tradex to host the sixth Vietnam Manufacturing Expo in August

Reed Tradex, Thailand’s exhibition organiser, today announced to host Vietnam Manufacturing Expo 2014 in Hanoi in August to foster Vietnam’s supporting industries, after the success of five previous events.

Reed Tradex announced that this comprehensive show for manufacturing and supporting industries would be organised during August 27-29, 2014 at Hanoi International Exhibition Centre. The event is coincided with the exhibition of “Industrial Components & Subcontracting Vietnam 2014” which is organised by Hanoi Trade Promotion Centre, and the Association of Electronic Industries in Singapore.

According to Reed Tradex, Vietnam Manufacturing Expo will help companies sharpen their competitive edge, upgrade production technologies, and upscale your business opportunities.

“For this year, at Vietnam Manufacturing Expo 2014, in addition to manufacturing machinery and technologies for the supporting industries by 200 brands from 20 countries, industrial part-making factory owners, engineers, production managers, and industrialists will use this event as a “Community Platform” to source new solutions, new parts, new suppliers, new partners, and new knowledge to keep up or lead the change that the promising future of ASEAN Economic Community will bring,” Duangdej Yuaikwamdee, deputy managing director of Reed Tradex, said.

Last year “Vietnam Manufacturing Expo 2013” in Hanoi was the fifth and the largest edition of the show ever. The exhibition has broken its own records in several dimensions. It is larger in terms of space. It is bigger in terms of collaborations between participating parties.

Reed Tradex reports a great number of companies and organisations, both from the public and private sectors, came together to jointly promote the strength and competitiveness of the supporting industries, especially the concerted efforts between Vietnamese and Japanese organisations who are celebrating the anniversary of the 40th year of friendship with the total number of attendants during three days reached 13,614.

Long Thanh international airport project feasibility in discussion

Vietnamese government agencies are delved into Long Thanh International Airport project to ensure investment efficiency.

In a recent discussion about the feasibility of Long Thanh international airport, Minister of Planning and Investment and chairman of the state council tasked with appraising the airport project Bui Quang Vinh asserted “We need more persuasive evidence that the project is necessary before asking the National Assembly’s approval to begin construction.”

The appraisal council, formed by the prime minister, consists of 16 members who are also government leaders. Its major function is to support the government in appraising the project’s investment forecasts before seeking the go-ahead from the National Assembly.

“With first-phase investment mounting to nearly $8 billion, we need to be sure the project is highly feasible,” Vinh told the Airports Corporation of Vietnam (ACV) which is in charge of drawing up Long Thanh International Airport (LTIA) reports.

Another member of the appraisal council, Deputy Minister of Natural Resources and Environment Chu Pham Ngoc Hien, said the project’s investment report had yet to address the project’s competitive advantages as a transport hub, although there are several airports in the region reporting stable operations and competitive quality services.

In terms of investment scope, Deputy Head of the Central Economic Committee Pham Xuan Duong said the developer needed to update the investment figures and information on scale and capacity as well as investment phases to ensure efficiency and effective use of resources.

The developer was also asked to present plans on the joint operations of Long Thanh and Tan Son Nhat airports in each development stage to avoid wasting important airport infrastructure resources.

In this respect, Vinh also asked the ACV to carefully assess the land needed for the project, as the project currently plans to absorb 5,000 hectares, much of which is currently growing valued cash crops.

“About 30,000 Dong Nai province residents would be affected by the project, so apart from resettlement the developer needs to survey and soon present job shift plans to help people move on with their lives,” said Nguyen Ngoc Long, an expert on the project’s appraisal council.

Long also stressed the importance of updating the project’s investment cost to 2013 pricing and comparing this to investments in similar airport projects in the region and around the world as well as considering ODA capital as a capital source and clearly defining the role of the state and private investors if the project follows the public-private partnership (PPP) model.

Members of the appraisal council reportedly voted on whether they agreed or disagreed with sourcing government and National Assembly approval for the project in the upcoming session in May.

“Before the results of the vote come out, the developer has 15 days to update their figures and revise their investment reports based on input from the appraisal council,” said Vinh.

In an earlier development, appraisal council members prioritised the LTIA project over expanding Tan Son Nhat airport or upgrading Bien Hoa air force base.

The reason behind this, according to the ACV, was that Tan Son Nhat is expected to reach a saturation point by 2016 when it is running at full capacity welcoming 25 million passengers a year, whereas passenger volume is expected to increase to 30.3 million by 2020 and spike to 53.4 million by 2030.

This has triggered the demand for a new airport to accommodate escalating passenger volumes.

Accordingly, the total cost for building the first phase of the Long Thanh airport would come to about $7.8 billion.

This includes $730 million for land compensation, as the project will affect 1,500 households.

Another option, expanding Tan Son Nhat, would reportedly cost $16.1 billion in compensation, $9.1 billion for construction and relocate 150,000 residents.

Turning Bien Hoa air force base into a civil airport was also regarded as less feasible, as it would require $4.6 billion in compensation and construction of a new air force base.

Another issue is that Bien Hoa is reportedly still infected with dioxin from the war, so a major investment would be required for clean-up.

If approved, the first phase of construction of LTIA would have a 25 million passenger, 1.2 million tonnes of freight capacity per year which would increase to 100 million passengers and 5 million tonnes of freight once it is fully built (estimated by 2035).

Advantages to Vietnam's textile exports to Russia

A free trade agreement (FTA) between Vietnam and the Customs Union of Russia, Belarus and Kazakhstan is expected to be completed this year, creating many tariff advantages for Vietnam's exports, especially textiles. A report by the Ministry of Industry and Trade's Vietnam Economic Times.

Russia is one of Vietnam’s comprehensive strategic partners, with bilateral trade having achieved great progress over the last several years.

According to the ministry, in the 2010-2013 period, the revenues Vietnam earned from exports to Russia increased more than 62 percent per year and Russia became the biggest market for Vietnam in terms of export growth.

In 2013, Vietnam's exports to Russia was more than 1.9 billion USD, up over 20 percent from the previous year. In the first two months of this year, Vietnam's exports to Russia reached 316 million USD, up 10.7 percent from the same period last year. The main exports included phones and components, computers, electronic products and components, textiles, garments, footwear, coffee, seafood, cashew nuts and rice.

The fourth round of negotiations of an FTA between Vietnam and the Customs Union finished in February, while the fifth round is expected to take place from March 31 to April 4 and the negotiation process is expected to end later this year.

The FTA is expected to pave the way for Vietnamese businesses to access a new, larger market with preferential tariffs.

According to the Vietnam Trade Office in Russia, once the FTA is completed, many non-tariff barriers (customs procedures, payment of goods and technical regulations, among others) in the union’s markets will be removed, many taxes will be cut and service and investment development conditions will become more favorable.

In 2013, textile exports to Russia reached 135.6 million USD, an increase of 11.02 percent over 2012, a ccording to the General Department of Vietnam Customs .

The Vietnam National Textile and Garment Group (Vinatex) said that with a population of 143 million and tariff preferences related to Russia’s accession to the World Trade Organisation (WTO) and the would-be-signed FTA between Vietnam and the Customs Union, Russia will become a key market for Vietnamese textile and garment exports in the coming time.

According to Trade Counselor in Russia Pham Quang Niem, the biggest difficulty for Vietnamese exporters is the absence of a centralised, stable trade transaction organisation in Russia, which makes it difficult for them to learn about consumer demands in this market.

Russia is an open and easy-to-please market so Vietnamese businesses trading with this market have to compete fiercely with rivals from other countries providing product of the same kind, he said. The European country is a large import market that remains potentially risky because its legal system remains inadequate and payment with Russian partners remains difficult, especially those made with letters of credit (L/C), he said.

To better access the Russian market, Niem said that enterprises should participate in annual fairs and exhibitions to directly introduce their products to Russian partners because they prefer looking for partners directly to seeking information through websites, while entering joint ventures with Russian partners to establish enterprises processing Vietnamese products in both countries to help increase sales in Russia.

Vietnamese businesses should assure a high product quality, improve product design and construct and register their product trademarks in Russia, he added.

The income and lives of Russian people have improved markedly. According to Niem, products of high quality and nice designs have attracted consumers; the quality and food safety and hygiene management systems in Russia have been operating quite seriously, and the concept of bringing cheap, average quality goods to Russia should be no longer suitable.-

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

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