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BUSINESS IN BRIEF 7/11

 Fitch upgrades Vietnam’s credit rating on improved macrostability; Word Bank says will fund IT application in agriculture; Bike market gets more hectic; Phan Thiet golf course removed; Sai Gon Hi-tech Park attracts more investment

Fitch upgrades Vietnam’s credit rating on improved macrostability

Ratings agency Fitch has upgraded Vietnam’s credit rating, citing an improvement in macroeconomic stability and stronger external balances.

Fitch said in a statement on its website on October 3 that Vietnam’s long-term foreign and local currency issuer default ratings were upgraded by one-notch from B+ to BB- with a stable outlook.

The issue ratings on Vietnam's senior unsecured foreign and local currency bonds have also been upgraded to BB- from B+.

According to Fitch, Vietnam’s inflation has been moderated to 3.2% in October this year, down 5.6% from an average of 6.6% in 2013 while economic growth remained relatively strong at a three year average of 5.6%.

Fitch said macroeconomic stability has helped Vietnam move from a current account deficit of 3.7% in 2010 to a projected surplus of 4.1% in 2014, adding that Vietnam is on track to post its fourth consecutive year of current account surplus, driven by strong export growth and remittances.

Meanwhile strong FDI inflows averaging 4.5% of GDP during 2011-2013 have contributed to a balance of payment surpluses and modest foreign reserve accumulation.

US investment news lifts HAG shares

US-based investor Global Emerging Markets (GEM) signed a VND1.7-trillion (US $80.9-million) investment agreement with the Hoang Anh Gia Lai Group yesterday.

The group said that the investment process was expected to be completed within the next three months. On the same day, the group's shares HAG rose 1.6 per cent in value, with each share being listed at VND25,500 ($1.2).

Doan Nguyen Duc, the group chairman and founder, said that he was delighted to have GEM as a shareholder and strategic investor, adding it will pave the way for other US-based investors to do business with the group in the future.

Duc pointed out that HAG's results suggested that the agricultural business in the Indochina region was on the right track, and could have enormous potential for future growth.

According to HAG, the investment agreement was advised and successfully arranged by the US-based Asia Global Capital Group and the local Bamboo Capital Group.

Established in 1993 as a small wooden furniture producer, HAG is now one of Viet Nam's largest diversified companies with total market capitalisation of $1 billion.

At present, HAG owns more than 100,000 hectares of land in Indochina, of which two-thirds are being used to grow rubber, sugarcane and corn, besides palm trees. The group is going to complete its palm oil processing plant in Cambodia and a sugar industrial complex in Laos by 2015. The rest of the land will be used for dairy and beef cattle breeding, as well as for growing more palm trees.

Recently, HAG co-operated with Viet Nam's market leader in dairy manufacturing and food processing to raise cows and bulls for both meat and milk production in the central highlands of Viet Nam, Laos and Cambodia to meet domestic and export demands.

APEC Senior Officials’ Meeting concludes with forward-looking results

The Asia-Pacific Economic Co-operation (APEC) Senior Officials’ Meeting wrapped up in Beijing on November 6 with agreements reached on a number of practical matters.

During the two-day conference, officials from 21 member economies reviewed APEC’s achievements over the past few years and discussed the future of their co-operation.

They also reached a consensus on four key issues, including accelerating the formation of the Asian-Pacific Free Trade Agreement (FTAAP), promoting co-operation of the global value and supply chains, boosting economic and technical co-ordination, as well as conducting joint research to strengthen the region’s multilateral trading mechanism.

According to Zhang Shaogang, Director-General of the Department of International Trade and Economic Affairs at China’s Ministry of Commerce, the APEC Committee on Trade and Investment decided to set up a database on the bloc’s value chain and global commercial benefit by 2018.

Additionally, plans to construct an Asian-Pacific cross-border e-commerce centre in Shanghai, China, were approved at the function.

These achievements will be tabled for further discussion during the 22nd APEC Economic Leaders’ Meeting (AELM) on November 10–11.

APEC was founded in 1989 and has 21 members: Australia, Brunei, Canada, Chile, China, Hong Kong (China), Indonesia, Japan, the Republic of Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan (China), Thailand, the US and Vietnam. It aims to promote economic growth and prosperity in the region.

This year marks the 25th anniversary of APEC, which is now the highest-level mechanism for co-operation on a wide range of issues in the Asian-Pacific region, serving as a major platform for discussions on regional co-operation.

Since the adoption of the Bogor Declaration 20 years ago, the average tariff level in the Asian-Pacific region has dropped by 12%; the total regional trade volume increased eight-fold; and nearly 200 co-operation projects are implemented in 30 different fields every year. Foreign direct investment (FDI) into the region surged to US$10.6 billion in 2011, up from US$2.5 billion in 1994.

Mekong Delta economic cooperation forum opens

The eighth Mekong Delta Economic Cooperation Forum (MDEC) kicked off in Soc Trang province on November 5, attracting the attention from ministries, sectors, localities, businesses and international investors and organisations.

Addressing the opening ceremony, Deputy Prime Minister Vu Van Ninh affirmed that the forum, held successfully for seven times, proposed many helpful mechanisms, policies and initiatives, and fostered collaboration between localities in the region, between the Mekong Delta and Ho Chi Minh City, other regions as well as the business community nationwide.

It has contributed to boosting the region’s socio-economic development and improving locals’ living conditions, he added.

With the focus on restructuring the agriculture and building new-style rural areas in the Mekong Delta, this year’s three-day forum will help facilitate the implementation of the Party and State’s policies on agriculture, rural areas and restructuring.

Hailing the importance of the Mekong Delta, the Deputy PM said that the region holds a strategic position in terms of socio-economic development, security and national defence.

With its great potential in land, water surface and human resources, the region contributes 20 percent to the country’s gross domestic product (GDP). It produces over 50 percent of the total food output, and provides 90 percent of the country’s exported rice, 70 percent of exported fruits and 60 percent of exported seafood.

However, the region is facing numerous challenges, including climate change impact, unsustainable economic growth, low infrastructure, limited high-quality human resources and high rate of households living under or near the poverty line.

Therefore, the forum is organised to seek measures to address the difficulties, and create the most favourable conditions for both domestic and international investors to run business in the region, Ninh added.

At the opening ceremony, the organising board honoured organisations and enterprises which have contributions to the region’s social welfare fund with a total amount of 430 billion VND (20.21 million USD).

Governor of the State Bank Nguyen Van Binh also took the occasion to present 50 billion VND to Soc Trang province to help build a 120-billion-VND general hospital in Tran De district.

Business matching program bears fruit

Enterprises in HCMC and other provinces have clinched more than 430 contracts with a total value of over VND19 trillion since the city launched a supply-demand connectivity program nearly three years ago.

Le Ngoc Dao, deputy director of the HCMC Department of Industry and Trade, unveiled the impressive numbers at a recent meeting with industry and trade leaders.

The third conference of the program takes place on October 31 with the participation of more than 1,100 enterprises from 38 cities and provinces nationwide.

To effectively implement the trade cooperation program between HCMC and other localities in the southeastern and southwestern regions in 2011-2015, the HCMC Department of Industry and Trade kicked off the first connectivity program in December 2012 to help localities sell farm produce, processed food, and specialties to distributors and retailers in HCMC.

The meeting that year attracted 198 enterprises from 14 provinces and cities and 43 deals were struck. As a result, many special products like pia cake of Tan Hue Vien in Soc Trang Province, gourd-shaped pomelo, gold bullion-shaped watermelon, Cao Lanh mango in Dong Thap Province entered the distribution systems of Co.opmart, Citimart, Big C and Lotte Mart, among others in the city.

One year later, the program was expanded and the number of participating businesses rose to 347. Not only enterprises of 20 southern provinces but also those of Bac Giang, Bac Kan and Quang Ninh provinces in the north joined the program and inked 394 trade deals with supermarket and restaurant chains in HCMC.

The program enabled enterprises from other provinces to find outlets for their products in HCMC while partners here in the city were able to expand their distribution networks to other parts of the country to increase sales.

In addition, enterprises in HCMC joined the price stabilization programs in other provinces like Vinatexmart and Co.opmart.

Talking about the fruit of the supply-demand connectivity program, Ta Minh Son, director of Tu Son Supermarket in An Giang Province, said his supermarket has benefited much from the program.

Son added that of 100,000 products at the supermarket, 70% are supplied by partners in HCMC and annual growth at the supermarket is 30-35%.

With good results in previous years, the scale of this year’s program is bigger with enterprises coming from 38 localities nationwide, including HCMC, 20 in the southern region and 17 in the northern, central and Central Highlands regions.

Int’l furniture fair kicks off in HCM City

The 2014 Vietnam Furniture and Home Furnishing Fair – VIFA Home 2014 – opened in Ho Chi Minh City, showcasing furnishings, floorings, textiles, house wares and decorative items of more than 115 enterprises in over 470 pavilions.

The four-day fair, which runs from November 6- 9, has attracted 20% more enterprises than last year and they came from all over the world, Nguyen Quoc Khanh, chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (Hawa), said.

The event provides manufacturers, architects, consultants, interior designers and distributors an opportune occasion to meet, exchange and establish networks.

Plastics and Rubber Industry Exhibition launched

The 14th Vietnam International Plastics and Rubber Industry Exhibition (VietnamPlas – VietnamRubber 2014) opened at the Saigon Exhibition and Conference Centre (SECC) in Ho Chi Minh City on November 5.

It features 350 booths showcasing products of 230 businesses from 10 countries and territories, including Vietnam, Australia, the Republic of Korea, India, Japan, Saudi Arabia, Malaysia, Taiwan, China and Thailand.

The Vietnam Plastics Association is participating in this year’s event with 30 booths, while the Vietnam Rubber Association is running five stands to show off their outstanding materials and products.

Several Vietnamese businesses are taking this opportunity to demonstrate their latest high-tech equipment. Duy Tan Plastics Corporation is presenting its entire production process, from mould design, injection and blow molding, to printing and labeling. Van Su Loi Machinery Trading Limited Company is showing off numerous power-saving machines in plastics production.

The Taiwanese organiser, Chan Chao Limited Company, expects the fair to bridge Vietnamese and international enterprises and help local businesses access up-to-date technology in order to improve their competitiveness.

The fair runs until November 8.

Bond assoc mulls credit rating agency

The Vietnam Bond Market Association (VBMA), which groups 54 banks, securities firms, insurers, fund managers, finance companies and law firms, is working on a plan to set up a credit rating agency (CRA).

If the agency is forthcoming, it would be the first of its kind in the country to be established based on Decree 88/2014/ND-CP on CRA issued by the Government in September. The decree will take effect next month.

VBMA general secretary Do Ngoc Quynh said the association has discussed with foreign partners and is now looking for suitable partners to establish a CRA in the country.

CRA has been familiar to international financial markets but it is a new model in Vietnam, where bonds have not been rated by independent rating organizations. As a result, Vietnam’s bond market has far lagged behind standards of the world.

CRA is a positive sign to the market and investors as it is expected to boost transparency of the debt market, Quynh said.

Speaking at VBMA’s 2014 annual meeting last week, Do Viet Dung from the Finance Ministry’s bank and finance department said around VND30 trillion worth of corporate bonds are issued each year.

The total outstanding loan of the bond market has been around 2.3% of gross domestic product (GDP), a small ratio compared to regional countries. However, the corporate bond market still has huge potential.

“We hope that there will be CRA establishment applications in the coming time. The Ministry of Finance is considering presenting a specific project to the Government to regulate the number of CRAs in the country,” Dung said.

Then, the ministry will evaluate and adjust bond issue conditions stipulated by Decree 90 to suit the development of the bond market. The ministry will consider adding a condition that bonds must be rated by one CRA or more.

VAMC is going to build a corporate bond information center with technical support of International Finance Corporation (IFC). Members of the association are collecting data for the center, which will help improve market transparency and facilitate policy building of administering agencies.

The association will also work out plans to develop new products for the bond market and announce a benchmark inter-bank lending rate.

Woes dog SMEs

Small and medium enterprises (SMEs) have shown signs of being succumbed to hard times though the business landscape in the country has begun improving, according to a report of the National Financial Supervisory Commission.

The commission said the business efficiency of the group of 100 enterprises with combined assets of less than VND100 billion has declined steadily since 2008.

The return on equity (ROE) and return on asset (ROA) of this group tumbled from 4% and 2% in June 2008 to minus 2% and minus 1% respectively in June this year. In October, their total corporate income tax arrears increased 12.9% against late 2013.

In the mid-term, private investment will remain limited as credit will not grow as strongly as expected due to low aggregate demand. Enterprises are still grappling with financial constraints and the real estate market has shown little sign of recovering.

However, many companies have performed better in January-October. A survey of over 800 to 1,000 non-financial firms listed on local stock exchanges HOSE and HNX, and UPCoM, a market for unlisted public companies and some public firms, indicated their average revenue has increased since the second quarter of 2013.

In the first six months of this year, their average revenue surged 20.1% year-on-year, the strongest rise since 2009. Their total assets and equity also jumped 19.44% and 18.92% respectively.

The figures proved that business confidence of the sector has improved as the stock market has moved up. Ending the second quarter of 2014, the VN-Index gained 18.16% from the previous quarter.

The Business Climate Index (BCI), a regular barometer of the business sentiment among European companies in Vietnam provided by the European Chamber of Commerce, climbed to 74 in the third quarter of this year from 66 in the previous three months.

In this year’s first half, ROA and ROE of non-financial enterprises reached 1.49% and 3.7%, up by 0.28 and 0.54 percentage point year-on-year. Corporate income tax also jumped 37% after falling 7% in the first six months of last year.

Between January and October, there have been 60,000 newly-established firms while 13,000 companies have resumed operations after halting business earlier. However, nearly 54,000 enterprises have stopped operations or been dissolved.

Word Bank says will fund IT application in agriculture

The World Bank (WB) will fund US$200-250 million to support the application of information technology (IT) in agricultural development of Vietnam, Victoria Kwakwa, Country Director of the WB in Vietnam, said on October 30.

So far, the WB has funded around US$100 million for the IT application in Vietnam’s agriculture, Kwakwa told the Daily on the sidelines of the closing session of the Asian-Oceanian Computing Industry Organization information and communications technology, or the ASOCIO ICT summit.

The global lender has supported Vietnam to apply IT in agro and aquatic development, and deploy the information system for the agriculture sector to raise output.

Speaking at the session in Hanoi on October 30, Kwakwa said agriculture is a key sector that has helped Vietnam build a successful economy in the past two decades.

Therefore, the country should improve output and efficiency of the sector, and IT can help do that.

IT will play a major part in agricultural restructuring in Vietnam and help the sector develop to a higher level, she said.

Le Quoc Doanh, Deputy Minister of Agriculture and Rural Development, said agriculture is being restructured to raise its output and competitive capacity, and IT application is important for Vietnam to reach the goal.

Pham Kim Son, head of the Institute of Policy and Strategy for Agriculture and Rural Development, said Vietnam’s economy depends much on agriculture, and developing agriculture means developing the country’s economy.

Since 2010 to date, Vietnam has led the world in exporting some agricultural products and if agricultural restructuring goes along with the application of IT, the country will see some breakthroughs in the future, Son said.

Deputy Prime Minister Vu Duc Dam told the event that IT brings more opportunities for farmers and Vietnam will lose those chances if it does not enhance the application of IT in agricultural development.

Mobile marketing, brand building discussed

An overview of the mobile marketing market and the steps of building brands based on mobile technology were presented at the Mobile Marketing Association Forum Vietnam 2014 (MMAF) in HCMC on October 30.

The forum themed re-imagining mobile was attended by 400 representatives from companies active in different fields in Vietnam like fast-moving consumer goods, electronics, finance, aviation, retail and technology as well as leading marketing experts.

Experienced speakers from leading companies shared mobile marketing trends with participants as well as discussed ways to get closer to consumers through mobile marketing.

In Vietnam, mobile phone penetration has reached 91.5% of the urban population while the proportion in rural areas is 89.7%.

According to Kantar Media, smartphone users account for 34.3% of the country’s population. The people aged 20-24 are the biggest group to own smartphones (56.5%) and they mainly use their devices to access the Internet to watch television.

New consumer behaviors and how consumers can know about a certain brand, product or service via the mobile channel are the major questions of marketing experts.

At MMAF, the organizers also introduced the Smarties Vietnam Awards 2014 which recognizes innovative and creative mobile marketing campaigns in the country.

Bike market gets more hectic

The local motorbike market is witnessing a fiercer competition as motorcycle producers vie for bigger share by launching new models.

Yamaha Motor Vietnam (YMV) on Monday unveiled three new versions of Nouvo scooter including standard FI 2015, RC and GP with prices ranging from VND33.9 million to VND36 million a unit.

YMV’s survey showed that its Nouvo had a market share of 14% among sports scooters in Vietnam last year. YMV has set a target of becoming one of the top motorcycle makers of sports scooters.

The launch of Nouvo FI 2015 equipped with global positioning system (GPS) aims to compete against Honda’s AirBlade scooter.

The local market has seen a fierce competition among major producers such as Honda, Yamaha and Piaggio among others. Sales of scooters are faring better than those of gear-box motorbikes.

According to motorcycle makers, scooters are making up about 40% of the domestic market for two-wheeled vehicles. Last year saw the total sales of scooters reach nearly 2.8 million units.

Aside from the domestic makers, some motorbike importers have also unveiled new scooter models.

Motorrock imported high-class Benelli Caffé Nero 150 scooter earlier this month, which is seen capable of competing with Honda’s high-class SH models. Its price is equivalent to SH 125 and around VND10 million cheaper than SH 150.

Some motorbike traders are also seeking to branch out into the market segment of 50cc and clutch vehicles to which Honda Vietnam has paid less attention. Over the years, Honda has mostly produced gear-box motorbikes and 110-125cc scooters.

However, Honda Vietnam began unveiling a clutch model of MSX125 priced at VND60 million earlier this month to challenge Yamaha’s Exciter 135cc.

NFSC puts 2014 credit growth at 9%

The National Financial Supervisory Commission (NFSC) has projected credit growth in the banking system at 9% this year though it might pick up significantly in the two final months of this year.

If NFSC’s forecast is right, the nation would fail to realize the credit growth target of 12% or higher for 2014 as announced by the central bank’s governor Nguyen Van Binh earlier this year.

According to a report prepared by NFSC for the Government’s regular cabinet meeting in October, local banks reported credit growth of 7.26% at the end of September, higher than the 6.2% in the first nine months of last year.

Meanwhile, figures released by Binh at the Government’s press briefing this month showed credit had grown 7.46% as of October 20 compared to 6.43% in the same period of last year.

The central bank aims to obtain a credit growth rate of 12-14% this year but it is not easy to reach the target, said NFSC vice chairman Truong Van Phuoc.

Though the central bank eyes high credit growth this year but a 9% rate is still fine, Phuoc said.

Regarding concerns over higher year-on-year economic expansion despite low credit growth, Phuoc said VND4,000 trillion worth of credit could fuel economic growth. Therefore, the nation’s gross domestic product (GDP) still expands despite lower-than-expected credit growth.

Phan Thiet golf course removed

The Prime Minister has approved removing Phan Thiet golf course, better known as Ocean Dunes, from the national zoning plan for golf courses until 2020.

The national zoning plan for golf courses was approved by the Prime Minister in 2009 and adjusted in May 2014.

As reported by the Government portal, the government of Binh Thuan Province is required to settle all issues related to the project following regulations and ensure efficient land use, environmental protection and sustainable development.

The Government has told the Ministry of Planning and Investment to revise the list of golf courses nationwide in line with the socio-economic development of localities and report the result to the Prime Minister.

In November last year, Rang Dong Joint Stock Company acquired the 62-hectare golf course for US$20 million. In March this year, the Phan Thiet-based company informed member golfers that the golf course would be closed, so its members would be transferred to Sealinks, which is some 10 kilometers from Phan Thiet golf course.

But members of the golf course still criticized the company over the shutdown and demanded proper compensation. The company explained that the golf course in the central area of Phan Thiet City had incurred losses over the past 20 years since it was put into service while the investment, maintenance and operation costs of the golf course were high.

Therefore, in December last year, Rang Dong asked for the provincial government’s permission to change the land of Phan Thiet golf course into a residential area. The province approved in principle what the company proposed and then forwarded the proposal to the provincial Party Committee for consideration in March 2014.

Despite strong outcries from member golfers and unsettled compensation with them, Rang Dong still closed the golf course to players in April. One month later, the province requested the Government to remove the golf course from the national zoning plan for golf courses, but on May 25 the Prime Minister issued Decision 795 allowing the golf course in the national zoning plan.

More than four months later, the Prime Minister agreed to take the golf course out of the zoning plan.

Rang Dong calculated that if the golf course is converted into a residential project and the State budget will collect more than VND1 trillion. The company plans to spend VND4 trillion developing the residential area comprising of villas, garden houses, townhouses, a kindergarten and greenery.

Nguyen Manh Hung, deputy secretary of the province’s Party Committee, once said as the business efficiency of Phan Thiet golf course was low, its tax contribution to the State was small, so the land use conversion would help reduce losses for the company.

Dai-ichi Life posts strong new premium rise

Dai-ichi Life Insurance Company of Vietnam Ltd. (Dai-ichi Life Vietnam) on October 30 said its new business premiums in the first nine months of this year increased 33% year-on-year to more than VND640 billion.

Total premiums of the Japanese-invested life insurer surpassed VND1,690 billion in the period, up 36% over the same period last year. Its preliminary profit was estimated at VND160 billion.

In January-September, Dai-ichi Life Vietnam opened 14 new general agencies in localities, bringing the total number of offices and general agencies nationwide to 130. This steady expansion helped consolidate the company’s third position on the local market.

In July, Dai-ichi Life Vietnam launched its Health Care Rider. This is was considered the first comprehensive medical insurance plan on the local life insurance market that combines the benefits of in-patient, out-patient and dental care, with the claim payment for each disease amounting to VND630 million.

Also in July, the company reached the milestone of serving more than one million customers after seven years of operation in Vietnam.

Dai-ichi Life Vietnam was established in January 2007 as a member of Dai-ichi Life Group headquartered in Japan. This is the first foreign market that Dai-ichi Life expanded its business through a 100%-owned subsidiary.

Dai-ichi Life Vietnam got approval from the Ministry of Finance to increase its chartered capital from US$25 million to US$72 million one year after it operated in this market.

Doosan Vina ships desalination evaporator to Saudi Arabia

Doosan Heavy Industries Vietnam (Doosan Vina) has shipped the final of four 4,500-ton desalination evaporators to the Yanbu Phase III seawater desalination project in Saudi Arabia.

The company said in a statement that this is the eighth desalination plant that the company’s water shop has completed since it started production in 2009.

Ryu Hang Ha, senior vice president of Doosan Heavy Industries Korean and CEO of Doosan Vina, said in the statement that the Yanbu Phase III contract for four desalination units was signed in March last year and that the company had completed shipment of these “Made in Vietnam” products from its Quang Ngai complex.

Each of the four evaporators is equal to the size of a football pitch, several stories tall and capable of producing 95 million liters of fresh water per day. The four units will provide enough water to meet the daily needs of several million people in Saudi Arabia when all are put into operation.

Credit growth expected at 10% this year

Though the central bank cut deposit rates and adopted measures for monetary easing in an effort to spur credit growth, HSBC Bank projected local banks would obtain a credit growth rate of 10% this year.

The 10% credit growth is lower than the target of at least 12% set by the State Bank of Vietnam for this year.

HSBC said in its recent report that the central bank is trying to do what it can to boost domestic demand and hoped that the reduction of the deposit cap will fuel spending and lead banks to lower lending rates.

“We believe the move is part of a seasonal boost to achieve the 12-14% credit growth goal as well as push up domestic demand. While we expect credit growth to accelerate, we forecast lending to expand by 10% this year and next,” it said.

Early this week, the central bank announced that it would cut the dong deposit rate to 5.5% from 6% from on October 29 and the U.S. deposit interest rate to 0.75% from 1% per annum.

In the report, HSBC expected the nation’s gross domestic product (GDP) to gradually accelerate thanks to strong export performance but still remain below trend. Inflation will likely be manageable too as oil prices are subdued and supply of food is ample.

“Low domestic demand and limited depreciation of the currency also help temper inflationary pressure. Given the subdued appetite for consumption, we do not expect the reduction of the deposit cap to spur spending significantly,” the bank said.

Meanwhile, ANZ in a quick report released on October 29 said the continued softness in inflation may give the central bank scope to further ease monetary policy in the next two months in the hope of reaching its 12-14% credit growth target.

Headline inflation declined further to 3.23% year-on-year in October, taking to an average to 4.47% since early this year. Unless economic activity picks up in the last couple of months of the year, inflation will likely be below 5%.

However, ANZ said sluggish credit growth at 7.85% as of October 24 is far from the central bank’s target.

The central bank expected that further monetary easing will sufficiently prop up credit growth to reach its full year target of 12-14%. Despite the ample liquidity, banks remain cautious of extending credit so long as there is lack of clarity with the structural problem of non-performing loans.

“We expect extraordinary incentives to be introduced to the banking sector in the last couple of months of the year in aid of credit growth. However, we are cautious about whether these incentives will really alter lending practices,” ANZ added.

Last year, the credit growth target was realized following temporary incentives. Upon their expiration, outstanding credit contracted in the first quarter of this year.

Transporters forced to register 3% charge change

All transport enterprises changing their freights by 3% either side of the previous registered frames will have to register the new rates with competent agencies, according to a circular due to take effect on December 1.

According to the joint circular of the Ministry of Finance and the Ministry of Transport, in case the adjusted rates do not exceed 3%, firms still have to notify the competent agencies in writing.

For example, a company that declared freight charges at the Department of Finance on June 1, 2013 and then revised up the fees by 2% on January 1, 2014 will have to send a report on the change to the department.

If it continued to raise the charges again by 2.5% on June 1, 2014, then the aggregate change is 4.5%, higher than the regulated rate of 3%. In such a case, the company will have to register the new charges with the finance department.

Transport operators on fixed routes, buses and taxis are required to work with the competent agencies at least five days before adopting the new charges.

Apparel industry poised for strong growth

Vietnam’s apparel output can double in the next 10 years owing to free trade agreements, but local enterprises will be the losers if they do not prepare themselves for international integration, said the apparel association.

Nguyen Dinh Truong, vice chairman of the Vietnam Textile and Apparel Association, or Vitas, said many opportunities will be ushered in by FTA for local enterprises to grasp, but they must prepare themselves first. Truong was speaking on the sidelines of the 14th international trade fair for apparel machinery and technology known as VTG 2014 that opened in HCMC on October 29.

“Favorable conditions will be there for local enterprises when several FTAs such as the Vietnam-South Korea FTA, the free trade pact between Vietnam and the EU, the Trans-Pacific Partnership agreement, and the trade pact with Russia, Belarus and Kazakhstan are signed next year,” Truong told the Daily.

Thus, in the next ten years, Vietnam can become a powerhouse in the global apparel industry, he said.

However, “opportunities come alongside challenges,” Truong said, stressing local firms need to improve productivity and quality, and sharpen competitiveness.

The domestic apparel industry has fared quite well this year. The industry has obtained export revenue of US$18 billion in the year to date, growing 19% year on year, and as the country spent US$11 billion on apparel imports, the industry enjoyed a trade surplus of US$6.2 billion in the period.

It is likely Vietnam will earn US$24.5-25.5 billion in apparel exports this year, or a year-on-year growth rate of 16%. The vice chairman also noted that many orders have been placed by foreign buyers for next year, heralding good business for the industry.

Pham Xuan Hong, chairman of the HCMC Association of Textile, Garment, Embroidery and Knitting, said foreign buyers tend to shift orders to Vietnam to capitalize on such free trade agreements, but local producers are still slow in upgrading technology to seize the opportunities.

VTG 2014 is taking place at Tan Binh International Exhibitions and Conventions Center until this Saturday, featuring 300 booths of 170 local and foreign companies. The event is also attended by several multinational corporations that supply technology and equipment for the apparel industry, such as Artrend, Da Kong, Eksoy, Tajima, and Welltex among others.

Exhibitors at the event remarked that the demand for apparel technology and equipment is poised to increase strongly in the next few years.

Jorge Fernandes, sales director of the Portugal-based Sroque that attends the trade fair for the first time, said Vietnam, Cambodia and Indonesia are the countries with strong potential for the apparel industry. Therefore, via Hong Kong’s Artrend as the distributor, Sroque is boosting sales of textile machines in Vietnam.

Ngo Thanh Hiep, director of HCMC-based Tam Phu Hiep Company, said his company this year has sold 60 textile machines, and the total number to be sold this year is expected at 80 sets compared to 60 sets last year.

Good Japanese foods at low prices

More food shops and eateries have been opened in HCMC in recent times to serve sushi, Udon noodle, takoyaki (grilled octopus cake), rice served with seaweed and other Japanese foods at reasonable prices.

M-H sushi shop on Nguyen Van Cu Street in District 5 is the pioneer in serving sushi at low prices. Opened in 2011, the Japanese-style trolley sells sushi rolls at VND16,000-110,000, and the popular dishes of the shop are fried sushi rolls with Furai and Maki mayonnaise sauce and salmon/tuna sushi.

Those who pass the shop during its opening hours from 6 p.m. to 9 p.m. can see a long line of diners waiting for their turn to be served. Some have to wait for even 40 minutes but they are happy to do that as besides low-priced Japanese foods they can observe the chef preparing sushi rolls.

A food court at Aeon Mall shopping mall in Tan Phu District offers locals a chance to taste Japanese foods at cheap prices. Customers can eat at the shop or take away sushi whose prices are from VND5,000 to VND10,000 per roll.

Many food shops in town serve takoyaki, a ball-shaped snack made of wheat flour and filled with minced octopus, teriyaki grilled chicken, crab and sausage to gourmets. Tako Oh shop on Nguyen Thai Hoc Street in District 1 is a popular venue to enjoy this dish at VND7,000 per cake.

What people like most about takoyaki cake is its taste and beautiful yellow cover, diverse sauces and the eye-catching toppings on this cake. As usual, a chef sprinkles grinded seaweed and dried fish on top of a cake with takoyaki sauce and mayonnaise. While diners are waiting for foods to be served, they can see the chef grilling the cake.

There are a wide selection of Japanese-flavor drinks at the shop with prices ranging from VND23,000 to VND28,000. Matcha milk tea is a favorite choice of many people.

Marukema Udon, a newly-established restaurant at the corner of Truong Dinh and Ly Tu Trong streets, is also an emerging dining venue for diners who prefer a budget eatery serving Japanese foods. There’s an open kitchen for guests to learn about the cooking process of making the noodle.

The restaurant sells Udon noodles at VND39,000-79,000 and tempura and sushi at VND10,000-30,000.

Prospects for the African-Middle Eastern markets

Over recent years, Vietnam businesses have made considerable inroads into the African and Middle Eastern markets, but most have failed to realise their full potential and achieve large-scale market leadership.

For these businesses, the key to reaching the next level will be learning to do business in the African and Middle Eastern way, rather than simply trying to impose the Vietnamese business model in a foreign market.

As of the end of 2013, Vietnam had invested US$728.3 million in 18 projects in 11 African nations.

Viettel alone had invested US$400 million in the telecoms sector in Mozambique and Cameroon, while Vietnam Oil and Gas Group (Petro Vietnam) had pumped more than US$300 million into the oil and gas field in Algeria, the Republic of Congo and Madagascar.

In 2013 the nation’s total import-export turnover with Africa peaked at just over US$4.3 billion and in the first half of this year it continued its upward trek hitting just more than US$2 billion.

The country’s key export items to Africa are rice, telephones and components, seafood while key imports from the market are cashew nuts, cotton and iron and steel waste.

The private sector has also invested in areas such as construction, automobile, garments and textiles, electronics, beverages, wood processing, gold and mineral resources.

On the other side of the coin, nine African nations have invested US$185.63 million in 72 projects in Vietnam.

Tran Quang Huy, head of the Ministry of Industry and Trade (MoIT)'s Africa, West Asia and South Asia Market Department says there are tremendous opportunities for future cooperation in the African market.

The Government has been diligent in its efforts to advance cooperative relations with African nations and promote trade and investment in areas of the nation’s strengths.

However, local businesses still face many challenges. For example, exports to Africa should be labelled in English and French or the language in the resident country, which is no easy task, Huy explains.

They should also strictly comply with laws and regulations pertaining to labelling of the foreign country, Huy added.

Hanoi Trade Promotion Centre Director Nguyen Thi Mai Anh says businesses should devise strategic plans to increase export turnover and not rely on the the centre in the future.

To realize Vietnam’s full potential, enterprises must show a strong and visible commitment to the African and Middle Easter markets, empower their local operations, and invest in local talent and pay closer attention to the needs of African consumers.

What do businesses have to prepare for?

Director Le Hoang Oanh from Avina Logistics Company in turn said logistics have remained a difficult issue for local businesses that want to export to the African and Middle East market due to cumbersome formalities of transport costs and bonded warehouses.

For his part, Vietnam lawyer Ngo Van Hiep, notes local businesses also have run into difficulties due to low prestige of African partners and should take precautionary measures to avoid being cheated.

Mr Huy suggests Vietnamese ministries should strengthen relations with the African-Middle East nations’ relevant agencies by conducting surveys and exchanging delegations to take full advantage of the market.

Huy adds the state agencies should help businesses and associations with trade promotion activities by participating in fairs and exhibitions, and imparting market information.

He also emphasizes the need to improve forecast work and sharpen competitive capacity to implement export programmes more effectively.

It’s essential for business enterprises to raise their game if Vietnam is to win in the African and Middle East markets, Huy says.

Sai Gon Hi-tech Park attracts more investment

Investment in the Sai Gon Hi-tech Park in the first ten months of this year amounted to nearly US$1.9 billion, its management said.

It included $1.4 billion for the Samsung CE Complex Project to research, develop, and manufacture hi-tech consumer electronics.

Licensed last month it is the second $1 billion project at the park after Intel's chip factory approved in 2006.

"This [Samsung] project indicates the [competitiveness] of the SHTP brand name," Le Bich Loan, deputy director of the park, said.

She said work is underway on infrastructure for the Samsung project, which will begin production next year.

Another major investor this year is the Sai Gon Industry Corporation, which will build a $257 million IC (integrated circuit) plant to manufacture RFID chips, bank cards, and energy management chips.

Construction of the plant would begin soon and it is scheduled to go on stream in 2017, the company said.

OneHub Sai Gon Complex, a $130 million joint venture between the Singapore-based Ascendas and Saigon Bund Capital Partners (UK), will be a services sector project built on a 12ha area.

SHTP's tenants will include Transimex Hi-tech Park Logistics Co, which will set up a bonded warehouse and logistics services facility at a cost of VND300 billion (over $14 million).

Le Hoang Quan, chairman of the city People's Committee, said Samsung's investment at the SHTP shows the effort made by the city authorities in selecting FDI into HCM City. The city has focused on attracting investment in hi-tech industries instead of large-scale labour-intensive projects.

With the licences issued in October, total investment in the 12-year-old park has exceeded $4 billion, according to its management board.

Dr Le Hoai Quoc, head of the SHTP, said nearly 40 per cent of the workers in the park are college and university graduates, and the value of the products their companies have churned out so far has exceeded $9 billion, and most of them have been exported.

He added that through 2020 the park would focus on efforts to attract hi-tech investors and increase the rate of locally made parts.

VAMC needs more power, funding

The Viet Nam Asset Management Company (VAMC), set up to buy and sell bad debts from commercial banks, needs to be given greater autonomy as part of efforts to revive the property market, experts say.

Speaking at a recent conference organised by property investment magazine CafeLand in HCM City, they said the company also needs more cash to buy bad debts.

Other measures that they proposed to revive the property market included administrative reforms, Land Law amendments and permission for foreigners to invest in Viet Nam's housing sector.

Many banks are "half-dead" because they are unable to deal with bad debts piled up by real estate projects, the conference heard.

Speakers also highlighted other problems including excessive supply over demand and difficulties in bringing down housing prices further.

Ho Ba Tinh, an economic consultant with the Tai Viet Joint Stock Company, said the Vietnamese property market has gone through three somewhat similar development phases, hitting a peak and then weakening.

The market surged in the 1993-1994 but froze from 1995 to1999, soared again in 2001 and 2002 and faced a downturn from 2002 to 2006, hit a peak in 2007- 2008 and has slumped until recently, when some signs of a recovery can be seen, he said.

Duong Thuy Dung, deputy director and head of research and consulting services at CBRE Viet Nam, said investors are now more confident about releasing housing products into the market because consumption has reached 58 per cent.

In the past nine months, 8,400 apartments were put on sale in HCM City, more than in the previous two years. Fifty per cent of these have been sold.

More promotion programmes, wide application of deferred payments, a gradual increase in consumer confidence and key traffic infrastructure constructions have made the housing market more attractive, Dung said.

Tran Trong Tuan, director of the HCM City Construction Department, told the Vietnam News Agency that continued revival of the property market requires efforts from all sides including investors, customers and management agencies.

Immediate and long-term financial solutions and improvements in State mechanisms are also needed, he said.

He advised investors to grab market opportunities by planning appropriate strategies based on improved customer care.

Tuan also noted that just 3.36 per cent of 1,400 housing projects in the city have been completed, with 49 per cent are mired in various difficulties.

Since the beginning of this year, 5,700 apartments have been sold in the city, a year-on-year increase of 83 per cent. Most of these were apartments with areas smaller 70sq.m.

Funds needed for waterway transport

Waterway transportation in HCM City has huge potential but it has yet to be developed due to limited investment.

The city has around 975 km of waterway that can be used for transport. Around 700 km of rivers and canals are divided into 106 routes for municipal management.

The city is linked with the Mekong Delta by the Sai Gon River, Dong Nai River, and the Te and Doi canal systems, which are connected with Cho Dem – Ben Luc rivers and other areas of the country as well as with the international sea transport system. Seaports include Sai Gon, Long Tau, and Soai Rap.

"It is difficult to develop because the waterways have not been connected with road, railway and port systems," Dr. Pham Sanh, a transport expert, was quoted as saying in Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper.

In addition, bridges in the city are too low for some boats, and big ships cannot travel on shallow canals.

"Waterway transport hasn't been included in development plans for the city," he added.

Most commodities are transported by road.

"If waterway transport were developed, there would be less traffic congestion on roads and crowding at seaport," Sanh added.

By 2020, sea transport in HCM City would reach 200 million tonnes of cargo. To implement the Viet Nam Sea Strategy, the Prime Minister approved the HCM City's Transport Master Plan last year.

In the master plan, the city would develop public transport on a large scale, as well as multi-transportation means and logistics systems. To reach the goals, the city is moving seaports out of the downtown area and widening passage for bigger ships.

Experts have also called on the Ministry of Transport to devise a transport infrastructure strategy.

HCM City has 74 ports in four regions: Sai Gon, Tan Cang Cat Lai, Nha Be and Soai Rap.

The seaports can only receive 30,000 tonne-ships, and most of them are located inland, which lead to higher expenditures.

However, Hiep Phuoc seaport recently began receiving 54,000-tonne ships.

In the near future, Soai Rap River along with the Cai Mep-Thi Vai International ports will receive 100,000 tonne-ships at ports in Vung Tau, Dong Nai and HCM City, according to the HCM City's Transport Department.

By 2020, HCM City would have many new seaports, and narrow passages would be upgraded, according to the master plan. A seaport system in Cat Lai, Nha Be and Hiep Phuoc would also be operating by then.

HCM City also wants to encourage investors to pour money into infrastructure and waterway tourism.

This year was chosen as the year for waterway tourism in HCM City.

Foreign ownership row rages

How to expand the right for foreigners to buy houses in Vietnam was one of the most controversial issues in the debate on the draft Housing Law at the National Assembly last week.

According to the Ministry of Construction that drafted the law, widening foreign property ownership rights would help stimulate the market and supposedly shift some of the country’s ‘up-market’ housing.

According to deputy Truong Trong Nghia from Ho Chi Minh City, reform is obviously necessary and foreigners should be able to sub-let their own property, something which they are currently banned from.

However, many other deputies insisted that foreigners should have less rights than Vietnamese.

Deputy Tran Van Minh from Quang Ninh claimed the draft was far too generous to foreigners.

“The draft law said that any foreigners who have a three month visa to stay in Vietnam would be allowed to buy a house. This condition must be re-considered, in order to avoid property speculation,” Minh said.

Deputy Nguyen Thi Quyet Tam, also from Ho Chi Minh City, said that the revised Housing Law must clarify what were the long-term consequences of allowing foreigners to have equal rights to Vietnamese to hold property.

“It could be a channel for speculation and we must carefully consider how to avoid this,” Tam said.

Moreover, she added that there is a difference in laws between Vietnam and other countries. In Vietnam, land is considered an asset of the whole people and managed by the state. Meanwhile, in other countries, land is owned by private landlords which made it easier to transfer.

Tam said the law should be dragged out in order for foreigners to understand how Vietnamese property law worked.

The draft law also added a regulation that all property purchases needed to be made through banks to ensure that there would not be speculation and currency laundering.

To avoid disputes between owners and developers in apartment buildings, the draft law was also required by the deputies to clearly identify the public and private space, parking and facilities areas.

In the five years since foreigners were allowed to buy housing in Vietnam, less than 250 have taken up the opportunity despite well over 80,000 foreigners working and living in Vietnam.

The appallingly low figure has been attributed to the fact there is a complete lack of realism over property rights for foreigners.

Foreign nationals currently cannot sub-let their own property and are not allowed to even sell their housing when leaving the country.

According to the draft law, foreign individuals and organisations who purchase and own housing in Vietnam will have to pay income tax on their rent and will be forced to give written notice to housing management authorities at a provincial level.

In addition, foreign organisations that own property will be restricted to only being able to accommodate their own employees.

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

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