HCM City firms get preferential loans

Twenty three companies situated in HCM City processing zones and industrial parks yesterday got bank loans on easy terms under a programme initiated two years ago by the central bank and the Government.

Six banks — Sacombank, Vietcombank, VietinBank, Agribank, VIB Bank, and Indovina — lent VND917.6 billion (US$43 million) at 7 per cent for short-term loans and 10 per cent for medium- and long-term loans.

"For the past two years the banking – enterprises linkage programme has been implemented to ease the funding and interest difficulties faced by companies in HCM City," Nguyen Hoang Minh, deputy director of the State Bank of Viet Nam in HCM City, said at the ceremony held to sign the credit contracts.

"But this is the first time the programme has come directly to enterprises in processing zones and industrial parks."

Last year around VND13.7 trillion ($650 million) was lent under it. This year another VND11.9 trillion ($580 million) was lent to 506 companies, 29 household businesses, and five co-operatives.

Through the rest of this year the SBV plans to promote the programme in all 24 city districts and throughout the country.

Despite the fact that the sum of money and number of companies eligible for the soft loans are limited the programme has managed to achieve impressive results: it has directly contributed to reducing difficulties faced by businesses, propagated information about the support provided by the Government and banking system to companies, and sensitised banks to businesses' needs.

"Processing zones and industrial parks are a very promising and stable market for banks with 1,300 companies and 273,000 workers," Nguyen Tan Phuoc, deputy head of the HCM City Export Processing Zones and Industrial Parks Authority, said.

"I hope banks provide more support to enterprises in processing zones and industrial parks."

Banks have so far lent VND75 trillion ($3.6 billion) to companies in the city's zones and parks, while foreign banks have lent another $600 million to foreign companies there.

Cement, steel sales on the rise

Cement and steel consumption could rise 8 to 10 per cent in the first half of 2014 against the same period last year, after declining in the past few years.

Chairman of the Viet Nam Cement Association, Nguyen Quang Cung said that cement consumption in the first six months was nearly 33 million tonnes, up roughly 10 per cent year on year.

Cement consumption, both in the domestic and export markets to date this year, have rebounded to register stable growth similar to 2010 after three years of decline, Cung said.

Cung forecast that price and sale of cement in the second half of the year will be continuously stable, helping the cement industry register sales of between 65 to 70 million tonnes, up roughly 9 per cent against last year. Of the total, domestic consumption will make up roughly 49-50 million tonnes.

Currently, the country's total cement output is more than 70 million tonnes, and fully meets domestic and export demands this year, the association said.

The steel industry has shown the same trend, with consumption in H1 estimated to reach nearly 2.5 million tonnes, up 8 per cent against the same period last year.

Vice Chairman of the Viet Nam Steel Association (VSA), Nguyen Van Sua said that after including other steel products such as steel and iron sheets and steel pipes, the steel industry's consumption in H1 was more than 5 million tonnes, up 12 per cent year on year.

Steel production in June alone was roughly 445,000 tonnes while consumption was roughly 411,000 tonnes.

The steel price in June was estimated to rise roughly 5 per cent against last month due to a rise in transport fees.

In June, Pomina and Vina Kyoei steel producers increased their ex-factory steel prices by VND100,000 (US$4.69) per tonne to VND13-13.1 million ($610.3-615). The retail steel price was VND15.5-16 million ($727.7-751.17) per tonne.

It was forecast that steel consumption this year, both in domestic and export markets, will be roughly 12 million tonnes, up 5 to 7 per cent against last year.

However, supply in the steel industry still exceeds demand, causing steel plants to run approximately 40-60 per cent of its designated output, according to the VSA.

VietJetAir to launch Danang-Can Tho service this month

VietJet Aviation Joint Stock Company (VietJetAir) has announced its plan to commence weekly Danang-Can Tho services this month to meet rising demand for air travel between the center of the Mekong Delta and that of central Vietnam.

The airline, the second largest in Vietnam after Vietnam Airlines, will fly between Danang and Can Tho on Tuesdays, Thursdays and Saturdays from July 22 in the initial time with a flying time of one hour and 30 minutes. As scheduled, the airline’s flights from Danang will depart at noon and from Can Tho at 2 p.m.

VietJetAir said tickets for the new route were made available Wednesday for booking on its website and at ticketing offices as well as agents nationwide. The carrier will provide nearly 1,100 seats a week on this route.

The Danang-Can Tho route had been unveiled earlier by a leader of Can Tho City. The city’s vice chairman Dao Anh Dung told the Daily last month that the city will provide some VND9 billion for VietJetAir in the first year to help it offer low fares on the route. The sum will come from the city’s budget and other sources.

“July will be the right time for launch of the route as this is the peak holiday travel season in summer. VietJetAir will make the service daily if it is successful,” Dung said.

Le Hung Dung, chairman of Can Tho City, said this city and other provinces in the Mekong Delta had been waiting for this air service for a long time and that demand for non-stop air travel between Can Tho and Danang could be met this July.

At a conference held in Can Tho in February this year, Tran Chi Cuong, deputy director of the Danang Department of Culture, Sports and Tourism, said many travelers in central Vietnam wanted to fly non-stop to Can Tho City, instead of stopping over at Tan Son Nhat airport in HCMC as at present. Direct air services will help them save 20% of cost and time.

Cuong called for airlines to launch flights between Danang and Can Tho this summer and pledged support for them. “We guarantee 20-25% seat occupancy on each flight,” he said.

Can Tho’s vice chairman Dung said there would be more domestic flights connecting Can Tho with Khanh Hoa and Dalat and scheduled international services to Siem Reap, Phnom Penh, Bangkok and Taiwan.

Last year, the Mekong Delta attracted more than 20 million travelers, including 1.6 million international visitors, and gained tourism revenues of over VND5 trillion. Currently, only Vietnam Airlines conducts flights to and from Can Tho Airport, which can handle three million passengers a year.

Industry ministry gets tough on energy guzzlers

The Ministry of Industry and Trade will issue a circular next year regulating energy consumption ceilings for key industries in a move to prevent them from using energy-guzzling machines and equipment.

The circular will set criteria for energy consumption of steel, paper and pulp, plastics, food and beverages industries, said Trinh Quoc Vu, head of the ministry’s Sciences, Technology and Energy Saving Department.

Vu told the Daily on the sidelines of a conference on the legal framework and policies for effective energy use in HCMC on Wednesday afternoon that the ministry will ask the Government for approval to apply the strict energy consumption criteria.

Manufacturers will be heavily fined or forced to suspend production if they fail to meet the criteria. Vu said such criteria are deemed as technical barriers to stop imports of outdated machines and equipment as well as machinery production using old technology.

In Vietnam, annual energy consumption grew 11% in 2005-2010 but has soared more than 17% in recent years due to surging demand in the country, Vu said.

A study by the World Bank revealed that energy consumption in Vietnam will continue high growth in the years to come.

Vu noted high electricity consumption will lead to an imbalance between supply and demand in the future and that after 2016, the country will likely have to import coal and gas to quench the domestic thirst for energy.

Energy experts said steel industry is now the biggest energy taker, accounting for 5.26% of the total electricity consumption every year in the country.

The country now has 65 steel and iron mills with combined annual output of 100,000 tons. Although those facilities currently run at only half of their designed capacity, they consume 3.5 billion kWh of electricity every year.

Experts attributed huge electricity consumption of the steel industry to the still-widespread use of old furnaces.

CII to invest in water supply

HCMC Infrastructure Joint Stock Company (CII) is in talks with Saigon Water Corporation (Sawaco) to participate in a project to supply water in district 12, Tan Binh, Tan Phu, Go Vap and Hoc Mon under a build-own-operate-transfer (BOOT) format.

The HCMC government has told local agencies to negotiate with CII over the project in which the latter would buy all the secondary water pipelines from Sawaco or Sawaco would use these pipelines as capital contribution to the venture.

If negotiations are successful, CII will buy clean water from Sawaco at wholesale prices and retail it to users in the districts at the prices regulated by the city’s government. In addition, the company has plans to invest in new pipelines to bring running water to more locals.

CII plans to develop the project within 15 years before transferring it to Sawaco.

Bach Vu Hai, deputy general director of Sawaco, said the BOOT format is new in HCMC but this is in line with the local government’s policy to open the water supply sector to more investors.

Hai said that as CII has an advantage in mobilizing capital, it will be able to invest in new pipelines to supply water to more users and help reduce water leaks.

HCMC now suffers an average water loss rate of 34%. Sawaco said the target is to reduce the ratio to 32% next year, 28% in 2020 and 25% in 2025.

The HCMC government aims to make running water accessible by all the population by the end of this year from the current 89.43%. To realize this goal, more than VND4.5 trillion should be spent on over 1,100 kilometers of new pipes.

Tran Dinh Phu, general director of Sawaco, said the corporation would increase its daily supply of water from 1.65 million cubic meters to 2.25 million cubic meters by the end of next year when Thu Duc Water Plant No. 3 and Tan Hiep Water Plant No. 2 come online.

The first plant has a daily water processing capacity of 300,000 cubic meters and the latter can process 300,000 cubic meters a day.

Bringing the additional water to more households in districts 3, 5, 7, 9, 10 and Binh Thanh will require more than VND4.52 trillion to install more than 1,170 kilometers of new pipes. But Phu said Sawaco could arrange less than half the amount.

Hai pointed out one of the major problems for the local water supply sector is that there are many water treatment plants but there is a lack of pipelines since it is difficult to attract investors to water pipeline development  projects that often need huge capital but take a long time to recover capital.

Private companies have got involved in a number of water processing plants but none of them has shown interest in pipeline construction projects.

ICDREC targets 150,000 SG8V1 chips this year

The Integrated Circuits Design Research & Education Center (ICDREC) of the National University HCMC is proceeding with a plan to produce 150,000 SG8V1 chips for domestic consumption this year following its success in applying the chip to various fields.

Ngo Duc Hoang, director of ICDREC, said the SG8V1 chip has been applied to more than 30 commercial products in different areas, including itinerary surveillance devices for vehicles and goods inspections.

A pilot scheme to make SG8V1 was completed late last year and commercial production of this product began early this year. ICDREC expected to turn out 150,000 SG8V1 chips for domestic market this year.

The average price of an 8-bit chip made by foreign companies is around VND75,000 (US$3.52) for an order for a batch of 5,000 chips, according to ICDREC. This center said it will sell a SG8V1 chip at VND40,000 for a batch of more than 1,000 chips.

ICDREC can meet the domestic demand for 30,000 chips a year for itinerary surveillance devices for motorcycles and cars.

ICDREC estimated around one million 8-bit chips will be needed every year for the power and cargo transport sectors in the country.

The HCMC People’s Committee will continue asking research centers, including ICDREC, to conduct new projects on integrated circuits this year and next. The city also plans to have the first integrated circuit factory in Vietnam built at a cost of around US$300 million.

Between now and 2020, HCMC will focus on development of information technology and communications, biotechnology, pharmaceutical and chemistry, nano-technology and new materials, and new energy sources.

The city’s government will also give priority to development of hi-tech industry by funding a program to develop the integrated circuit industry with an aim to post revenues of US$100-150 million in 2017.

Honda Vietnam unveils new Accord

Honda Vietnam has unveiled the 9th generation of the Accord car with a price tag of VND1.47 billion, including valued-added tax (VAT).

The new Accord is the first model in Vietnam equipped with Honda’s new ‘Earth Dreams Technology’ engine. This 2.4-liter DOHC 16-valve i-VTEC engine with a 5-speed automatic transmission uses a valve-control system to combine high power output with fuel efficiency and low emissions.

The new Accord is also installed with the Eco Assist system consisting of the ECON mode which controls the engine, transmission and air conditioning performance to enhance fuel consumption.

The model features Honda’s first use of LED headlights, which provide improved light distribution for improved visibility and enhanced nighttime driving performance but require one-half the electrical power of conventional halogen/projector headlights.

The car comes with six colors and are available at Honda automobile dealerships nationwide with a retail price of VND1.47 billion and a three-year or 100,000-km warranty.

Denmark funds climate change, energy projects

Denmark will provide an official development assistance (ODA) amount of US$90 million for Vietnam to implement projects related to climate change adaptation and efficient use of energy in 2014-2015.

The funding will go to improvements in water resources and other areas, Danish Ambassador to Vietnam John Nielsen said at a conference on support for businesses in HCMC last Friday.

Denmark has funded Vietnam over US$1.3 billion in ODA since 1993. Denmark’s priorities for the coming years are to help Vietnam realize green growth and small- and medium-scaled enterprises enhance efficient use of energy.

The European country is financing a program in Vietnam for enterprises of both countries to carry out joint projects in renewable energy, clean water, environmental hygiene, waste treatment, food, healthcare and education sectors. More than US$74 million has benefited 300 projects of Danish and Vietnamese firms operating in Vietnam.

Regarding green growth for Vietnam, Nielsen said the conditions for investments in this area, including renewable energy, in Vietnam are not favorable since many foreign enterprises fail to find Vietnamese partners as there are a small number of local enterprises operating in this sector.

According to Nielsen, the Vietnamese market holds much potential for renewable energy and efficient use of energy but there remain huddles to them. Many foreign wind power and solar power firms have been keen to invest in Vietnam but have not been unable to make it for fear of low power prices.

Vietnam needs more energy and Danish enterprises have technology to help the country realize this goal, but companies of the two countries have not had many opportunities to cooperate in the energy sector. Therefore, energy is one of the fields Danish companies are interested in, Nielsen said.

There are currently more than 130 Danish enterprises in Vietnam and most of them operate in the sectors of textile, garment, information technology, marinetime, food and beverage.

Techcombank, Generali ink bancassurance deal

Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has entered a bancassurance agreement with Italy’s life insurance firm Generali Vietnam to help sell insurance products for the latter through its network.

One important part of the deal is that Techcombank will give advice to its customers on insurance products and services offered by Generali Vietnam to ensure financial safety for them and their family members.

Generali Vietnam expects its agreement with Techcombank to boost its sales via banks. Previously, the insurer clinched a similar deal with Saigon Commercial Bank (SCB).

Sergio Di Caro, general director of Generali Asia, said Vietnam is one of the markets where the Italian group wants to focus its investments on.

Generali Vietnam now has more than 40,000 individual and 200 corporate customers.

Exports record year-on-year increase of 14.9%

The total export turnover in the first half of 2014 reached US$70.9 billion, increased 14.9% from the same period in 2013.

The sum gathered the monthly average figure of US$11.8 billion, US$1.5 billion higher than the same period in 2013.

Thirteen items have joined the US$1 billion export club. It is expected that 22 items will be listed in the club this year, one more from 2013. It is the first time phones and garments have exceeded the turnover of US$20 billion.

Over the past five months, Thai Nguyen province attained more than US$1 billion in exports. This year, 20 provinces and cities nationwide are expected to record a turnover of over US$1 billion.

Viet Nam’s total export turnover is estimated to reach US$ 150 billion this year.

The nation enjoyed a trade imbalance of US$1.3 billion over the past six months.

Semen Indonesia plans to inject another $300 million into Vietnam to build a new plant as part of its business expansion in South East Asia, despite concerns about market oversupply.

Semen Indonesia president Dwi Soetjipto was quoted by Indonesia’s Jakarta post as saying that it would expand the production capacity of its Vietnamese subsidiary Thang Long Cement Company by establishing a new plant with a total production capacity of 1.5 million tonnes of cement per year.

The new cement plant is expected to start construction within next year and will take three years to complete. Unlike Thang Long Cement’s existing plant located in the north of Vietnam, the new facility will be in the south.

“Thang Long has reached its production capacity, which means we have to expand and add a new plant to satisfy market demand,” he explained.

Located in Cai Lan deep sea port in northern Quang Ninh province, Thang Long Cement is one of the leading producers in Vietnam with a total production capacity of 2.3 million tonnes a year.

In late 2012, the company teamed up with a leading cement group from Indonesia – Semen Gresik – which acquired 70 per cent of the company, helping them more than double Thang Long’s chartered capital from VND1.75 trillion ($83 million) to VND4.2 trillion ($200 million).

Since it became a strategic shareholder, Semen Indonesia has helped Thang Long Cement focus its marketing activities on highly profitable domestic and foreign markets.

“We also have long-term contracts with large foreign partners to export cement and clinker to many countries in Asia, Africa, and Latin America. This has helped us to enhance the brand in overseas markets,” said Semen Indonesia’s marketing director Amat Pria Darma last year.

Besides the Vietnam market, Semen Indonesia is aimed at becoming a leader in the ASEAN cement industry and is in the midst of carrying out massive expansion in the region.

Foreign investors have seized opportunities to enter Vietnam’s cement sector through mergers and acquisitions as many Vietnamese cement companies are on the verge of bankruptcy.

Over the past three years, the country has seen 10 M&A deals in the sector. According to the Vietnam Association of Foreign Investors (VAFI), the deals show reflect the growing overseas interest in the local cement sector.

In fact, foreign-invested firms now account for nearly 30 per cent of the Vietnamese cement sector’s total output.

Managing director Tan Sri Francis Yeoh of Malaysia’s YTL Cement Bhd, a potential investor in Vinaconex’s already operating $285 million Cam Pha Cement facility in Quang Ninh province, was quoted as saying, “The group has a presence in Vietnam. We are already providing power services in the country and hope to further enhance our presence.”

Vietnam was estimated to produce a supply of 8-12 million tonnes of cement per year from 2010-2012. The oversupply was a result of a rash of new cement factories in recent years. At present, Vietnam has 106 cement factories with a total annual capacity of 63 million tonnes.

The Ministry of Construction has estimated that cement consumption will reach 62-63 million tonnes in 2014, a mere 1.5-3 per cent increase compared to 2013. It has estimated exports will reach 14 million tonnes this year, on par with 2013.

H1 FDI rockets in HCMC

This year’s first half saw foreign direct investment inflows to Ho Chi Minh City more than double to almost $1.08 billion year-on-year.

At the latest investment certificate granting ceremony, Chairman of the Ho Chi Minh City People’s Committee Le Hoang Quan said the first-half performance showed foreign investors’ confidence in the southern economic hub’s business climate and their commitment to long-term business.

He added that the city would continue to take measures to ensure transparency in administrative procedures and security for investors, while providing them with further assistance through the availability of an adequate infrastructure system and proper human resources training.

During the first half of the year, the $1.08 billion went towards 169 new projects with the total registered capital of $967 million, and $110 million went into 53 existing projects.

Quan presented the five latest investment certificates to foreign-invested projects with $220 million in the combined capital. The investments were from Japan, Germany and Hong Kong. Among them was the $39 million German House project in District 1, designed to provide a collective home for all German institutions operating in the city and for interested German entrepreneurs. The current German Consulate General in District 3 will also be relocated to the building.

Another investment certificate went to Japanese leading retailer Aeon for construction of a $128.5 million shopping mall inside private Hoa Lam-Shangri-La Healthcare Park in Binh Tan District. This plans to be Aeon’s fourth largest mall in Vietnam. The first, Aeon Tan Phu Celadon, also located in Ho Chi Minh City, opened this January. The second aims to be inaugurated in adjoining Binh Duong province this November. Aeon is set to open the third, located in Hanoi, next year.

Aeon Vietnam also received an investment certificate to add $43.3 million to its total investment capital for Aeon Tan Phu, which now totals $235.7 million. The Japanese corporation, which is ramping up its investment in overseas expansion, has poured $512 million into Vietnam over the past four years, said Aeon Vietnam general director Yasuo Nishitohge.

The fourth investment certificate went to Hong Kong shoe and bag maker Freetrend Industrial A to put an additional $8 million into its already operating factory at the city’s Linh Trung Export Processing Zone, raising its total investment capital to $58.2 million. The company was affected by violent protests in mid-May due to China’s illegal stationing of an oil rig in Vietnamese territorial waters, but was not dissuaded from increasing its investment.

Meanwhile, Japanese company Nikkenseimitsu was permitted to set up its Vietnam precision engineering arm with $711,000 in investment, located in the Tan Thuan Export Processing Zone.

Nikkenseimitsu’s senior managing director Takashi Sakakibara said this investment was expected to increase in the next two years, direct towards mainly mechanics, machinery manufacturing, and automobile components. He added that his firm had decided to invest in Ho Chi Minh City, as it offered a good business investment climate with favourable policies and an abundant labour force.

Quan said the metropolis reported GDP growth of 8.2 per cent in the first half of 2014, higher than the 7.9 per cent seen in the same period last year. He added that the city had just inaugurated its second navigation channel for supramax 50,000DWT vessels to dock at the city’s Saigon Premier Container Terminal in Nha Be District. This is a new chapter for the city’s seaport operations, multimodal transport capability and logistics. The city also has plans to further dredge the channel to make it deep enough for container vessels up to 70,000 DWT to call on the port.

Over 7 percent increase in petrol price must be reported to PM

Presiding over a regular cabinet meeting on a draft petrol trading decree, Prime Minister Nguyen Tan Dung asked businesses to report to him in case they increase petrol retail price over 7 percent.

The new decree is being amended to replace the old one issued by the Government on October 15, 2009.

Companies will be enabled to hike the prices less than or equal to 3 percent and must report to relevant ministries of 3-7 percent increase, Mr. Dung said.

The new decree should entitle wholesalers to reduce the petrol prices themselves as long as they inform authorized agencies.

The State targets to run the economy in accordance with the market rules. Besides, the Government will issue suitable policies to assist the poor and those under the preferential treatment, said the Prime Minister.  

Bond market spikes on improved CPI

According to the Asian Development Bank, Vietnam has the fastest growing bond market in East Asia’s emerging markets during the first quarter of 2014. The growth of the bond market can be credited to Vietnam successfully managing to sustain macroeconomic stability, contain inflation, and maintain economic growth over the past three years.

The consumer price index (CPI) growth fell from 23.02 per cent in August 2011, to 7.5 per cent in August 2013, to 6.04 per cent in December 2013. In June 2014, CPI rose 4.98 per cent on-year, recovering from the bottom of 4.39 per cent reached in March 2014 which posted the lowest since August 2009.

Inflation in 2013 was just 6.04 per cent on year, well below the 8 per cent level set by the National Assembly’s socio-economic development resolution and within government target of 6 per cent to 6.5 per cent. This was the second year Vietnam has contained inflation within the National Assembly’s and government’s targets.

The State Bank of Vietnam’s (SBV) determination to effectively control money supply combined with declines in the world prices of major basic commodities contributed to the fall in Vietnam’s CPI.

Trade and foreign direct investment (FDI) were also major contributing factors. Significant improvements in Vietnam’s balance of trade and strong FDI inflows have brought large amounts of foreign currency into the country. The SBV capitalised on these flows to stabilise foreign currency reserves with radical measures including raising required reserves and capping deposit interest rates in US dollars; restricting offshore borrowings by domestic entities and reducing the position in foreign exchanges of banks. This resulted in Vietnam having its highest level of foreign currency reserves in its history, giving the SBV the power to support the value of the VND. In spite of the recent 1 per cent devaluation, the VND has been largely unchanged over the past two years. A stable currency has prevented increases in the prices of imports and has therefore contributed to the lower inflation rates.

While Vietnam’s CPI has been on a downwards trend since last September, the CPI of neighbours like Indonesia, Philippines and Thailand have been on the rise.

Low inflation has helped to make Vietnam’s bonds more attractive than those of its peers. We have calculated the inflation adjusted or “real” bond yields in these four countries, comparing the one-year bond yields and the annual CPI a year later. The results show that Vietnam’s one-year bonds have continuously offered the highest real return from April 2011 until now. Vietnam’s bonds have provided positive real yields since April 2011. In the meantime, real yields of Indonesia have been declining until recently and have been negative since February 2012. Those of the Philippines stayed below zero for most of this time. Thailand’s real yields seemed to have moved in tandem with those of Vietnam, but at significantly lower levels.

The low levels of CPI maintained since the middle of 2012 brought about two outcomes in the bond yields. First, we note that the yields 10-year and two-year bonds have been on the decline in general since April 2012, except for the rise in two-year yields during the summer of 2013 following the exit of foreign investors and rising CPI. Second, the decline in 10-year yields has been less than those in the 2-year tenure, leading to the yield spread widening since then.

Previously, the yield spreads were negative from December 2011 to April 2012, implying an inverted yield curve. Their shift from negative to positive positions suggested that the yield curves became normal and then steepened. As shown in the chart, the yield curves first shifted downwards from December 14, 2011 to April 17, 2012; then reached its steepest shape by June 20, 2014.

The movements are all compliant with the theory, which says that an inverted curve can serve as an indication that the economy will soon experience a slowdown, which causes future interest rates to give even lower yields. Before a slowdown, it is better to lock money into long-term investments at present prevailing yields, because future yields will be even lower.

Thanks to the slowing of CPI and the stability of the foreign exchange rates, Vietnam has attracted foreign capital into its bond market, making it among the most robust bond market in the region.

Phu Quoc Island set for construction wave

Vietnam’s Phu Quoc Island, recently cherry-picked as one of the world’s ten ‘lost paradises’ by online travel agent Zuji, may soon lose its unspoilt reputation as developers descend on this popular destination.

Phu Quoc currently offers international travellers warm turquoise waters, secluded sandy beaches, and lush mountainous lanscapes protected within its national park.

However, Vietnam’s government intends to turn Phu Quoc from a sleepy backwater to a major mass market destination similar to Phuket or Bali. As part of this turn towards the mass market, international travellers can now enjoy a 30 day visa-free stay in Phu Quoc following a government decision which took effect this March.

The island is still largely undeveloped, and hotel rates are largely higher than on the Vietnamese mainland. But unlike Phuket, visitors can find little to do on the island after dark and there is a lack of other hospitality focused infrastructure, which poses questions about such a rapid expansion.

Higher construction and operational costs are another concern of investors, according to a special report on Phu Quoc, which property consultant CBRE released last week.

The construction costs for a standard low-rise five-star hotel varies from $1,000-1,500 per square metre depending on the materials used, the consultants employed, and the construction and management companies contracted. The costs in Phu Quoc are 20-30 per cent higher than the mainland.

Electricity and water costs on the island are also higher. Before 2014, a typical four-star resort in Phu Quoc was allocated power at VND9,300 ($0.4) per kWh for 10 hours a day and had to use generators for the remaining 14 hours at a cost of VND12,500 per kWh ($0.6). However, since the island was connected to the national power grid, prices have fallen to VND1,509 for a kWh, a fifth of their previous cost.

Food and beverage (F&B) costs are another concern. According to the CBRE report, F&B costs for a four-star resort in Phu Quoc can account for 30-35 per cent of total revenue compared to 20-25 per cent on the mainland.

A shortage of qualified, English-speaking employees is also a big concern for the island’s hospitality industry. There has been fierce competition among high-end hotels for good employees which has pushed up labour costs on the island to a higher level than on the mainland.

Phu Quoc’s hotel market will fundamentally change when the Vinpearl Phu Quoc Resort & Spa opens at the end of 2014, with 750 rooms, a 27-hole golf course and an entertainment park.

The five-star 120-key Salinda Premium Resort & Spa is now being fitting out and will be also put into operation in 2014. Other new projects have also kicked off in recent months, including the five-star Crowne Plaza Phu Quoc Hotel, the four-star Novotel Phu Quoc Resort, and the 24-ha Sunset Sanato Premium Complex. All of these projects are located on Bai Truong Beach and are scheduled for completion in 2015-2016.

Environmental procedures hit businesses

Many enterprises have complained about administrative procedures regarding natural resources and the environment, according to a report announced by Vietnam Chamber of Commerce and Industry (VCCI).

Speaking at a dialogue with the Ministry of Natural Resources and Environment in Hanoi last week, Nguyen Quoc Hiep, chairman of the Vietnamese Association of Construction Contractors, said land procedures had made life hard for enterprises since they often caused delays in their construction projects.

For instance, if an enterprise wants to develop a project, it has to ask for approval from local authorities. The proposal is sent to the government but then it will be sent back to agencies at lower levels for consultation.

Finally, the proposal will be sent to the local authorities again to issue a decision to the investor. The process is time consuming as the proposal is normally passed around different agencies.

Nguyen Hung Quang, director of Hung Quang law firm, said there have been a lot of inconsistencies in land-related laws such as Land Law and Law on Real Estate Trading. As a result, many enterprises, households and individuals have met difficulties in land leasing, use or transfer.

Therefore, Quang emphasized the importance of having specific rules on application scopes of the two laws to deal with the problems.

Most enterprises at the event also called on the ministry to streamline its administrative procedures on land management and make land management more transparent.

Dau Anh Tuan, head of VCCI’s legal department, said the report collected suggestions from 219 large and over 8,000 small and medium-sized enterprises on administrative procedures on natural resources and environment conducted last year.

According to the report, the environment ministry scored a poor performance rating among the ministries having the most interaction with the business community. Some 55% of enterprises surveyed said land administration procedures were troublesome.

HCM City’s supporting industries underdeveloped

Though supporting industries are crucial for economic development, HCMC has yet to find effective measures to attract investments in them.

Speaking at a seminar in the city last Friday, HCMC vice chairman Le Manh Ha said the concepts of supporting and hi-tech industries as well as the status and development orientations of the sectors have not been clearly defined, resulting in their haphazard development.

This problem has hindered the implementation of a plan to local content in production and eroded the attractiveness of the country’s investment environment, Ha said.

Le Hoai Quoc, head of Saigon Hi-Tech Park Authority, said identifying the decisive factors for supporting industries development will help the city boost their growth.

The city should zone specific areas for supporting and high-tech industries and has consistent policies to back these sectors.

Vu Van Hoa, head of the HCMC Export Processing and Industrial Zones Authority (Hepza), said Vietnam has yet to determine key products to develop suitable supporting industries, and build up a mechanism and policies to assist investors. There is a lack of policies for supporting industries as well.

While Japan and South Korea deem supporting industries as vital, Vietnam has not attached much importance to them, Hoa said.

Hirotaka Yasuzumi, managing director of the Japan External Trade Organization (JETRO) in HCMC, called for Vietnam to focus its investments on specific areas for supporting and high-tech industries. This will form a network connecting foreign-invested and domestic enterprises in the production chain, thus facilitating the science-technology transfer process.

In fact, the biggest challenges for enterprises are capital and technology. Most of them are small and medium-sized enterprises (SMEs) with weak financial capability and low technologies.

Therefore, enterprises should receive assistance in tax, manpower training, credit and administrative procedures to make strong investments in supporting industries.

Experts and delegates at the seminar also agreed that current policies are not strong and effective enough to drive up supporting industries.

Hoa from Hepza said the Government has issued policies such as export-import tax incentives, investment credits and financial support for SMEs but in fact, the incentives are the same at those for other sectors.

Quoc from Saigon Hi-Tech Park said it is necessary to improve the incentives and encourage firms to set up a science and technology development fund.

Modern urban area to go up on Saigon Newport site

Saigon Newport in HCMC’s Binh Thanh District will stop all facilities in May next year to make room for a modern urban area, according to Ngo Minh Thuan, executive vice president of operation at Saigon Newport Corporation.

The corporation has informed shipping lines and customers of a roadmap on the suspension of services to develop the port site into a multi-purpose urban complex.

Thuan said the port would stop receiving empty containers except those used for immediate cargo loading from the beginning of July. Therefore, customers will return the empty containers to other facilities of the corporation such as the inland clearance depots of Tan Cang-Long Binh, Tan Cang-Song Than, Phuc Long, Tan Cang - Cat Lai Port and Cai Mep Container Terminal.

The corporation has asked customers who have their goods kept at its stores No.9, No.11 and No.12 to complete clearance by August 20 this year.

The port will halt serving container vessels except those which unload goods at Container Freight Station (CFS) storehouses from September 1. Later, it will call off packaging service from October 1 except rice packaging at the piers and CFS storehouses as this service will be available until March.

Commodities will not be allowed at the CFS storehouses from next March but at the CFS storehouses of Cat Lai Port instead. Operations of Saigon Newport’s facilities will officially end in May next year.

A business development executive of New Island Limited Company said shipping lines and companies will not meet difficulties with the shutdown of the port as the corporation has informed them in advance.

Previously, the HCMC government approved the scale-1/500 zoning plan for the Tan Cang complex comprising a multi-functional urban area.

CMC sets up R&D institute

CMC Corporation (CMC) has established a research and development (R&D) institute with an operational budget of VND100 billion (some US$4.7 million) after 21 years of operations in the market.

CMC has invested much in the institute to research and develop products and services incorporating high-tech in order to enhance competitiveness for its member companies. The corporation currently has seven affiliates in information technology and telecommunications sectors, with a total number of 1,600 employees.

The institute will participate in a number of research projects, cooperation programs for training and theme seminars.

Nguyen Trung Chinh, chief executive officer of CMC, said the institute has been set up to boost research and application of new technologies to the corporation.

“To survive in tough competition, CMC should create an advantage in research activities, scientific applications and technological development. The institute is very important to enhance competitiveness of the corporation in a long run,” Chinh said.

Previously, CMC spent nearly VND50 billion on R&D activities. Chinh expected the institute will help attract finance from foreign organizations, the nation’s national development research and investment fund, and other sources.

Besides CMC, other major technology companies in Vietnam, including Viettel and FPT have established R&D institutes.

Japan aids Vietnam’s agricultural development

Japan has pledged to support Vietnam to develop a modern agriculture sector, from production to processing and distribution in order to help the country improve the value of farm produce and farmers increase their incomes.

The pledge was made by Hayashi Yoshimasa, Japanese Minister of Agriculture, Forestry and Fisheries, at a Vietnam-Japan dialogue on agricultural cooperation held by Vietnam’s Ministry of Agricultural and Rural Development and the Japanese agriculture ministry in Hanoi last week.

Yoshimasa said Vietnam’s economy has grown impressively since the nation implemented an open-door policy (more than two decades ago) and agriculture is among major contributors. However, the agriculture sector has not achieved sustainable growth as productivity and quality of farm produce are low and there has not been a supply chain for this sector.

As the labor force in agriculture makes up a majority of Vietnam’s population, agricultural development will lead to an improved life for people in rural areas and a balanced development of parts in the country.

Cooperation between Japan and Vietnam has developed over the years. In recent years, Japan has provided technical and financial assistance for Vietnam’s agriculture sector.

Vietnamese Minister of Agriculture and Rural Development Cao Duc Phat said in the coming years Vietnam and Japan will focus on cooperation in sciences, and new technologies for processing and post-harvest in agriculture. The objective is to add value to foods and foodstuffs of the country.

Accordingly, the central province of Nghe An will be chosen for a pilot scheme to build irrigation systems and control watering as well as apply a proper amount of pesticide and fertilizer to increase yields and value of agricultural products.

Thanks to its ideal climate, the Central Highlands province of Lam Dong will be home to processing and developing farm produce. Hanoi and HCMC will give priorities to distributing products and assisting private enterprises in investing in cold storage facilities to keep products fresh.

Yoshimasa said many Japanese companies are greatly interested in Vietnam’s agriculture sector and want to cooperate with Vietnamese firms to develop and expand markets and business operations in this market.

Job opportunities await fresh graduates in city

Job opportunities abound for fresh graduates, especially for those of business schools, said experts and employers at a career day held at the HCMC University of Economics last Saturday.

However, fresh graduates can grasp those opportunities only if they have good qualifications, communications skills and knowledge of foreign languages.

Tran Hoang Ngan, vice rector of the HCMC University of Economics, said  employers now pay more attention to recruiting those with good professional knowledge and practical skills and ability to quickly adapt to a real-life working environment.

Tran Anh Tuan, deputy director of the HCMC Forecast Center of Manpower and Labor Market Information, said all students want to have good jobs after leaving university but with little or no experience they should start with low positions first to learn necessary skills.

Employers care more about skills than diplomas, Tuan told the career day.

The event offered 4,000 jobs from participating companies.

Statistics of the HCMC Forecast Center of Manpower and Labor Market Information showed HCMC needs 150,000 employees in the second half of this year, including around 55,000 in the third quarter.

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