Foreign companies take shortcuts into Vietnam

Foreign firms are fast-tracking their entry into Vietnam’s lucrative advertising and communications market by building alliances with local partners.

Samsung Group-owned Cheil Worldwide’s Cheil Vietnam Limited Company last week illustrated the trend by inaugurating a joint venture with Vietnam’s Mekong Marketing Communications Corporation to provide a full marketing business with a focus on digital marketing services.

Cheil Worldwide is Korea’s largest advertising group. It set up a representative office in Vietnam a few years ago and wanted the new joint venture to grow into one of Vietnam’s top three advertising agencies in the next three years, said Cheil Vietnam director Dion Lee. The inauguration came shortly after WPP, the world leader in marketing communications services, announced its wholly-owned global public relations and public affairs firm Burson-Marsteller was to launch Burson-Marsteller Vietnam.

Burson-Marsteller Vietnam is a joint venture with local partner Chu Thi Company Limited with the foreign company holding a majority stake. Chu Thi Co is a leader in Vietnam’s content industry – its founder Chu Thi Hong Anh has been associated with WPP since 1995 and has served as chairwoman for JWT and Mindshare in Vietnam. WPP stated that the investment was part of the group’s continued strategy of developing its networks in fast growing markets and sectors, with Vietnam being one of the fastest growing markets in the world.

WPP has been operational through its companies in Vietnam for more than 10 years.

Last year, it acquired Who Digital and establishing a joint venture with OgilvyOne. Earlier, the firm acquired a 20 per cent share of Smart Media and WPP’s media unit GroupM took out holdings in three subsidiaries of DacvietVAC Group Holdings. WPP businesses and associates in Vietnam generate revenues of $50 million and employ 1,000 people.

In a similar development, in early March 2012, Edelman, a world leading independent public relations firm, announced its buy-out of AVC Communications, a wholly Vietnamese-owned public relations and marketing firm founded in 2000. The move came in response to the growing demands from Edelman’s clients.

“Because its [Vietnam’s] immediate and medium growth prospects are one of the best in Asia-Pacific, our clients are pounding at our door for communications help to navigate the Vietnam market,” said Edelman president Richard Edelman. Tran Thi Thanh Mai, general director of TNS Media Vietnam, said WPP was an example of aggressive and non-organic expansion where foreign firms acquired local operating companies and developed them.

“Foreign companies acquiring or cooperating with local companies can obviously take advantage of their local partners’ strength, while being able to save time and costs to consolidate their presence in the country,” said Mai. Le Quoc Vinh, CEO of Le Bros - a leading Vietnamese-owned public relations firm, said a deep understanding of the local market, a rich client base and domestically established relationships were what foreign players were looking for.

“Thus, teaming up with a local company is the quickest way for a foreign company to approach the domestic market,” he said. Vietnam is home to around 5,000 advertising and communications firms, most operating in Hanoi and Ho Chi Minh City. The industry’s revenue almost doubled from $555 million in 2008 to $1 billion in 2011, according to Vietnam Advertising Association figures. Foreign firms are soaking up 70 per cent of the local market share.

New fertiliser plant to grow rural output

A urea fertiliser plant in northern Ninh Binh province kicked-off production last week in a move that should reduce Vietnam’s reliance on imports.

The $667 million project developer state-run Vinachem said this plant was a key national project in terms of ensuring food and energy safety for Vietnam. Vinachem deputy general director Chu Van Tuan said operations at the plant in Ninh Phuc Industrial Zone would help stablise domestic fertiliser market.

With an annual production capacity of 560,000 tonnes, the plant will reduce the reliance on urea fertiliser imports of Vietnam, which currently spends about $1.7 billion importing urea fertiliser annually according to Vinachem.

Vinachem has targeted satisfying the domestic fertiliser demand for agricultural production by 2015 with exports to follow. Also in its pipeline project is the expansion plan of Ha Bac nitrogenous fertiliser plant in northern Bac Giang province which will see production capacity rise from the current 180,000 tonnes to 500,000 tonnes per year.

Vietnam at present has operational Ha Bac, Phu My with an annual capacity of 800,000 tonnes and Ca Mau urea fertiliser facilities, which are able to produce 1.78 million tonnes of urea per year, meeting 71 per cent of the domestic demand at around 2.5 million tonnes.

The $900 million Ca Mau fertiliser factory in the southernmost Ca Mau province, the largest of those having state-run PetroVietnam’s investment, officially opened in January 2012, nearly four years after construction.

Together with Phu My, the 62 hectare factory has a design capacity of 800,000 tonnes of urea fertiliser per year and will make a considerable contribution to fertiliser supply for agricultural production in the Mekong Delta region.

In a similar development, privately-run Cong Thanh Group is also working on the construction of a urea fertiliser plant with an annual capacity of 560,000 tonnes in central Thanh Hoa province’s Nghi Son Economic Zone.

Phung Ha, head of Ministry of Industry and Trade’s Chemical Department, said Vietnam was expected to shift into exporting fertiliser when these projects were in full swing.

Sun Wah turns VinaCapital’s second largest shareholder

VinaCapital Group on Wednesday announced a change in its ownership that has made Sun Wah Group the second largest shareholder in the group.

According to a statement VinaCapital released on Wednesday, a consortium of co-founding shareholders and management, led by VinaCapital CEO Don Lam, Jonathan Choi, chairman of Sun Wah Group, and Katherine Yip, chairwoman of KYG International, had acquired the shareholdings in the group previously held by fellow co-founder, Horst Geicke and other parties.

After the acquisition, Don Lam will continue to serve as an executive director and CEO and become the largest shareholder in the group while Jonathan Choi’s acquisition of shares makes Sun Wah Group the second largest shareholder.

VinaCapital said that the purchase will enable greater equity participation by the group’s senior management. It will have no impact on the strategic direction or day-to-day operations of the group.

Jonathan Choi will join the VinaCapital board of directors as a co-chairman for an interim period and he will be appointed as sole chairman later. Katherine Yip will also join the board as a director while Horst Geicke and Ted Powers have resigned from the board of the group.

The investment strategy and operations of the listed funds managed by VinaCapital Investment Management Ltd., a wholly owned subsidiary of the group, remain unchanged. VinaCapital continues to purse its aim of sourcing and investing in sound opportunities in high-margin, high-growth areas in Vietnam, and intends to strengthen its market leading position in the region.

Don Lam, CEO of VinaCapital, said that Vietnam is at a turning point and so it seems an opportune time to restructure ownership to broaden management participation. This will strongly align management’s interests with those of the funds.

With a diversified portfolio of US$1.6 billion in assets under management, VinaCapital manages three closed-end funds trading on the AIM Market of the London Stock Exchange, namely VinaCapital Vietnam Opportunity Fund Limited (VOF), VinaLand Limited (VNL), and Vietnam Infrastructure Limited (VNI). It also co-manages the DFJ VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson.

Sun Wah Group, established in Hong Kong in 1957, has invested in Vietnam for more than 40 years through projects like Sun Wah Tower and Saigon Pearl residential area in HCMC.
 
CJ wants to expand investment in city

South Korea’s CJ Group is planning to expand investment in various fields in HCMC after having developed some projects in Vietnam, said Lee Jay Hyun, president of the company.

Speaking at a meeting with leaders of the city on Tuesday, he said the investment expansion plan for HCMC was part of CJ’s globalization strategy. The company is active in sectors such as food, catering services, entertainment and communications, pharmacy, home shopping and goods transport.

The home shopping service of CJ is running well but the group targets to offer more products to customers instead of 70 products as at present.

CJ now buys Vietnam’s farm produce and seafood products for export to South Korea.

At the meeting, HCMC chairman Le Hoang Quan said he appreciated CJ’s plan and proposed the group study developing a pharmaceutical industrial park in the city.

Regarding the entertainment and communications sector, HCMC vice chairman Hua Ngoc Thuan said the group should consider getting involved in a film studio project of HCMC Television Station under way on 100 hectares in Cu Chi District.

CJ is now a major stakeholder of the MegaStar cinema chain and the owner of the Tous Les Jours bakery chain. It has facilities that supply meals for workers and is involved in a comprehensive cooperation deal with C.T Group.
 
Petrol stations shut for fuel fraud

The business licenses of several petrol stations have been suspended and revoked following discover of fraud or substandard petrol trading.  

During the first quarter, the market management force under the Ministry of Industry and Trade revoked 14 business licenses and handled 501 violations of petrol trading regulations. The market management force seized over 29,000 litres and 3,320 litres of adulterated A92 and diesel respectively at just one petrol station in Bac Giang Province.

On April 4, after inspecting 33 of 300 petrol stations in Binh Duong Province, local authorities announced the suspension of 13 fraudulent stations.

Uyen Hung Petrol Station in Tan Uyen District was found to be operating a rigged petrol pump that over charged customers. Inspectors also discovered similar fraud at Hung Thinh Oil and Gas Trading in Di An Town.

Nguyen Thanh Hien, Head of Bình Duong Department for Standards, Measures and Quality said, "Most of the pumps have been tampered to raise the amount of petrol from between 2-5%. Those petrol stations have swindled at least VND500 (USD0.024) per litre from their customers."

Sharp decrease in apartment supply

Supply and sales volume of apartments in the first quarter shrank sharply against last year though realtors were trying all possible ways to lure more customers into their projects, said a market research company.

Savills Vietnam reported on Wednesday only two new apartment projects entered the market with some 300 units in the first quarter, down 35% year-on-year.

Meanwhile, apartment sales volume in this quarter is no better than that of the year-ago period with around 9,000 units absorbed, falling by 12% against last year.

Speaking at a briefing on HCMC apartment sales overview organized on Wednesday, Truong An Duong, head of Research and Consultancy Department of Savills Vietnam Ltd in HCMC, said high lending rate plus credit tightening policy have had a great impact on both investors and buyers in the apartment segment.

Several developers suspend their sales and await the market to recover while others are looking for investors to transfer their projects. It is one of the major reasons leading to a reduction in the supply of apartment units.

Duong of Savills Vietnam said buyers are in the hope that prices will drop further. As of now, the most appealing factor to homebuyers is sale prices, so low-cost apartment projects will sell well in the quarters ahead, according to Savills.

Savills expects around 70,000 units from 115 projects will penetrate into the market between now and 2016.
 
Japan steel maker eyes giant steelworks in Dung Quat

Japan’s JFE Steel Corporation has expressed its interest in joining the US$4.5-billion steel project of Taiwan-invested Guang Lian Steel Vietnam Co., Ltd in Dung Quat Economic Zone in Quang Ngai Province.

The Japanese firm says on its website that it has signed a memorandum of understanding with Taiwan’s E-United Group to jointly study the feasibility of building the steelworks of Guang Lian in Dung Quat. Currently, E-United is holding the majority of stake of this project.

JFE Steel wants to become a shareholder of the project and is also seeking investment opportunities in Southeast Asia or India to meet the increasing demand in these emerging markets. Having a high steel demand and the steady economic development, Vietnam is regarded as a good place to produce steel products for export and domestic consumption.

The Japanese steel maker expects the feasibility study for this steelworks will be completed late this year.

Le Van Dung, deputy head of the management unit of Dung Quat Economic Zone, told the Daily on Wednesday that the unit has been informed by Guang Lian Steel of JFE Steel’s intention of joining the project but yet to receive an official dossier on the changes.

Dung said the participation of JFE Steel would help accelerate the construction progress of the project and produce high-quality steel products.

JFE Steel is one the few companies producing steel plates used in auto manufacturing, and the firm will produce such products if joining the steelworks, he added.

Besides, with the participation of the world’s sixth largest steelmaker, the project’s technologies may be adjusted based on JFE Steel’s standards which are friendly to the environment, Dung said. However, the site allocated for the project cannot be expanded as it has been surrounded by many other plants, he said.

Currently, the steelworks of Guang Lian is 90% owned by E-United and the rest by Taiwan’s steel maker Tycoons. The investors have yet to receive a certificate to adjust investment capital from US$3 billion to US$4.5 billion.

It is because the management unit of Dung Quat Economic Zone only issues the license after seeing the investor’s proven capital capacity.

After great efforts, E-United has finally been able to borrow capital from the Export-Import Bank of China to carry out project, and Guang Lian is also completing procedures to obtain the license soon. With the capital increase, Guang Lian will adjust the plant’s annual production output from five million to seven million tons.

The price of economic stability

With GDP growing at 4.1 percent and inflation easing off in the first quarter of 2012, the State Bank of Vietnam (SBV) is likely to further reduce loan interest rate.

According to a recent report by the Hong Kong – Shanghai Banking Corporation, the SBV’s lowering interest rates led to an economic slowdown from 5.9 percent in 2011 to 4 percent in the first quarter of 2012 and, as a result, there would be less price pressure during 2012.

For over a decade, economic growth rate has always been the primary target of the Vietnamese Government.

Statistics showed that in the 2003-2010 period, credit growth was maintained at a high level of about 30 percent per year. But since the beginning of 2011, the Government’s efforts to curb inflation has kept credit growth at 10.9 percent in 2011, much lower than its set target of 20 percent.

To cope with high interest rates, both businesses and people have cut down on their demand for credit and goods. Not a few businesses having difficulties in liquidity reduced their production scale.

Judging from low credit growth in the first two months of 2012, the national economy will not be able to achieve high growth rate as before.

A strict policy and measures have had a serious impact on the economy, especially in the agricultural, service, real estate, and construction sectors, as there was a fall in consumer demand.

With domestic demand dropping than expected, how to achieve a 5.7 percent growth rate in 2012 remains an open question.

However, experts said they were not concerned about the growth rate of 4.1 percent in Q1 as it used to be low at the beginning of the year.

Thanks to the SBV’s recent decision to lower interest rate by 1 percent as from early March, inflation is expected to hit a single-digit number with interest rates charged in the Open Market Operations dropping to 10 percent by the end of the year.

This move, however, is said to have eased pressure on the economy as low domestic demand will help slow down import growth and reduce the trade deficit.

HSBC experts also predicted that the national economy would be rather stable in 2012. They said the Government’s efforts to keep deposit rates at 13 percent and loan rates at 18 percent and maintain slow credit growth in the first quarter were paying off.

Simplify SOE restructuring: Investors

A plan to speed up restructuring of State-owned enterprises to help improve their performances has been proposed by the Viet Nam Association of Financial Investors .In a letter to Minister of Finance Vuong Dinh Hue on Tuesday, the association suggested SOEs be transformed into share-holder companies with three major shareholders as an initial step.

The three major shareholders should include representatives from the individual SOE's trade union, Communist Party and the State.

The State, however, should still hold 99.999 per cent of shares of the new companies with the balance being held by the other two shareholders.

The suggested shareholding was a technical solution and "definitely not an equitisation process", association general secretary Nguyen Hoang Hai said.

However, such a move would bring huge benefits to the State budget while improving enterprises' corporate govern-ance, Hai said.

For a start, several costly requirements for equitisation plans would be removed, such as the need to employ a team in charge of implementation and the requirement to assess the value of each equitising enterprise, among others.

Also, the equitising companies would not need to make initial public offerings.

The move would also result in a major revenue boost, Hai said. Under the existing regulations, SOEs kept residues from their earnings after taxes and were not obliged to pay dividends for the shares held by the State, as did other shareholding companies.

Under the solution suggested by the association, the new companies would be required to pay dividends to the State budget for the shares held by the State from their earnings after taxes.

He cited the experience of Thailand where the Government held about 51 per cent of shares of many huge corporations while the Thai State budget received about 10 per cent of its annual revenues from those firms' dividends.

If the measures suggested by the association were implemented next year, the total dividends collected from the new companies would be "huge", up to US$4 billion per year, accounting for 10 per cent of the Vietnamese State budget revenue, the association said.

Hai said it was unfair that incentives, which included natural resource exploitation, had been provided to SOEs, such as MobiFone, Vinaphone, Viettel, Petro Vietnam and Vinacomin, but they had not been required to pay dividends. As a result, such incentives had driven those SOEs to monopolise the domestic market.

The association's proposed measures would also help avoid investment in non-core businesses by State-owned groups and corporations.

Hai said that thanks to the SOE reorganisation process over the past 20 years, many small SOEs had grown larger, with a significant increase in their charter capital.

However, hundreds of huge corporations, who were still receiving incentives for their business operations, had not yet developed re-organisation plans and there were no effective policies to force such companies to restructure or to strengthen State management of their operations.

If the proposed solution was introduced, the number and speed of SOE restructuring would be increased significantly and their performances enhanced.

Government Office statistics showed that after 10 years of equitisation, the number of SOEs had been reduced to 1,309 from 5,655.

VN has lowest current account surplus in Asia

Viet Nam has the smallest current account surplus in Asia at US$200 million, equal to just 0.1 per cent of GDP, according to a quarterly research on emerging Asian economies released by ANZ Bank earlier this week.

The report also showed that current account balances have significantly narrowed throughout Asia, reflecting a shift in the global balance of payments. Combined current account surpluses in the region have fallen from $533 billion in 2007, when they were equivalent to 7 per cent of GDP, to just $333 billion last year, or 2.5 per cent of GDP.

The report blamed the declining surpluses on increased consumption in countries in the region, as well as rising investments into other countries.

Five countries or territories listed in the report had stable account balances, including Hong Kong, Indonesia, Philippines, South Korea and Viet Nam. Meanwhile, statistics from the Ministry of Industry and Trade showed that Viet Nam's imports last month rose by 5 per cent while exports surged 23 per cent, reducing the trade deficit to around $150 million.

However, both imports and exports in the first quarter were down against the previous quarter, and the trade deficit, at $275 million, was far below the average of $2 billion in previous quarters.

ANZ predicted the reduced trade deficit would help Viet Nam maintain a more stable foreign exchange rate in the near future. It also forecast that Viet Nam would see an economic growth rate of 5.5 to 6 per cent this year despite a pace of only 4 per cent in the first quarter.

The ANZ report also forecast that the State Bank of Viet Nam would maintain the prime rate at 14 per cent this month following last month's single-percentage-point reduction. However, ANZ predicted the rate would fall to 10 per cent by the first half of 2013.

Steel production, imports increase slightly

The steel industry saw a slight increase in production and import during the first quarter of this year after consecutive decline due to restrictive consumption and the global economic downturn.

According to the Ministry of Industry and Trade, the volume of steel production in the first quarter reached 1,469 million tonnes, a year-on-year increase of 4.8 per cent, while steel and steel-made products saw 7.7 per cent and 24.8 per cent increases over the same period last year.

Four VN web sites ranked second for speed

Four Vietnamese websites rank second in speed, according to ZDNet Asia's Business Web Performance Benchmark Report released on March 30.

The sites include those of Asia Commercial Bank (ACB) with response time at 2.8 seconds, Thien Duong at 3.8 seconds, Tiger Airways at 5.6 seconds and ring tone vendor Funring at 5.7 seconds. Competing industries include banking and financial services, government, retail, telecommunications and travel.

Doosan Vina exports new batch of heavy gear

The Chemical Processing Equipment Plant (CPE), a unit of Doosan Heavy Industries Viet Nam (Doosan Vina), shipped 6 hi-tech pressure tanks and 9 heat exchangers with a total weight of 600 tonnes to Turkmenistan yesterday.

This is the 3rd out of 5 shipments including 38 pressure tanks and 20 heat exchangers which will be used in Turkmenistan's South Yoloten gas field project. The last two shipments will be carried out in the middle of this month.

Air Mekong to launch Ha Noi-Con Dao route

Air Mekong will open a direct route between Ha Noi and Con Dao on May 19 with two flights each week, the carrier announced yesterday.

The new route is expected to better meet the increasing air travel demand of tourists from northern localities to the historical island off the country's southern coast during the upcoming summer, it said.

During the summer, the carrier will also increase the number of flights on the Ha Noi-Phu Quoc route to nine per week while launching new flights from Buon Ma Thuot, Pleiku and other destinations in the Tay Nguyen (Central Highlands) and from central regions to Con Dao and Phu Quoc via HCM City.

Top paint producer moves from strength to strength

AkzoNobel has announced the completion of a major phase in its ongoing plant expansion in Viet Nam which will add momentum to the continued growth of the company's decorative paints business in Southeast Asia.

With an aim to increase revenue to 20 billion euros, AkzoNobel sees the region as an important growing market of more than half a billion people.

Around 13 millions euros has been invested since 2007 in the production facility in southern Binh Duong Province, it said.

Binh Duong closes 13 petrol stations

Thirteen petrol stations in southern Binh Duong Province have been sealed off early this week for cheating customers, according to the provincial Market Watch.

The stations were found to increase the volume of petrol displayed in their meters by 2-5 per cent or sell low quality products, enabling each to earn an addition of VND500 (US$0.024) per litre of petrol, according to Director of the Department of Standards, Measurement and Quality Nguyen Thanh Hien.

The province started to inspect the operation of more than 300 stations throughout the province in February.

Electronic stamps beat counterfeiters

The Viet Nam Standards and Consumers Association (VINATAS) in co-ordination with Vina CHG yesterday introduced electronic anti-counterfeit stamps to distinguish genuine from fake goods.

Customers who want to verify if products are genuine can have them checked by texting the stamp codes to the operator or going to the stamp operator's online website.

The stamps, which do not replace quality product stamps, cannot be reused and faked.