Brazil slaps anti-dumping lawsuit on Vietnamese steel

The Brazilian Ministry of Development, Industry and Foreign Trade (MDIFT) has officially begun an anti-dumping investigation into rolled steel imported from Vietnam and some other countries.

The Vietnam Competition Authority under the Ministry of Industry and Trade said Aperam Inox America do Sul, S.A. filed the lawsuit and the MDIFT will conduct investigations from January to December 2012.

It will use Taiwan as a comparison for the dumping amplitude up to 22.5 percent. Businesses have been allowed 70 days, including extension time, to answer all questions related to the investigation as of April 13, 2012.

Shares soar on news of tax relief

Stocks rose during afternoon trading yesterday as stronger buys pushed total market value on both national stock exchanges to nearly VND3 trillion (US$143 million).

On the HCM City Stock Exchange, the VN-Index gained another 2.1 per cent to close at a one-year high of 486.31 points. Half of all codes rose by the maximum daily limit of 5 per cent. Volume decreased 7 per cent from Friday's level to 100.5 million shares, but the value of trades rose 5 per cent to over VND1.8 trillion (US$85.7 million).

"The market is supported by a significant amount of positive news now," FPT Securities Co analysts wrote in a report yesterday. The Ministry of Finance has just proposed a business bailout package in forms of tax exemptions and reductions worth a total of VND25 trillion ($1.19 billion), while the central bank late last week decided to cap lending rates at 15 per cent per year in several sectors, they wrote.

Advancers overwhelmed decliners by 243-36. Of the 30 leading shares by market capitalisation and liquidity, 20 rallied, with nine soaring to the ceiling. The VN30-Index closed 1.8 per cent higher at 552.3 points. Without positive news yesterday, Sao Mai Construction Corp (ASM) surprised the market by becoming the most-active share with over 6.5 million traded. ASM closed up 4.5 per cent to VND25,800.

On the Ha Noi Stock Exchange, meanwhile, the HNX-Index also jumped 3.1 per cent yesterday to finish at 83.79 points. The value of trades totalled VND1.1 trillion ($52.4 million), down 35 per cent from Friday, while volume decreased just 2 per cent to nearly 99.4 million shares.

After sharholders of Sai Gon-Ha Noi Bank (SHB) approved the bank's takeover of Habubank (HBB) on Saturday, HBB shares rose to their ceiling price of VND6,600 a share after three sucessive falling sessions last week. SHB also soared to its ceiling of VND11,300.

SHB chairman Do Quang Hien said the share swap to complete the merger was expected to conclude in June at a ratio of 1:0.75, after which time the HBB code would be delisted. SHB would not use its capital surplus to make the exchange, so the reference price would not be adjusted downward after the swap date, Hien said.

Japanese economists share experiences with Vietnam

Japanese economists shared experiences with Vietnamese partners at a seminar on 'Economic Bubbles: Lessons Learnt from Japan', held in Hanoi on May 5.

A "bubble economy" is one in which a lot of trade takes place with discrepancies between the trading price and the intrinsic value of products. When the prices of assets, such as stocks and land, increase sharply and inflate the "bubble", many investors try to sell their assets quickly, which causes the prices to fall and burst the "bubble".I

Japanese experts say it is high time for Vietnam to find the right track. They suggested that when a financial crisis occurs, the country must create an available, flexible financial and credit system.

Management agencies should also maintain a healthy banking system and provide accurate information about bad debts to deal with arising issues promptly.

Experts said that “bubbles” will occur repeatedly but a crisis should not occur twice so practical and flexible measures should be put in place to solve the problem.

Tax relief proposed to revitalise economy

The Ministry of Finance is recommending to the Government a tax break package worth roughly VND25 trillion (US$1.2 billion) to help revitalise production and consumer spending during the economic downturn.

The proposed package includes a 30-percent corporate income tax reduction this year for small-and medium-sized enterprises and labour-intensive firms in the agricultural, textile and garment, and footwear industries.

A six-month deferment of value-added tax (VAT) is also proposed to help firms have higher cash flows for business and production. The deferment will allow them to pay VAT amounts for April as late as October, with VAT for May and June to be payable in November and December. The ministry estimated the total value of the VAT deferment at VND4 trillion (US$190.47 million) per month.

It also proposed a VAT exemption for employers of industrial zone workers.

The package will also cut land use fees by 50 per cent for businesses in the tourism and services sectors. Other businesses with financial difficulties will receive a two-month deferment in corporate income taxes.

The director of the ministry's Tax Policy Department, Ngo Huu Loi, said that it was pressing for comprehensive measures to help revitalise the firms' operations and ease the current high level of unsold inventories seen across a number of sectors and industries.

The former deputy director of the General Department of Taxation, Pham Van Huyen, said slashing VAT should be the top priority. In this time of low demand, policies to boost consumption were needed, Huyen said, noting that in theory, cutting VAT should benefit end consumers more than the businesses themselves.

Overall, he said, the current 10-percent VAT was too high and needed to be reduced to improve consumer satisfaction with getting goods at lower prices and enabling businesses to sell more.

Huyen suggested that the Government seek approval from the National Assembly to cut VAT entirely or at least broaden VAT exemptions. The tax relief needed to be applicable to a large number of goods to be effective, since VAT accounts for 20 percent of the country's total tax collections.

Huyen also suggested that Government consider exempting personal income tax for income earned from wages and payments. Many individual taxpayers were facing difficulties after over a year of high inflation and the recent steep hike in fuel prices, he noted.

Meanwhile, the former deputy director of the ministry's Market and Pricing Institute, Vu Dinh Anh, said that tax relief alone was not enough. The biggest problem for businesses was the burden of high unsold inventories in the wake of low consumer demand.

High input costs have forced producers to raise sale prices even as consumer purchasing power remained low. The Government urgently needs to delay the imposition of further increases in electricty rates or petrol prices to enable producers to cut sale prices and boost consumption.

Economist Le Dang Doanh said the Government should set up a credit guaranty fund to help businesses with established market shares and effective business strategies to access to preferential loans.

How to make economic restructuring more effective?

Restructuring State-owned enterprises (SOEs) should be a a primary task to fulfil in the economic restructuring process.

All proposals concerning the national economic restructuring masterplan are aimed at improving the effectiveness of the economy.

Many economists propose cutting public investment, restructuring SOEs, reforming the financial market, shifting the economic structure by increasing productivity and added value of the products, and amending the land law.

Economists and policy-makers point out the shortcomings of the economy including the gradual decline in economic growth, which is mainly built on increasing investment capital and exploiting natural resources, the ineffective use of resources, and the low productivity.

In addition, they say, the production cost and energy consumption for each product remain high and even increased.

If Vietnam cannot deal with these problems, the economic growth will continue to slow down, they say.

According to financial expert Bui Kien Thanh, investment capital now contributes about 60 percent to the annual GDP growth while labour and labour-related factors contribute the remainder.

High-tech product make up only six percent of total export value, and the figure has remained unchanged for the past 10 years, Thanh says. Additionally, most of exports are outsourced products with low added-value, which is attributed to the over-reliance on imported materials.

Former Minister of Trade Truong Dinh Tuyen says restructuring is a must, proposing that businesses should associate product strategy with selecting target markets.

It is also necessary for businesses to have a plan to improve the competitive edge of their products by applying new production and management technologies, and developing their human resources.

In addition to the economy’s over-exploitation of cheap labour and natural resources, the allocation of resources remains inadequate. While SOEs fail to fulfill their leading roles in shifting the economic structure, the private sector cannot boost economic growth.

In the meantime, Vietnam’s economy has become more and more dependent on foreign sector as it is expanding rapidly.

What is more, there has not been a close link between economic regions that can support and supplement each other. Most localities pursue similar economic structure,creating unhealthy competition practices ditrimental to the common plan.

Regarding the operation of SOEs, financial expert Bui Kien Thanh says although SOEs account for 50 percent of the country’s value, their operational efficiency remains modest.

Former Minister Tuyen says it is necessary to address the involvement of SOEs in specific areas, and speed up their equitization to make their operation more transparent.

Tuyen also suggests creating a fair and healthy competition between the State economic sector and other sectors and renovating the management and the State ownership in SOEs.

Former Minister of Planning and Investment Tran Xuan Gia says the State should only involve itself in areas related to national security and defence and social protection that the private sector cannot cover.

The Government should not invest in areas, which the private sector can manage and earn financial profits or compete with other economic sectors, Gia notes.

Tuyen anticipates several challenges facing the economic restructuring such as the bankruptcy of some businesses.

However, in the long run, renovation will help stabilize the marcoeconomy, contain inflation, and lower interest rates, he says.

18,700 new businesses established in Q1

More than 18,700 businesses were established in the first quarter of this year, according to a Vietnam Chamber of Commerce and Industry (VCCI) report.

The report shows domestic and foreign investors’ confidence in the economy’s medium- and long-term potential, as well as the Government’s management.

Businesses should join hands with the government in ironing out snags to control inflation and ensuring a good macroeconomic environment, it says, adding that this is also a good chance for them to improve competitive edge.

However, the VCCI report reflects a negative sign in business operation, with 8.4 percent of enterprises being dissolved or halting operation.

In order to deal with the problem, the business community proposes that the State introduce favourable policies to help them increase their competitive edge by speeding up the disbursement of capital for public investment projects.

They also hope the State will reduce corporate income tax and extend the deadline for tax payment, especially for small- and medium sized businesses, strengthen the management of businesses’ rising input costs, and encourage the development of the capital market.

VCCI also proposes reducing the interest rates and creating favourable conditions for businesses to have access to bank loans.

Coal consumption slows on industrial stagnation

Domestic consumption of coal in April shrank as the industrial production outlook was still gloomy, resulting in a huge coal stockpile.

Vietnam Coal and Mineral Industries Group (TKV) reported a decrease of 3.1% in coal consumption last month, making up an overall drop of 12.2% in January- April. As of end-April, the stockpiles of coal were estimated at 8.38 million tons.

The rising stockpile is attributed to a production slowdown at major coal users, especially steel, paper, fertilizer and cement firms.

In fact, the industrial stagnation is shown in the Index of Industrial Production (IIP), which increased a mere 1.5% in April against the previous month. This is far lower than the IIP growth rate of 13.1% in the same period last year.

Meanwhile, the world economic slowdown has left a strong impact on coal exports.

* TKV is seeking approval from central agencies to increase the price of coal used for power generation in an effort to make up for operating costs.

TKV suggested a coal price increase of 25-30% but the final decision would rest with ministerial authorities, said Nguyen Van Bien, deputy general director of TKV.

“The Prime Minister has assigned the ministries of Finance, and Industry and Trade to assess the scheme on coal price increase. At present, the group is waiting for approval and has yet to know when it will be decided,” Bien said.

It costs around VND1 million to produce a ton of coal serving coal-fired power plants whilst the selling price now stays at VND600,000 a ton despite recent price hikes. It is time to lift up the coal price to cover rising production costs of coal used for power generation, according to TKV.

The Ministry of Industry and Trade is considering the coal price increase for electricity production before presenting it to the Government, said Le Tan Phong, deputy head of the Bureau of Energy.

However, Phong reckoned the coal price increase must be at a reasonable level as coal is a key source of power generation, and any price rise should not trigger an increase in the power price.

HCMC shopping centers filled with idle air

For years, in Ho Chi Minh City, big shopping centers, such as Diamond, Parkson, Vincom, and Now Zone, were the places many people wanted to stroll around when feeling the need for entertainment or bored.

But now, those who want to entertain themselves by walking around such places, may get sadder, as the unexciting shopping atmosphere caused by falling demand is haunting those shopping spheres.

“Take this! The popular trend is belts with big buckles.”

“Take it please, we are selling at a discounted price, VND800,000 each. Normally we sell it for a few million dong.”

This was heard at the Polo booth selling belts, and wallets at discount prices at Parkson shopping centers on Le Thanh Ton Street in District 1. Two employees were trying to persuade a customer to buy the belt.

The customer excitedly took the belt out of the box, but then fitted it on her waist and turned around tentatively. The group started to laugh out loud.

The customer, who wore the uniform of an employee there, turned out to be an employee of a neighboring booth, Alain Delon.

The Alain Delon employee, Nguyet, and the two sellers, Son - salesman of Giovanni and Ly - salesman for Polo brand, said that after standing all day without guests, they didn’t know what else to do to but gather and rehearse their sales pitch.

Nguyet said in recent months, visitors to the center were getting fewer and fewer. The center is open from the morning, but only in the afternoon are there new customers. Many days she did not sell any products.

Nguyet, an employee working the shift from 3 pm until late evening, gets VND1.9 million a month. In addition to a base salary, sales staffs are also entitled to commissions based on sales of goods.

As the sales are shrinking, this money has also decreased "Fortunately, I only have an afternoon shift. In the morning, I work for a roadside cafe on the nearby Ham Nghi Street, just enough to support my life here in Saigon," she said.

"Sales here suffer the most when there are no customers," said Nguyen Minh Hung, salesman for the company NinoMaxx. Hung explained: "Without customers, I cannot do anything else, from chatting, reading newspapers, listening to music, to surfing the net."

At a Calvin Klein clothing booth, salesman Nguyen Minh Phung said: "We are suffering from slow sales, with each shift seeing about 1-2 products sold."

Walking along the floor of the center, we are confronted with a series of booths with no customers. The salespeople there are huddled together brushing each other’s hair and chatting. In each corner, sometimes we caught employees eating snacks.

After the recent national holidays, walking around the shopping places, the gloomy situation seems more serious. Many booths, having launched big promotional programs, stating the discounts only valid for the holidays, have begun to extend the discount programs.

Before the holiday, the World Diamond booth offered 40-50 percent discounts for gold jewelry and precious stones. Employees then reminded the customers: “buy now before the program ends on May 2.”

But two days later, the program was still there. The salespeople said it will be lengthened for another two days.

Similarly, the fashion brand Papaya offered 50 percent price cuts from May 3-16, while the Mary & Jei booth offered a number of Korean-styled dresses at VND500,000-800,000 each, down over 50 percent of original price. Jeanswest booth did the same, a “super program” discounting 50 percent for all items from may 4-6.

Supermarket dienmay.com on Xo Viet Nghe Tinh Street in Binh Thanh District, occupying a wide frontage with tens of meters at the intersection of three major roads, hung the big banner "Supporting purchase power in “price storm”, special discount prices of up to 49 percent".

In the last few hundred square meters exhibiting machines and electrical products of all kinds, at the time of our visit, the store had 45 employees, but only 36 guests.

Many employees, stayed idle, talking on the phone to kill time. We went to the electronics counter, wanting a backup phone charger, and two employees immediately came to consult.

They [Nguyen Thi Hue and Nguyen Le Giang] said: "This product is currently enjoyed at a 50 percent discount. After buying it, if you aren’t satisfied within seven days, you can return it. In our 10-day program, you not only get discounted prices but can also select nice phone numbers, with a VND25,000 SIM card, you can get a free 10-minute intra-network call.”

With other customers, Giang and Hue also gave the same such breathtaking advice, but then a number of tourists leave without buying anything.

Currently, the largest store chains for home appliances, Nguyen Kim and Thien Hoa have also fallen into the slump, despite having launched several discount programs and promotions for several months. A manager at the home appliance system Thien Hoa, who has worked there for 7 years, said she has never seen such a state of slow sales.

At 7 pm on the weekend, the prime time for shopping, business center Now Zone saw a dozen guests on the first and second floor.

A Vera booth selling women’s underwear saw no customers, so when we came in to have a look at a nightgown with a 70 percent price reduction, from VND525,000 to VND199,000, the salesperson said: “We have all sizes. Just try them all and take the one you like."

This is strange because before that nightgowns and underwear were not eligible for trying on. The salesperson said: "Every year, I have suffered slow sales after the Tet, but the situation has never been as tragic as this year with sales dropping by almost 50 percent year on year.”

“The owner had to lay off some salespeople, and if it continues like this, I will lose mine in the coming days," she said.

A uniformed female customer of Hong Lam Co visited, picking up a few items before putting them down. She said: "Now, even milk for my children, I have to think twice, let alone clothing."

At the end of a day wandering in the shopping paradise with shimmering lighting displays, air conditioning causing numbness, and the scent of air freshener tingling our noses, we don’t feel happy.

Taking the escalator down, past the Giovanni stall, we saw Son sitting still, yawning, alone. “Sitting idle makes you so sleepy,” he said.

Looser credit, lower inflation lifts shares

The economy has shown a number of positive signals in the first four months of the year, including an easing in interest rates and a more stable foreign exchange rate. Nevertheless, domestic companies are still facing difficulties in affordably accessing capital for business operations.

The most positive data was an inflation rate in April which fell to its lowest level in three years, a one-month increase of just 0.05 per cent. With the sudden increase in petrol prices at the end of March, the price index for transportation rose by 2.67 per cent, suggesting this would still be the area most likely to drive further inflationary pressures.

Less intensive inflation means that there is a higher probability for further cuts in interest rates in the coming months. The State Bank of Viet Nam has cut interbank rates by a percentage point for two consecutive months, a move that may ease the capital crunch for many local companies, as well as lower the risks in the banking system caused by rising loan defaults.

On the nation's stock exchanges, the VN-Index and HNX Index posted amazing returns in the first four months of the year, each gaining over a third in value. It has been the most impressive rally since the recovery of the market after the financial crisis back in 2009, when the economic stimulus programme promote flows of capital into the market.

April is normally the month for speculative stocks, following companies' reporting good first-quarter operating results. Very often, rumours about abnormal revenue in listed companies will be tracked closely and investment decisions will be made partially based on this kind of information. However, this kind of speculation is no longer a driving factor in the local market.

According to our statistical review, the most impressive sector in April was mining companies, e.g., Binh Dinh Minerals Co (BMC) and Binh Thuan Hamico Minerals (KSA) on the HCM City Stock Exchange, and Bac Kan Minerals (BKC) on the Ha Noi Stock Exchange. Calculating year-to-date returns, BMC and KSA each posted unbelievably high returns of 340 per cent and 240 per cent, respectively.

Interestingly, however, the rally of these stocks was derived from market factors only. BMC managed to perform, but BKC lost VND3.7 billion in the first quarter while Ha Nam Minerals (KSH) posted a loss of VND400 million ($19,000). Good operating performance is not the reason behind the strong rallies of shares in these three companies, which are all considered highly speculative stocks.

The correlation between mining shares and benchmark indices is quite high, suggesting that if the market is in an uptrend, these stocks will outperform the market. The beta of all three stocks is greater than 1, with the beta of BKC even reaching 1.43. Taking a look at the historical performance of these stocks, BMC had a long rally in 2006-07, with a ten-fold increase in value, while KSH recently saw its share price double within the first quarter. Therefore, these shares are preferred by risk-taking investors despite some weak fundamentals.

Purely influenced by market factors, these shares are good choices for speculators seeking an abnormal return in an uptrending market.

Domestic investors are looking forward to the official reduction in the pending time between transactions from four days (T+4) to three (T+3). When this regulation becomes effective, market liquidity will improve significantly. Recent efforts by local authorities have also helped increase the attractiveness of equity markets, as more products are added or activities of both listed companies and securities companies both more tightly managed in order to reduce risks. Increased cash flows are expected to be channeled into the stock market, suggesting an extension of the current rally and a positive outlook in the medium term.

Business assistance vow lifts market sentiment

Word of Government plans to support enterprises helped boost stocks late last week.

Vu Duc Dam, the minister-level chairman of the Government Office, said that, in the next few days, the Government would issue a resolution that, while not a stimulus package, would offer various fiscal, monetary and administrative measures, including tax relief.

Among the measures, small- and medium-sized enterprises in agriculture, real estate, construction and building materials production would be entitled to a 30-per-cent reduction in this year's corporate income tax. In addition, value-added tax payments in the second quarter will be delayed for six months.

The Government will also propose that local governments grant a 50-per-cent reduction in land use fees for businesses this year.

The Ministry of Finance has estimated the value of the relief package at VND29 trillion (US$1.3 billion).

"We don't expect these measures to put enterprises in sound condition, but it can reduce the challenges facing them," said Maritime Bank Securities Co analyst Tran Quoc Hoan.

Shares concluded the three-day trading week higher on both stock exchanges. Although they saw fewer trading days after the national holiday, the average daily value and volume of trades improved over the previous week – suggesting that demand for stocks on the market was still high, PetroVietnam Securities Co analysts wrote in a note.

On the HCM City Stock Exchange, the average daily value reached VND1.5 trillion ($71.4 million), up 12 per cent over the prior week, on an average daily volume of 110 million shares. The VN-Index edged up 0.5 per cent over the course of the week to 476.32 points.

The Ha Noi Stock Exchange saw about 94.8 million shares change hands per session, an increase of 30 per cent, for an average value of VND955.8 billion ($45.5 million). Inching 1.8 per cent up over the previous Friday's close, the HNX-Index concluded the past week at 81.27 points.

"A large amount of cash is still retained inside the market as foreign investors have kept on buying and money from other investment channels pours in," Hoan said. Foreign investors last week were net buyers on both bourses, picking up shares worth a combined margin of VND325.3 billion ($15.4 million).

Technical indicators indicated that the VN-Index would see a strong rally in the coming two or three weeks, he added.

"We expect the VN-Index will break through the resistance level of 475-480 points, while the HNX-Index will get past 80-82 points."

PetroVietnam Securities Co analysts were more cautious, suggesting that the market need more trading days to test the trend.

On Saturday, Sai Gon-Ha Noi Bank (SHB) shareholders approved the planned merger with Habubank (HBB). The new bank would have a higher bad debt ratio of 12.88 per cent, mainly due to Habubank's loans to troubled State-owned shipbuilder Vinashin Group, said Sai Gon-Ha Noi Bank general director Nguyen Van Le.

Lack of regulation stalls PPP investment model
 
The much-vaunted public-private partnership (PPP) model of investment has failed to take off because of an incomplete legal framework and inability of provinces to make proper project assessments.

The Ha Long – Hai Phong Highway was chosen as one of three national pilot PPP projects that met one of the basic criteria of profit-making potential. As such, it was expected to receive financial support of US$4-5 million from the International Finance Corporation.

However after its selection, the northern province of Quang Ninh signed a memorandum of understanding with the State Capital Investment Corporation (SCIC) and Ha Long Production Investment and Development Limited to build the highway under the build-operate-transfer (BOT) and build-transfer (BT) models.

Their partner is the Japanese SE company, which will build the Bach Dang Bridge, the most significant construction in the project.

"The BOT arrangement with the Japanese contractor is much quicker than other models. Pressure to finish the highway is very high. If we were to choose PPP, we would have to wait for a long time," one senior official of the provincial Investment and Planning Department was quoted as saying by the Dau tu (Viet Nam Investment Review) newspaper.

The Prime Minister had in 2010 asked concerned agencies to draft regulations for making about pilot investments under the PPP model, but these have not been released yet.

"It takes six processes for a PPP project to come through, but right now, everything is at the beginning stage," said Nguyen Dang Truong, deputy head of the Investment and Planning ministry's Bidding Management Department.

According to Dang Xuan Quang, deputy head of the ministry's Foreign Investment Department, who is in charge of setting up the regulations, said progress has been very slow.

He said one of the most basic steps for approving a PPP project is that localities must submit good projects themselves.

However, despite the fact that around 30 projects have been chosen with a total capital of US$20 billion, "they are not good enough for us to submit them to the Government. The profit making potential has not been made clear in any of the 30 projects," he said.

The PPP model has great potential and is ideal for Viet Nam in the context of limited capital resources and huge investment demand, however the unfinished legal framework has restricted its operations in Viet Nam, said Nguyen Van Tu, deputy director of Ha Noi's Investment and Planning Department.

Unfair Provision Should Be Removed

A seminar was recenlty held by the Vietnam Chamber of Commerce and Industry (VCCI) in Danang to seek opinions on the Trade Union Bill which was scheduled for approval by the National Assembly in May. During discussions, attendees mostly insisted that the draft provision for trade union’s budget worth 2% of the total payroll be repealed.

On December 8, 2004, Deputy Minister of Finance Huynh Thi Nhan and Vice Chairman of the Vietnam Labor Confederation signed Joint Circular No. 119/2004/TTLT/BTC-TLDLDVN on implementation guidance for trade union’s budget. The document cited three legal points on the issue, namely Decree No. 133/HDBT dated April 20, 1991 on implemenation guidance of the Trade Union Law, Decree No. 60/2003/ND-CP guiding the implementation of the State Budget Law, and Article 4 of Decision 53/1999/QD-TTg on several incentives for foreign direct investment.

According to Article 4, Decision 53/1999/QD-TTg, however, “foreign-invested enterprises are not liable to contribute to trade union’s budget as prescribed in this circular.” Furthermore, Decree No. 60/2003/ND-CP doesn’t mention anything about collecting fees and cites only three types of collections, being tax, fee and charge, nor any regulation on collecting trade union’s budget.

The only legal basis for the dues stipulated in the bill is therefore Decree No. 133/HDBT, dated April 20, 1991 on implementation guidance of the Trade Union Law. This decree hinges on Point b, Item 2, Article 16 of the 1990 Trade Union Law which stipulates that the budget for trade union includes “allocations from the State budget and money taken from funds of entities.”

Unfortunately, no regulation has specifically defined what these funds are. However, many have argued that the funds are in fact welfare funds, and the employers thus have to save a portion of these funds for the trade union’s budget. Based on the above regulations, in the joint circular the authorities have required entities to “contribute to grassroots trade union’s budget equivalent to 2% of the total salary, wages and allowances” and extract a part for higher levels of trade union. This sipulation is groundless and should be carefully reconsidered.

Firstly, the trade union is a voluntary organization established by workers to protect their legitimate and justifiable benefits. Hence, in a sense, this organization stands opposed to employers (in case of conflicts). So, it is totally illogical to ask employers to pay a fairly large amount for trade union’s activities. Truong Thi Mai, chairwoman of the National Assembly’s Committee for Social Affairs deemed it irrational when she said, “It makes sense to fund union’s activities with union’s funds. Using different sources [employers’ money] would make no sense.”

Secondly, in Item 3, Article 26 concerning trade union’s finance, the bill stipulates that one source of trade union’s collections is “support from the State budget.” However, this statement is incorrect because according to Article 10 of the 2002 State Budget Law, “The State budget ensures operation expenses of the Communist Party of Vietnam and other socio-political organizations (including the Vietnam Labor Confederation).”

In this sense, the State budget has to provide sufficient expenses for trade union, not only “support.” The bill is misleading in that the State only provides “support” and the trade union needs to collect money from employers.

Moreover, if trade union’s budget is to be paid by those stipulated in Circular 119, it will be paid twice: the first is from the Government according to the State Budget Law, and the second (2% of the total payroll) is from employers.

If trade union’s budget is paid by entities, this will prompt employers to oppose the foundation of trade union in the entities. If adopted, this provision may be harmful to investment attraction, particularly from foreign investors, as it will increase costs.

First of all, this regulation is unfair to other public organizations. While these associations can only raise funds from the State budget and their members (member fees), trade union will collect money from employers. What’s more, this does not include revenues from trade union’s system of hotels located in good positions nationwide.

Vietnam has integrated into the world economy. While businesses in other nations are not liable to pay for this funding, Vietnamese businesses are required to do so. Furthermore, they currently have already paid too many official and unofficial fees.

Habeco left with kicking hangover

A big northern beer-maker has been left with a hangover after missing its business targets in 2011.

Habeco, which has an 85 per cent market share in Hanoi and 13 per cent nationally, met only one of its five business targets set by its previous shareholder meeting.

Specifically, industrial production, total revenue, total after-tax profit and sales in 2011 reached $86.7 million, $254 million, $30.8 million and $19.9 million, against a planned $89.7 million, $266 million, $33.4 million and $21.3 million, respectively.

Only the average salary was VND10.8 million ($519) per month, up by 5.6 per cent against a planned VND10.2 million ($490) per month. Habeco general director Nguyen Hong Linh said 2011 was a difficult and challenging year.

“In 2011, the global debt crisis badly impacted on the domestic economy which caused financial woes for many enterprises. From early last year, complicated exchange rate, gold and interest rate fluctuations, plus petrol and electricity price rises made inflation higher and consumption lower, especially for beverage products,” said Linh.

In addition, he said input costs also sharply went up from 10-30 per cent, while the beverage market competition was more heated. Vietnam Beer-Alcohol-Beverage Association Ngo Quang Vinh spokesman said Habeco was not the only firm feeling the heat in the sector.

“Higher inflation and interest rates have lessened people’s demand for goods such as beer and alcohol. Meanwhile, advertisements and promotions for beer and alcohol are restricted,” said Vinh.
Denmark-based Carlsberg Beer Company is now Habeco’s foreign strategic shareholder with a 17.23 per cent stake, while the state holds a 81.79 per cent stake. Formerly, Carlsberg proposed the Vietnamese government raise the ownership ratio up to 30 per cent.

Habeco completed its equitisation to become a joint stock firm in March, 2008 with charter capital of VND2.31 trillion ($122 million). In 2012, the company plans to reach a revenue and an after-tax profit of $267.8 million and $32 million, up 1 and 3.9 per cent year-on-year, respectively.

“Formerly, a good product was enough to attract consumers. However, with the current drastic competition, the company’s trend to focus on market development is good,” Vinh said.

AkzoNobel tightens grip on regional market despite economic recession

AkzoNobel has announced the completion of a major phase in its ongoing plant expansion in Vietnam which will add momentum to the continued growth of the company’s Decorative Paints business in South East Asia.

Around $17.2 million (€13 million) has been invested in the production facility in Binh Duong province in order to optimize operations and help meet growing customer demand in the region. AkzoNobel Decorative Paints has been continuously investing in the South East Asia region with several plant expansions.

The plant in My Phuoc Industrial zone, Ben Cat district in Binh Duong province is the latest addition. The Binh Duong plant was built in September 2007 with an initial investment of $10.5 million (€8 million).

“We have more than half of billion people in South East Asia. With emerging economies and populations’ rising incomes, most of them will firstly build up their houses. Hence, this new investment will capture the huge opportunity in the medium term,” said Jeremy Rowe, managing director for AkzoNobel Decorative Paints South East Asia and Pacific.

Last year, the company invested $9.8 million (€7.5 million) in its plant in Jababeka Industrial Estate-Cikarang in Indonesia.

Both plants have cutting-edge technology which leads to high flexibility in the production process through shorter cycle-times. This technology allows a choice of more colours and the new “raw material dosing system” with superior level of accuracy provides better product quality, as well as allowing the team to be faster and more responsive in fulfilling consumer demand.

“Besides the expansion of our capacity and production facilities, the level of energy consumed in the production process also becomes lower. This new technology will reduce energy consumption per litre by 20 per cent and reinforce AkzoNobel’s commitment to sustainability, while at the same time providing better quality in our products,” added Rowe.

Furthermore, thanks to its global performance improvement programme, AkzoNobel Vietnam has doubled the production capacity and increased the speed of packing up to 30 paint cans per minute, from 12 paint cans.

AkzoNobel’s performance improvement programme, launched in October 2011, targets to strengthen competitiveness, enhance the company’s ability, simplify support structures and reduce the cost base.

“Last year was a challenging one for AkzoNobel due to inflation, price increases that affected most raw materials and the continuing economic crisis. But, the company showed performance improvements in South East Asia,” Rowe said.

AkzoNobel Decorative Paints in Asia had total revenue of $1.2 billion (€952 million) in 2011, an increase of 13 per cent from 2010. Its South East Asia business grew faster than the market, cementing its overall number one position in the region, said AkzoNobel.

AkzoNobel Vietnam was a leader in Vietnam market in terms of decorative paint industry due mainly to its famous Dulux brand, according to Asia Paint Industry Council (APIC).
The performance improvement programme also reflects a significant change in the operating model and business culture.

The comprehensive three-year plan designed to improve performance and deliver $660 million (€500 million) in EBITDA (earnings before interest, taxes, depreciation and amortisation) in 2014 is already expected to deliver $264 million (€200 million) EBITDA in 2012, according to AkzoNobel.

FPT to ring in big telco profits

FPT is ramping up efforts to dial into telecom sector profits.

FPT's leadership has just unveiled a plan to procure all state capital contributions in FPT Telecom, currently represented by the State Capital Investment Corporation (SCIC).

FPT holds a 40.43 per cent stake in FPT Telecom, while SCIC retains 50.15 per cent.

In the past six months, FPT leaders met with SCIC counterparts several times to make OneFPT a reality as it had handled with FPT Software, FPT IS and FPT Trading in 2011, said FPT's chief executive officer Truong Dinh Anh.

Anh said SCIC's Member Council was in the process of valuating FPT Telecom and devising meticulous plans on the purchase, which will be handled through share swapping or cash payment.

"From FPT's part, the higher FPT Telecom's valuation the better, but the final response is pending on the part of SCIC who gets a ruling 50.15 per cent stake in FPT Telecom," said Anh.

FPT executives expected they could wrap up the deal within 2012.

Deputy Minister of Information and Communications Le Nam Thang said less state firms in the telecommunications field was desirable as a bloated market could undermine firms' production and business efficiency.

Parallel to quickening FPT Telecom's acquisition, FPT is reportedly seeking other viable telecom field purchases as well as waiting to be licenced for the deployment of new technologies like 4G.

"FPT is using every opportunity to grow powerful in the telecom business," said Anh.

FPT financial reports in 2012's first quarter show that telecom services brought in VND658 billion ($31.6 million) revenue, making up 11 per cent of the group's total revenue and tantamount to 17 per cent of the distribution sector's revenue.
It generated VND186 billion ($8.9 million) in profits, equal to 29 per cent of the group's total.

In 2011's financial year, telecom services contributed VND801 billion ($38.5 million) profits, equal to 31 per cent of the group's total.

Anh said the telecoms segment had made a huge leap forward in 2011 as during 2009-2010 the group opened new branches in 30 provinces and municipalities throughout the country and around half of them enjoyed profits in 2011.

Paper firms’ pulp demands

An Hoa Paper Joint Stock Company has proposed state agencies hike the export duty on wood chips from 5 to 20 per cent to ensure stable materials for pulp production.

In fact, export wood chips rose sharply in volume in the past few years. In 2011, Vietnam shipped abroad around 5.4 million tonnes of wood chips, or tantamount to six million tonnes of wood, against four million tonnes of wood chips in 2012.

The revenue from exporting those big volumes of wood chips is approximately $300 million per year. However, the country needs to spend more than double that chunk $700 million on importing similar pulp volumes to feed the paper industry, according to Vietnam Paper Association (VPA).

VPA’s general secretary Vu Ngoc Bao said An Hoa Paper’s proposal to hike wood chips’ export duty was reasonable.

An Hoa Paper’s pulp production plant came on stream from August 2011 with an annual capacity of 130,000 tonnes in the first phase. By the end of March 2012 the plant turned out 15,000 tonnes of ISO standard pulp. As scheduled, the plant will reach its full capacity after one year going into operation.
But, to reach its 130,000 tonnes per year designed capacity the plant would need around 650,000 tonnes of wood per year.

However, An Hoa Paper faced difficulties in sourcing material for production and must share materials with other pulp production plants under Bai Bang Paper Company and Hai Ha Paper Factory, said An Hoa Paper’s director Tran Chien Cong.

In fact, timber is also used in the production of floor planks, art articles and processed into wood chips for export.

“An Hoa Paper does not have its own material growing areas like Bai Bang Paper so that it loses the initiative in sourcing materials for production. Besides, sharply rising wood chip exports, coupled with escalating material prices hamper the company efforts to source sufficient material for production,” said an expert from Ministry of Industry and Trade’s (MoIT) Department of Light Industries.

Export wood chips currently fetch VND2.6-2.8 million ($125-$135) per tonne, while timber is sold for around VND2 ($96) million per tonne in Tuyen Quang province. An Hoa Paper’s current production cost is reportedly surpassing its actual product prices.

The MoIT expert supported An Hoa Paper’s export duty hike proposal, but forest growers’ interests must also be taken into account as supply had outran the demand for pulp and industrial wood production.

Vietnamese labour market looking up  

The number of jobs created last quarter was higher than expected; due to the Governments policies to bolster certain sectors, said Dang Quang Dieu, Director of Vietnam General Confederation of Labour's Institute of Workers and Trade Union.

Dieu predicted that the second quarter will be difficult for many enterprises. “However, because the Government has made certain essential adjustments in economic policy, such as reducing interest rates, extending categories of loans and seeking ways to help the real estate market, more businesses have access to credit. This, in  turn, helps production. By the third quarter we should see a rebound in the job market," he said.

Statistics released by the Ministry of Labor, Invalids and Social Affairs showed that some 12,000 enterprises, most of which operated in industrial and processing zones, were forced to stop production, many even going bankrupt in the first quarter, leaving about 240,000 workers unemployed or underemployed.

Meanwhile, though food price over the last months has remained stable, the cost of living is still high due to significant increase in prices of petrol and other essential goods.

Dieu pointed out the differences between the labour markets in the north and the south of Vietnam.

“While losing a job may not be as big a problem for workers in the south, it is normally considered catastrophic for northerners. The reason is that in the south there are many more opportunities in the industrial zones of HCM City and surrounding provinces," he said.

Dieu also emphasised the importance of support for the unemployed, as well as the importance of people who are out of work to understand current policies such as unemployment insurance and other available benefits.