VN retains attractiveness to Japanese investors

Vietnam was seen as a attractive destination for Japanese investors, although the northeast Asian nation has changed its investment policy in Southeast Asia due to post-March disaster challenges.

According to a recent survey by Japan’s Nikkei Economic Times, the number of Japanese firms investing in Vietnam in 2010 rose to 1,000, from 200 in 2006.

The survey showed that approximate 70 percent of Japanese businesses interviewed considered Vietnam as the most attractive destination, surpassing Thailand, Indonesia and India.

The result of a survey made by the Japan Bank for International Cooperation (JBIC) in 2010 showed that of Japan's total overseas investment, Vietnam ranked third in the medium term as a country with high potential for foreign trade, and the fourth in the long term.

Hideo Naito, Head of Department for Investment Finance of Energy, Water Resource and Infrastructure at JBIC, attributed Vietnam’s magnetism to cheap labour, skilled workers, a strong development outlook for the domestic market and capacity to export to third countries.

Vietnam was also considered a market for potential domestic consumption by Japanese firms.

Marubeni group has cooperated with the Dong Nai Food Corporation (Dofico) with an ambition of becoming the number one in production and distribution of farm produce, food and feed in the Vietnamese market.

Earlier in May, the Japanese firm signed a strategic cooperation agreement with the Vietnam Garment and Textile Group (Vinatex) to increase exports of Vietnam’s apparel products to Japan.

According to the Ministry of Planning and Investment’s Foreign Investment Department , Japan had by August run 1,560 valid projects with a total registered capital of nearly US$22 billion, ranking fourth among 92 nations and territories directly investing in Vietnam .

Japan’s investment projects were mainly in the areas of industries and supporting industries, plus high tech investments in line with the Vietnamese Government’s policy.
 
Inflation slows growth of retail sales

The total value of retail trade and services reached VND1,224 trillion (US$59.72 billion) during the first eight months of this year, an increase of 22.2 percent over the same period last year, reports the General Statistics Office (GSO)

Considering inflation, however, the value rose by only 3.9 percent, the lowest rise since the beginning of this year, the GSO said.

Vu Manh Ha, a senior expert in the GSO Trade Department, blamed the period's slower retail sales pace on higher inflation, 15.6 percent, compared with 6.12 percent and 13.29 percent in the first and second quarters, respectively.

The increasing consumer price index had led consumers to curb spending, Ha said.

During the period, commercial sector revenue, which accounted for nearly 80 per cent of the nation's total consumption revenue, rose by 22.5 percent year-on-year. This figure represented a 0.7 percent drop in comparison with the first seven months of this year.

The service sector, accounting for nearly 10 percent of the total revenues, experienced a 22.7 percent rise while the tourism sector saw a 14.8 percent increase.

From January to August, the stockpile index in the manufacturing and production sector rose by 17.8 percent against the same period last year, or 1.8 percent higher than in the first seven months.

Retail sales would likely maintain the period's growth rate or slightly increase in the remaining months of this year due to several festivals and the Tet (Lunar New Year) holiday, Ha forecasted.

Last year, the country's total retail sales value of goods and services jumped by 24.5 percent to VND1,561 trillion  ($74.3 billion) against the previous year.

Modern retail chains currently account for 20 percent of distribution in the country. This level is low compared with other countries in the region. However, experts have predicted this figure would grow to around 31.2 percent by 2015.

Official suggests potential in new European markets

The European Union’s countries of Austria, Slovakia and Slovenia are small but potential markets for Vietnam’s exports besides current big markets like the UK or Germany, a Ministry of Industry and Trade official said this week.

Counselor Nguyen Thi Thu Huong from the Vietnam Trade Office in Austria said during the online dialogue at www.ttnn.com.vn, a foreign market online gateway that helps domestic firms learn more about new markets that Vietnam’s enterprises were exporting little to these three markets because of a lack of information.

Exports to these small markets must meet EU’s regulations and demands of quality and hygiene, she said. Specifically, products shipped to Austria need to meet ISO standards and contain environment-friendly materials only.

However, each market has specific demands that Vietnam can supply, she said.

Slovenia, with a population of over two million people and high living standards, for instance can be seen a gateway for Vietnamese firms to penetrate into other EU markets.

Vietnamese products can be easily transported to regional countries from Slovenia through Koper Port, Huong said.

She added that China, Japan and South Korea are also taking advantage of this port to penetrate EU’s markets.

According to Huong, seafood is a potential product for these markets, especially Austria which has high seafood consumption because of its limited fishing.

For their parts, Slovenia and Slovakia like tra fish because of their low prices and good quality.

Austria also has a strong need for services and products such as machines, shoes, pharmaceuticals and steel.

An Austrian delegation is planning to visit Vietnam in November.

Huong also reminded local firms of checking information of foreign partners through Vietnam’s trade offices before signing contracts to avoid commercial frauds.

Dong credit growth in HCMC barely rises

Total Vietnam dong loans at Ho Chi Minh City-based banks as of the end of August reached VND522.2 trillion, or a mere 1.24 percent increase compared to late 2010, the HCMC branch of the central bank reported.

This figure confirmed many banks’ opinion that dong credit can’t grow because of the impact of the high interest rate on borrowing demand. The banks say they are mainly lending to their old clients.

Though many banks have launched promotion programs to reduce the interest rate burden for their clients, especially exporters, and individual and household businesses, clients are still finding it hard to access loans.

Meanwhile, as of the end of August, loans in foreign currencies of the banks in HCMC have risen by 19.66 percent over late last year to VND231.2 trillion.

As explained by the central bank and experts, the big difference between interest rates in the Vietnam dong and the U.S. dollar made borrowers prefer foreign currencies over dong.

The current U.S. dollar lending rate is 6-8 percent a year but the rate of the Vietnam dong is as much as 20 percent.

Overall, the total outstanding loans of HCMC’s banks are VND753.4 trillion as of the end of August, or 6.26 percent higher compared to the end of 2010.

The difference between interest rates in the Vietnam dong and the dollar has also resulted in the opposite directions of the banks’ mobilizing and lending activities.

Whereas foreign currency lending prevails over the national currency, mobilization of foreign currencies is on the downtrend compared to that of the Vietnam dong.

Currently, the annual deposit interest rate for the greenback is capped by the central bank at 2 percent for individuals and 0.5 percent for businesses.

On the other hand, clients are enjoying the dong deposit rate at 14 percent, which can surge to 18-19 percent with big deposits upon negotiation.

The central bank has lately committed to keep the foreign exchange rate fluctuation within 1 percent, prompting many people to switch to Vietnam dong deposits.

According to the report of the central bank’s HCMC branch, the total mobilization of credit institutions is VND857.7 trillion as of the end of August, up by 6.38 percent against late 2010.

Mobilization in the Vietnam dong has reached VND657.8 trillion, or a rise of 8.89% over late last year, while mobilization in foreign currencies is VND199.9 trillion, dwindling by 1.12 percent.

In the short term, the fall in foreign currency deposits versus a rise in foreign currency lending would pressure not only the forex rate, but also the balance of foreign capital ratio and loans in foreign money.

The central bank has thus decided to raise the foreign reserve requirements by one percentage point, saying it would also inspect foreign currency credit growth at credit institutions.

Vietnam’s export growth expected to slow down

Vietnam’s prospect of export growth in the years to come looks gloomier than other neighboring economies, said a UNESCAP trade report.

The Asia-Pacific Trade and Investment Report 2011: Post-crisis Trade and Investment launched on Thursday in Hanoi said that while the region as a whole is expected to return to a historical trade growth rate of about 10 percent in 2011 and 2012, Vietnam’s trade growth is expected to be slower.

Export growth may slow down to 1.4 percent in 2011, and rise back to 8.9 percent in 2012, while imports are projected to increase by 4.9 percent in 2011 and 7.4 percent in 2012.

The report also pointed out that although Vietnam’s trade picked up last year, with an estimated growth of 5.2 percent in export volume and a rise of 2.5 percent in import volume, these figures were lower than the average rates achieved by Asian developing countries of 17.3 percent and 15.8 percent, respectively.

Witada Anukoonwattaka from the Trade and Investment Division, UNESCAP said at the launching ceremony that the macroeconomic instability is a near-term risk that may curtail economic growth and adversely affect the confidence of foreign investors.

She added that rising oil and food prices as well as the pressure of accelerating demand will continue to drive inflation, which had already risen above 20 percent in June 2011, compared with the same month in 2010.

“The high rate of inflation may deter private consumption, increase production costs and hurt the export competitiveness of Vietnam,” she warned.

However, Nguyen Anh Tuan, Head of Division, Asia-Pacific Market Department of the Ministry of Industry and Trade, who was invited to the launching ceremony to comment on the report, said he was not concerned about the figures.

“Personally, I think the way the report authors look at Vietnam is not new compared to those from other international entities like ADB and WB,” Tuan told the Saigon Times Daily.

Tuan said he wasn’t worried about these figures which were based on a different calculation. Moreover, these figures could have no influence on potential foreign investors who want to do business here. They make their decisions based on reality rather than figures, he said.

According to the report, Vietnam’s economy is currently ranked 53rd in the world, based on the value of the World Bank’s Logistics Performance Index, with a score of 2.96.

During the past five years, Vietnam has attracted a significant inflow of foreign direct investment (FDI) which has been growing at an average of 22 percent per year while the country’s FDI inward stock has been rising by 14 percent every year.

The country is ranked 4th in Southeast Asia in terms of FDI inflows.

Air Mekong begins Hanoi-Con Dao service

Private carrier Air Mekong began to fly between Hanoi and Con Dao Island Thursday with a refueling stopover in Ho Chi Minh City.

Passengers can retire to lounges at Tan Son Nhat Airport during the 40-minute stop and return to the aircraft by a private entrance.

There will be flights on Mondays, Wednesdays, Fridays, Saturdays, and Sundays every week.

They will depart Hanoi at 9.40 am and arrive in Con Dao at 1.05 pm. The return flights will leave Con Dao Island at 1.40 pm and arrive at 5.15 pm.

The fare costs US$85 plus taxes and fees.

After nearly one year of operations, Air Mekong has carried more than 600,000 passengers from Hanoi and Ho Chi Minh City to Phu Quoc, Con Dao, Da Lat, Pleiku, Buon Me Thuot, Quy Nhon City, and Vinh.

Khanh Hoa drawing Russian tourists

Tens of thousands of Russian tourists will visit Nha Trang and Phan Thiet in Khanh Hoa Province from late October to early May next year.

Hoang Thi Phong Thu, Chairwoman of Anh Duong Co., said her company had just signed a contract with Moscow-based Turkish Pegas Touristik Company, which specializes in organizing international tours for Russians.

Anh Duong is currently an official representative of Pegas Touristik in Vietnam.

As planned, there will be a flight carrying around 180 visitors to Cam Ranh International Airport daily with 65 percent -75 percent visiting for sightseeing tours and staying at three- to five-star hotels in Nha Trang, while the rest will be bound for Phan Thiet.

These tourists, who come from nine cities in Eastern Europe, are expected to stay at the beach cities for around 12 days per tour.

Though the company has carried Russian visitors to Vietnam via chartered flights several times, this will be the first time the visitors have flown directly to Cam Ranh instead of stopping over in Ho Chi Minh City and reaching Nha Trang and Khanh Hoa by road.

The Russian market has shown signs of growth during the tourist season from the end of the year to the beginning of next year.

In addition to the large number of tourists visiting via chartered flights, the company will continue welcoming Russian tourists to Nha Trang and Phan Thiet from Tan Son Nhat International Airport in HCMC, Thu added.

Regarding the promotion of the Russian market, last week tourism firms as well as tourism promotion agencies in Khanh Hoa met with representatives of some Uzbekistan tourism companies who came to survey tourist destinations and services in the province.

These companies wanted to send tourists from Central Asia to Khanh Hoa during the next tourist season.

From September 20 to 27, the Ministry of Culture, Sports and Tourism will run Vietnamese culture days in Russia with cultural, music and exhibition activities as well as meetings between tourism firms of the two countries to introduce Vietnamese culture and tourism to Russian people.

Holiday shoppers boost sales
 
The month of September, designated a special promotional sales period, has begun very well with customers flocking in the thousands to supermarkets, trade centres and fairs.

The rush was particularly evident on National Day (September 2) as long queues of customers queued to buy promotional products at these events.

On the morning of September 2, thousands of customers braved the hot weather to gather at the Phu Tho Indoor Stadium to buy goods at a fair.

The fair had nearly 360 booths showcasing a range of products including clothes, shoes, foods, and electronic products.

Thanh Tung of Tan Binh District said that this year, he had spent the whole of the Independence Day holiday on shopping at the fair instead of travelling as usual. He said he was motivated to do so by the range of items and the 30-50 per cent discounts offered.

A staff member of Ba Huan Ltd Co said their company booth was overcrowded with customers buying eggs and rice because of the promotion. The Vissan foodstuff booth also attracted significant numbers of people.

Supermarkets and trade centres have also proved popular holiday destinations for families not having ideal conditions for travelling. In fact, some supermarkets have seen an overload of customers on these days.

A representative of the Maximark supermarket chain said fresh and processed foodstuff as well as consumer goods were selling well at discounted price.

On National Day, their outlets had to keep restocking shelves with many items such as detergent, fabric softener, instant noodles and cooking oil.

Nguyen Tri Kien, director of Minh Tien Handbag Joint Stock Company, said that in the current situation of high inflation that was forcing customers to tighten their spending, businesses would not be able to sell products without offering discounts.

Firms were cutting down on expenses for advertising and brand building, he said, adding they were offering many promotional programmes to lower prices for customers instead.

The largest discounts were being offered for textiles and garments as well as electrical and electronic appliances.

Nguyen Minh Thu, deputy general director of Thien Hoa Home Appliances and Furniture Centre, said they had received a good response to their promotional offers including freebies and discounted prices.

However, many customers have expressed doubts about the quality of products on sale, saying low-quality goods and expired consumables are increasingly found when a lot of shops offer particularly large discounts and make exaggerated claims through their slogans.

Hong Nhung, a HCM City resident, said fashion shops, for instance, were taking advantages of the occasion to get rid of unsold stock.

Le Van Khoa, deputy director of HCM City Department of Industry and Trade, admitted that it was very difficult to control promotional programmes at sales points, so customers have to be cautious in their shopping habits, and rely on prestigious trademarks.

Inflation rate in 2011 swings around 18pct

Consumer price index (CPI) in 2012 is estimated to fall to 9-10 percent.

The National Financial Supervisory Committee has completed and submitted the Government the draft report on the macro-economy for the first eight months of 2011 and the forecast for 2011-2012.

The committee has predicted that CPI will swing around 18 percent in 2011 and will likely fall to 9-10 percent in 2012.

To contain inflation effectively, the committee proposed implementing a ceiling interest rate, promoting the distribution of goods and devising solutions focused on the total supply. It also urged the General Statistics Office to announce the basic inflation index (excluding food and petroleum) along with the current overall CPI.

Creative thoughts needed for sustainable development

The cultivation of creative thoughts is needed to ensure the sustainable development of the creative economy and to avoid the “middle-income trap”.

Eight months of 2011 have passed with numerous challenges facing the entire society. There are now growing concerns among people, businesses, and managers over the fluctuations in prices and the rate of inflation. This shows a snapshot of Vietnam’s economy a year after escaping from the low-income status.

However, Vietnam has been warned against the “middle-income trap”. While economic growth is a top priority for the country, these warnings should be heeded.

According to the World Bank’s criteria, middle-income countries are those with per capita income of US$996-US$12,195. Vietnam, with per capita income reaching US$1,168 in 2010, is still among the lower middle-income countries. It is striving to increase the figure to US$1,300 in 2011 but this is by no means an easy task.

Regarding economic growth, Vietnam aims to reach a per capita GDP of US$3,000, a twofold increase compared to the present figure and an amount which would put the country in the top group of lower middle-income countries. However, the target will only be met if Vietnam becomes a modern industrialised country. That difficult task will take a significant amount of time and require great efforts.

The “middle-income-tax” mentioned by economists denotes the vicious circle which economies are in and which prevent them from escaping the middle-income status. Malaysia, Indonesia, Chile, and Brazil are cases in point. Although they enjoyed significant growth and escaped from the low-income status tens of years ago, they can not maintain that growth rate at present. In Asia, there are few countries such as the Republic of Korea and Singapore, which can avoid the trap and flourish into developed countries.

According to economists from major financial institutions such as the World Bank (WB), the Asian Development Bank (ADB), and the International Monetary Fund (IMF), Vietnam’s achievement of “middle-income” status is attributed to its exploitation of natural resources and cheap labour. When these factors are no longer Vietnam’s advantages, there will be no driving forces for economic development if the country does not change the growth model.

Analysis has shown the inefficiency of the economy, expressed in the high Incremental Capital Output Ratio (ICOR) index.

Vietnam, therefore, is giving top priority to changing its ways to achieve economic growth and sharing the achievement of the growth among people. This is more important than the “per capita GDP” figure.

The Government has addressed institutional improvement, human resource development, and infrastructure development as measures to reach a sustainable and continual development.

Human resource, and the additional value and creativeness which it provides, is among the most important factors for the development of the economy. However, improving the quality of education and training to provide a high-quality reserve of human resources in order to meet the global demand is now one of the most difficult tasks in Vietnam.

In order to ensure the sustainable development of the creative economy and avoid the “middle-income trap”, it is necessary to develop creative thoughts, especially in improving capacity to build development strategies and manage the economy of the Party and State apparatus.

Cashew nut export revenue hits US$850 million

Vietnam exported nearly 108,000 tonnes of cashew nuts worth US$857 million in the first eight months of this year, up 25 percent in terms of value compared to the same period last year, according to the Vietnam Cashew Association (Vinacas).

The Association said that in the second half of August, local cashew nut exporters faced price pressure from importers.

Vinacas asked businesses not to buy low-quality products, stressing that they must ensure food hygiene and safety to build a solid trademark for Vietnamese cashew nuts. Local businesses were also urged to stop importing raw materials to reduce pressure on loans and maintain long-term contracts.

Meanwhile, a joint stock corporation on cashew nuts has been established with a chartered capital of approximately VND100 billion.

The Military Bank (MB) has allocated VND2,000 billion to help local businesses boost cashew nut exports and purchase the remaining 30,000 tonnes of cashew nuts from farmers.

Fish dealers can't deliver

Many foreign importers are offering attractive prices for tra catfish and want large quantities, but exporters have to reject their orders because of a shortage of the fish.

Duong Ngoc Minh, general director of the Hung Vuong Seafood Co said many European and US importers came last week looking for big volumes of tra filet.

Minh said that they wanted deliveries in the fourth quarter of this year and the first quarter of next year and offered average prices that were 20 per cent higher than in July.

Just a couple of weeks ago, analysts had predicted exporters would be in trouble in the last few months of the year due to the economic crises in Europe and the US which would force consumers to tighten their belts.

Farmers had immediately called for help as buyers, who supplied fish to seafood processing companies, refused to buy from fish farms, leading to a sharp decline in tra prices.

But tra remains on top of the import list in western countries because it is cheaper than most of other seafoods.

The rising demand for tra products in the European and US markets has caused stiff competition among seafood processors to scramble for the fish.

On August 30 first grade tra sold at VND24,500 per kilogramme on the domestic market, up VND1,500 from the previous fortnight. But even at the higher price, seafood processors find it difficult to source the fish.

The steep rise in fish costs and bank lending interest rates and the fall in tra prices caused losses to farmers and forced many of them to leave their fish ponds idle.

According to feed manufacturers, sales have dropped by 20 to 50 per cent in the past few months even as tra prices dropped from VND28,000-29,000 to VND20,000-21,000. The Viet Nam Association of Seafood Exporters and Producers (VASEP) sounded a warning about a serious shortage of tra from September onwards.

Viet Nam exported nearly 400,000 tonnes of tra in the first eight months for US$1.1 billion, a 4 per cent increase in volume and 25 per cent rise in value year-on-year.

VASEP said with the conditions becoming favourable, exports this year could top $1.5 billion.

Cement industry loses loan guarantees

The Government will stop guaranteeing overseas borrowings by cement enterprises following a report by the State Auditing Agency that four companies are likely to default on repayment and have sought support from the Ministry of Finance.

The Government had guaranteed foreign loans worth US$1.36 billion for 16 State-owned cement companies out of whom Dong Banh, Thai Nguyen, Tam Diep and Hoang Mai companies were facing financial problems and could not repay, said the Minister of Finance, Vuong Dinh Hue, during a press meeting in Ha Noi on Thursday.

Analysts warn many others could end up in the same boat.

The reasons are not hard to find: the mushrooming of cement plants in the country leading to a massive oversupply and the ineffective operation of plants due to the use of outdated technologies.

In 2004 the cement industry began to adopt the Chinese rotary kiln technology and imported machinery at low prices though they are much less efficient than technologies and equipment imported from Europe or Japan, according to Saigon Economic Times.

But what made things worse was that the number of cement plants licensed rose three-fold in the last seven years while demand just doubled.

Thus, while there are 110 factories with a designed capacity of 64 million tonnes annually and current production is around 57 million tonnes, demand is expected to be only 52.5 million tonnes this year due to a reduction in the number of building projects, according to the Viet Nam Cement Association.

The association added that in addition there were 4-5 million tonnes in stock.

Producers are looking to boost exports but international prices are low while transport costs are high.

Dao Ngoc Binh, director of the Hoang Thach Cement JSC, says if firms stop or reduce production, they would incur even higher losses due to high fixed costs.

In such a situation, many of the newcomers have to sell their products at "competitive" prices that may be lower than their production costs.

Saigon Economic Times said while the prices of feedstock and production costs had doubled or tripled since 2003-04, cement prices were lower than they had then.

Clearly, there has been a failure by the relevant authorities to monitor the import of equipment and technologies for cement manufacture, draft a master plan for the industry, and accurately forecast the growth of the market.

Fertiliser prices increase dramatically

With global fertiliser prices surging and supply plunging in Viet Nam, prices have risen sharply in the last fortnight.

Several kinds of fertilisers have seen prices increase by 50 per cent and even 100 per cent, Tuoi tre (the youth) newspaper reported.

At the same time, rice prices are falling, in what could turn out to be a double whammy for farmers.

Duong Van Thanh, a farmer in Tra Vinh Province's Chau Thanh District, said in April urea had cost VND420,000 for 50kg bag.

Several fertiliser agents in the Cuu Long (Mekong) Delta have now hiked prices to VND620,000.

Fertiliser traders said the wholesale price of imported urea was VND11,400 per kilogramme [or VND570,000 a bag], a rise of 10 per cent in just the last fortnight and 84 per cent year-on-year.

Thanh said in April DAP fertiliser had cost VND640,000, and Kali fertiliser ,VND540,000, but their prices had risen to VND940,000 and VND615,000.

"The price of the summer-autumn rice has fallen by VND1,000 per kilogramme since July," he added.

The Fertiliser Association of Viet Nam (FAV) blamed the sharp rise in global prices for the jump in domestic prices.

Import prices have topped US$500 (VND10.3 million) per tonne, a rise of VND1 million within a month.

On the other hand, many fertiliser traders blamed a supply shortfall for the higher price though both imports and domestic production are up sharply this year.

Customs figures show that imports rose by 550,000 tonnes year-on-year by mid-August to 2.3 million tonnes. Local production in the first eight months was up 146 per cent, according to the General Statistics Office.

A fertiliser dealer in Long An Province's Thu Thua District said supply from both local producers and China in the last month had been inadequate to meet demand.

Vu Duy Hai, chairman and general director of HCM City-based Vinacam Joint Stock Company, said fertiliser demand had increased since early August.

Imports might have been higher than last year but lower than in the past, he said.

Besides, there had been a huge quantity of exports, he said.

"At this time in previous years, large quantities of fertiliser were stockpiled.

"[But now] shops in HCM City and other places are almost empty."

The director of a fertiliser trading company in HCM City said companies exported because there were times when domestic prices were much lower than import prices.

The high bank interest rates dissuaded import companies from keeping fertilisers in stock for long, he pointed out.

PetroVietnam Fertiliser and Chemicals Corporation hiked the wholesale price of its Dam Phu My urea fertiliser by VND700 per kilogramme to VND11,000 on September 1.

It costs just VND8,200 in February.

PV