CEOs learn risk management lessons

Economic risks including high inflation and interest rates, together with unpredictable monetary policies, are among the risks faced by CEOs of Vietnamese firms, experts say.

Risks were defined as uncertain future events that could influence the achievement of a company's strategic, operational, financial and compliance objectives, they said at a seminar held last Friday in HCM City.

Co-organised by the HCM City Investment and Trade Promotion Centre in collaboration with International Business Knowledge Corporation, the seminar was attended by 200 CEOs, managers and experts.

Pham Do Chi, a former senior economist at the International Monetary Fund (IMF), said inflation was forecast to accelerate quickly in the next two months due to high shopping demand for the upcoming holiday season.

The inflation rate is estimated at 19-20 per cent for this year.

The Asian Development Bank has lowered the forecast in the GDP growth rate of Viet Nam from 6.1 per cent to 5.8 per cent this year and from 6.7 per cent to 6.5 per cent next year.

Monetary tightening policy will be applied in the three remaining months and even next year, causing further pressure on businesses, especially small – and medium-sized businesses.

The Small - and Medium-Sized Enterprise Association said from the beginning of this year, 30 per cent of businesses had to close their operations because of a high interest rate and were unable to access bank loans for production.

The minimum wage adjustment from VND830,000 to VND2 million, depending on various areas, would have a negative impact on the CPI index for the remaining months of the year, he said.

The CEOs warned of external risks and a difficult world economy that worsened in the third quarter, including bad debts in Europe, a loss of investor confidence in financial markets and a high unemployment rate.

As a result, foreign direct investment (FDI) capital to Viet Nam is expected to decrease sharply if the world economy does not recover quickly.

As of Sept. 22, FDI capital reached $9.9 billion, equal to 72.1 per cent of last year's FDI.

Nguyen Dang Duy Nhat, operation director of Global Elite Consulting Corporation and chairman of CMO Council Worldwide in Viet Nam, said: "The CEOs of Vietnamese firms also need to identify business risks such as technology innovation, product design change, market demand and competitor activities."

Dang Duc Thanh, deputy chairman of the HCM City Business Association, said "Business strategies are not adequate if there is no risk management."

Trends such as the IT boom, globalization, environmental impact and climate change require businesses and organisations to build appropriate and complete systems of risk management that can help create a sustainable growth rate.

He advised CEOs to identify risks and keep business operations under control to cope with changes caused by a volatile economy.

Thanh said CEOs should become more aware of the importance of risk management.

He also advised CEOs to review and re-adjust business plans in accordance with the new economic context.

He noted that Vietnamese companies should not heavily depend on borrowed capital from banks as they once did.

Instead, they should develop business and production by mobilising capital through the stock market by issuing stocks, shares and bonds.

Nhat said domestic companies could learn about risk management from leading corporations such as Toyota and Citi Group.

"In order to manage risks effectively, there has to be a regular assessment and a company-specific plan to deal with each risk," he noted. "Periodic re-assessments are essential to keep up to date with changing business landscapes and laws."

Vietnam economy not out of the woods yet

A meeting of the National Assembly Standing Committee last Saturday saw the release of a less than optimistic economic forecast for the next five years.

Minister of Planning and Investment Bui Quang Vinh said despite the government’s recent efforts, the economy remained unstable, warning it could run into rough weather at any time in that period.

Many businesses had been forced to scale down or even went bankrupt. Some 48,700 businesses had dissolved or shut down in the year to date due to losses, according to data available with the ministry September.

The figure was 21.8 percent higher than previous year, and the high lending rate had been the main culprit.

The economy would continue to face difficulties in 2012, with the GDP only likely to grow at 6 percent. Inflation would be below 10 percent.

The Ministry of Planning and Investment had laid out two scenarios for economic development between 2011 and 2015, offering a choice between 6.5 percent growth and 7 percent growth.

The government had chosen to set the latter target.

Only VND225 trillion (US$10.9 billion) could be raised by issuing government bonds while VND500 trillion would be needed for public investment between 2011 and 2015, so many projects would be delayed until 2016.

The government was also willing to convert some public projects to build traffic infrastructure, hospitals, and student dormitories into build-operate-transform (BOT), build-transfer (BT) or public-private partnership (PPP) mode.

More foreign retailers to set up shop in Vietnam

Vietnam’s retail market will soon see the entry of at least three giant foreign retailers while some others already with a presence in the country will expand their operations, Saigon Times daily has reported.

A Ho Chi Minh City foreign investment management agency said Japan’s leading retailer Aeon Co Ltd was seeking approval to invest in the local retail market.

Aeon is expected to build a shopping mall at a cost of more than US$100 million in Tan Phu District.

Local retailers said Aeon would be a powerful rival because of its experience and deep pockets.

Though it has yet to get a license, Aeon has been training personnel with an eye on beginning operations in 2014.

Japan’s Nikkei newspaper reported that Aeon had tied up with the HCMC-based University of Social Sciences and Humanities for personnel training and recruitment.

Hong Kong’s Dairy Farm International Holdings has got a license to begin operations in the country next month.

Dairy Farm will open an outlet of Giant, its supermarket chain, at the Crescent Mall Center in Phu My Hung, District 7.

In 2007 a subsidiary of Dairy Farm, Giant South Asia Vietnam, entered Vietnam with its Wellcome supermarket chain.

E-Mart, one of the largest retailers in South Korea, has joined hands with the Binh Duong-based U&I Group to open a supermarket chain in Vietnam.

E-Mart will hold an 80 percent stake in the E-Mart Vietnam joint venture, which will invest $1 billion to open 52 supermarkets and stores in urban areas around the country.

Some foreign retailers who are already in the country are eyeing expansion.

Korea’s Lotte Mart said it had received the government’s green light to hike its investment to $50 million.

In 2008 it tied up with Minh Van Co for a $15-million joint venture in which it held 80 percent to open two supermarkets in HCMC.

Germany’s Metro Cash&Carry has expanded its network with two new outlets set up at a cost of $33 million in Ha Long and Vinh cities in the north last month and plans to open one more this year.

Dak Lak seeks privilege for foreign coffee firm

The Central Highlands province of Dak Lak is seeking approval from the Ministry of Industry and Trade to allow a foreign company to buy coffee directly from farmers, a practice hitherto banned.

If approved, Man – Buon Ma Thuot Coffee Processing and Export Co, a joint venture between Vietnam’s 2-9 Dak Lak Coffee Import and Export Co and the UK-based E.D & FMan Vietnam Holdings B.V., will become the first foreign company to be able to buy coffee directly.

Normally in Vietnam, foreign businesses are not allowed to buy coffee and some other agricultural products from farmers but only from licensed Vietnamese traders.

The Dak Lak people’s committee said it would be unfair not to allow Man – Buon Ma Thuot Co since it had been for long assisting local farmers grow clean coffee with a 4C certificate.

Tran Hieu, deputy chairman of the people’s committee, said the recommendation was being made on the basis that Man – Buon Ma Thuot Co was a joint venture with a state enterprise.

But local coffee exporters are not too happy with the proposal. With foreign businesses already managing to buy large quantities of coffee through Vietnamese dealers and subsidiaries, they would be able to manipulate the market, they warned.

Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association, said 12 major international coffee companies had entered Vietnam and set up a countrywide buying network.

He said half of all coffee buying companies in Vietnam now were foreign, compared to only 15 percent two years ago.

Vu Duc Tien, director of the Dak Lak-based Tay Nguyen Coffee Import and Export Co, said the rationale that Man – Buon Ma Thuot should be taken as an exception because of its 4C certificate was not persuasive enough since several other companies had also obtained this certificate.

“Domestic coffee exporters cannot compete with foreign rivals if the latter are licensed to buy directly from farmers,” he said.

But some businesses and farmers believe that allowing foreign companies to buy will benefit the sector.

Le Van Phuong, a farmer in Lam Dong Province, said domestic coffee firms usually paid farmers low prices for coffee.

But last year, when some foreign dealers entered the market, he had got higher prices, he said.

A coffee agency based in Ho Chi Minh City rejected this saying the main reason for the high prices last year was not the entry of foreign traders.

“Domestic prices went up mainly because global prices soared,” it explained.

Nguyen Xuan Thai, director of Thang Loi Coffee Co, also said the entry of foreign companies would boost the market’s competitiveness and benefit farmers in terms of prices.

Vietnam-Germany trade expected to hit $5 bln

Two-way trade between Vietnam and Germany has increased continuously in recent years and is expected to hit $5 billion this year.

Nguyen Huu Thien, President of the Ho Chi Minh City Vietnam-Germany Friendship Association made the statement at a get-together on October 3 to mark the 21 st anniversary of German Unification Day.

As Vietnam’s leading EU trade partner, Germany mainly imports Vietnam’s footwear, garment, aquatic and agricultural products – especially coffee beans and black pepper – while Vietnam imports machinery, electrical appliances, equipment for mining and construction, garment, automobiles and pharmaceutical industries from Germany, Thien said.

He added that Germany currently ranks 22 nd out of 89 countries and territories investing in Vietnam with 139 direct investment projects worth $778 million .

At present, the two countries are carrying out several major projects in the fields of infrastructure and energy, especially the projects on building the subway No 2 route in Ho Chi Minh City, Vietnam National Assembly House and an international airport in the southern region.

Conrad Cappel, German Consul-General in Ho Chi Minh City said that the German government is following a policy of deepening cooperation with Vietnam in many fields, especially in politics, culture, economics, science, development policy and law.

The diplomat said that German Chancellor Angela Merkel’s upcoming visit to Vietnam would lift the two countries’ relations to a new height.

Nation exports over 5.8 mln tonnes of rice in nine months

Vietnamese businesses shipped more than 5.8 million tonnes of rice worth over $2.8 billion in the first nine months of 2011.

According to the Vietnam Food Association (VFA), the country exported 560,020 tonnes worth $291.5 million in September alone.

The Quan doi Nhan dan (People’s Army) newspaper on October 4 quoted Deputy Minister of Industry and Trade Nguyen Thanh Bien as saying that Vietnam’s rice export markets continued to be expanded as some Southeast Asian nations were importing large volumes of Vietnamese rice.

Indonesia plans to import around 1.5 million tonnes of rice from Vietnam, he added.

Vietnam expects to export 7 million tonnes of rice this year, the highest volume for a year so far.

Accelerating disbursement of ODA-funded projects

HCM City is focused on ensuring site clearance for major projects to get off the ground.

At present, it is monitoring three completed projects and 20 ongoing projects with a total investment of US$5.432 billion, of which US$4.27 billion comes from ODA, and US$1.162 from government funds.

Since the beginning of the year, the city has disbursed VND2.574 billion, up 21 percent from the same period last year. Among major projects are the East West Highway and Thu Thiem Tunnel which are expected to open to traffic in November 2011.

Canada boosts investment, trade with Vietnam

Canada’s bilateral merchandise trade with Vietnam over the past decade has increased steadily by more than four fold over 2000.

It reached an all-time high of nearly US$1.4 billion in 2010, according to Audri Mukhopadhyay, Consul General of Canada in HCM City.

Merchandise imports from Vietnam were valued at US$1.2 billion, while exports were worth US$264.7 million.

Canadian statistics showed that the stock of Canadian direct investment in Vietnam was US$89 million at the end of 2009.

Canada and Vietnam are currently negotiating a Foreign Investment Promotion and Protection Agreement (FIPA).

The Consulate General of Canada has arranged for many trade delegations to visit Canada and Vietnam, and organized various activities, including food promotions, education fairs, and seminars in an effort to boost bilateral cooperation.

Export value of hi-tech zones hits US$626m

Exports from high-tech zone (HTZ) enterprises in HCM City were reported to have reached US$626 million, a year-on-year increase of 165 per cent, accounting for 99 per cent of total production value.

The production sector showing a 163 percent growth over last year earned US$631 million.

So far this year, eight new projects with total investment capital of $151 million have granted investment licences across HTZs, an increase of 39.5 per cent from a year earlier.

Power supply projects for Phu Quoc

Phu Quoc Island District in the southern province of Kien Giang will receive more than VND9.16 trillion (US$436.2 million) to implement three power supply projects, said the Phu Quoc Investment and Development Management Board.

The approved projects include installation of the 56km Ha Tien – Phu Quoc 110kV underground cable system, which is expected to be completed next year to connect the island to the national power grid.

A 200-megawatt-per-day thermal power plant will be built in Ganh Dau Commune.

The Prime Minister assigned the Ministry of Industry and Trade to work out the planning for the plant.

The thermal power plant, worth more than VND7.22 trillion (US$344 million), is included in the national power planning until 2015, which was ratified by the Prime Minister.

Under the plan, the first turbines should be operational by 2015.

Another VND180 billion (US$8.57 million) will be allocated for developing wind and solar energy on Hon Thom Island, in a project designed to generate 1.27 megawatts of power each day.

Vietnam jumps in development index

The International Telecommunication Union (ITU) has published a report placing Vietnam 81st in a development index.

Titled ‘Measuring the Information Society 2011’, the report included the ICT Development Index (IDI) and the ICT Price Basket (IPB).

Vietnam moved up 10 places on the IDI list with value increases of 2.76 in 2008 to 3.53 in 2010.

The IDI figures are divided into three sub-indices rating access, use and skills. Vietnam saw growth in the use category which reflected the rise in broadband internet subscribers from zero in 2008 to 13 percent in 2010.

Vietnam also jumped 16 places in the access sub-index compared to 2008 and now ranks 12th in the Asia-Pacific region.

It was listed as third place among 10 countries which experienced the highest IDI growth rates during the 2008-2010 period, after Armenia and Morocco.

According to the report, the 3G services launched in late 2009 have contributed to doubling mobile subscriptions in two years.

Vietnam’s wood furniture export turnover to cross $4 billion

Vietnamese furniture exporters have made significant gains with the country’s furniture export turnover expected to cross $4 billion this year.   

The furniture export turnover touched $3 billion in the first nine months of this year, an increase of 17 per cent compared to the same period last year. September alone saw the export turnover cross $402 million.

However, such an impressive growth rate has not come easily for exporters who have to face obstacles like difficulty in obtaining or importing raw wood, said Nguyen Ton Quyen, general secretary of the Vietnam Timber and Forest Product Association.

Quyen said that after the ban on logging of forest wood in the country, exporters have to import 4,000,000 cubic meters of wood each year from Laos, Africa and some other countries.

The biggest problem for exporters is not lack of orders, but the increasing cost of raw material. Everything is becoming so much more expensive, from raw timber to packaging, said Quyen.

In addition, Vietnamese wood enterprises are facing an obstacle in the form of the Lacey Act. Wood furniture exporters now have to comply with the Lacey Act when sending shipments to the US, said Quyen.

Similarly, the EU Forest Law Enforcement, Governance and Trade Act (FLEGT), which aims to stop illegal logging and poor forest governance, will take effect from January 2012.

Quyen said that enterprises need to reduce import of raw wood by increasing afforestation and improving quality of wood products. The Vietnam Timber and Forest Product Association must also train local manufacturers to purchase wood legally and create a control system for the trade of wood and wood items.

The wood products industry in Vietnam has around 2,500 domestic enterprises processing wood products for domestic consumption and 400 foreign investment companies contributing to roughly 50 per cent of the total wood export turnover.

Vietnamese wood products are exported to 120 countries in the world. Major markets include the US with 38 per cent, EU countries with 44 per cent and Japan with 12 per cent.

Hanoi to apply ceiling service fees for flats

Hanoi City’s authority has decided on VND4,000 per square meter per month as the maximum level of fee imposed on every kind of apartment, aiming to ease conflict between residents and investors in terms of expensive management fees.

Fees applicable to apartments will range from VND2,100 to VND4,000 per square meter per month for cleaning, operating technical facilities, security, fire exercise and green space service.

Recently, there have been numerous complaints from residents living in Keangnam, The Manor and Golden Westlake, saying that fee levels they pay developers are too high.

For instance, Keangnam’s investor originally charged a fee of VND21,000 per square meter monthly but later reduced it to VND18,600 under pressure from residents.

However, the local authority also noted that fees would be charged in line with provisions regarding services fees specified in the contracts between suppliers and buyers.

The problem is that investors ask for a high fee whilst providing a worse-than-expected service, which is mostly seen in newly-operated apartment buildings, Pham Trung Ha, general director of property company Hoa Phat, pointed out.

The ceiling level at VND4,000 per square meter merely helps enterprises have a base to set a reasonable fee - but fails to allow them to cover all service fees and therefore, the agreement between investors and clients is the key to solving the issue, Ha commented.

Saigon Co.op launches TV shopping channel

Saigon Union of Trading Co-operatives (Saigon Co.op) on Saturday started its first TV shopping program, HTVCo.op, on HTVC18 channel.

The channel is active for 18 hours a day, from 5 a.m. until 11 p.m.

This shopping channel, developed by Saigon Co.op, the owner of Co.opMart supermarket chain, and HCMC Television station, is aimed at bringing Vietnamese products closer to consumers, encouraging the use of locally-made products.

News and entertainment programs are included to meet the demand of Vietnamese female viewers in age group of 25-49.

Saigon Co.op Media Co., the operator of HTVCo.op, has a customer care center, warehouse system and a dedicated team, said director Vo Thi Ngoc Huong.

On the occasion of the launch of this TV shopping channel, Saigon Co.op Media is offering two big promotion programs worth VND6 billion for shoppers on HTVCo.op channel.
 
155 firms disqualified from exporting rice

The Ministry of Industry and Trade has issued licenses for only 107 out of 252 firms qualified to export rice under Government Decree 109 on rice trading which comes into effect from this month.

Truong Thanh Phong, chairman of the Vietnam Food Association (VFA), said 69 among 107 exporters were members of VFA. The number of exporters licensed to export rice was only 80 in early August, two months before the decree became effective.

Several firms were disqualified from exporting rice as they failed to meet requirements for rice storehouses and mills which need to be built near each other, Deputy Minister of Industry and Trade Nguyen Thanh Bien explained.

To remedy this situation, the ministry has issued the licenses to exporting firms who have storehouses and mills located in different places.

Other articles of the decree such as requiring firms to have a 5,000-ton storehouse or a mill with a capacity of 10 tons per hour are extended until October next year.
 
Online Expo made attractive to businesses

The website of the International Furniture & Handicraft Fair and Exhibition 2011 (Expo) at hcmcexpo.com.vn is expected to attract more businesses to visit given new improvements and additional functions.

In the past, hcmcexpo.com.vn was the official website of the exhibition providing viewers with information about registrations and general views on the expo. In 2009, the website underwent a complete revamp aimed at adding values to the on-site exhibition via activities including online exhibition, and online B2B.

The website operator, the HCMC Department of Industry and Trade, also wanted it to become an exclusive website for wood and handicraft trading, helping local exporters approach new trading methods and get latest news on the industry.

One important part of the website is the Exhibition Information section that introduces all related information about the exhibition, pavilion, registration form, pictures and information on the previous exhibition, as well as the detailed schedule on all upcoming events of Expo 2011. Visitors can choose Visitor Information to register for B2B activities or participate in other supporting activities for visitors.

Those who can’t attend the exhibition can still go to the Online Tradeshow, which allows visitors to review the previous exhibitions and see the current one.In addition to business supporting information, the website owner organized the Communication Column to help reporters get the latest information about the exhibition. They can also search for information about local and international exhibitions, get to know the latest consumer trends and explore Vietnam’s export markets.

Hcmcexpo.com.vn is playing an important role in helping international buyers get contact with local wood and handicraft makers. The department’s figures show that there were 179 companies participating in the Online Tradeshow with more than 3,000 items in 2008, the respective numbers in 2009 rose to 761 and 5,000, and 800 and more than 12,000 items last year.

Therefore, together with the annual Expo, the website has become a unique online exhibition for wood and handicraft producers and exporters in Vietnam.

Many companies have described the website as helpful as it offers business information and that on products for foreign importers when they do searches. This is also a place where Vietnamese producers can get updates on their business partners. But the most important thing is that the HCMC Department of Industry and Trade as the Expo organizer will exempt them from all costs.

At the beginning, the department set the target of making the website the most useful trading promotion tool for entrepreneurs.  

Many local wood and handicraft producers are small and medium, so their trade promotion budgets are still limited. Most of them choose to put the logo or buy commercial advertising on well-known sites including Alibaba.com and Google.com at high costs.

Le Phuc Thinh, managing director of Saigon Palm, a frequent customer of Alibaba.com, told the Daily that every year he spent an average of VND100 million on trading promotion activities, including  local and overseas exhibitions and online commercials. For small logo and product display of Saigon Palm on Alibaba.com, he paid US$1,500 per year. This year Thinh has decided to cut half the spending on on-site exhibitions to focus on online trade, he said, because the online version will last longer than the on-site exhibition.

Therefore, the free Online Expo has helped him cut trade promotion cost. Thinh said he really appreciated the department’s assistance for entrepreneurs like him.

The website is undergoing the last phase of technical improvement in the lead up to the opening this Wednesday of Expo 2011.

Companies unable to borrow, despite lower interest rates  

Even after commercial banks capped the deposit interest rate at 14 percent and cut lending interest rates, companies continue to complain of their inability to borrow capital at 21-24 percent per year.  

Major commercial banks have lowered the dong lending rates on loans to businesses at 17-19 percent. However, Bui Van Chinh, director of the Hoan Cau Garment Company, says he is being denied access to lower rates. A bank offered him lending interest rate at 21.5 percent per year.

Chinh said that it is difficult to access the lending rate at 17-19 percent. Some businesses have had to accept lending rate at 20-24 percent, despite offering mortgage assets.

Similarly, companies operating in sectors like mechanics, plastic and electronics also complained about the lending interest rate that banks were offering at 22-23 percent, sometimes even higher.

Tran Van Binh, director of Hoang Tan Private Company said that his firm had asked to borrow from some commercial banks but none agreed to lend at 19 percent. Now, he has to borrow at 22 percent.

Le Ba Lich, chairman of the Vietnam Association of Animal Feed Manufacturers, said only a few big firms could access the lower interest rates. Many small firms still borrowed at interest rates of over 19 percent.

A representative of Dai A Commercial Bank said that the bank just applied the lending rate of 17-19 percent for some special companies. The bank carefully assessed firms’ profiles before deciding to lend them, to ensure that we offer the loans to the right people, the representative said.

In the short term, the rates will be applicable only to particular beneficiaries or loyal customers of the bank, the representative said.

Another manager of a commercial bank who wished to remain anonymous said the reduced lending interest rates could cause problems for banks.

It is difficult for banks to lower lending rates suddenly and apply the new rates for all customers, he said.

The interest rates of 17-19 percent can only be applied to more and more customers in the next one or two months when banks have dealt with all high-interest deposits, he said. If banks disrupt the cap on deposit rates, lending rates will be cut as low as 17 percent in coming times.

PV