Business in brief 10 May, 2013
Planned oil refinery capacity increased
The planned Vung Ro oil refinery project in central Phu Yen province would increase investment capital from US$1.7 billion to $3.18 billion and its capacity would be doubled to 8 million tonnes a year.
The investment licence was being adjusted accordingly, the provincial People’s Committee said. The oil refinery would be built in Hoa Tam Industrial Zone, in Nam Phu Yen Economic Zone, instead of in an area of more than 175ha in Hoa Tam and Hoa Xuan Nam communes.
According to the project consultants, the old location was not appropriate for expansion and the plant might have a bad impact on the surrounding scenery.
The original project licensed in 2007 had a capacity of 4 million tonnes a year and investment of $1.7 billion.
The proposed adjustments were agreed in Document 52/TB-VPCP issued in February this year.
Minister of Planning and Investment Bui Quang Vinh said incentives should be provided, such as exemptions of land use fees and crude oil import tax, according to the Vietnam Economic Times newspaper.
Previously, chairman of the provincial People’s Committee Pham Dinh Cu said construction of the project must start no later than July. Project investors were to have the plant operational in four years.
Vung Ro oil refinery was expected to attract other projects to Hoa Tam Industrial Zone.
The project was expected to contribute around $111 million a year to the State budget and provide jobs for 1,300 labourers.
Central bank eyes gold sale to stabilise market
The State Bank of Viet Nam stated that it would pump about 10 tonnes of bullion gold into the market if needed in order to stabilise the market.
The domestic gold price has fallen for six consecutive days to its lowest level in the past three weeks. Yesterday, the selling price of DOJI Group fell to VND41.68 million per tael while the buying price was VND41.44 million per tael.
In HCM City, each tael cost from VND41.42- 41.67 million, about VND4.4 million higher than the world price. A representative from the SJC Company told the Saigon Economic Times that gold purchasing power has been low despite the decreasing prices.
He said investors have been hesitant to buy gold, as all banks will soon be forced to stop mobilising or lending gold.
The central bank has been selling gold through auctions. Yesterday, SBV organised its 14th auction of gold bars, where 26,000 taels were up for sale.
The bank set the reference price at VND41.50 million per tael, about VND50,000 higher than the buying price and about VND200,000 lower than the selling price on the market.
Commercial banks were the major buyers at the auction, attended by 11 enterprises and banks – eight of which bought gold bars.
To date, 392,900 taels (15.11 tonnes) have been sold out of 432,000 offered.
Economist Vu Dinh Anh told online newspaper infonet that the difference between the domestic and world gold price was not a concern, adding that analysts should instead pay attention to the difference between the buying and selling prices.
Anh said people would benefit from a high difference between the buying and selling prices.
He added that the central bank’s current goal was to stabilise the gold market, not narrow the gap between the domestic and world gold prices.
In another move, the Ministry of Finance announced yesterday that the Prime Minister had decided to make raw gold materials exempt from export taxes and gold import duties.
The ministry said the decision would help the central bank export and import gold bars while ensuring raw materials for bullion production.
Under Circular No 184, an export tax rate of 10 per cent was imposed on gold of purity between 90 and 99.99 per cent and gold jewellery of above 99 per cent purity.
Vietcombank slashes interest on deposits
Vietcombank early this week cut its monthly deposit interest rate for the dong to 6 per cent, 1.5 per cent lower than the ceiling rate stipulated by the State Bank of Viet Nam.
It also slashed the rates for six-month to nine-month terms to 7 per cent (a drop of 0.5 per cent) while 12 month terms were cut to 8 per cent (a 1 per cent drop).
This was the second time the bank cut rates within a month and it now offers among the lowest deposit and lending rates of all its competitors, it announced in a press release this morning.
Most other banks currently apply a rate of 7.5 per cent for deposits fewer than 12 months, and 10 per cent for 12 months or more.
Vietcombank general director Nguyen Phuoc Thanh told the press that good deposit growth at the bank and stable liquidity of the banking system drove the rate cuts, which are taking place against a market backdrop of stagnant lending.
Thanh said that the move aimed to stimulate consumption and help firms reduce inventories and improve business results.
"In my opinion, there should be a vanguard bank cutting interest rates. The cuts were not only to meet our internal demand but also to follow Government and central bank directions about helping enterprises access cheaper loans," he said.
Currently at Vietcombank, short-term lending rates are around 10.5 per cent and medium- and long-term lending rates stand at 11.6 per cent, levels which have continued to fall sharply.
The bank is also applying preferential lending programmes, including a VND30 trillion (US$1.4 billion) package with a rate of 7.5 per cent and a $700 million package with a rate of 2 per cent, to assist struggling enterprises.
These would affect Vietcombank’s business performance in the short term but claimed they were necessary to clear capital flows in the economy. He added that it was difficult to predict the moves of other banks.
"We believe that the market always operates correctly following its rules and no one can stay outside of its circle."
Thanh said that economic conditions still leave room for the State Bank to further reduce the ceiling deposit rate, with inflation being controlled at 6-7 per cent and the consumer price index increasing 2.4 per cent in the first four months of this year.
Fruit and vegetable exports drive healthy sector growth
Fruit and vegetable exports this year are expected to increase to US$1 billion from $829 million last year, according to the Fruits and Vegetables Association (Vinafruit).
Speaking at the association’s third-term congress organised in HCM City yesterday, Huynh Quang Dau, Vinafruit’s deputy chairman, said that global demand for fruits and vegetables would increase by 3.5-5 per cent in the next few years.
Exports reached $187 million in the first four months of the year, a year-on-year increase of 10 per cent.
Vietnamese exporters in recent years have used advanced preservation methods like irradiation to find acceptance in demanding markets like Japan and the US.
Dau, who is also general director of the An Giang Fruit-Vegetables and Foodstuff JSC, said Vietnamese fruits and vegetables were sold to more than 50 nations and territories, with China, the US, EU and Japan being the main importers.
"The EU market has high demand for baby corn, edamame and pineapple. Africa and Middle East are potential markets, also," he said.
New markets also have quality requirements on imported fruits and vegetables, but they are not as strict as those set by the US and EU, he said.
Tran Ngoc Hiep, deputy chairman of the Binh Thuan Dragon Fruit Association, said that dragon fruit exports had increased and would continue to do so in the next few years.
"However, the most important thing is how to manage the pesticide residue on dragon fruit to increase export opportunities to choosy markets," Hiep said.
Viet Nam’s varied geographic and climatic conditions have allowed it to diversify its fruit and vegetable production, giving the sector great export potential.
With import countries tending to raise requirements in quality, hygiene and food safety, the sector has no choice but to apply Good Agricultural Practices to ensure hygiene and safety standards, Dau said.
Meanwhile, it must focus on raising awareness among farmers about hygiene and food safety standards, he said.
Nguyen Van Nga, director of the Plant Protection Department’s Regional Plant Quarantine Sub-department II, said fresh fruits exported to choosy markets must go through irradiation.
The country has facilities offering irradiation services in southern Binh Duong Province and HCM City, he said, adding that the Government plans to open two similar plants in HCM City and neighbouring Long An Province. Agencies from Japan and South Korea will inspect the two new facilities soon.
Once put into operation, the new facilities are expected to help local fruit and vegetable exporters reduce costs and preserve their goods better, Nga said.
"We plan to work with Korea and Japan to seek ways to boost exports of mango and star-apple to those markets," he added.
He said that agencies must develop measures to enable buyers to work directly with sellers.
Dau said the fruit and vegetable sector lacked Government support since it was not a major export earner.
The Government should consider developing support policies for the sector, including providing preferential loans to farmers, he said.
Many delegates at the event called for closer links among enterprises to avoid unhealthy competition.
Central region tops FDI attraction list
The north central and central coastal provinces took the lead in attracting foreign direct investment (FDI) in the first four of this year.
According to the Foreign Investment Agency (FIA), Vietnam has attracted more than US$8.2 billion in FDI capital in the reviewed period, a year-on-year increase of 17 percent.
Notably, FDI has shifted from the Red River and Southeastern regions to the north-central and coastal central region, with the total capital pouring in the central and coastal central region increasing by 15 times over the same period last year.
The high value was largely contributed by Japan’s US$2.8 billion Nghi Son oil refinery project in Thanh Hoa province and Russia’s US$1 billion bus assembly plant project in BinhDinh province.
Experts believe that incentives for infrastructure construction and local and overseas investment promotions are the main factors in luring FDI to the central region.
Vietnam to export 187,000 tonnes of rice to Philippines
Vietnam has won a bid to provide 187,000 tonnes of rice for the Philippines in 2013, according to the Vietnamese Trade Mission at the Philippines’ National Food Authority.
The Philippines awarded the supply to the Southern Food Corporation (Vinafood II) with a price offer of US$ 459.75 per tonne, lower than that of Thailand.
The rice stock under the tender is long grain white rice with 10 percent and 25 percent brokens. The volume will be delivered to the Philippines in the next few weeks.
Chairman of the Vietnam Food Association (VFA) Truong Thanh Phong said that the VFA targets 1.5 million tonnes of rice exports in May and June.
In the first four months, the country’s rice export surpassed 2.1 million tonnes, up 23.4 percent over the same period last year.
However, prices dropped by nearly US$30 per tonne during the reviewed period, due to low demand. The decline in rice prices also led to the cancellation of a number of contracts with a total volume of 280,000 tonnes in the mentioned time.
Saigon Co.op, FairPrice to open hypermarkets in Vietnam
The Saigon Union of Trading Co-operatives, Limited (Saigon Co-op) and Singapore NTUC FairPrice Co-operative, Limited (FairPrice) announced their Saigon Co.op – FairPrice joint venture on May 4 with a proposed new chain of hypermarkets.
The joint venture, which has an initial investment of US$6 million of which 64 percent was contributed by Saigon Co.op and 36 percent by FairPrice - will set up two hypermarket chains throughout the country under the brand names Co.opXtra and Co.opXtraplus.
The Chairman of Saigon Co.op said that the joint venture will launch one or two hypermarkets each year in major cities and the first Co.opXtraplus, invested with US$9 million, is scheduled to open in Thu Duc district, Ho Chi Minh City in mid-May.
Co.opXtra targets individuals and households and Co.opXtraPlus will focus on organisations, companies, schools, hotels, restaurants and other such enterprises, he added.
Saigon Co-op currently operates the Co-op Mart supermarket chain and Co-op Food and Co-op stores in Vietnam with a strong presence in Ho Chi Minh City and some other provinces.
FairPrice is a retail giant in Singapore with over 260 supermarkets, hypermarkets and other stores accounting for 57 percent of the country’s market share.
Finland, Vietnam foster trade links
Seeking investment opportunities and promoting Vietnam-Finland trade links were the focus of a seminar held in the central city of Danang on May 6.
Participants were briefed about the city’s socio-economic development, its business environment, policies to attract foreign investment and related regulations to support establishing partnerships between Finish and Vietnamese enterprises.
Development programmes for businesses and universities in Danang funded by the Finish government were also introduced.
The Finnish businesses presented sectors on which they are currently focusing, including clean technology solutions for water, energy and the environment, as well as education, communications, information technology (IT), imports and exports.
In November, 2011 Danang signed a memorandum of understanding (MOU) with The city of Salo in Finland to work closely together on research in high-tech, IT, communications, vocational training and other types of higher education.
However, two-way trade turnover between Danang and Finland remained modest and continuously decreased annually to stay at around US$65,000 last year.
The Danang Municipal Department of Industry and Trade and the Salo Business Centre (Yrityssalo, Ltd.) reached an agreement last December on implementing a sub-project to offer training courses for creating innovative standard systems for enterprises in Danang.
After winning first prize in the design contest for Tran Thi Ly and Nguyen Van Troi bridges in Danang, the Finnish WPS Group signed a consultative contract with the city in 2007.
In 2011, the Finish Foreign Ministry also agreed to sponsor three projects in the city worth a total of VND1.53 billion as part of the Innovation Partnership Programme (IPP).
Quang Binh hosts 2013 trade and tourism fair
The 2013 trade and tourism fair, co-organized by the Quang Binh Provincial Department of Industry and Trade and SHB Event Joint Stock Company, opened in Dong Hoi city on May 6.
It has more than 250 Vietnamese enterprises across the country, showcasing 350 stalls put up by a wide range of high-quality products such as conical hats, garments and textiles, processed food, wooden furniture, fine and handicrafts, and household goods.
The provincial Department’s Deputy Director Dinh Minh Chat said the fair is a good opportunity for them to find cooperation partners in the fields of trade and tourism.
The eight-day fair is part of activities to celebrate UNESCO’s recognition of Phong Nha-Ke Bang National Park as the World Natural Heritage Site.
Exports to Singapore increase sharply
Vietnam’s export earnings from Singapore in the first quarter of this year reached 692 million SGD, over 30 percent higher than in the same period last year.
The Vietnamese embassy’s trade office in Singapore said this was a positive result as Singapore’s imports from all international markets decreased by 9 percent.
Among Vietnam’s major exports to Singapore surpassing 100 million SGD were telephones and components, crude oil, glass, printers, fax, and photocopy machines.
Singapore’s exports to Vietnam in the first quarter reached nearly 3 billion SGD, equivalent to last year’s figure.
In 2012, two-way trade turnover between Vietnam and Singapore reached 15.8 billion SGD, up 6.2 percent against the previous year.
Farmers to hold congress in June
The sixth national congress of the Vietnam Farmers’ Union (VNFU) will take place in June to clarify orientations and targets for the union’s action programmes as well as farmers’ movement in the 2013-2018 period.
The focus of discussion will be on the role of farmers and VNFU in developing agriculture and building new rural areas in line with the resolution adopted at the Party Central Committee’s 7th session (10th tenure).
Since its establishment, the VNFU has spared no effort to improve farmers’ material and spiritual life and promote socio-economic development in the process of international cooperation towards the goal of making people rich and building Vietnam into a strong, democratic, just and civilized country.
By the end of 2012, the union had a total of 10,536 members in 92,700 villages and hamlets across the country.
Vietnam-Malaysia trade up 36.5 percent in Q1
Two-way trade between Vietnam and Malaysia hit US$2.142 billion in the first quarter of 2013, a year-on-year increase of 36.5 percent.
In January-March period, Vietnam earned US$1.152 billion from exports to Malaysia while importing more than US$990 million of goods from the regional country.
Vietnam’s key exports to Malaysia include crude oil, computers, electronic products and spare parts, cell phones and rubber. It imports from Malaysia computers and spare parts, plastic, petroleum, machinery and equipment as well as household electricity products.
In terms of investment, Malaysia now ranks 7th among countries and territories in the world and 2nd of ASEAN member countries investing in Vietnam. The country has 432 valid projects in Vietnam worth more than US$ 11.3 billion.
Vietnam has so far poured US$412.9 million in nine projects in Malaysia.
According to Vu Van Canh, Vietnamese Trade Counsellor to Malaysia, the two countries’ trade is forecast to increase this year thanks to Malaysia’s economic recovery and strong growth.
The figure is expected to hit US$ 8.5-9 billion in 2013, including US$ 5.2 billion worth of Vietnamese exports to Malaysia.
WB pledges continued support for Vietnam
Vietnam is the world’s second largest beneficiary of the World Bank’s International Development Association (IDA) capital, behind only India.
World Bank (WB) East Asia and Pacific Regional Vice President Axel van Trotsenburg, noted Vietnam’s privileged position during a meeting in Hanoi on May 7 with Minister of Planning and Investment Bui Quang Vinh.
Trotsenburg, visiting Vietnam from May 6–9 to deepen his understanding of the country’s socio-economic situation, said IDA capital has delivered significant results -especially in Vietnam’s successful poverty reduction campaign.
He confirmed Vietnam will continue to benefit from IDA funding in the future.
He urged Vietnam to collaborate regionally on IDA capital attraction efforts and pay more attention to IDA funding disbursement.
The country should also attempt to increase capital received from the International Bank for Reconstruction and Development (IBRD), he said.
At the reception, Minister Vinh praised the WB for supporting Vietnam’s recent infrastructure development and social issue initiatives. He said Vietnam plans to reduce its reliance on non-interest IDA capital, shifting its emphasis to low interest IBRD capital.
To develop sustainably and consolidate social achievements Vietnam must transition from IDA to IBRD funding as quickly as possible, Vinh told his guest.
He said the country is devising policy mechanisms to ensure received capital is used efficiently. Over the next fiscal year, he said Vietnam will work with donors to balance spending on infrastructure and social welfare projects.
Experts are also drawing up the criteria for combining IDA and IBRD capital in the same projects, improving IDA capital efficiency to create higher values.
Vinh added that his ministry will compile a list of projects using the two kinds of capital for submission to the Government. Upon Government approval, the ministry and WB will begin fine-tuning funding criteria.
New MoU boosts Vietnam-IRRI rice cooperation
Vietnam and the International Rice Research Institute (IRRI) have inked a memorandum of Understanding (MoU) on technological cooperation to develop Vietnam’s rice sector.
The MoU was signed by Minister of Agriculture and Rural Development Cao Duc Phat and IRRI Director Robert S. Zeigler in Hanoi on May 7.
Phat said Vietnam is facing great challenges in developing the rice sector, including the improvement of productivity, quality and added values, thus creating higher incomes for farmers in the context of diminishing farmland.
The country is also addressing climate change, which is forecast to seriously hit Vietnam’s main rice hubs, especially the Mekong Delta region, he said.
Zeigler expressed his pleasure at the IRRI’s contributions to the success of Vietnam’s rice sector.
He described Vietnam’s experience in the field as a good example for other countries to study, adding that in the future, his institute will continue to work closely with Vietnam to respond to climate change in Southeast Asia.
As one of the leading agricultural research institutes in the world, IRRI has given Vietnam remarkable support in rice research and production since 1975. Experts said IRRI rice varieties are cultivated in 60-70 percent of Vietnam’s total rice growing area.
Annually, the institute helps train thousands of Vietnamese apprentices and scientists and creates conditions for Vietnam’s institutes to access the world’s new achievements in the field.
Vietnam resumes fruit export to EU
Vietnam will grant quarantine certificates to its fresh fruit and vegetable as of June 30, making them eligible for export to the European Union (EU) after over 12 months of temporary halt.
Nguyen Van Nga, Head of the Zone 2 Plant Quarantine Sub-Department of the Plant Protection Department under the Ministry of Agriculture and Rural Development, revealed the information on the sidelines of the Congress of the Vietnamese Fruit and Vegetables Association held in Ho Chi Minh City on May 7.
The temporary halt of the export of five kinds of vegetables, namely basil, sweet pepper, celery, bitter gourd and coriander began in early 2012 when the produce failed to meet EU food hygiene and safety regulations.
EU authorised agencies warned that if another five violations are detected they will issue a ban on all fruit and vegetable imports from Vietnam.
To avoid this, domestic exporters are advised to purchase fruits and vegetables produced in line with Good Agricultural Practice (GAP) standards.
According to the General Department of Customs, by mid-April, fruit and vegetable exports have brought home US$224 million, and the figure is expected to amount to US$1 billion this year.
Deposit interest rates likely to go down
Low inflation in April has provided a good chance for the State Bank of Vietnam (SBV) to lower annual deposit interest rates to 7 percent and loan rates to 10 percent.
The UK-based Standard Chartered Bank said in a recent report that the SBV “may take advantage” of the country’s still-benign inflation to loosen its monetary policies and go for another rate cut of 0.5 percent on deposits.
According to the General Statistics Office (GSO), the consumer price index (CPI) in April increased by 0.02 percent over the previous month due to the impact of the pharmaceutical, medical services and transport sectors, but in the first four months of 2013 by 2.41 percent from late last year’s level.
By keeping inflation at 6-7 percent, the Government hopes the SBV will be able to lower deposit and loan interest rates for businesses and help promote credit and economic growth in the whole country.
The International Monetary Fund (IMF) said the weak domestic supply in 2012 brought the country’s real GDP down to 5.25 percent compared to the 6.25 percent recorded in 2011, but the risk of runaway inflation has remained high.
Many securities companies forecast that deposit rates in the second quarter of this year might drop to 7 percent if inflation was successfully kept at 6-7 percent.
Economist Le Dang Doanh insisted the SBV cut deposit rates by 0.5 percent this year as a precaution against the possibility of inflation rearing its ugly head again in the petroleum, exchange and financial markets.
In fact, there is not much room for adjusting interest rates. If they are lowered again and again, inflation will get out of control. Once finding their deposit rates in the negative citizens will invest their money in other schemes like buying gold or foreign currencies, Doanh argued.
Although the macroeconomy is back on track, the Government is resolved to control inflation and money supply, even impose a ceiling on loan rates if need be.
Paradoxically, there remain unfair differences between deposit rates and loan rates and, more often than not, businesses have to access loans at a cutthroat rate of 15-18 percent.
As economists put it, cutting deposit rates to lower loan rates is no easy task. They propose banks first need to narrow the gap between deposit rates and loan rates, rather than cut deposit rates only, to ensure the rights of depositors as well as the flow of money into banks.
Footwear sector strives for supply chain sustainability
The footwear industry is set to expand its international cooperation and supply chain for long-term, sustainable growth.
The Ministry of Industry and Trade (MoIT) has recommended the footwear sector capitalise on ongoing regional and global production transition trends to achieve higher growth.
It says the footwear industry must develop material production and focus on seizing the advantages of modern technology while keeping environmental concerns in mind.
The Ministry also stresses the need for administrative reform—especially in tax and customs—and for promoting local footwear product trademarks in overseas markets. Expanding markets and distribution networks are also required if export activity is to be boosted, the MoIT says.
Economists say that Vietnam’s World Trade Organisation membership has made it an ideal base for footwear producers as trade barriers have gradually been removed. However, the local footwear sector is still burdened with disadvantages like poor pattern designs, high production costs, imported material dependence, and small-scale production.
According to the MoIT’s latest report, Vietnam earned US$2.25 billion from footwear exports in the past four months, up 9 percent from a year earlier.
Tech forum on marine economy development
A forum and exhibition on technology serving the development of Vietnam’s marine economy is taking place in the northern coastal city of Haiphong from May 7-8.
The first-ever event, jointly held by the Ministry of Natural Resources and Environment (MONRE) and the Vietnam Administration of Sea and Islands (VASI), aims to assess the current situation and opportunities to develop Vietnam’s sea-based economy using marine technology.
It has attracted more than 300 participants, including domestic and foreign researchers of marine technology, officials from 28 coastal provinces and cities, non-governmental organisations as well as businesses from France, Germany, the US, the Republic of Korea and Canada.
Domestic and international marine technologies cover areas like the environment, energy, construction, disaster prevention, fishing, marine tourism, pharmaceutical chemistry, fresh water production, oil and gas, and minerals.
Therefore, it is necessary to consider building marine science and technology to satisfy Vietnam ’s economic development, industrialisation and modernisation.
At the forum, participants gave their opinions on measures, products and services relating to marine technology. Particularly, the Canadian Foreign Ministry in coordination with its embassy in Vietnam organised a delegation of businesses to introduce their clean technology products.
According to the VASI, Vietnam’s 2020 Marine Strategy will see the country become a strong and rich sea-based nation by 2020 with the marine economy making up 53-55 percent of its GDP and 55-60 percent of its total trade turnover.
Securities firms seek plans to dissolve
Securities companies are shutting down or threatened by dissolution as the economic recovery takes time to have an effect.
Cho Lon Securities Company recently announced that it would close after seven years. All their debts and contracts will be dealt with by the end of October. Au Viet Securities Company will also dissolve the company and try to complete all payment in 2013.
Meanwhile, many other companies have chosen to leave the market without major public announcements, such as the Lien Viet Securities Company that withdrew its membership from the country’s two stock exchanges.
The State Securities Commission of Vietnam (SSC) is also contemplating to revoke licences of Truong Son, Hanoi and Delta securities companies.
Those three companies technically have not worked in the past year because of poor financial security. Trang An Securities was also suspended because of its financial plight in April.
Dozens of other brokerage firms are suffering from debts, violations, and special controls from the SSC because they could not maintain healthy indexes.
Last year, the securities market received a heavy blow from the recession and some companies even incurred losses for six consecutive years, laying off staff, closing offices and withdrawing from the stock market.
Because of the small size of Vietnam’s securities market, 60-70% of the market share belong to the 10 largest players while the remainder shared by 95 firms.
Even if the small brokerage firms can invest themselves to earn some income, they face huge challenge now from the tough times.
Several experts said firms would not publicly announce their dissolution which they deemed as a difficult task because of required procedures.
Vietnam should push on with stock market reform and start with creating favourable conditions for poorly-performed securities firms to dissolve.
Vietnam to tackle tax evasion problem in FDI companies
The ministry of Planning and Investment has recently analysed the benefits and problems of 25 years of foreign direct investment.
One of the most pressing problems has been tax avoidance. Coca-cola was the most recent example. The soft drinks corporation has expanded since 1993 but Coca-Cola Vietnam has always reported huge losses.
Adidas Vietnam, which has invested since 1993 and currently employs 80,000 workers, earning VND22 trillion in revenue (USD1 million), still reports losses.
Talking with VTV1, deputy minister of Planning and Investment Bui Quang Vinh said transfer pricing is a common problem in any countries that have FDI companies.
Those companies have closed production processes because their raw materials come from the mother companies so it is difficult to check the input and output costs.
"It’s the responsibility and a challenge for the finance and tax departments," Vinh said.
A plan to prevent transfer pricing was approved two years ago but Vinh said it needs co-operation from many state agencies. "We should be stricter with this problem but we shouldn’t blow it out of proportion because Vietnam’s business environment could be affected." he said.
After 25 years of attracting foreign investments, Vietnam has about 14,552 projects with total registered capital of USD210.5 billion. The contribution of the FDI companies to the GDP increased from 2% in 1992 to 18.97% in 2011. They also provided jobs for nearly six million people.
However, FDI projects also have some shortcomings such as low added value and lower capital disbursements.
Technologies that have been transferred to Vietnam remain not very advanced and most workers still have modest incomes. Moreover, tax evasion remains a common problems with FDI companies.
Hanoi wants to set up its own capital investment company
Hanoi is seeking to set up its own capital investment company to support enterprises.
Vietnam currently only has one capital investment company, the State Capital Investment Corporation (SCIC) to support the restructuring and economic reform of firms.
The SCIC manages the capital of hundreds of firms with a total portfolio market value of VND50 trillion (USD2.4 million). However, most of SCIC’s revenue come from interest from banks and in 2012, deposits money reached VND19.6 trillion.
Meanwhile, hundreds of medium and small-scaled firms are unable to access the preferential loans to maintain their operations.
Hanoi authorities have submitted a proposal to establish its own capital investment company to the NA’s Economic Committee. Vice chairman of the Hanoi People’s Committee, Nguyen Huy Tuong, said they hoped to speed up the restructuring process by establishing a new company.
Nine enterprises in the city have drafted their restructuring plans and five plans have already been approved. However, there are still about 30 enterprises that are set to be restructured during 2013-2015 period.
They have also asked for the management of national highway sections that run through the city and capital to improve the roads.
Fuel price stabilisation fund publicised
Deputy PM Vu Van Ninh has asked the Ministry of Finance to announce the management and spending of the fuel price stabilization fund every quarter.
The move aims to strengthen transparency of the fund and provide official information to relevant organizations and residents.
Earlier, the Ministry of Industry and Trade said that Circular 84/2009/ND-CP regarding petrol businesses will be amended and submitted to the Government before the end of June.
The fuel price stabilization fund was founded based on Circular 84, under which wholesale petrol enterprises must set aside funds to stabilize prices.
Foreign firms heat up domestic retail market
France-based Auchan, one of the world’s largest hypermarket chains, plans to invest 500 million USD over the next decade in Vietnam, after many years absent from the country.
Economists have described the group’s return as tinder that fuels the country’s hot retail market.
Founded by Gerard Mulliez, one of the wealthiest people in France , Auchan has presence in 15 countries across the world and is expanding in China, Russia and Eastern Europe, according to Business Week.
Earlier this year, E-mart, a subsidiary of Shinsegae – one of the leading retailers of the Republic of Korea (RoK), partnered with U&I Group in southern Binh Duong province to set up a joint retail venture in Vietnam worth 80 million USD.
The RoK group expects to establish 52 supermarkets and outlets by 2020 with total investment amounting to 1 billion USD.
E-mart Sales Director Ja Young Heo describes Vietnam as an ideal destination for RoK investors, especially in the fields of retail, logistics and household utensils.
Last year, the group imported over 7.88 million USD worth of products from Vietnam, she said, noting that the group’s online sales turnover in Vietnam reached 89 million USD in 2012.
Last year also saw an influx of investment from Japanese companies Aeon and Takashimaya.
Aeon is building Celado Shopping Mall, which will be the largest hypermarket in Ho Chi Minh City , and another hypermarket in Binh Duong province at the same time.
The group has also worked with Trung Nguyen Group to set up 13 Ministop convenience stores in HCM City.
Takashimaya, a leading Japanese retailer, will operate on a site of 15,000 square metres in the Saigon Centre in 2015.
Other retailers that have gained a firm foothold in Vietnam such as Metro Cash & Carry, Big C and Lotte are also devising plans to expand their operations in the country.
With 17 commercial centres running successfully in Vietnam over the past ten years, Metro strives to open another 30-35 stores in the next 3-5 years.
Domestic firms are also seeking ways to compete in the modern retail market, which is traditionally dominated by foreign groups.
Co.opmart has joined hands with NTUC FairPrice of Singapore to establish a chain of hypermarkets called Co.op Xtra Plus in Ho Chi Minh City.
According to Saigon Co.op General Director Nguyen Thi Hanh, the move marks an important milestone in the group’s retail market development strategy.
Maximart, which has been operating in Vietnam for 17 years, is also working with Dairy Farm of Hong Kong.
Sharing successful experiences in Vietnam, foreign firms place special emphasis on geographical location, advantages in business and strong partners.
Vietnam now has 717 modern retail outlets and 8,600 traditional markets. However, the percentage of retail stores in the country remains below 20 percent, much lower than that it other countries in the region such as Indonesia , Thailand , Malaysia and China.
The Ministry of Industry and Trade expects that by 2020, the country will have 1,200 supermarkets, 157 shopping centres and 180 trade centres.
Registering a growth rate of 14.8 percent in 2007-2012, the country’s purchasing power was forecast to attain a value of 89.7 billion USD by early this year.
In 2013-2015, retails revenues are forecast to grow 8.5 percent a year averagely.
Banking mergers get hotter
Various Vietnamese banks are seeking merger and acquisition (M&A) deals as well as strategic partners to make them stronger.
Eximbank, a major Vietnamese lender in which Japan’s Sumitomo Mitsui Financial Group holds 15 per cent, is planning to merge with another bank, but yet to disclose the identity of the prospective partner.
The Ho Chi Minh City-based bank’s annual general meeting late April approved a merger plan, assigning the board of directors to be responsible for carrying out the deal.
Eximbank chairman Le Hung Dung said such a merger would enable the lender to rapidly expand its network under the guidelines set forth by the State Bank of Vietnam.
Late this January, Eximbank and Sacombank signed a cooperation agreement saying they might merge in the next five years. Eximbank and Sacombank are the fourth and fifth largest non-State commercial banks in Vietnam in terms of assets with VND170 trillion ($8.17 billion) and VND152 trillion ($7.3 billion) as of mid-December 2012.
However at the annual general meeting, Dung did not say Eximbank would merge with Sacombank. Instead, he noted that Eximbank currently had a total of 217 branches and points of transaction nationwide, just in Vietnam, while Sacombank had over 400 in the country together with Laos and Cambodia branches. In addition, he disclosed that Sacombank reported VND850 billion ($40.8 million) in pre-tax profit in the first quarter of 2013, while Eximbank put the number at just VND470 billion until late April ($22.6 million).
“I supposed that we can set up five branches and points of transaction each year, we’ll need 40 years be equal to Sacombank’s current number,” Dung said.
Sacombank is now negotiating to sell a maximum of 20 per cent of its chartered capital to a foreign strategic shareholder, set to be completed this year. Its chairman Pham Huu Phu did not disclose any name of buyers.
Ho Chi Minh City Development Bank, or HDBank, also has M&A plans. The State Bank has given it the green light to merge with Dong Nai province-based Dai A Bank, said its chairwoman Le Thi Bang Tam. HDBank’s annual general meeting late April also approved a merger scheme.
Elsewhere, Military Bank is seeking a foreign strategic shareholder while local lenders are hoping to merge into the second largest non-State commercial bank in terms of assets. The minimum ownership for the strategic shareholder must be 5 per cent. So far, no prospective M&A deal seems appealing as no Vietnamese lenders meet Military Bank’s financial health requirements, which focus on non-performing loans and financial safety.
An Binh Bank, meanwhile, is calling for a higher foreign ownership limit, as the lender contends this would be preferable to an M&A plan. An Binh Bank chairman Vu Van Tien said at its annual general meeting late April that his bank wanted the limit to be raised to 49 per cent of its chartered capital instead of the current 30 per cent under Vietnamese laws. He added his bank currently saw no need for a merger.
At present, An Binh Bank has four major corporate shareholders, namely the World Bank’s International Finance Corporation (IFC), Malaysia’s Maybank, State utility Electricity of Vietnam, and Hanoi-based multi business group Geleximco.
Ho Chi Minh City-based Dong A Bank, meanwhile, acknowledged at its 2013 annual general meeting late April that it is also pondering M&A deals. Chairman Pham Van Bu said three or four local banks had made inquiries on a possible merger, and his bank was considering them.
Meanwhile, Western Bank and PetroVietnam Finance Cooperation have confirmed their merger plan with shares of the two firms valued equally. PVFC is now a credit institution specialising in wholesale while a strong point at Western Bank is retail.
According to their draft merger contract, the merged bank is expected to have a charter capital of VND9 trillion, ($432.7 million) or 900 million shares at par value at VND10,000 per share.
Viettel gets nod to provide cable TV services
The military-run mobile service operator Viettel has reportedly been licensed to provide cable television services and plans to start the business in the last quarter of this year, a source told the Daily.
Viettel will be allowed provide digital and analog cable TV services nationwide, except in major cities including Hanoi, HCMC, Haiphong, Danang, Can Tho, Khanh Hoa, Lam Dong and Daklak where it is only allowed to provide digital cable TV services, not analog cable TV services, according to the source.
Viettel plans to launch the services in the last quarter of this year. Viettel will focus its cable TV services on rural markets by offering affordable packages, at only some VND30,000-50,000 a month.
Hoang Anh Xuan, general director of Viettel, declined to reveal the service fee but told the Daily earlier that his company would offer service packages targeting poor people. That is what Viettel has done with its mobile phone services up to now.
The license for Viettel came after about one and a half years waiting for the consideration from the Ministry of Information and Communications.
Nguyen Manh Hung, deputy general director of Viettel, who was so impatient with the time-consuming licensing procedure, had during a meeting last year urged the ministry to allow his firm to carry out the business. At the same meeting, Deputy Prime Minister Nguyen Thien Nhan expressed his support to Viettel’s petition, saying cable TV services should be available for all people instead of residents in urban areas only.
Before being given the license for cable TV services, Viettel had been granted another license to operate as an Internet Protocol Television (IPTV) services provider.
As such, Viettel is the only firm given permission to provide cable TV services among a slew of telecom enterprises applying for the right. Meanwhile, applications of other entities like AVG, FPT and VNPT now are still being weighed by the information ministry.
The local pay TV market has been developing for over a decade with some 50 services providers nationwide, the information ministry reports. However, only more than four million households out of 20 million in the country are using pay TV services, mainly in urban areas, according to the ministry.
HOSE builds data backup center
The Hochiminh Stock Exchange (HOSE) commenced work on a data backup center in Quang Trung Software City in HCMC’s District 12 last Friday.
HOSE chairman Tran Dac Sinh said that the center, which will cover an area of over 16,000 square meters with nine stories, one mezzanine and a supporting block on 325 square meters, will be an information technology (IT) service center and archive of HOSE, southern units of the Ministry of Finance and securities companies.
This facility will be the largest and most advanced data backup center in Vietnam, helping the stock market operate in a stable manner, building domestic and foreign investors’ confidence and making HOSE a modern stock exchange in the region and the world, Sinh added.
The project requires total investment of VND300 billion and is expected for completion in the first quarter of next year.
The center is one of three large projects HOSE is deploying, the others being an IT project conducted by contractor Korea Stock Exchange and a housing project.
