Business in brief 13 May, 2013
Louis Vuitton opens new store in Hanoi
Louis Vuitton continues its journey in Vietnam by unveiling the latest store at Trang Tien plaza, one of Hanoi’s most prestigious malls.
While staying true to the Malletier’s heritage of travel culture, craftsmanship, creativity and innovations, this opening will also be the first store in Vietnam to welcome a Haute Maroquinerie "Made To Order" salon where elegant women will create their personalised Louis Vuitton bag.
“Louis Vuitton opened its first store in Vietnam in 1997 at the Metropole hotel in Hanoi as the forerunner in luxury and savoir-faire, followed by a second store in Ho Chi Minh ten years later,” said Jean-Baptiste Debains, president of Louis Vuitton Asia Pacific. “Over the past three decades, we have witnessed the luxury market growing in Vietnam. The opening of the third store in Vietnam at Trang Tien Plaza testifies our confidence in the potential of this country, in a development that attracts both locals and tourists from around the world.”
The Trang Tien store is the latest example of Louis Vuitton’s vision of transforming store visits into inspiring journeys of discovery through three different universes which will no doubt appeal to the city’s trendy and fashionable crowd.
Since 1854, Louis Vuitton has accompanied the world’s most celebrated travelers, defining, with each expertly conceived and painstakingly crafted creation, an art de voyager. To celebrate the opening of the Trang Tien store, the Louis Vuitton’s new four-wheel trolley “Zephyr”, together with the other new travel products, will be in the spotlight to stay true to the Maison’s heritage of leather craftsmanship, combining respect for tradition with daring modernity.
The key highlight of this store is the exclusive "Made to Order” (Haute Maroquinerie) Salon, a private space cladded in a contrasting bronze colored silk fabric in which clients will be able to create their personalised Louis Vuitton bag. Here, they will receive a unique experience to first select from five different shapes; two most notable are the lockit, originally designed in 1958 and the Milaris, a newly created shape. They then choose from eight types of leather, twenty-six colours and two finishes for their bag, before their uniquely personalized bag is made in the House’s workshops in Asnieres. The Trang Tien store is the only Louis Vuitton store in Vietnam to offer this exclusive service.
Textile shareholders break out the champagne
Textile and garment sector shareholders are happy with a solid dividend payment amid continuing economic hardships.
When shareholders of many building material production companies were disappointed with firms’ low business efficiency and their inability to meet dividend payments, those at many textile garment firms were happy with these firms’ upbeat business results and high dividend payments.
Ho Chi Minh City-based Viet Tien Garment Joint Stock Corporation offered shareholders 25 per cent dividend rate in 2012 when the company reported VND3.851 trillion ($476 million) revenue, surging 15 per cent on-year and pre-tax profits VND170 billion ($8.1 million), up 13 per cent.
In the north, Hanoi-based Garment 10 Joint Stock Corporation gave shareholders relatively high dividend at 18 per cent.
Last year, Garment 10 reaped VND1.503 trillion ($71.5 million) revenue, up 24 per cent on-year and pre-tax profits over VND37 billion ($1.7 million). Labourers’ incomes averaged VND5 million ($238) per month.
With around VND2 trillion ($96 million) in revenue, up 19 per cent and pre-tax profits of VND55.4 billion ($2.6 million), up 5 per cent on-year, Hoa Tho Textile Garment Joint Stock Corporation, based in central Danang, paid 20 per cent dividend in cash to shareholders.
According to a Hanoi-based Textile Finance JSC (TFC) source, 2012 was a challenging year for credit organisations and the banking system. Despite TFC only achieving 86.7 per cent of the year’s plan the company still offered shareholders a 9 per cent dividend which was still higher than current ceiling deposit rate 7.5 per cent, per year.
In 2013, though the sector’s major export markets like the US and Japan still mired in difficulties, shareholders are still optimistic as many textile clothing firms could take the initiative of their business plans and envision dividend payment to shareholders from 15-20 per cent of their chartered capital.
For instance, Viet Tien Garment set a minimal dividend rate of 20 per cent.
“With a stable output market and customer base and big production capacity from 22 subsidiaries and affiliates, the target is within our reach,” said the company’s general director Bui Van Tien.
Tien said Viet Tien Garment would apply consistent measures to save costs, boost labour productivity and improve environmental standards.
Besides, the company is contemplating shifting production from the city to other locations with favourable development conditions. One pivotal project is that involving building Tan Thanh Tien garment complex in southern Ben Tre province with more than 20,000 labourers.
The project aims to take advantages of EU’s free trade agreement (FTA) or in the near future the Trans-Pacific Economic Partnership Agreement (TPP).
As for Garco 10, this year the company set a 12 per cent hike in revenue target to reach VND1.688 trillion ($80.3 million), VND39 billion ($1.8 million) pre-tax profits and 17 per cent dividend though additional costs were forecast at VN56.5 billion ($2.7 million) due to rising input costs, according to the company’s general director Nguyen Thi Thanh Huyen.
Hoa Tho Textile Garment reportedly set a VND2.3 trillion ($109 million) revenue target, a VND55 billion ($2.6 million) pre-tax profit and 20 per cent dividend in cash and bonus shares.
TFC’s 2013 general shareholder meeting had approved business targets with VND190 billion ($9 million) revenue, VND90 billion ($4.3 million) pre-tax profits, 18 per cent return-on-equity (ROE) rate and 11.5-12 per cent dividend rate.
Customs posts low tax revenues
The local customs sector collected an estimated VND56.3 trillion from import and export taxes as of the end of last month, shrinking over 5% from the same period last year, though the total import and export value rose 17.5%.
As the tax revenue is only equal to 23.7% of the year’s target, the customs has adopted many measures to avoid tax revenue losses such as inspections after customs clearance to fight fraud and boost anti-smuggling activity.
As per a report of the General Department of Customs released last Friday, the January-April revenue mentioned above is comprised of some VND19 trillion of import-export taxes and special consumption and environment taxes and about VND37.1 trillion of value-added taxes among others.
In April alone, customs tax revenues were around VND15.5 trillion.
According to the general customs department, the total import and export value of goods amounted to nearly US$$79.65 billion in the first four months of the year, up 17.5% year-on-year, with export value increasing 16.9% and import spending surging 18% year-on-year.
According to the target assigned by the National Assembly, the Government and the Ministry of Finance, the customs in 2013 is to collect VND237.5 trillion, including some VND81 trillion of import and export taxes, special consumption taxes and environmental taxes, and roughly VND156.4 trillion of value-added tax.
The customs forecast the nation’s tax collection targets to face difficulties in the current gloomy global and local economic situations. The industry therefore has resorted to several solutions to fulfill State budget revenues.
Specially, to avoid tax losses, local customs agencies have been told to enhance post-clearance inspections.
Also, the industry finds it necessary to concentrate on fighting smuggling and commercial fraud.
TKV bemoans meager profits in coal export
The local coal industry exported 5.2 million tons of coal in January-April or a year-on-year growth of 16.4% but posted poor profits due to the export price falling almost on par with the production cost.
Speaking with the Daily on Tuesday, Bui Van Khich, deputy general director of Vietnam Coal and Mineral Industries Group (TKV), said coal export prices have fallen 30-40% year-on-year, which are almost equivalent to production costs at present.
Local coal products are mainly exported to China, Japan and South Korea, with China being the biggest importer of low-quality coal.
Prices of coal exported to the above importers stay at only US$65-68 a ton, Khich said, adding low-quality coal shipments for the Chinese market sell for around US$65 a ton, shrinking some US$20 over the same period in 2012.
It is impossible for TKV to reduce export prices to compete with other foreign coal suppliers in the Chinese market as the current prices are equal to production costs plus an export tariff of 10%.
Coal output reached 14.92 million tons in the first four months of the year, declining 2.6% over the year-ago period. Meanwhile, coal inventories had amounted to some 5.9 million tons as of the end of last month, up one million tons against a month earlier.
Despite the shrinking profit margin, TKV still has to boost export of low-quality coal for which local demand is low. In fact, exporting poor-quality coal is aimed at having funds for importing higher-quality coal products in need at home, according to TKV.
According to the Ministry of Industry and Trade, coal exports are facing difficulties due to price falls and slackened demand on global markets. At the moment, the proportion of open-cast coal in the total volume is falling, thus pushing up the overall production costs.
TKV sold 45.5 million tons of coal in 2012, surging one million tons from one year earlier, with local consumption of about 32 million tons and exports of roughly 13.5 million tons.
TienPhong Bank, FPT City offer loans for homebuyers
TienPhong Bank and FPT City Danang Joint Stock Corporation have struck a strategic cooperation agreement to provide financial products and services for customers, including soft loans for buyers of FPT City’s housing projects.
The bank will offer home loan rates that are one to two percentage points lower than normal levels, and other products and services for clients of FPT City.
FPT City is developing FPT Danang technology urban area project along Non Nuoc beach in the central coast city. The project includes villas, houses and high-quality mini condos priced from VND325 million each.
Customers of this project are able to pay less than VND10 million a month over a period of three to 10 years. The bank and the investor will apply preferential interest rates and a grace period of 24 months for these loans.
Ministry backs SBV’s gold imports, exports
The Ministry of Finance has completed a draft government decision on giving tax exemptions to raw gold exports and imports conducted by the State Bank of Vietnam (SBV), which is seen as a move to legalize such activities of the central bank.
However, the regulations go against current tax policies imposed on gold.
According to Government Decree No. 87 guiding the implementation of the Law on Import and Export Tax, gold imported for processing for customers abroad is exempted from import duty and processed products exported back to foreign parties are also exempted from export duty. Gold imported for production and export is also not subject to these tariffs.
For the remaining cases, material gold with purity under 99.99% is subject to an export tariff of 10% while that with purity above 99.99% enjoys a zero tax rate but gold content evaluation certificates are required.
The central bank has taken sole responsibility for gold bar production and export and import of raw gold under Government Decree No. 24. The decree stipulates that SBV’s raw gold exports and imports will be exempted from duties given the Prime Minister’s decision.
While the decision has not been issued, the Finance Ministry has asked for permission to give tax exemptions to raw gold imports and exports carried out by the central bank and this proposal has been approved.
Therefore, the ministry has given guidelines to tax exemptions for gold bar and bullion exports and imports mandated by SBV from February 4 to March 31. Since April 1, SBV has stopped assigning credit institutions to export and import gold and directly conducted raw gold imports and exports.
The Prime Minister’s decision and the Finance Ministry’s move aim to intervene and stabilize the gold market. However, the gold market has seen many uncertainties while the gap between local and world gold prices has widened.
Banks paid out VND300 trillion savings interest
Banks paid savings interest of over VND300 trillion last year, and are now burdened with several other costs, including a considerable risk provision.
Thus, their profits are not as high as predicted, said Pham Xuan Hoe, deputy head of the Monetary Policy Department under the State Bank of Vietnam (SBV).
He was talking to the Daily on the sidelines of a conference on bank credit for economic growth held in Hanoi on Tuesday.
Citing State Capital Investment Corp. (SCIC) as an example, he said this firm earned around VND1.5 trillion every year from VND19.5 trillion in its savings account.
Besides, most insurance companies entrust banks with their money because fund management companies are underdeveloped in Vietnam. For instance, Vietnam Social Security each year earns interest of VND18 trillion from the banking system.
Still, the overwhelming part of the aforesaid interest sum, or more than VND280 trillion, was paid to corporate and individual depositors, said Hoe.
In addition, banks have to bear several other costs, like product development, labor, depreciation and especially risk provision. In 2012, they made a total provision of about VND68 trillion and in the first quarter, they added some VND4.3 trillion.
A survey of the 102 banks that reaped profits last year reveals their profits dropped more than 30% against 2011. Meanwhile, 22 banks incurred losses which were seven times bigger than the figures in the preceding year, said Hoe.
Regarding lending rates, he affirmed lending rate cuts only affect enterprises’ decisions on whether to take out loans or not, they did not affect credit growth.
Consumption has kept on shrinking, leading to a production slowdown and eventually lower needs for credit. Citing the steel industry as an example, steelmakers are suffering poor sales as domestic supply far exceeds demand, and thus they do not need to borrow loans, he said.
“Obviously, lending rates do not greatly affect credit growth, but aggregate demand and capital absorptive capacity do,” he stated.
In response to the Daily’s question on SBV’s policy to keep Vietnamese dong attractive, Hoe said the governor had vowed to restrain the exchange rate fluctuation at less than 2% in 2013. Exchange rate stabilization is an effective way to tackle dollarization and bolster confidence in Vietnamese dong.
The interest rates for deposits in Vietnamese dong are currently 4.5-5% higher than the rates for U.S. dollar deposits, making dong obviously more attractive, he remarked.
Lotte Mart to open two more supermarkets at year’s end
Lotte Mart, an arm of South Korea’s retailer Lotte Group, will open two more supermarkets in Vietnam towards the year’s end, taking the total number of its stores to six in the country.
Speaking with the Daily, an executive of Lotte Mart, said the retailer has been licensed to open the two new stores and that they are being constructed in Binh Duong and Binh Thuan provinces.
The Lotte Mart Binh Duong project, which requires an estimated US$30 million, covers more than 21,300 square meters in The Seasons Binh Duong urban area in Thuan An District. The supermarket is set for operation in November this year.
Similarly, the Lotte Mart Phan Thiet project, located in Phu Thuy Ward in Phan Thiet City in the south-central coastal province of Binh Thuan, also needs a total of US$30 million.
With a total floor area of 7,500 square meters, the project is designed with six floors and will be put into operation. It will be up and running in December.
With the two new projects that are under construction at present, the Lotte Mart chain will have six stores nationwide, with two in HCMC’s District 7 and District 11 and one in each of Dong Nai, Danang, Binh Thuan and Binh Duong provinces.
Lotte Mart in October 2012 acquired the entire stake from its Vietnamese partner in the initial venture to become a wholly foreign-invested company. The retailer has set a target of opening 60 supermarkets across the country by 2020.
GM Vietnam launches Chevrolet deals
General Motors Vietnam (GM Vietnam) has launched a promotional program to offer discounts to buyers of the Chevrolet brand and also give them a chance to win Chevrolet models this month.
Those purchasing cars produced, imported and distributed by GM Vietnam including Spark, Spark Van, Lacetti, Aveo, Cruze, Captiva, Orlando and Colorado will be subject to special prices this month. For instance, prices of Chevrolet cars are slashed by nearly VND200 million to VND683.5 million for each Captiva, some VND75 million for a Spark and over VND50 million for an Orlando.
Besides, when purchasing any Chevrolet cars at GM Vietnam’s official sales agents until June 30, customers will be able to join lucky draws to snap up huge prizes totaling up to VND1 billion.
The program consists of a first prize of a Chevrolet Orlando LT priced at VND696 million and ten second prizes of Canon Powershot G15 priced at VND15.5 million.
Weighing loss against gain is vital
Vietnam has agreed to give giant foreign investors, especially those in the electronic and industrial manufacturing sectors, preferential incentives for their investment expansion in the country. But in turn, what will Vietnam benefit from these investments?
In 2006, when the world’s largest chipset maker Intel decided to set up its largest global factory in Vietnam, it was granted the country’s highest tax incentives as a recognised hi-tech manufacturing enterprise set up in Vietnam in accordance with the Law on High Technology.
Four years later, South Korea’s Samsung Group also asked the Vietnamese government for recognising the group’s first manufacturing complex in northern Bac Ninh province as a hi-tech enterprise associated with the eligible highest corporate income tax incentive of 10 per cent for the project’s lifespan as a condition for the group to expand its investments to $1.5 billion in this complex. After two years of negotiations, the Vietnamese government agreed to recognise the electronics giant’s Bac Ninh complex as a hi-tech business, thus granting it the best favourable tax breaks.
This move is considered the key motivation for Samsung’s continued expansion in Vietnam with the construction of its second manufacturing complex worth $2 billion in neighbouring Thai Nguyen province, where the South Korean electronics firm just announced it would pour additional $1.2 billion in the near future.
The cases of both Intel and Samsung inspired some other multinational companies to ask for similar tax incentives when setting up shop in Vietnam. Nokia, which relocated their European factories to Asia, is among them. The Lumia smartphone maker is now building a $302 million manufacturing facility in Bac Ninh. Once the factory opens this year, Nokia will also enjoy tax incentives similar to Samsung’s.
Bosch Vietnam two weeks ago announced that it had received in-principle recognition as a high-tech company from the prime minister, overcoming the last obstacle to continue expanding its investments in a continuously variable transmission pushbelt manufacturing plant to 230 million euros by 2015.
And LG Group, another South Korean giant, is also expecting to get the nod from the Vietnamese government within this quarter for the highest tax incentives that would green light the firm investing an additional $1.5 billion in the country.
In reality however, not one of these projects met the criteria to be recognised as a high-tech company under the Law on High Technology. The law regulates that a company can only be recognised as hi-tech after three years of manufacturing operations and after relevant governmental agencies confirm it meets other criteria on research and development activities, average turnover of hi-tech products, as well as environmentally friendly and energy-saving solutions to production and product quality management.
So, why did the Vietnamese government agree to go beyond the current regulations to grant the highest tax incentives possible to these foreign investors?
One important purpose of attracting foreign direct investment (FDI) projects is tax collection. But for investments from Samsung, Intel, Nokia or LG, tax collection was not the main purpose for the Vietnamese authorities, claimed Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises.
While other companies operating in Vietnam at present have to pay 25 per cent of corporate income tax (CIT) on their profits each year, or 22 per cent in the future if the National Assembly approves the amended Law on Corporate Income Tax this month, the giant recognised hi-tech foreign investors just have to pay CIT of a mere 10 per cent rate on their profits. Moreover, they are exempt from the CIT for the first four years of operations with profits and the rate is reduced by half in the following nine years.
In the case of Samsung Electronics Vietnam, which runs the $1.5 billion manufacturing complex in Bac Ninh, its total revenue during 2009-2012 was VND436.239 trillion, or approximately $21 billion at the current exchange rate, according to Bac Ninh Provincial Tax Department. The firm’s total profit was VND35.526 trillion, or $1.7 billion. However, the firm’s total tax contributions including CIT, personal income tax and value added tax till April 26, 2013 were just around VND1 trillion, or $48 million, the department reported.
Some local economists criticised the government for giving the recognised hi-tech foreign investors too strong incentives, for very little tax collection.
“This is an issue, a real issue,” Minister of Planning and Investment Bui Quang Vinh told VIR. But he said the government had to weigh the interest of the foreign investors against that of the country to ensure “harmonisation.”
“Giant foreign investors have the right to ask for good conditions for their investments. We have to weigh what we benefit, if we give such preferential incentives to foreign investors, and what benefits they gain. Overall, if the investment plans are good for the country, we should encourage them to invest here through offering preferential incentives,” said Vinh.
He also advocated not accessing the overall impact of giant investment projects to the country through tax collection alone.
Vietnam is moving from luring low-value-added foreign direct investment (FDI) to high-value-added manufacturing projects. And there is no doubt that foreign investors like Intel, Samsung, Nokia and LG are putting Vietnam on the map for hi-tech investments, helping the country attract more and more investments from the hi-tech electronics firms.
In the case of Samsung, up to August 2012, its Bac Ninh complex helped drawing in 53 foreign suppliers to invest in Vietnam to support the group’s production, with the total committed investment capital of $350 million, according to a report by Bac Ninh Provincial People’s Committee. By 2015, Samsung may need 96 foreign part suppliers and a similar number of local suppliers for its Bac Ninh complex.
In addition, Vinh said, these investment projects also help change the structure of the nation’s economy. Last year, Vietnam’s export turnover of telephones, electronic equipment and computers weighed in at $21.5 billion, surpassing garment and textiles, footwear and agricultural products for the first time. Shipments of telephones and components rose 97.7 per cent from one year earlier in 2012.
Job creation is an important indicator for the Vietnamese government to offer tax incentives to the recognised hi-tech foreign investors. Till the end of last year, Samsung’s Bac Ninh complex created 23,000 jobs for local workers. The firm announced it could also employ tens of thousands of local workers for its under-construction Thai Nguyen complex. Meanwhile, Nokia has committed to employ around 10,000 local workers for its Bac Ninh factory.
“Look at those projects, just within an area of around 100 hectares, they could create about 25,000 jobs and generate the export turnover worth tens of billion dollars. These are our benefits,” said Vinh.
Mai, who has studied FDI in Vietnam over the past 25 years, said the incentive policy was a “wise decision” to attract multinational companies in the context of growing competition between nations seeking FDI.
“We will collect less tax from them, but it is still better than having nothing if they leave for another country,” Mai added.
HCM City processing firms grow while others lack capital
The growth rate of industrial production in HCM City was 4 per cent for the first four months of this year, only slightly higher than the 3.9 rate for the same period in 2012, according to the city’s Department of Industry and Trade.
The city posted 3.8 per cent growth in its processing industry, with the highest rates in the plastics and food processing sectors, beverages, garments, footwear, chemicals and chemical products.
Growth declined in the sectors of mining, tobacco, electronics, automobiles and machinery and equipment, with the mining sector achieving 90.9 per cent of the growth recorded during the same period last year.
In the first quarter, nearly 5,000 HCM City-based businesses suspended operations, or equal to 63.8 per cent of the number of newly registered businesses for the same period.
Compared to other localities nationwide, HCM City had the highest number of private businesses facing bankruptcy in the first quarter of the year.
The number of private firms in HCM City that suspended operations was 5.2 per cent higher than the number of newly established companies.
According to the city’s Statistics Department, most of the new businesses in the first quarter were in the service sector, while new businesses declined substantially in the industrial and construction sectors compared with last year.
Many manufacturing and trading companies still faced difficulties, such as capital shortages, high volumes of inventory and high input costs.
As a result, many businesses have cut staff and lowered production activities. They have also tried to balance inventories while eliminating unnecessary intermediary costs.
Nguyen Van Sinh, director of Nguyen Sinh Co Ltd, said the company’s sale of supply materials and equipment for the engineering sector had dropped sharply, despite the company’s big discounts.
"Currently, we are only working at a low level, processing orders made by regular customers," he said.
Low purchasing power and rising production costs, have caused difficulties for manufacturing and trading enterprises.
Many businesses have been focusing on their brand names while cutting costs and raising labour productivity.
Nguyen Van Lai, director of HCM City’s Department of Industry and Trade, said that capital shortage was the biggest challenge facing businesses.
He said that only 30 per cent of small- and medium-sized enterprises in HCM City were able to access bank loans.
The remaining 70 per cent had to take out loans from other sources that required high interest rates.
This situation had led to low credit growth and declining effectiveness of the banking system, as well as rising bad debt, he added.
Huynh Van Minh, chairman of the HCM City Business Association, said many banks were still offering loans at high interest rates.
In addition, banks were continuing to ask for mortgages as collateral from businesses. This requirement was especially difficult for small- and medium-sized enterprises, Minh said.
Two businesses caught violating food safety regulations
Two businesses in Tan Phu District of Ho Chi Minh City were caught violating food safety regulations while processing bean sprouts, by the Health Watchdog on May 7.
Two units in Do Thua Luong Street in Tan Phu District were caught using chemicals without authentic certificates of origin to stimulate the growth of the vegetables and make them look better while processing bean sprouts.
At the unit on 35/47 Do Thua Luong Street, food safety supervisors discovered more than 50 kilograms of bean sprouts and two unmarked chemicals; while at the other unit, 100 kilograms of bean sprouts and 25 kilograms of power chemicals and 4 kilograms of a liquid chemical were discovered. Both units also had no business licenses.
No dangerous chemicals found in Chinese ginger
Health watchdog in Vietnam has not discovered any dangerous chemicals in Chinese ginger so far, which is more popular in both the North and South of Vietnam than the local produce.
Wholesale markets in Hanoi and Ho Chi Minh City are flooded with Chinese agricultural produce such as ginger and garlic. A wholesaler said imported Chinese ginger has been widely sold in Vietnam for years.
Chinese ginger is bigger and looks fresher and cleaner than the locally grown type, and is therefore more popular with consumers despite its high price.
However, Vietnamese consumers were recently shocked to learn, via a Chinese TV channel earlier this week, that farmers in Weifang City in Shandong Province have been overusing the pesticide aldicarb in growing ginger for years.
The pesticide is highly toxic and farmers had been using three to six times above permissible levels.
Extended consumption of the chemical can cause dizziness, blurred vision, nausea and respiratory failure. The chemical exists for a long time in the soil and water.
Nguyen Xuan Hong, head of the Department of Plant Protection, said Chinese ginger is imported mainly through border gates in the northern provinces of Lang Son and Lao Cai.
The department said that in April staff tested Chinese lemons and discovered it contained excessive amounts of the chemical carbendazim, which is used to kill insects.
Earlier, the Ministry of Agriculture and Rural Development had announced that many Chinese produce contained excessive amounts of dangerous chemicals.
Demand for summer-autumn rice crop in jeopardy
Millions of households in the Mekong Delta fear that fall in price and exports, along with high inventory, will jeopardize the demand for their summer-autumn rice crop, currently beginning to be harvested.
According to the Ministry of Agriculture and Rural Development, the Mekong Delta has seeded 1.2 out of 1.68 million hectares of summer-autumn rice.
Dong Thap, Soc Trang, Long An and Kien Giang Provinces are reaping about 100,000 hectares. Harvested area is expected to reach more than 200,000 hectares by mid May.
Vo Van Duc, a farmer in Thap Muoi District in Dong Thap Province, said that a kilogram of fresh rice fetches only VND4,200-4,500 now. With fertilizer, petrol and labor prices having increased, farmers are left with much lower profit levels.
Pham Thien Nghia, secretary of the Party Committee in Thap Muoi District, said that this is peak harvest time for 38,000 hectares of summer-autumn rice in the district. However, local farmers are very anxious due to the low rice price.
Farmers have harvested 5,000 out of 22,000 hectares of summer-autumn rice in several communes in Tan Hong District of Dong Thap Province.
Phan Thanh Xuan, deputy head of the district Department of Agriculture and Rural Development, said that farmers are insecure because rice price is too low.
Similar conditions are in Tan Hung and Vinh Hung Districts in Long An Province.
Rice exports have slowed even though export rice prices have fallen to the lowest level as compared to world prices.
Vietnam Food Association said that businesses now have about two million tons of unsold rice in stock. As a result, consumption of the estimated nine million tons of summer-autumn rice is likely to be in jeopardy in the Mekong Delta.
Huynh Van Ganh, director of the Department of Industry and Trade in Kien Giang Province, said that the province now has 588,000 tons under inventory from the winter-spring crop. Of this, 250,000 tons is fragrant rice.
Farmers have been unable to sell the winter-spring rice because of low prices over the last few months.
Summer-autumn rice crop has been ready for harvest to further increase the rice output amidst the price drop.
The provincial People’s Committee has proposed to concerned ministries to permit them to purchase another 100,000 tons of rice for stockpiling, aimed to reduce inventory.
While local residents and authorities are very anxious, relevant ministries and the Vietnam Food Association have not put forward any measures to consume summer-autumn rice. The rice price is feared to continue to drop when the Mekong Delta enters peak harvest season.
Dr. Le Van Banh, head of the Mekong Delta Rice Research Institute, said that farmers cannot stockpile rice themselves because they do not have warehouses and need capital to resume production. As a result, they usually sell rice right after harvest.
He said that relevant ministries and departments should quickly put together measures to consume rice in order to rescue rice growers from the current difficult situation.
In the long term, experts said that Vietnam should reconsider rice production and export policies, making them suitable with the new condition.
Rice supply is now higher than demand in the world. Indonesia and the Philippines are heading towards the policy of self-sufficiency in food. Vietnam’s rice export has also faced the increasing competitiveness from Thailand, India, Pakistan and Myanmar.
BTS invests in online-game website
BTS Joint-stock Company on Wednesday clinched an agreement with the owner of the bonus hunter website thomo.vn to invest VND25 billion in the operation and the development of products and marketing activities of the website within one year.
Nguyen Thi Thanh Thao, director of BTS which specializes in making online games and entertainment products, said her company decided to make investment into thomo.vn because the website’s model is appropriate with its development orientation.
Relating to games and prizes of thomo.vn, Ngo Dinh Thu Nhan, leader of the website, said information on prizes, ratings and winners is all publicized.
According to thomo.vn, around 100,000 persons accessed the website during its two-week trial operation, with 500 prizes totaling more than VND80 million finding winners. Specially, thomo.vn has raised the total value of its prizes to VND300 million this month.
An executive of BTS said thomo.vn had been granted a license by the Ministry of Information and Communications already.
ADB, EIB agree to fund metro line No.5 project in city
The Asian Development Bank (ADB), the European Investment Bank (EIB) and the Spanish government have agreed to provide loans for the first stage of the Metro Line No.5 project in HCMC.
This is the most noticeable information in the report submitted by the Management Authority for Urban Railways (MAUR) to the city’s government this week.
As such, among 857.56 million euros required for the project’s first stage stretching from Bay Hien Intersection in Tan Binh District to Saigon Bridge, ADB will provide 330 million euros or around US$429 million and EIB will give 200 million euros.
“The Spanish government earlier had committed to financing the project with 500 million euros in official development loans (ODA), which recently was scaled down to only 200 million euros due to the EU nation’s financial constraints. MAUR therefore has had to seek funds from other sources,” Le Khac Huynh, deputy head of MAUR, told the Daily.
The local authorities on March 28 petitioned the Ministry of Planning and Investment to propose ADB to put the scheme into the financing plan for 2014-2016. At the same time, the city’s counter capital has also been revised to 127.56 million euros.
To be developed under the engineering, procurement and construction (EPC) format, the whole Metro Line No.5 requires an estimated cost of some US$1.85 billion. The project in the first stage extends 8.9 kilometers from Bay Hien Intersection to Saigon Bridge, with nearly seven kilometers going underground with seven terminals.
The second stage which connects Bay Hien Intersection with Can Giuoc Coach Station in the Mekong Delta province of Long An is still waiting for investment capital and approval from authorities for its basic design.
Saigontourist wants to develop tourist boat terminal
Saigontourist Holding Company has roposed the HCMC government to turn the flower garden and Thu Thiem ferry station at Bach Dang Wharf in District 1 into a terminal for tourist boats.
After being assigned with the garden and the ferry station, Saigontourist will invest in facilities such as waiting area, pier and trading office as well as promote HCMC’s river tourism. These are what the city has not made sufficient investments in.
According to HCMC vice chairwoman Nguyen Thi Hong, the city will introduce its seven river tours to tourists, and Saigontourist will prepare boats for such tours.
Tra fish price freefall breaks usual rule
In the past, raw tra fish prices picked up and went down several times with each cycle lasting for just a few months, but such a rule has been broken as fish prices have kept falling for the past two years.
Two reasons are given for the prolonged tra fish price slump, namely the change in material production profile and the competition among exporters.
Nguyen Van Kich, vice chairman of the Vietnam Tra Fish Association (VN Pangasius), said: “It is because farmers have lost their right to negotiate deals between them and tra fish exporters.”
Previously, tra fish raised by export-processing firms only satisfied 40% of the demand among importers. Therefore, they had to buy a large volume from farmers, so farmers held the initiative in negotiations over fish prices.
However, in recent two years, the volume of fish raised by enterprises has risen sharply, making up 70% of the annual export volume. Meanwhile, farmers have been suffering shrinking output and constant losses, and thus they no longer have the right for price negotiation.
Nguyen Van Dao, general director of Godaco-Tien Giang Joint Stock Company, cited another reason for tra fish price drop.
“Some cash-strapped companies are now willing to sell fish at any price to soon recover capital, or reduce the product quality for lower prices to win the market. This prevents raw fish prices from moving up,” he stressed.
Nguyen Viet Thang, chairman of VN Pangasius, suggested farmers should only raise tra fish when receiving orders from processors. VN Pangasius will soon send a proposal to the Government and the central bank, seeking preferential loans for tra fish farmers, he informed.
Meanwhile, according to the Department of Agriculture and Rural Development of Vinh Long, the province is encouraging tra fish farmers to switch to other types of fish whose feeds are available in the wild and prices are relatively stable.
In the first quarter of 2013, some 28.5 among the total 323 hectares of tra fish farming in Vinh Long was used to raise other aquatic species.
Dao of Godaco-Tien Giang Co. said tra fish production, processing and export should be reorganized in a bid to revive the industry. “VASEP has been playing the leading role in rearranging export activities and looking for the Government support, but the results are not as good as expected,” he said.
The Government has provided tra fish farmers and processors with a VND9-trillion support package and gave enterprises access to foreign currency loans at low interest rates. However, the tra fish industry is still in crisis, with more and more farming households going bust.
A senior agricultural official in the Mekong Delta said: “I think we should let it (the tra fish industry) and the market decide their own fate. The more supports are given, the more serious the problem becomes.”
Outlook bleak for real estate sector
The Vietnamese property market is expected to continue struggling for the rest of 2013, with hopes of a quick rebound looking increasingly unlikely.
Experts at a conference organised by the Viet Nam Investment Review newspaper yesterday urged a re-evaluation of the current market, so that the root causes of the continuing slump could be fully uncovered and an appropriate clear-cut solution found.
Authorities had expected that a Government support package worth VND30 trillion (US$1.43 billion), offering preferential loans to enterprises and low-income families to purchase a house, would help unfreeze the real estate market.
The director of the State Bank of Viet Nam’s Credit Department, Nguyen Viet Manh, told the conference that the support package and an attached circular offering guidance would be finally issued next week after final consultation on Wednesday with the Ministry of Construction.
However, many experts and real estate developers have raised their concerns about the package.
According to Nguyen Tri Hieu, member of OceanBank Board of Directors, the proposed interest rate of 6 per cent offered to home buyers for three years was not reasonable.
He estimated 90 per cent of low-income earners must seek loans to buy a house of around VND600 million ($28,500).
He suggested that a more effective policy would be to lower the interest rate to 5 per cent and keep it stable for around 20 years to encourage buyers, citing that in the US, the rate was only 3.37 per cent and the term was up to 30 years.
Pham Truong Son, chairman of HUD 3 Investment and Construction Joint Stock Company, commented that the package was only focused on providing support for interest rates but interest expenses accounted for less than 10 per cent of a project’s total capital.
Buyers waiting for further price cuts, which are widely predicted due to enterprises failing to sell their apartments, would cause huge damage to the economy, said Le Quoc Chinh, sale manager of an apartment complex project supported by South Korean investors.
He urged clear and consistent policies from the Government to raise consumer and developer confidence in the property market.
Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said that measures to clear high inventories in medium and high-priced apartments were needed.
Experts at the conference agreed that the real estate market needed support from the Government to get back on the right track. They stressed two key problems to be tackled: non-performing loans and a low supply of affordable social housing.
According to Hieu, the real estate market might hit rock bottom at the end of this year, and stay there for up to three years. He said he did not expect the market to recover soon unless bad debts were resolved imminently.
Developers should not be allowed to mobilise capitals from buyers, Hieu argued, pointing out that contributors were reluctant to enter the market due to fears about the lack of regulations controlling how investors use money.
Vo Dai Luoc, former director of the Institute of World Economics and Politics, said that mechanisms to ensure the market’s healthy performance were critical to prevent the bubbles, ensure balanced supply and demand and stop speculation.
He added that transparency of the support package must be enhanced to ensure no party would be influenced by self-interest.
Vu Xuan Thien, Deputy Director of the Real Estate Market and Housing Management under the Ministry of Construction, said his department has asked localities to check real estate projects, report inventories and halt developments that are infeasible.
Nguyen Mai, former Deputy Chairman of the State Committee for Co-operation and Investment, urged the Government to introduce long-term solutions.
Regarding forecasts of the real estate market recovery, Cushman&Wakefield said that there was "no quick fix" solution because confidence remained weak and would take time to recover.
Asia-Pacific kickstarts first talks in bid to create trade super bloc
Sixteen Asia-Pacific nations including Japan and China held the first round of negotiations yesterday toward the creation of one of the world’s largest free trade blocs.
During the five-day meeting through Monday in Brunei, the 10 members of the Association of Southeast Asian Nations and their six regional partners will discuss the scope and method of talks on the Regional Comprehensive Economic Partnership as they aim to conclude a deal by 2015.
The RCEP, if realised, will account for over 3 billion people, or about half of the global market, and a third of global economic output, according to the Japanese government.
In addition to a committee of senior officials, the 16 countries will launch working groups, which pertain to trade in goods, trade in services, and investment, in the Brunei capital, according to Japanese officials.
The RCEP talks began at a time of progress for other multilateral free trade negotiations, including the US-led Trans-Pacific Partnership, with Japan set to soon become its 12th member.
Japanese Prime Minister Shinzo Abe and senior government officials have said the TPP could become the foundations for the RCEP and an even greater free trade agreement called the Free Trade Area of the Asia-Pacific.
But concluding the RCEP negotiations by 2015 does not appear to be an easy task, given that the Asia-Pacific nations are aiming for a deal that involves deeper engagement than existing ASEAN free trade agreements.
Japan, however, expects conditions of the RCEP to be more relaxed than those of the TPP, as the 16 nations would be allowed to retain certain tariffs.
The ASEAN countries are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam.
Also involved in the RCEP talks are Japan, China, South Korea, Australia, New Zealand and India.
Ministry of Justice rules on exclusive gold bar production
The Ministry of Justice has replied to inquiries from National Assembly deputies, clarifying the position on the State monopoly of gold bar production.
Deputy Tran Thi Quoc Khanh of Ha Noi said prime ministerial Decree 24/2012/ND-CP released in April last year, did not specifically designate any business to produce gold bars.
However, Decision 1623/QD-NHNN released by the State Bank in August exclusively designated the Saigon Jewellery Joint Stock Company (SJC) to produce gold bullion, reports Vietnam Economic Times.
Khanh said decision 1623 raised concern among businesses and NA deputies that the central bank may have violated the Constitution and Law.
In response to a petition to deputy Khanh, the Ministry of Justice confirmed that the SBV decision was legal.
According to the Ministry of Justice, Clause 3 of Article 4 in Decree 24/2012/ND-CP stipulates that the State holds the monopoly on gold bar production, and the export and import of gold to produce bars.
In addition, Clause 3 of Article 16 issued in Decree 24 stipulates that it controls the organisation of gold bar production.
Therefore, the State Bank issued decision 1623 designating the Saigon Jewellery Joint Stock Company (SJC) to produce gold bullion.
SBV Governor Nguyen Van Binh said that under the new regulations, the State would exclusively produce gold bars, therefore it considers the SJC brand as the State brand.
In another development, the State Bank sold 19,600 gold taels at auction yesterday for between VND41.52-VND41.56 million per tael (1 tael is about 1.2 ounces). This was the smallest amount in the last 15 auctions.
The central bank is expected to sell about 10 tonnes of gold in the near future.
On June 30, commercial banks will be forced to close gold sales. If market demand is still high, the SBV is expected to continue selling gold until supply meets demand.
The central bank has sold a total of about 412,500 gold taels (16 tonnes) of the total 458,000 taels offered since March 28 in an effort to stabilise the market.
It estimates that commercial banks need to buy another 20 tonnes of gold to close their positions.
MoF increases fuel tariffs
The Ministry of Finance increased the preferential tariff of some fuel products yesterday for the second time in the last ten days.
Circular 58/2013/TT-BTC, signed yesterday, increased the import duty for petrol from 16 to 19 per cent, diesel from 12 to 14 per cent and natural oil from 14 to 15 per cent.
Previously, the ministries of Finance and Industry and Trade also asked enterprises to reduce the fuel price in the market in order to stabilise the local price.
This time, there has not yet been a request for price reductions in the market, said Tran Minh Ha, sale manager of Saigon Petrol.
