BUSINESS IN BRIEF 8/10

HCM City industrial clusters attract $480m

Industrial parks and export processing zones in HCM City have attracted investments of more than US$480 million in the year-to-date period, an increase of 48 per cent over the same period last year.

Announcing this, the city’s Export Processing and Industrial Zones Authority (HEPZA) said foreign direct investment accounted for more than $341 million, a year-on-year jump of 114 per cent.

But only $63.6 million of the investment was in new projects.

Japan was the biggest investor with $31.9 million in four projects, followed by Singapore with $16.7 million and Australia with $9.8 million.

Services, pharmaceuticals, plastic, mechanical engineering, apparel and textile, and food processing attracted the largest investment.

But domestic investment declined 15 per cent to $138.8 million.

Food processing, mechanical engineering, electronics, software, and plastic were the major sectors attracting investment.

Exports by firms based in IPs and EPZs rose by 6 per cent to $3.4 billion while imports fell 10 per cent to $2.5 billion.

HEPZA attributed the decline in imports to the lack of orders and rising input costs.

Firms in IPs and EPZs employ nearly 270,000 people, including 1,900 foreigners.

Hue invites investors to ‘golden land’

Central Thua Thien - Hue Province is calling for investment in trade centres, high-rise office buildings and land plots, called ‘golden land,’ in the municipality of Hue City.

According to Le Quang Dung, deputy director of the province’s Construction Department, the land plots are located at the corners of large streets in the southern part of the city and the construction heights for buildings are not limited by heritage conservation requirements in the northern part.

The plots include land bordered by Hung Vuong, Ba Trieu and Ton Duc Thang streets, land at the corner of Ha Noi - Ly Thuong Kiet streets, and plots planned for a trade centre in the An Van Duong new urban area, and other plots in busy Tran Hung Dao and Le Loi streets.

In the northern part, which is separated from southern section by the Perfume River and concluded by the royal Citadel, high-rise buildings are allowed in areas 3km from the heritage buildings, Dung said.

Local authorities are also inviting investors to a wholesale market in Phu Hau Ward and a centre for trade fair and exhibition at An Dong Ward.

Dung said the Department of Planning and Investment would give 15sq.m of land to the wholesale market project and 62,000sq.m to the exhibition centre. Height limit for the centre is 17 stories. It will also assist investors in site clearance.

The city also planned to make land plots for several offices and agencies in the city’s centre, including offices for the Department of Education and Training, Department of Construction, Department of Health, and the Press Association, and give plots to big investors for trade and tourism complex projects.

Tran Ba Man, deputy director of the Finance Department, said land prices would range from VND27 million (US$1,230) to VND71 million ($3,230) per one square metre, depending on its location. Plots at Le Loi and Tran Hung Dao are the highest.

The information was released at an online conference held by the provincial People’s Committee last week.

Phan Ngoc Tho, deputy chairman of the committee, said the province is doing well in land management and the issuance of land use and lease certifications at the locality has reach 83 per cent.

As for delayed projects in the ‘golden land’ plots which have investors already, including the plot at the corner of Ha Noi - Nguyen Tri Phuong streets, the department of planning and investment said economic downturn and loss in business prevented the investors from completing the buildings.

Its deputy director Phan Thien Dinh pledged to revoke the investment licenses for long delayed projects.

During the online conference, local and HCM City businesses contacted related departments to show their keenness on the trade fair centre and fashion show projects.

HCM City enhances trade with southern provinces

HCM City’s process-ing plants get farm produce, seafood, food and foodstuffs from other southern cities and provinces. To ensure stable supply and keep pace with the rising demand locally and elsewhere in the country, the city has enhanced trade co-operation with 20 southern localities.

Speaking at a meeting held by the city’s Department of Industry and Trade with its counterparts from 20 southern provinces and cities late last month, Le Ngoc Dao, its deputy director, said the two sides introduced their strong areas of business hoping to set up trade co-operation programmes.

The Sai Gon Trading Corporation (SATRA) has invested in seven agricultural areas in Dong Nai, Binh Duong, Lam Dong, Long An, Tien Giang, An Giang, and Dong Thap provinces.

To ensure stable supply for its processing facilities, Vissan, a subsidiary of SATRA, has invested VND600 billion (US$28.36 million) in five animal-husbandry projects in An Giang, Binh Duong, Dong Nai, Long An, and Ba Ria – Vung Tau provinces. It also supplies goods valued at VND2.4 trillion ($113.5 million) annually to these localities.

The city supplies brood animals to 13 southern provinces and invested VND192 billion in building a plant making goods for export.

Ba Huan Co has undertaken three co-operative projects with farmers in Long An, Kien Giang, and Binh Duong. It provides them with brood animals, feed, and animal husbandry techniques worth VND350 billion and sells other products worth VND500 billion per year.

Sai Gon Co.op has five projects to set up distribution networks, co-operate for production, provide funding, and to buy products worth around VND700 billion a year from these localities.

It has outlets in 19 provinces and is expected to open another one early next year, thus having Co-op Mart outlets in all 20 southern provinces that have signed co-operation deals with HCM City.

The three wholesale markets in HCM City are supplied some 8,000 tonnes of goods daily by localities across the country, especially southern provinces.

The co-operation programme has also helped HCM City-based businesses expand their retail markets and develop distribution networks across the country.

Together, they have so far opened 64 supermarkets in southern provinces.

With two new mini-marts in An Giang and Binh Phuoc, Vinatex has 19 mini-marts in 14 out of the 20 provinces.

It is also provided capital of VND25 billion a year for market stabilisation in Binh Duong and Binh Phuoc provinces.

With support from these localities, Sai Gon Co.op and Vinatex plan to open convenience stores in Dong Nai, Dong Thap, and An Giang before expanding to the other provinces.

At the meeting, the department heads agreed to enhance exchange of information, especially about demand and supply of goods, to prevent possible speculation and gouging.

They will also create favourable conditions for firms from other southern localities to access the distribution networks in HCM City.

FDI exceeds target

Foreign direct investment in the first nine months was worth over $15 billion, meaning it has already exceeded the whole year’s target.

Processing and manufacturing attracted the largest inflows with science and technology projects coming in at a surprising third place.

Investment and the number of new projects in science and technology are on the rise, according to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA).

There were 116 new projects with a total investment of $380 million against just $99 million in the whole of last year.

It accounted for a third of all the investment in the sector over the last 25 years of $1.1 billion. According to the FIA, processing and manufacturing attracted investment of nearly $13 billion, $7.6 billion of it in new projects, followed by the property sector with over $587 million.

The last quarter has already seen a sharp increase in FDI with Samsung getting a licence for an electronic components plant costing $1.2 billion at the Samsung Thai Nguyen Hi-tech Complex.

FDI to have actually been brought in this year is around $8.6 billion, a 6.4 per cent year-on-year jump, and the target of $10.5-11 billion seems achievable.

VietJet has high hopes

The country’s first private air carrier VietJet Air is confident it can raise the funds required to buy the 100 Airbus A320 aircraft for which it has already inked deals, according to Luu Duc Khanh, its managing director.

He signed an MoU with the European manufacturer on September 25.

The agreement is for buying 42 A320neo (new engine option), 14 A320ceo (current engine option) and six A321ceo aircraft, leasing eight from a third party, and an option to buy 30 more A320s, according to a press release from Airbus.

The order, not including the option, is worth about $6.1 billion at listed prices.

Khanh said while the sum is huge, the carrier has identified the sources to raise it already.

They include Government programmes to fund aircraft purchases, loans from foreign financial institutions, and an IPO, he said.

The foreign banks would only provide 20 per cent of the amount needed, he said, revealing that VietjetAir held negotiations with many of them and had the loan deals in the bag before signing the MoU with Airbus.

The aircraft to be bought would themselves be used as security for the loans.

VietjetAir has also approached the governments’ financing channels, which promises promising results since authorities have a good impressions about VietjetAir’s business model, he said.

The carrier made a pre-tax profit of VND120 billion ($5.67 million) in the first seven months of this year, which was beyond its expectations, he admitted.

At the time it started in December 2011 VietjetAir had hoped to break even only after three years.

Its fleet has expanded from three in the beginning to 10 now.

"With the number of passengers and volumes of cargo it transports, VietJet needs five to 10 aircraft every year," he said. Demand for air transport in Viet Nam is rising and VietJet would have to expand to every destination for which there is demand, he said.

Bribery remains urgent issue to Vietnam’s economy

Bribery is still an urgent issue in Vietnam, which has caused great difficulties for enterprises and slowed down the country’s development, according to economists.

The issue was discussed at the dissemination workshop ’Vietnam: Trade Facilitation, Value Creation, and Competitiveness’ held by World Bank and Vietnam Chamber of Commerce and Industry (VCCI) on October 4. Vietnam’s competitiveness index is lagging behind its neighbours because the of the high cost of logistics, underdeveloped infrastructure and lack of transparency in the customs system.

Pham Minh Duc, an expert from World Bank said, "From 1997 to 2011, the volume of freight traffic has increased 12% a year and economic growth rate is about 18% a year, yet the growth rate of infrastructure investment is 0%. Our infrastructure and services are weak because we heavily depend on public investment even though it is said to be ineffective."

Luis Blancas, another expert from World Bank agreed with Duc, saying, "Average logistics costs of other countries is only accounted for 9%-13% of GDP, but this figure in Vietnam is estimated at 25%." He went on to say that the logistics costs are so high because firms have to pay extra money for customs and traffic police. Bribes for traffic polices could take up to 13% of a total cost of a shipping container.

According to the World Bank, complicated procedures in the customs system costs Vietnam’s economy hundreds of millions of USD each year. For example, customs clearance work in Vietnam lasts three to four days longer than in other countries. Because of the slow work, firms have to spend extra money to warehouses. In 2012, the economy lost USD96 million because on storage fees and it may increase to USD182 million in 2020 if Vietnam does not act quickly.

"Complicated procedures create loopholes for bribery so we need to use more high-tech methods and limit manual work. This way, customs officials will have little contact with the firms and fewer chances to ask for bribes," Duc said.

An export-import company also said, "Not every officials asks for bribes. It’s just that our regulations are so inconsistent and we want our work to be dealt with quickly, so we have to ’grease the wheel’."

World Bank suggested the government issue clearer and more consistent regulations along with frequent inspections at state offices. 

Taiwan firms explore opportunities in Vietnam

Executives from 46 Taiwanese companies are in Ho Chi Minh City looking for distributors and franchisees to sell their products in the country.

At an exchange organised on October 4 by the Taiwan Trade Centre (Taitra), they showcased products like cosmetics, home appliances, machinery, automobile parts, many of them technologically advanced.

Food, foodstuff, cosmetics, and other companies looking for franchise partners were introduced to Vietnamese companies, the first time Taiwanese franchise opportunities have come up here, a Taitra official said.

Many Vietnamese companies have benefited from cooperating with Taiwanese companies and Taitra is looking for more opportunities, she said.

Trade ties between Vietnam and Taiwan increased more than 6% year-on-year in the first eight months of this year to US$7.5 billion.

Vietnam’s exports were worth nearly US$1.7 billion, up 14%, while its imports rose 4%.

Vietnam has a trade deficit of US$4.1 billion with Taiwan, but the figure is gradually reducing.

Vietnam attends int’l food and beverage fair ANUGA 2013

Eighteen businesses are showcasing their products at the international food and beverage fair ANUGA 2013 in Cologne, Germany, from October 5-9.

The Vietnam pavilion displays fresh fruit and vegetables, agricultural products, processed cashew nuts, food processed from rice, Phu Quoc fish sauce, cookies and drinks.

On the opening day on October 5, the Vietnam pavilion attracted large numbers of visitors for a variety of high quality products, meeting international hygiene and safety regulations.

The fair is expected to help Vietnamese businesses maintain regular contacts with importers in Germany and Europe, sign contracts, and promote Vietnamese products.

Do Vu Thanh, a member of the Vietnamese delegation, said as the EU economy is showing signs of recovery, such a well-known fair offers a good chance for Vietnamese businesses to meet potential partners around the globe.

ANUGA is the world´s leading food fair for the retail trade and the food service and catering market.

This year’s event has attracted 6,700 businesses from 100 countries and territories around the world. It’s expected to draw about 155,000 guests to visit, carry out transactions and sign contracts.

Tra fish exports estimated at US$1.8 billion

Tra fish exports are expected to reach around 1.8 billion due to high demand from export market, according to the Ministry of Agriculture and Rural Development (MARD).

Despite a hike in the price of the fish, many local businesses succeeded in signing a number of contracts to ship abroad until the end of this year.

The tra fish export activities in the first eight month of this year were dull.

Vietnam’s tra fish exports recorded a yearly increase of 3.23 percent in volume but a year-on-year decrease of 7.93 percent in value during the first eight months of this year.

The Ministry said, Vietnam’s seafood export turnover in the first nine months of this year reached over US$4.6 billion, a year-on-year increase of three percent.

Vietnam runs trade deficit with Laos

Vietnam shows a high deficit in trade exchanges with Laos, its close neigbouring country, according to the Vietnam Customs.

Its exports to Laos over the past nine months reached US$329 million, up 12.3% against the same period last year, while imports fetched US$394.6 million, up 10.3%.

Wood and timber products and metals and minerals were two key groups of import items, valued at US$246.7 million and 18.5 million, respectively, and accounting for more than 80% of the total import value.

The Vietnam Customs reported despite the high export growth, the market share of the Vietnamese products in Laos remains low.

In 2012, Laos ranked 33rd among 200 Vietnam’s importers with a combined value of US$421.4 million, a year-on-year increase of 53.7%.

Vietnam mainly exported steel to Laos, earning US$67.2 million last year and making up 24% of the total. Other products attaining high export value included machinery, equipment and tools.

Meanwhile, Laos shipped US$444.6 million worth of commodities to Vietnam, ranking it 28th among foreign traders with Vietnam and 8th among ASEAN exporters.

Customs collect $7.27bn in taxes

The General Department of Customs collected nearly VND160 trillion (US$7.27 billion) in taxes and duties in the first nine months of this year, up 13.8 per cent year-on-year.

However, the figure met only 67.6 per cent of the annual target.

Value added tax (VAT) accounted for VND55.8 trillion ($2.53 billion) or 34.87 per cent, while collections from imports and exports, special consumption and environment protection duties were VND104 trillion ($4.72 billion). Another VND200 billion ($9.09 million) came from other taxes.

The customs department aimed to collect VND237.5 trillion ($10.79 billion) this year, a year-on-year increase of 20 per cent.

In efforts to minimise tax fraud, this week the customs department required its province-level agencies to scrutinise VAT refunds for products exported across the border.

The move was a response to last year’s discovery that a number of exporters with VAT tax refunds had a suspiciously sharp rise in both the volume and value of export goods.

Most export products eligible for VAT refunds are for the agriculture, forestry and fishery sectors; the category also includes construction materials and mobile phones.

The customs department attributed the tax fraud increase to loose regulations on setting up and dissolving firms as well as allowing firms to print red invoices on their own.

Loopholes in regulations allowing foreigners to open currency accounts to pay export and import duties in Vietnamese dong are also frequently exploited.

Last year, the department generated $9.48 billion in taxes, a drop of 8.8 per cent from 2011 that met 88.4 per cent of the annual plan.

Petrol station owners to face heavier fines for metre rigging

Petrol stations found scamming customers will face a fine of up to VND50 million (US$2,400) and have their business licence revoked following a new decree which comes into force next Thursday.

As a result, those who intentionally rig pump metres or commit similar frauds will be fined VND50 million instead of the VND30 million ($1,400) that was stipulated in the previous decree issued in 2011.

The new regulation also states that enterprises which mix petrol with cheaper substances to increase profit margins will be fined up to 2.5 times the value of the petrol.

"I really hope that the decree will discourage fraudulent activities at petrol stations, which are becoming quite widespread and directly affect consumers’ interests," said Pham Hong Xuan, a resident of Ha Dong District, adding that she herself witnessed a scam take place at a local filling station several weeks ago.

As a state official, vice head of the Ha Noi Market Watch Nguyen Dac Loc said that the decree rectified the shortcomings of its predecessor.

"The new decree specifies the fine imposed for the adulteration of petrol with other cheaper substances, which was not stipulated in Decree 97," Loc told the Nguoi lao dong (The Labourer) newspaper.

However, according to Nguyen Van Truong from Dong Da District, the fines are still not high enough to deter violators from continuing because the huge profits they earn fraudulently far outweighed the fines they could have to pay.

"Authorities should not only impose heavier punishment on violators but also strengthen inspections of petrol trading to detect frauds which are not easily discovered by customers," Truong added.

Under the newly-issued document, stations using inaccurate devices in which the error is of a technical nature will receive fines of VND10-20 million ($480-960)

In addition, petrol stations and exporters engaging in any one of the above violations will have their licenses for petrol trading and export withdrawn for up to six months and could even be forced to halt their business altogether for up to three months.

So far this year, the Ha Noi Department of Science and Technology has carried out inspections of 31 filling stations and imposed fines totalling VND15 million on administrative violations in petroleum trading.

Inspections will be also conducted in another 50 stations by the end of this year, according to the department vice director, Vu Nhu Hanh.

VCCI promotes role of business in rural development

Despite many new State policies, enterprises remain hesitant to invest in rural development, according to General Secretary of the Viet Nam Chamber of Commerce and Industry (VCCI) Pham Thi Thu Hang.

"The number of enterprises operating in rural areas is only about 30 per cent of those nationwide. Most of them are small-scale and earn lower profits than those in urban areas," Hang said.

Secretary General of Association of Hi-tech Application Agricultural Enterprises Ngo Tien Dung added that enterprises were reluctant to invest in the agricultural sector because of its "high probability of risk and slow recovery of capital."

Three years ago, a national programme for rural development aimed to draw 20 per cent of its funding from enterprises and co-operatives, supplemented by the State and provincial budget, credit loans and local communities.

Yet enterprises have so far contributed VND 3.501 trillion (nearly US$167 million), which accounts for only five percent of total capital. Funds mobilised from the State and provincial budget make up 50 per cent.

The government issued Decree No.61/2010/ND-CP on incentive policies for enterprises investing in agriculture and rural areas in 2010. However, the decree is too general to be effective, according to Nguyen Minh Tien, Deputy Director of the Economic Co-operation and Rural Development under Ministry of Agriculture and Rural Development (MARD).

As many as 1,800 of the 9,000 communes across the country will meet the new rural standards by 2015. To realise this target, all power resources need to be mobilised more efficiently, especially from the business community. Therefore, to engage more enterprises in building new rural areas, the Government should have preferential policies to encourage enterprises to invest in hi-tech applications to agriculture, Dung said. The MARD proposed creating more favourable conditions for enterprises to invest in specific products and professions, according to Tien.

So far, as many as 9,000 infrastructure works worth VND30.1 trillion ($1.4 billion) have been improved and built in rural areas, including 38,000 kilometres of road and 15,000 kilometres of canals.