Vinalines takes losses for 5th consecutive year
Vietnam National Shipping Lines (Vinalines) is forecast to lose around VND1 trillion (USD47 million) in 2014, the fifth consecutive year of losses for the shipping giant.
Leaders of Vinalines have admitted that the competitiveness of their fleet is weaker than that of private shipping companies.
The biggest difficulty in restructuring of for the company has been the high investment required for upgrading its fleet, which experienced its best business between 2007 and 2008. In the ensuing years, business faltered and the company ran at a continuous loss. However, if the company waits for the market to recover, the fleet will have aged considerably, driving up the cost of maintenance. As a result, Vinalines has had to sell some of its ships to cut losses.
Without improved port operations and logistics, Vinalines may fail to reach total revenue of VND9.78 trillion in the first half of 2014.
Amid this difficult situation, leaders of Vinalines consider restructuring as a way to save the firm from the looming risk bankruptcy in two to three years.
To date, seven affiliates of Vinalines have completed equitisation as scheduled.
Of their current outstanding debt of VND54.78 trillion (USD2.61 billion), Vinalines has restructured USD196.3 million of it through foreign credit organisations and VND43 trillion (USD2.06 billion) through domestic commercial banks.
Vietnam becomes ideal market for beer producers
Vietnam has become a promising market for beer production as the country tops Southeast Asia in beer consumption, totaling 3 billion litres of beer per year.
The high demand places Vietnam 25th worldwide and the third in Asia in beer consumption, which is expected to climb to 4.2 to 4.5 billion litres in 2015.
Vietnam is home to more than 400 beer companies, with around 30 international brands. The country has become a very attractive market to foreign investors.
In the end of 2013, Slovakia’s BTG Holdings started building a beer plant in Hoa Binh Province using Czech technology. The project is scheduled to be in operation late this year.
Sapporo Vietnam in Long An Province has plans to raise their annual capacity to 100 million litres of beer from the current 40 million litres for export to more than 10 countries.
The Vietnamese market has seen the presence of several imported brands such as Corona (Mexico), Bochka (Russia), DAD (Germany) and Duvel (Belgium)…
In 2013, the Vietnamese person drank 32 litres of beer, leading Southeast Asia, meanwhile, per capita income of Vietnam is only 8th among ASEAN countries.
Vu Thi Minh Hanh, Deputy Director of Health Strategy and Policy Institute, said that average global average beer consumption has remained almost unchanged over the past decade at 6.13 litres per person per year. Vietnam, however, has seen a sharp rise.
Per capita beer consumption in Vietnam is forecast to reach 7 litres by 2025, she added.
Up to 90% of Vietnamese men drink alcohol and the rate of local young people who use alcohol is also increasing rapidly.
Mrs. Hanh cited a survey which said that up to 60% of traffic accidents and 68% of domestic violence cases as well as 38% incidents of social disorder can be attributed to the abuse of alcohol.
Every year, around 2.5 million fatalities are related to the use of alcohol, accounting for 2.8% of the total number of deaths worldwide.
Nguyen Trong Thai, Office Manager of the National Committee for Traffic Safety, said that out of every 500 traffic fatalities, 34% show high blood alcohol levels.
New State-owned enterprises must focus on critical areas
New State-owned enterprises (SOE) can only be formed if they provide products and services critically important to ensuring national economic security, according to a new decree approved by Prime Minister, Nguyen Tan Dung.
Under the decree, the parent company in a State economic group must have the minimum charter capital of VND10 trillion (US$470 million) and have at least 50% of their subsidiaries operating in key stages of their main businesses.
The decree stipulated that subsidiaries are not allowed to buy shares of other subsidiaries within a parent company, as well as the company having control over the State-run economic groups and corporations to which they belong.
State economic groups and corporations are also required to disclose key information related to their operations on a website for enterprises run by the Ministry of Planning Investment.
The issuance of the decree is part of the Government’s effort to restructure State-run companies which, along with bad debt, have slowing down Vietnam’s economic growth in recent years.
In 2013, the Government equitised 74 SOEs but most of them were small companies and only a small share of equitised assets has been transferred to non-State shareholders, according to a World Bank report.
Vietnam has set a target to equitise more than 400 State firms over the next two years.
Walmart riding on TPP advantages
The US’ Walmart, one of the world’s biggest retail groups, is seeking more profits from Vietnam if the Trans-Pacific Partnership (TPP) Agreement is agreed upon.
Kevin Gardner, senior director of Walmart Global’s International Corporate Affairs, told Vietnam Investment Review (VIR) last week in an interview that Walmart was a strong advocate of the TPP negotiations from which it could greatly benefit.
“This comprehensive trade agreement provides market access and will bring a wide range of Vietnamese goods and agricultural products to consumers in our key retail markets in the US, Canada, Mexico, Japan and Chile,” he said.
The delayed TPP negotiations, which will hopefully be signed next year, are a multilateral free trade pact between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam. Once signed, the pact is expected to cover almost 40% of global gross domestic product.
“By gaining tariff-free access to large markets such as the US and Japan and by reducing non-tariff barrier, Vietnam could see faster export growth and large gains in gross national product than any other TPP members,” said Professor Robert Lawrence from the John F. Kennedy School of Government at Harvard University.
“Walmart does not have retail operations in Vietnam now, and we don’t have plans to open stores there,” Gardner said when questioned about expansion plans.
However, Walmart opened a sourcing office in Ho Chi Minh City in late 2013, and its current presence in Vietnam is through this office, which employs approximately 20 people and has relationships with numerous suppliers in Vietnam.
Walmart is sourcing apparel, footwear, homewares, toys and seasonal items from Vietnam.
Establishing “strategic relations with growers and economic groups” is important for Walmart and its customers, and having an office in Vietnam enable it to “more broadly and effectively” operate and better facilitate the identification and selection of suppliers while monitoring the manufacturing process to ensure compliance, safety and quality, Gardner said.
In January 2014, Walmart’s Global Sourcing vice president Bill Foudy came to Vietnam in search of more market opportunities and met with Minister of Planning and and Investment Bui Quang Vinh.
“Our presence in Vietnam will prompt other investors to come to Vietnam to do business,” Foudy said. “We will also provide local partner with technical assistance.”
A good example of Walmart’s sourcing relationships in Vietnam with Thuan Phuong Embroidery, which Walmart has been working with for more than four years.
“The owner of this business has been successfully exporting her products to the US, and we are hoping her to expand further with our direct business,” Gardner said.
Walmart currently operates retail outlet chains in North America, South America, Europe, Africa, Japan, India and China.
Instant noodle firms eager to tap into Mexican market
Vietnamese noodle manufacturers have a chance to tap the Mexican market which annually imports an estimated 1.6 billion packs worth US$500 million annually, according to the Mexico-based Vietnam Embassy’s Trade Office.
A trade office survey showed that instant noodles are primarily sold through 12 major supermarkets, such as Wal-Mart, Aurrera, Superama, Soriana, and Comercial Mexicana.
When exporting to Mexico, domestic manufacturers should be aware that Mexico levies a 10% tariff on all normal products and a 20% tariff on products containing egg as part of efforts to protect the chicken industry, one of the country’s key exportss.
Hoang Tuan Viet, Trade Counsellor to Mexico, affirmed Vietnamese instant noodles can be exported to Mexico. Businesses should choose brand names associated with low prices such as Vifon, Masan, Milliket, Micoem, and Asia Food, he suggested.
To best approach the market, businesses should develop a detailed advertising strategy to market the products to the Mexican people. For example tasting at supermarkets is an effective and proven method of marketing, he said.
Vietnam currently has 50 instant noodle manufacturers which produce nearly 50 billion packs a year. It is also one of the largest consumers of instant noodles in Asia with average consumption of 1-3 packs per person a week.
Currently, Japan-invested VinaAcecook leads the market with 51.5% of market shares, followed by Masan Consumer (16.5%), Asia Food (12.1%) and the remaining 20% are owned by smaller brand names like Miliket and Vifon.
Japanese businesses want to invest in Vietnam
Around 30% of Japanese businesses that are intent on investing overseas consider Vietnam as their prime choice, according to a recent survey by Japan External Trade Organisation (JETRO).
JETRO reported that it will conduct a fact-finding tour in the near future of key industrial zones in northern Vietnam, such as Hanoi, Hung Yen, Bac Ninh, Ha Nam, Haiphong and Quang Ninh for 26 Japanese businesses.
JETRO chief representative in Hanoi Atsusuke Kawada said his agency anticipates that the visit will facilitate Japanese businesses gain a better understanding about the northern region’s investment environment, encouraging them to invest in the country.
HCM City:Exponential retail growth on the horizon
The retail market in HCM City is getting set for major realignments as many of the world’s leading retailers in the food, beverage, and fashion industries formulate expansion plans to set up shop.
In early July, Singapore’s Mapletree Group announced it is expanding its presence in the city with a Vietsin Commercial Complex Development JSC joint venture development of a one-stop ‘family-lifestyle-destination’ mall for both the local and expatriate communities in Ho Chi Minh City.
The five-storey mall will offer the latest fashion, a hypermarket, a cineplex as well as lifestyle, entertainment, education, dining outlets, and other entertainment on an area spanning 21,270 square metres, located at SC Vivo City’s South Palace Complex .
Mapletree Group will be introducing international brands including CGV-one from the Republic of Korea, the largest multiplex cinema chain in the RoK which has branches throughout China and the US. Saigon Co.op and NTUC FairPrice have also signed deals to set up mega supermarkets in the SC VivoCity shopping centre.
Other international giants in including Starbucks, MOF, BreadTalk, ThaiExpress, Pepper Lunch and Shabu Ya are also lining up putting the final touches on negotiations to begin operation in the shopping centre in the near future.
Robins Department Store-a member of Thailand’s leading retailer Central Group recently unveiled its plan to enter Vietnam’s southern market this November. Following a successful opening of its first store in Hanoi, Robins Department Store announced it has rented four floors covering 10,000 square metres at Ho Chi Minh City-based Crescent Mall to launch its southern campaign.
Japanese retail tycoon AEON Mall will also officially making its debut appearance in the Vietnamese market in the remaining months of the year. The group inaugurated its first commercial centre in Tan Phu district, HCMC on January 1, 2014 and is continuing to expand its market share. The company is hurriedly preparing to expand into Binh Duong province which borders HCMC in the fourth quarter (Q4) of the year.
McDonalds’s, the world’s largest chain of hamburger fast food restaurants opened its first franchise in eastern Saigon earlier this year just after the Lunar New Year (Tet) holiday. Then in Q2/2014, its second franchise opened in District 1. At the opening a representative of McDonald’s announced plans for a third and fourth franchise.
It appears McDonald’s is following the lead of its predecessor to HCM City, Starbucks, which has accelerated rapidly in the market and is on track to celebrate the grand opening of its 8th coffee shop in HCM City in Q3/2014.
Baskin-Robbins the international home of delicious cones, shakes, treats, cakes, and pies recently opened the doors for business of its 20th store in Q2/2014.
Dairy Queen, a US based franchise owned by billionaire Warren Buffett, opened its first ice cream outlet in January, 2014 with its first in District 1 and a second shortly thereafter within only a few months. As planned, over the next five years, Dairy Queen chain will massively expand to over 60 stores.
Caffe Bene, famous Korea coffee brand which currently operates in 12 countries has chosen Q3/2014 as the time to set foot in the Vietnam market. Recently, in Seoul, CaffeBene Vina Company signed an exclusive franchise contract with Caffe Bene.
In the HCMC Q3/2014 real estate report, CBRE Executive Director Vietnam Marc Townsend predicted the landing of international retail brands in HCM City would be strong in the future.
The leading indicator of the growth he says came in a Nielsen survey, in Q1/2014. The confidence index of Vietnamese consumers was higher than the global average. This is one of the key factors that increased the confidence of international retailers and helped sway their decisions to invest in Vietnam.
Global Director of Leasing Services and Retail Consultants Cushman and Wakefield Mark Burlton recently commented that the global economic crisis created many changes in the retail market over the past five years.
Retailers no longer need to maintain a large number of stores like before in their country, he said, adding that instead, they are actively searching for opportunities to open stores in international markets, and they are particularly fond of Asia.
Currently, many international brands have their eye on the Asian market, and most particularly Vietnam.
Mark Burlton stressed that most of the products of brands making their appearance in Vietnam are readily available in other countries and have been for years. This gives them a competitive advantage as it is relatively easy to develop distribution channels and tie into their pre-existing networks.
However, prior to a retailer pouring direct investment into any project, they must always carefully weigh the pros and cons of the long-term venture.
One of the more prominent obstacles that foreign retailers coming to Vietnam face is the vast difference among differing parts of the country and the weather. When a foreign retailer enters Vietnam, it often chooses to open a chain instead of just one or two small stores and the varying factors complicate matters.
The process of finding good location is arduous work. Overall project quality in Vietnam is not equal in general. Vietnam does not have an abundance of good projects for retailers to choose from.
These are highly complex and significantly important issues that retailers coming to Vietnam must cope with, Burlton said.
Cushman and Wakefield leaders say that although many international brands are cropping up throughout the country, the number of brands has not matured as of yet.
In 2015, Vietnam is poised to fully open the retail market in line with World Trade Organization (WTO) commitments. The country should brace itself for exponential growth of the presence of foreign retailer giants in HCM City and throughout the nation in the coming time, they say.
Thai Nguyen actively betters investment climate
The northern province of Thai Nguyen has directed its departments, agencies and authorities at grassroots levels to step up implementing an array of measures to improve its investment climate.
Duong Ngoc Long, Chairman of the provincial People’s Committee, said his province always creates the most favourable conditions possible for investors in terms of investment permits and ground clearance.
Having welcomed a high-tech complex project invested by Samsung Group from the Republic of Korea, Thai Nguyen continues to call on affiliates of the business to promote their support industry projects.
The province has also hastened ground clearance in Yen Binh, Diem Thuy, Song Cong and Nam Pho Yen industrial parks, enabling investors to kick-start the construction there at an early date.
Regarding administrative reform, it has promulgated 20 mechanisms and policies to facilitate investment, notably the application of the “one-stop-shop” mechanism in dealing with administrative formalities.
Regular dialogues between businesspersons, provincial officials and bankers to ease difficulties for local businesses have also been maintained.
As a result, many investors have accessed preferential loans from commercial banks and benefited from some tax policies.
In the first half of this year, Thai Nguyen attracted 19 foreign-invested projects valued at US$134 million, bringing the total to 66 with a combined investment of around US$3.8 billion.
Local firms seek investment opportunities in Turkey
A Vietnamese business delegation is visiting Turkey from July 9-12 to seek investment opportunities, especially in the electronics and home appliance industries.
A Vietnamese business delegation is visiting Turkey from July 9-12 to seek investment opportunities, especially in the electronics and home appliance industries.
The delegation, led by Dien Quang Company Director General Ho Quynh Hung, are making the visit at the invitation of Levent Çakıroğlu, CEO of Arçelik, one of Turkey’s leading industrial groups.
The two sides are expected to establish an official cooperation channel, bolstering bilateral trade ties.
Dien Quang CEO said he wants to study the Turkish markets and secure a foothold in the Middle Eastern country, which he described as the largest export market of Vietnam in southern Europe.
During their stay in Istanbul, the Vietnamese businesses worked with representatives from the Union of Chambers and the Commodity Exchanges of Turkey (TOBB), the Foreign Economic Relations Board of Turkey (DEİK)’s Turkey-Vietnam Business Council, and a number of Turkey businesses.
Vietnam Ambassador to Turkey Pham The Cuong expressed his strong desire to strengthen economic links between the two countries. Turkey’s large groups are more than welcome to invest in Vietnam, he said, adding that the Vietnam Embassy in Turkey has implemented many activities to promote Vietnam-Turkey business connectivity and facilitate Vietnamese firms’ operations overseas.
Bac Ninh provides VND300 bln for Samsung Display
The People’s Council of northern Bac Ninh province on July 10 approved a VND300 billion incentive package to recruit a new Samsung Display project to the Yen Phong Industrial Park.
The package provides VND287 billion to fund 50% of the cost of infrastructure facilities on an area spanning 46 hectares and another VND12 billion for employee training.
The maximum allotted for training each employee is capped at VND1.5 million, which is further limited by an overall cap of 8.000 employees.
As part of the deal, the Bac Ninh provincial People’s Committee granted an investment license for a US$1 billion Samsung Display at Yen Phong Industrial Park.
The Samsung project is projected to produce 48 million electronic products per annum, create 8,000 jobs and generate revenue of nearly VND6 billion annually.
Viettel in Africa presented with Mobile Innovations Awards
Movitel, a joint venture between Vietnam’s military-run telecommunication Viettel Group and Mozambique’s SPI, has won the Mobile Innovations Awards for enterprises in the Europe, Middle East and Africa (EMEA) region.
This is the third consecutive year in a row that Movitel has been selected for the coveted award for its achievements and innovation in mobile technology.
Since its inception in May 15, 2012, the company subscribers have climbed to 5 million (making up 32% of market share) and it is poised to take the lead in the market in the coming time.
Last year, the company’s total revenue was US$154.5 million with profits of over US$8.8 million.
AEC could be a bitter pill for sugar industry
The sugar and sugarcane industry should look for ways to enhance its competitiveness, especially with the ASEAN Economic Community set to come into existence next year.
Vo Tong Xuan, chairman of the Tay Ninh Sugar and Sugarcane Research Centre and senior adviser on sugar to the Thanh Thanh Cong Group, said sugarcane and sugar production costs remain high in Viet Nam compared to other countries in the region.
The industry is thus at risk of losing on home turf once the AEC comes into being, he told a conference organised by the Thanh Thanh Cong Group.
More than 200 scientists, farmers, and local and foreign executives from the sugar industry attended the conference that analysed successful models from Viet Nam and other countries like Thailand and Australia to help farmers improve their yields.
Nguyen Huu Loc, chairman of Thanh Thanh Cong’s sugarcane committee, said the area under sugarcane increased slightly in recent years to 289,018ha to yield a sugar output of 1.58 million tonnes in the 2013-14 crop.
“The average sugar yield in Viet Nam is 5.47 tonnes per hectare, much lower than 7.62 in China, 8.05 in Thailand, and 11.8 in Australia, “he said.
Ho Thai Binh of Nuoc Trong Sugar Joint Stock Company, which grows 2,150ha of sugarcane in Tay Ninh Province, said irrigation during the dry season and timely use of fertilisers among other things helped his company improve the quality of sugarcane and yield to 85 tonnes per hectare.
Profits have increased to VND27.25 million (US$1,285) per hectare compared to VND17.89 million without irrigation during the dry season, he added.
Nguyen Trong Thua, director of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production, said the small scale and scattered production made it hard to mechanise sugarcane production, resulting in high costs and low productivity.
Besides, a lack of irrigation and use of unsuitable sugarcane varieties also affected productivity, he said.
Post-harvest loss of sucrose in the cane was high, especially in areas where transport from the fields to the mills was limited, he said.
Factors that cause a reduction in sugarcane yields include growing unsuitable varieties, poor techniques, and inappropriate choice of planting time, fertilisers, and irrigation, and failure to mechanise, according to Loc.
The planting time decides sugarcane yields, good preparation of land help roots grow well, and mechanised planting helps reduce costs.
Meanwhile, disease-free and high-purity saplings plays a decisive role in increasing yields, and farmers should be careful in translocating strains since they are not suitable for all regions.
Le Ngoc Tinh, a cane grower in Tay Ninh, said controlling dangerous sugarcane diseases was also very important.
He said authorities should invest more to produce harvesters suitable for each region. While sugar companies should co-operate with farmers associations to set up co-operative teams to make it easy to use machines in sugarcane cultivation, he added.
Loc said the country had10 different areas suitable for cane cultivation, each with different climatic and soil conditions, and so it was important to find a suitable model for each region.
Besides studying the latest global models to identify new technologies, successful domestic models should also be expanded, he said.
Thua urged the sugar industry to boost research to make use of sugarcane by-products, saying this would help reduce sugar production costs and improve the competitiveness of Vietnamese sugar.
Vinacomin posts 18% increase in H1 turnover, profit declines
The Viet Nam National Coal and Minerals Industries Group’s (Vinacomin) turnover in the first half of the year was VND55.3 trillion ($2.6 billion), representing 18 per cent year-on-year increase.
Vinacomin is expected to show VND600 billion (US$28.5 million) profits, meeting 30 per cent of this year’s target.
Vinacomin’s Deputy General Director Nguyen Van Bien told a press conference in Ha Noi on Thursday that the low profit was due to increasing taxes and fees imposed on the group.
Bien said that from the beginning of February, tax on natural resources rose two per cent, making the group pay VND1 trillion more in a year.
In addition, it also had to pay more than VND1 trillion a year to get the rights for exploration.
“The increasing taxes and fees, together with unchanged coal prices in the domestic market for the past three years have caused difficulties for Vinacomin,” he said.
He added that the high taxes and fees would make the coal sector run out of capital for investment.
He asked the Government to lower taxes and duties, to help the group accumulate capital to develop its coal mines while allowing it to export coal to Japan till 2015.
Vinacomin’s General Director Le Minh Chuan said coal exports to China have been halted because of high prices.
Chuan said in the process of restructuring, the group has absorbed nine single member companies into its branches. It has also completed privatisation of two out of six companies.
It withdrew VND1.6 trillion from non-core businesses in the finance and banking sectors.
Vinacomin has ensured jobs for more than 126,000 labourers with an average income of VND7.7 million ($360) each a month, increasing 3 per cent over the same period last year.
He said the group was committed to making the Nhan Co Aluminium project operational by 2015.
Vinacomin is looking to have a turnover of VND105 trillion this year, and produce 37.7 million tonnes of coal with consumption of 35 million tonnes. Of this, coal exports would be 8 million tonnes and 27 million tonnes would be for domestic consumption.
It would improve capacity, lower product prices and complete its construction projects to ensure energy security.
It planned to increase the salaries of workers from 5 to 10 per cent.
Minister of Industry and Trade, Vu Huy Hoang placed high value on the coal sector’s achievements in the first half of the year despite the difficulties.
Hoang urged Vinacomin to make greater efforts as coal and electricity industries could affect other sectors such as building materials and fertilisers it was facing.
He asked the group to accelerate its restructuring and focus on its core businesses.
Rubber glut to last another two years
Despite a fall in rubber export prices, many farmers in Viet Nam are earning good profits from exports, a seminar heard yesterday in HCM City.
With an oversupply of rubber in the market, the price plummeted to US$1,979 a tonne in the first half of the year compared to its peak of US$3,000 a tonne in 2011, said Pham Dong Quang, deputy head of the Crop Production Department.
Global oversupply is expected to last for two more years, but will gradually shrink because of a decline in production in rubber-exporting countries in Asia caused by impact of the El Nino weather phenomenon.
In addition, the recovery of the world economy is expected to increase demand for rubber, he said.
Tran Ngoc Thuan, president of the Viet Nam Rubber Group and chairman of the Viet Nam Rubber Association, said the current rubber price was “really not that low, just low compared to its peak.”
Do Duc Oanh, owner of Doan Ket farm in Binh Phuoc Province, who has more than 60ha under rubber cultivation, said that despite the price fall, he was still making a good profit.
However, many farmers are not using proper harvest techniques, which affects their rubber productivity and quality, Oanh said, adding that the Government should pay more attention to helping farmers use better methods.
He also petitioned the Ministry of Agriculture and Rural Development to have better management of seedling production organisations as many unreliable seedling providers operated in the market.
Many delegates at the seminar said that reports that many farmers were cutting down rubber trees to plant other crops were untrue.
Quang said according to reports from departments of agriculture and rural development of many provinces, about 3,856ha of rubber was cut in the first half of the year.
“However, of that amount, 3,123ha was from old rubber gardens or from trees that could not recover after being hit by storms last year that need to be replanted,” he said.
Only about 733ha, mostly planted on unsuitable cultivation land that was economically inefficient, was cut down for other higher profit crops, he said.
The area of rubber tree plantations increased rapidly from 454,100 ha in 2004 to 995,600 ha last year, about 115,600ha higher than the Government’s plan for rubber development, he said.
VN-EU FTA will benefit Vietnamese firms: experts
The Vietnam and EU Free Trade Agreement (FTA) would benefit Vietnamese enterprises, according to economic experts.
They said the FTA with the EU would improve Viet Nam’s business climate thanks to a transparent legal framework after the negotiations.
The FTA with the EU would conform to World Trade Organisation (WTO) standards.
Viet Nam had made strong commitments to improve many domestic policies and regulations, said former minister of Industry and Trade Truong Dinh Tuyen in the Vietnam Economic Times.
The country’s export turnover to the EU market wass predicted to increase by four per cent annually after the FTA is finalised.
The import-export tariff on most Vietnamese products exported to the EU would gradually drop to zero, creating an opportunity for Vietnamese enterprises.
However, to be able to enjoy the advantages of the FTA, domestic businesses needed to be fully aware of technical barriers to trade imposed by the EU relating to quality and points of origin for products.
Le Trieu Dung , Deputy Director General of the Multilateral Trade Policy Department under the Ministry of Industry and Trade, said local producers needed to increase investment to improve product quality. The improvement of production would also have a positive effect in the long term.
According to Tran Ngoc Quan Deputy Director of the Ministry of Industry and Trade’s European Market Department, Vietnamese businesses should make every effort to raise product quality to meet technical standards required by the EU market to raise their competitiveness and boost export turnover.
According to the General Statistics Office (GSO), in the first six months, the EU has taken the lead in Viet Nam’s export markets with a total import turnover of $13.1 billion, an increase of 12.8 per cent over the same period last year.
Viet Nam mainly exports apparel, footwear, coffee and furniture and seafood to the EU, while the EU exports machinery, drugs, equipment, vehicles and raw materials for apparel, fertiliser and steel.
Le Ky Anh , an expert with the EU delegation to Viet Nam, said exporters would have more chances to export seafood, coffee and rice products after the FTA was signed.
Ngo Van Sinh, a senior official from the Agro-Forestry Fisheries Quality (NAFIQAD), said the EU was an important market for Viet Nam’s fisheries sector. Since 2006, EU has surpassed the US and Japan to become Viet Nam’s largest seafood export market.
The eighth round of FTA negotiation concluded on June 28, and both sides are now planning to finish the negotiations this October.
The FTA will enable the country to make annual gains of about $1.5 billion by 2020 when export tariffs are cut. The estimated increase in gross domestic product is about 2-2.5 per cent, and wages are estimated to improve by around 5 per cent.
Likewise, imports from the EU will increase by 25-35 per cent, reflecting the greater reduction in tariffs.
Policy needed on wind investment
The Government needed to develop a policy that encouraged investment in wind power projects in order for the sector to progress, according to Germany’s GIZ Macroeconomic Reform Programme.
In 2011, the Government issued Decision 37/2011/QD-TTg to support wind power projects with a target of reaching 1,000 megawatts (MW) by 2020 and 6,200MW by 2030, Le Tuan Phong, deputy head of General Department of Energy, said at a seminar held by the Ministry of Industry and Trade (MoIT) and the GIZ in Ha Noi on Thursday.
Phong said that since the decision, Viet Nam had attracted 48 wind power projects with a total capacity of 4,876MW. However, only three projects were operating at a total capacity of 52MW. The rest were still conducting feasibility reports, he was quoted as saying in the Thoi bao Kinh te Viet Nam (Vietnam Economic Times).
The MoIT and GIZ have conducted a survey to examine the issues investors have faced during the development of these projects, and asked the Government to support investors interested in developing the local wind power market.
According to GIZ experts, difficulties included the support policies for the development of wind power and its potential gains.
The survey also found that many local enterprises that lacked expertise in the field invested in projects believing they could get rich quickly.
Foreign investors who were informed of sector’s potential also discovered that the wind capacity was less than required and cancelled their investments.
At the three operating wind power projects, experts said that with the average construction cost stood at US$2 million per MW of wind power with annual operation costs of $35,000 per MW, investors had suffered losses.
The GIZ also said that Viet Nam’s wind power strategy should not have focused on investing in wind turbines at sea because construction costs were too high. The correct step would have been to prioritise building turbines on the coast that cost less.
The GIZ also said the Vietnamese Government should make land rent exempt for investors on the coast instead of building turbines at sea.
The government should help enterprises to access loans and offer credit guarantees, the GIZ survey said.
The Ministry of Finance should exempt them from the 10 per cent import tax for wind turbines, which pushes costs up.
Regarding the price of wind power sold to EVN, the GIZ suggested that the price should be increased to 10.4 US cents per kWh instead of the 7.8 cents investors are currently receiving.
Larger lenders on track to hit annual targets
Several banks have posted satisfactory profits, achieving around half of the annual targets, during the first half of this year, the Sai Gon Dau Tu (Sai Gon Investment) online reported.
They have achieved the results although the margins between deposits and lending interest rates were narrowing, and the business conditions remained tough.
TPBank announced that it had earned VND263 billion, or US$12.52 million, representing 60 per cent of the annual target. Its deposits and outstanding loans grew 4.5 per cent and 8.8 per cent, respectively, while bad debts declined 0.3 per cent at 1.66 per cent in the period.
Eximbank Chairman Le Hung Dung said the bank has already reached over half of the year’s profit target of VND1.8 trillion, or $85.71 million, adding that this figure is achievable if the economy doesn’t see fluctuations between now and the end of the year.
He noted that the current context requires greater efforts by the banks as lending activities remain a challenge with the risks of increasing bad debts.
For the first five months, BIDV reported a profit of approximately VND2.5 trillion, or $119.05 million, and Sacombank posted about VND1.3 trillion, or $61.90 million. Both figures were close to half of the banks’ quotas for 2014.
Industry insiders said it won’t be easy for banks to complete their annual goals because the current margins between deposits and lending rates are only 1 to 2 per cent. Meanwhile, in credit activities, the margins should be 3 per cent or more so that banks can establish provisional funds and obtain profits.
Due to this, it will be hard for banks to avoid adjusting the profit targets in the fourth quarter, like they had done last year, a senior banker said.
Tran Du Lich, a member of the National Advisory Council for Financial and Monetary Policies, said it is unlikely that the general credit situation will see significant improvement in the coming months, and this will challenge banks expecting high profits this year.
New cotton plant to boost garments sector
The Phu Hung cotton plant will officially begin operations in August in the central province of Thua Thien-Hue’s Phu Bai Industrial Park. With a total investment of VND258 billion (US$12.2 million), the plant invested by the Viet Nam National Textile and Garment Group (Vinatex) is expected to export products to Turkey and Taiwan.
The plant has an annual capacity of 21,600 spools and once completed, will generate jobs for 200 workers and produce 100 per cent cotton yarn with an average output of 240 tonnes per month.
A development strategy for the garment industry was approved by the Prime Minister and the Ministry of Industry and Trade for the Central Region.
FLC to issue shares to pay dividends, increase charter capital
The FLC Group will issue shares to pay dividend and increase the charter capital.
It got the nod from the State Securities Commission on Wednesday to offer shares to the public to pay dividends at ratio of 4 per cent and to existing stakeholders to increase its charter capital.
After the issue of shares, FLC’s charter capital would be increased to approximately VND3.15 trillion or $148 million from VND1.54 trillion or $72.3 million.
In the first half of this year, the group met 50 per cent of the full year’s profit target which was set at VND350 billion or $16.5 million.
SSC approves merger of two securities companies
The State Securities Commission on Thursday approved the merger of Viet Nam International Securities (VISE) and the Dai Tay Duong Securities Joint Stock Company (OSC).
The merger is part of the efforts to restructure securities companies and will be implemented with the swap ratio of 4:1 for VISE and 13.5:1 for OSC, and must ensure that trading is implemented without any interruption.
If the deal goes through, it would be the second merger of securities companies in Viet Nam, after the deal between MB Securities and VIT Securities at the end of last year.
VISE reported an aggregated loss of nearly VND75 billion or US$3.5 million in the first six months of this year. As of the end of March, 55 of the 90 existing securities firms reported aggregated losses, statistics of the finance ministry showed.
Restructuring securities companies was a core issue during the restructuring of the stock market which aimed at developing a more stable and healthy market.
Vietnam aims for sustainable electronics industry
An international seminar was held in Hanoi on July 14 to discuss environmentally friendly smart steps to sustainability for the electronics industry in Vietnam.
In a keynote address, Deputy Minister of Natural Resources and Environment Bui Cach Tuyen stressed that in recent years, Vietnam’s information technology (IT) industry has seen tremendous growth.
The total revenue in the industry exploded by 86.3% to US$25.5 billion in 2012, he said, adding that the trend is continuing.
The IT industry’s gross exports hit a record high of US$20 billion in 2012, up 82% from a year earlier, and accounted for 17.5% of the country’s total exports for the year.
However, Minister Tuyen cautioned that environmental pollution caused by production activities in the industry is posing great challenges to the environment and the nation’s health.
Other participants at the seminar in turn shared their experiences in electronic waste collection, management and treatment, as well as global environment protection.
There was general consensus that electronic waste treatment in Vietnam is a national concern and that installing state-of-the-art recycling technologies needs to be stepped up.
Da Nang Airport Service to list on Ha Noi Exchange
The Da Nang Airport Service Joint Stock Company (Masco) will list more than 3 million of its shares under the code MAS at the Ha Noi Stock Exchange this year.
This was reported by the Investment Newspaper. In the first quarter of this year, Masco earned VND58 billion, or US$2.76 million, in revenue and after-tax profit of VND7.8 billion, or $371,000, which was thrice the value of the after-tax profit of the same period last year.
The service supply, including the supply of flight meals at the Da Nang, Cam Ranh and Phu Bai airports, taxi services at Da Nang Airport, and training car and motorbike drivers in Da Nang City and Thua Thien Hue Province, accounted for more than 90 per cent of the company’s annual revenue.
Hoa Phat wants to issue shares to employees
Steel maker Hoa Phat Group (HPG) will seek the opinion of its stakeholders about issuing shares under the employee stock ownership plan (ESOP) as bonuses for its internal staff.
HPG plans to issue more than 9.6 million ESOP shares. With HPG currently being traded at around VND55,000 or $2.6 per share, the ESOP shares, which are expected to be issued in the next two years, are estimated to be worth VND530 billion or $24.9 million.
HPG expects to earn VND23 trillion or $1.08 billion in turnover and VND2.2 trillion or $130 million this year, up 25 per cent and 80 per cent respectively over last year.
BIDV offers $93m in separate bonds to investors
The Bank for Investment and Development of Viet Nam is offering VND2 trillion or $93.8 million in separate bonds to a group of investors.
Sources quoted by Dau Tu Chung Khoan (Securities Investment) newspaper said the bond issue, which would reportedly end by the end of this month, aims to increase capital. Last year, the bank issued VND3 trillion or $140.8 million worth of bonds, which helped it raise its capital adequacy ratio.
As of the end of last year, BIDV’s capital adequacy ratio was 10.23 per cent.
Major cities aim to boost co-operation
Trade and investment promotion campaigns and economic forums have yet to play a significant role in the development of five major cities in the country.
Director of Da Nang City’s trade and industry department, Phan Van Kha, said during a meeting in Da Nang yesterday that production, retail and service values of five cities – Ha Noi, Hai Phong, HCM City, Can Tho and Da Nang – grew to over VND623 trillion (US$30 billion) during the first six months of this year, a 12.5 per cent increase in comparison with the same period last year.
The figure also contributed 43.3 per cent to the country’s production, retail and service values in the last six months.
“However, even though the production value of five cities contributes 45 per cent annually, the link in trade and investment has not been satisfactory in the past few years,” Kha said.
“Economic co-operation has just seen information exchanges, discussions of investment opportunity, trade fair and potential, but there has been no effective action,” he said.
“The joint action of co-hosting conferences and forums on investments and trade were rarely seen, while the policy on investment promotions and hi-tech developments or supportive industries has yet to see an agreement signed among the five cities.”
Vice Chairman of the Da Nang city’s People ‘s Committee, Phung Tan Viet, said the meeting aims to find out solutions to tackle difficulties during the economic downturn.
“There are various challenges for us ahead when Viet Nam joins the ASEAN community in 2015 and prepares to participate in the Trans-Pacific Partnership Agreement (TPP).
“It calls for further co-operation and close links among the five cites in creating power to sustain the economic growth and contribution to the country,” Viet said.
“It is also a chance for us to set out a long-term strategy of industry development in joining world trade.”
Despite an economic crisis hitting the world in late 2008, the five cities have seen medium growth in industrial production and exports in the first half of this year.
Hai Phong was the biggest with an industrial production growth of 11.8 per cent, ahead of Da Nang with 10.5 per cent, while Can Tho and HCM City earned 6.37 and 5.6 per cent, respectively.
Over 1,976 projects have been put into operation in 6,400 industrial parks and complexes in the five cities over the first half of this year, an equal value of VND4 trillion ($190 million).
Export turnover in the first half of this year has earned $22 billion, an 8.2 per cent growth in the same period last year, accounting for 31.3 per cent of the country’s total export turnover.
However, only Ha Noi, HCM City and Da Nang have developed hi-tech parks, Information Technology (IT) parks and centralised information centres as well as electronic transaction centres.
Two cities, Da Nang and Can Tho agreed last year to promote co-operation in tourism, and a direct flight between the two cities will start from July 22.
Direct air routes are available between five cities.
BUSINESS IN BRIEF 18/7