BUSINESS IN BRIEF 28/3

Tycoons fall hard due to securities investment

The stock market is no longer a chicken that lays golden eggs for securities tycoons in Viet Nam, with many incurring heavy losses and others being forced out of the market or even prosecuted for securities fraud.

On Wednesday, shareholders of Au Viet Securities Company (AVS) agreed to dissolve the business after six years of operations, selling assets and canceling all of its listing on the Ha Noi Stock Exchange.

The company’s equity by the end of last year totalled VND216 billion (US$10.3 million) while their income still reached VND161 billion ($7.7 million), enough to pay shareholders VND4,500 on each share of holdings, a sum nearly equivalent to the share price on the stock market.

According to the chairman of the company Doan Duc Vinh, he and other executives struggled long and hard with the decision to close the business.

He said they used their experiences in the securities and financial markets to analyse the macro economic situation and review the investment strategy of the company, and this had shown that cutting their losses was the only viable option.

AVS are far from the only company to be suffering on the stock market. Many others have also struggled and been forced to reduce their activities (either by removing brokerage services or terminating their membership on the two stock exchanges). These include CLS, Sao Viet, Lien Viet, An Phat and Dong Duong.

However, while some can make a soft landing, others must accept heavy losses which bring them to the verge of bankruptcy or even prosecution.

Sacombank Securities (SBS), a financial arm of Sacombank, fell from a position of dominance on the market two years ago with a capital size of VND1 trillion ($47.6 million) and is now heavily indebted, with a negative equity capital of VND250 billion ($11.9 million).

Although the company showed determination to restructure, it is still facing the risk of a mandatory delisting. To make the situation even worse, all of the firm’s leaders withdrew from their positions at the same time on Thursday, creating chaos at the top.

SBS shares are now trading for less than VND1,000 ($0.05) on the bourse.

SME Securities (SME) is in a similar situation. Some years ago it was a big company with large capital and advanced technology. However it was forced to delist shares in October 2012 due to prolonged losses. Its leader was later prosecuted for fraud involving asset appropriation.

According to market insiders, there are too many securities companies operating in the relatively small market of Viet Nam (the number stands at over 100) and it is inevitable that only the strongest ones can survive, especially during the market’s restructuring process.

FPT enjoy 5 per cent leap in profits this year

Software giant FPT posted a revenue of VND3.5 trillion –a 5 per cent increase – in the first two months of this year.

The corporation’s pre-tax profit reached VND326 billion, achieving 100 per cent of its two-month plan. Its after-tax profit stood at VND270 billion.

Shareholders are due to meet in Ha Noi early next month.

FPT Telecom is recognised as one of the top 10 service providers in telecoms and television in Viet Nam.-

Giant electronics plant under construction

Construction has started on an electronics accessories manufacturing plant in northern Thai Nguyen City, 70km northwest of Ha Noi.

The plant, Glonics Vietnam backed by covers more than 6ha, with a total investment capital of US$10 million.

It will specialise in producing electronic parts for cell phones and LCD TV, with a production capacity of 500 million products a year.

When finished this November, the facility will create 5,000-10,000 jobs.

Long-awaited security software makes debut

CMC InfoSec of Viet Nam has announced this week its CMC Mobile Security for Windows Phone and iOS after a year of launching security software for the Androi system.

So far, CMC has launched three security software systems for Android, iOS and Windows Phone, aimed to enhance the security capacity of most smartphones.

HCM City launches mobile innovation contest

Registrations are being taken for a contest to choose the best developers of mobile applications from Southeast Asia.

Organised by the HCM City Department of Information and Communication in co-ordination with mLab East Asia and the World Bank’s Information for Development Programme, the Mobile Innovation Challenge 2013 aims to contribute to the growth of the mobile-applications sector. It will also provide opportunities for the mobile-applications community to realise innovative ideas and meet investors.

The last day for submission is April 14. Awards will be presented on May 24.-

Thousands of viruses infect millions of computers

About 3,000 new viruses appeared in Viet Nam last month, infecting over 4.4 million computers.

This month, 216 websites of government offices and enterprises have been hacked, mostly by foreigners, according to the Bach Khoa Anti-Virus Centre’s report.

It warns that a new virus which can take over a Facebook account is spreading quickly.

MobiFone steps up spam vigilance initiative

Mobiphone has pledged to increase its supervision of spam, saying that foreign switchboards will no longer be able to send spam to its subscribers.

The volume of spam to Mobiphone’s subscribers increased sharply after the Lunar New Year holiday.

Billion-dollar apartments now available

Becamex Tokyu Company Ltd, a Viet Nam-Japan joint venture, began selling apartments in its first real estate project in the country on Wednesday.

On offer are more than 400 apartments at Sora Garden 1, one of three high-rise condominium projects being built under an overall project called Sora Gardens.

The first stage of selling will last until April 18 in the form of capital contribution contracts for a limited number of customers. From April 19, it will be open to all.

Sora Garden 1 is being built on an area of more than 9,000 square metres with two 24-storey buildings. It is a complex that combines residential, commercial and retail centres.

The apartments on sale are 67sq.m to 105sq.m in size. The average cost of the apartments is around US$1,000 per sq.m.

Construction of the project began in November 2012 and is expected to be handover in 2014.-

LPG depot opens in Thi Vai

The PetroVietnam Gas Corporation (PV Gas) opened a liquefied petroleum gas (LPG) depot in southern Ba Ria-Vung Tau Province on Wednesday.

Covering 5.3 hectares in Cai Mep Industrial Park, the Thi Vai depot is capable of storing 60,000 tonnes (equivalent to 15,000 cubic metres) of LPG, making it the largest of its kind in Viet Nam.

The US$114 million depot was built by the PetroVietnam Construction Corporation (PVX) and South Korea’s Daewoo Engineering Company (DEC).

It is expected to help PVGas stabilise its supply of LPG for the local market, ensuring the nation’s energy security.

Viet Nam now houses 26 LPD depots with a total capacity of 61,000 cubic metres. They are mainly in the northern port city of Hai Phong, the central port city of Da Nang, the southern province of Dong Nai, HCM City, the Mekong Delta city of Can Tho and the oil-rich province of Ba Ria-Vung Tau.

HSBC set to hit new heights with VN Airlines

HSBC Vietnam, one of the leading international banks in the country, has forged an alliance with Vietnam Airlines, to create a special programme aimed at HSBC’s jet-setting customers.

From this month, HSBC cardholders will be able to enjoy regular discounts on flights to multiple destinations across Asia and enjoy many other travel incentives by simply using their HSBC credit card to buy tickets online.

This is the first time a foreign-owned bank has ever partnered with Viet Nam’s national airline.

“This is such an exciting joint venture,” said Godfrey Swain, head of RBWM at HSBC Vietnam. “Our customers will be able to convert card usage points into Golden Lotus Plus miles for Vietnam Airlines and other airlines’ flights in Skyteam, helping them to realise travel plans for the year ahead.”

Doosan Vina to produce super boiler

The RoK-invested Doosan Heavy Industries Vietnam Co Ltd (Doosan Vina) recently signed a US$50 million contract to provide a super critical boiler for a coal-fueled thermoelectric power plant in India.

Doosan Visa General Director Ryu Hang-ha said that the boiler has a capacity of 800MW and is able to provide 2,550 tonnes of steam per hour. It will be installed at the Lara thermoelectric power plant in India’s central state of Chhattisgarh.

Ryu Hang-ha expected his company to contribute to the localisation of mechanical products in Viet Nam, including equipment for thermo-power plants and oil refineries as well as lifting devices.Doosan Vina has so far provided two 600 MW boilers to the Raipur power plant in Chhattisgarh state. At present, the company is producing two 800 MW boilers for India’s Kudgi thermo power plant.-

BMW organises Driving Experience Day

BMW’s fourth Driving Experience Day, consisting of Zig Zag driving, Break and Avoidance and Performance Parking, will be held in HCM City on Thursday and in Ha Noi in early April.

For the first time ever, a night session offers a rare opportunity for testing attendees’ driving skills in practical situations such as Emergency Stop and Target Braking. Drivers will be under the supervision of experienced international instructors.

This unique BMW Driving Experience was first established in Germany in 1977. BMW was the first vehicle manufacturer in the world to offer professional driving training for customers. Over the last 35 years, this programme has has been held in many key markets, including Viet Nam.

Long Hau IP gains Japanese tenants

Japanese enterprises plan to rent 23,000sq.m. in the Long An-Long Hau Industrial Park in southern Long An Province (LHG).

Nitta Gelatin Vietnam, which got its investment licence earlier this year, is expected to start producing gelatin and collagen agents in October.

The other two, already in operation, will expand their production facilities. Chubu Rika Vietnam makes components for cars, motorcycles, digital cameras and other machinery, while Vina Astec makes couplings and stainless steel components for construction and other industries.

LHG now has 114 investment projects, including 38 from Japan. Twenty-eight of these are already in operation and the remaining 10 are under construction.

Securities firms to apply separate accounting

The State Securities Commission is building a separate accounting standard to be applied to securities companies.

According to many accounting experts, current accounting and auditing regulations contain many gaps and do not fully reflect the nature of financial assets, especially the provisions relating to unlisted stocks.

According to Pham Hong Son, director of the commission’s Securities Business Management Department, the application of new regulations for securities firms will help enhance transparency of their financial health.

“Under the plan, securities companies will have to apply the new accounting system in their financial statements of 2013,” he said.

DHG to pay 10 per cent dividend in April

Hau Giang Pharmaceutical Co (DHG) will pay the second 2012 phase dividend at 10 per cent in cash next month, the HCM City Stock Exchange announced on its website.

Investors who will receive VND1,000 on each share of their holding will have to register to participate in the payout before April 4. The payout is scheduled for April 18.-

Mekong Capital cashes in on investment arm

The Mekong Enterprises Fund II, which is managed by Mekong Capital, completed its sale of a 6.7 per cent stake in Mobile World Joint Stock Company, earning a huge income.

The transaction value was not disclosed but according to Mekong Capital, income from share sales plus the dividends received during six years of investment are 11 times higher than its initial investment value in 2007.

Mobile World JSC operates one of the biggest mobile phone retailing chains in Viet Nam. After the transaction, the fund’s holdings in the company declined from 32.5 per cent to 25.8 per cent. The fund’s annual cumulative growth rate stood at 45 per cent from 2008 to 2012.

VF1 to change from close to open-ended fund

Shareholders of the Viet Nam Securities Investment Fund (VF1) have approved a change from a close-ended to an open-ended fund at their annual investors’ meeting on Thursday.

VietFund Management will be responsible for preparing the detailed plan, which will be submitted for investors’ feedback at an extraordinary meeting in June 2013.

As of December 31 last year, the net asset value (NAV) of the fund reached VND1.52 trillion (US$72.4 million), equivalent to VND15,201 ($0.72) per fund certificate, up 17.1 per cent from the previous year.

Last year, the fund recorded a net profit of VND222 billion ($10.6 million). However, because it still incurs accumulated losses, the fund did not pay dividend on last year’s profit.

VF1′s investment focuses on large-cap stocks with high liquidity. By March 20, NAV of the fund was around VND17,000 ($0.81) a fund certificate.

HOSE to host Invest ASEAN-Viet Nam 2013

The HCM City Stock Exchange will host the conference Invest ASEAN – Viet Nam 2013 on March 30.

The conference will hear a presentation about co-operation on the ASEAN capital market delivered by a working group from ASEAN’s stock exchanges. They will introduce the transaction model, clearing system and technology infrastructure used in the bloc.

The conference will also draw the participation of many securities companies in ASEAN who will present an overview of the regional market.

Kepco-Marubeni win contract

A Japanese and South Korean consortium has successfully bid to invest in and operate a powerful coal-fired thermal power station in Nghi Son, the central province of Thanh Hoa.

The 1,200MW plant will be built under the BOT (Build-Operate–Transfer) model with a total investment expected to reach VND48 trillion (US$2.3 billion).

The consortium consisting of the Korean Electric Power Corporation (Kepco) and the Japanese Marubeni Corporation will set up a joint-venture company to build the power plant by 2018, after which they will operate it for 25 years before handing it over to Viet Nam.

The cost of the $2.3 billion project will be supplied by South Korea’s Eximbank and the Japan Bank for International Co-operation through project financing.

The pair of investors plan to hand over the engineering, procurement and construction of the plant to the Doosan company, which will gradually complete the construction and equip it with a turbine, power generator and boiler, manufactured and installed by Doosan Korea and Doosan Vina.

Speaking at the ceremony announcing the project’s investors, Deputy Minister of Industry and Trade Le Duong Quang called on the consortium to quickly finalise the contract and proposal to ensure that work begins on schedule.

He also expressed his confidence that Doosan will well accomplish the project following their effective work on a similar plant in Mong Duong.

Indonesia taxes steel dumping

Indonesia has placed anti-dumping duties on steel imported from China, Japan, the Republic of Korea, Taiwan and Viet Nam to protect local producers.

The additional import duties, ranging from 5.9 to 55.6 per cent, will be valid for three years, according to Astera Primanto Bhakti, head of the state income policy center at the Finance Ministry’s Fiscal Policy Agency,

After Indonesia’s biggest steel maker, Krakatau Steel, claimed to have suffered considerable losses due to the introduction of cheaper imported steel into the local market, the Indonesia Anti-Dumping Committee (KADI) initiated an investigation into the situation.

While KADI recommended that the duties go as high as 74 per cent, according to the committee chairman, the highest duty imposed was 55.6 per cent, to be paid by Japanese companies Nippon Steel Corporation and Sumitomo Metal Industries Ltd. Taiwan-based SYNN Industrial will have the lowest fee – 5.9 per cent.

In October, the Finance Ministry imposed anti-dumping duties on hot-rolled iron and steel plates from China (10.47 per cent), Singapore (12.33 per cent) and Ukraine (12.5 per cent) following a request from KADI.

Ironically, while Vietnamese steel exporters face anti-dumping lawsuits in Thailand and Indonesia, those countries’ products – even those of poor quality – can easily penetrate Viet Nam.

Last year Viet Nam imported millions of tonnes of cheap boron steel from China. The total import turnover was worth several million US dollars, but the product faced no import duty at all.

The imported products were then sold as rolled construction steel, while authentic construction steel is subject to a 10 per cent import tariff.

Meanwhile, Indonesia, Thailand and Malaysia have set up technical barriers to prevent imported products from dominating the market.

To deal with this situation, the Viet Nam Steel Association (VSA) is making efforts in coordination with other ASEAN countries to establish a legal standard for this commodity and call for stricter control over imported steel.

Steel production this month may reach 350,000 tonnes, while the average level should be 400,000 tonnes, according to a VSA estimate.

Ha Noi to foster production growth

Ha Noi is setting up a new group that will include representatives from local business associations in a bid to remove obstacles to business development and foster growth in production.

The new standing board would hold its first meeting next month, said chairman of the Ha Noi People’s Committee Nguyen The Thao at a conference held in the capital yesterday.

Addressing the conference on measures to boost business growth, Thao said that the municipal authorities would invite representatives from business associations of Ha Noi to take part in the board.

In addition, the city would organise dialogues with businesses to find better ways to spur production as the domestic and global economy was forecast to continuously face difficulties.

Thao said to help local businesses who were facing ever increasing inventories, the city would set aside VND50 billion for trade promotion this year to help them find customers.

The city has provided aid of VND328 billion for firms to supply necessary commodities in the city’s pricing stabilisation programmes, he said.

The city will also support prioritised businesses in exports, high-tech, rural and agricultural development and support industries as well as aid small and medium-sized businesses with a VND100 billion preferential interest rate package, he announced.

Under the scheme, Sacombank, Military Bank and VIB Bank are setting aside VND5 trillion for businesses at low interest rates.

To support businesses in expanding production, the city is also implementing a post-investment preferential interest rate package worth VND100 billion in addition to setting another VND80 billion aside for a credit guarantee fund for small and medium-sized businesses.

To reduce high inventories in the cement and steel industries, the city would invest more in building more transport infrastructure in rural areas as well as diversifying the investment methods of BOT (built-operation-transfer) and PPP (public-private partnership) development models.

As for the real estate industry, city authorities will consider investor proposals of converting commercial apartments into social housing and resettlement housing for civil servants.

According to statistics from the Ministry of Construction, the capital currently has roughly 5,789 vacant apartments.

To reduce supply of commercial apartments, authorities will not consider all investment, construction and trading proposals for commercial housing projects in the city from now to December 31, 2014.

The city would also work on providing low-interest rate loans for low-income people, civil servants and officials in the armed forces to buy or rent social housing or commercial housing (of less than 70 square metres with prices of less than VND15 million per square metre).

To further support real estate businesses, Ha Noi authorities will direct commercial banks to continue funding uncompleted property projects.

Owners of housing projects for sale, rent or infrastructure trading that are in financial difficulties may also benefit from an extension for land-use fee payments.

$1.84 billion from Japan for projects

The Japanese Government has committed more than US$1.84 billion in official development assistance (ODA) loans to 11 ongoing and newly-launched projects in Viet Nam.

An Exchange of Note for the loans was signed yesterday between Viet Nam’s Ministry of Planning and Investment and Japanese Embassy in Ha Noi.

Afterwards, the loan agreements were signed between Viet Nam’s Ministry of Finance of and the Japan International Co-operation Agency (JICA).

Japan has continued to give preferential ODA loans to Viet Nam, despite the nation developing from a low-income to middle-income country, said Tsuno Motonori, JICA Chief Representative in Viet Nam.

In 2015, tariff barriers are scheduled to be removed within the ASEAN region, meaning Viet Nam will have to improve its business and investment environment, while enhancing international competitiveness through structural reform of its economy.

In terms of administration, the nation will need to improve its financial system, as well as infrastructure, to continue its economic growth and mid to long-term macroeconomic stability, said Motonori.

He disclosed that Viet Nam has ranked second (after India) among Asian countries borrowing ODA from Japan. Around $1.27 billion has been disbursed for socio-economic development projects in Viet Nam so far.

The credit will be used to implement five key transport projects, including the Noi Bai International Airport to Nhat Tan bridge road construction (Phase II); Nhat Tan bridge construction (Phase III); the second transport sector loan for national road network improvement; safety improvement of the Ha Noi – HCM City railway line bridges (Phase III); and the Ha Noi City urban railway construction (Line 1) Phase I – Ngoc Hoi Complex (Phase I).

It will also fund important infrastructure and power projects including the Cai Mep – Thi Vai International Port Construction (Phase II); O Mon Thermal Power Plant Unit 2 Construction (Phase II); North Nghe An irrigation system upgrading; and the Ha Noi City Yen Xa sewage system (Phase I).

Furthermore, two projects on economic management and climate change response will be funded through the agreement.

Hydropower shortage looms amid drought

Power shortages may occur over the next three months due to low water levels in hydro-electric reservoirs, according to Electricity of Viet Nam (EVN).

An EVN report showed the volume of water in northern reservoirs mostly reached 50 per cent of their capacity. Central and Central Highland reservoirs are much lower than last year.

Those in Dai Ninh, Dong Nai 3 and Ham Thuan in the south are at 73 – 98 per cent capacity.

This situation has resulted from prolonged drought, especially in the Central Highlands.

Head of the Hydro-meteorological Forecast Station for the Central Highlands region Pham Vu Tuan said the drought was expected to last until May.

“Although there were unseasonable rains early this year, they had little effect,” he said.

Not only long-lasting drought but also other factors including fluctuating prices of coal and petroleum contributed to low electricity output.

According to EVN, the electricity consumption this month reached 355 million kWH per day.

The EVN representative said this was just the beginning of the dry season. When the hot weather covers the northern region earlier than normal, with temperatures forecast to hit up to 36 degrees Celsius, the electricity consumption will be much higher.

Deputy Prime Minister Hoang Trung Hai has asked relevant agencies to mobilise more sources to ensure electricity supplies.

EVN is expected to utilize more sources run by petroleum and import electricity from other countries.

The Ministry of Industry and Trade has asked electricity plants to track the weather developments to effectively regulate reservoirs.

Relevant authorities are also taking measures to save electricity. Last Saturday, Viet Nam took part in Earth Hour and saved 401,000kwH worth VND576 million (US$27,400).

Nguyen Van Suu, deputy chairman of HA Noi’s People’s Committee, said that people should remember to turn off unused electrical devices and save water sources.

Semi- conductor association launched

The HCM City Semi-conductor Industry Association was established with the aim of boosting the semi-conductor industry and using it to foster economic development.

Prof Nguyen Luong Mo, an Overseas Vietnamese IC (integrated circuit) expert based in Japan, was elected honarary chairman of the association for the period from 2013 to 2018.

Nguyen Anh Tuan, deputy director of the city Department of Information and Communications has been named chairman.

Ngo Duc Hoang, head of the HCM City National University’s Integrated Circuit Design Research and Education Centre is the association’s general secretary.

Duong Minh Tam, deputy head of the Sai Gon Hi-tech Park, Dang Ngoc Hung, deputy general director of the Sai Gon Industry Corporation, and Huynh Thanh Dat, deputy director of the HCM City National University, are the deputy chairmen.

A conference that marked the association’s formation was also attended by representatives of the HCM City People’s Committee, the Japanese consulate in HCM City, the Kyushu Economic Research Centre in Japan, and the associations of semi-conductors of Japan and Singapore.

The association signed MoUs with the two foreign counterparts on the occasion.

Banks await State’s new bad debt manager

In January the Government asked the State Bank of Viet Nam to draw up plans for establishing a national asset management company (AMC) and detailed regulations for its operations so that it can be set up in the first quarter.

If the schedule is honoured an AMC will be set up within the next week, meeting credit institutions and businesses’expectations about settling bad debts, which is one of the economy’s biggest problems currently.

The AMC will be set up under the so-called N+1 model, in which the central bank acts as the manager while ministries participate.

Basically, it is a 100 per cent State-owned enterprise established by the Government for non-profit activities.

The company, which will have an initial capital of VND100 trillion (US$4.78 billion), will buy bad debts from credit institutions and sell them to buyers who may be Vietnamese or foreign.

The AMC could make a decisive contribution to settling bad debts, which was estimated at 6 per cent (or VND180 trillion) of total outstanding loans as of January 28.

Anticipating the AMC’s creation, many banks are actively reviewing and classifying their bad debts to sell them to the AMC as soon as it is established.

But some are sceptical about the AMC’s effectiveness.

The primary problem is that the domestic debt market is not developed. It means that bad debts, after being transferred to the AMC and packaged, will likely be sold at very low prices or find no takers.

If that indeed turns out to be the case, it would mean massive losses for banks. When the banks sell their bad debts to the AMC, they will receive its bonds in exchange. But if a debt cannot be sold, it will be sent back to the bank when the bonds fall due.

The establishment of the AMC has also raised eyebrows since a large proportion of bad debts has already been settled even without its help.

On July 2012 the SBV announced that bank’s bad debts amounted to VND235 trillion (US$11.2 billion), or 8.6 per cent of total outstanding loans.

But by late January this year the ratio had fallen to 6 per cent, meaning bad debts worth VND55 trillion had been resolved within six months. This means that there is no AMC but bad debts are handled very quickly.

Besides, many point out, banks’ bad debts are a permanent problem, and not only in Viet Nam. The question is only what ratio is acceptable.

According to international norms, the bad debt ratio of a country should be less than 3 per cent of total outstanding credit.

This means that with their current bad debts ratio at 6 per cent, Vietnamese banks will only have to bring it down by another 3 percentage points.

Obviously, resolving bad debts is a very important task but effective measures are also needed to prevent their recurrence.

Franchises fail

Franchising first came to Viet Nam in the 1990′s with the appearance of fast food chains like KFC, Pizza Hut, Lotteria, and Jollibee.

The franchising model is popular and well-suited to a developing economy like Viet Nam. Together with the passage of laws regulating franchising and rising incomes, this has made the business ubiquitous in the country in recent years.

Growth prospects are getting brighter as local investors become more familiar with franchising and are increasingly exposed to successful franchises.

This is especially true in the urban centres of Ha Noi and HCM City, where incomes are significantly higher than the national average.

The franchise sector in the country is poised for continued growth not only in traditional sectors like fast foods but also in other such sectors like retail, education, entertainment, health care, and lifestyle-oriented businesses.

There are more than 70 international franchises in Viet Nam, with food and beverage brands being by far the most prevalent.

Several Vietnamese businesses have also joined the franchising trend — such as Trung Nguyen Coffee, Pho 24, Kinh Do Bakery, AQ Silk, Coffee24Seven.

But while foreign franchisers have proved to be very successful in the Vietnamese market, with the number of restaurant chains of brands like Jollibee, KFC, Lotteria, and Bread Talk increasing quickly, domestic franchisers have been having a bleak time.

The reasons are along expected lines. Firstly, they are unable to sustain service quality when their chains expand especially to above 10 outlets.

Before becoming franchises, some of the Vietnamese brands created a good impression on customers with their quality products and services and uniqueness.

But subsequently they failed to focus on improving constantly to make their products even better, and as a result lag behind foreign brands.

Some of the franchisers also failed to exercise close control over franchisees, allowing quality to deteriorate and their prestige to erode.

But on the flip side, many domestic franchisers do not provide adequate support to their franchisees. The truth of the matter is that it takes just a few bad stores in a chain to drag down the entire chain.

Unable to make head way in expanding their chains, many domestic franchising businesses have been forced to sell out to foreign investors at low prices. The buyers then pump in money and expertise to get a firm foothold in the market.

To ensure success in the franchising business, companies should have long-term strategies and stringent norms for sustaining service quality even after expansion.

A fleet of cars to fleece

Last year, the arrival of a 2008 Bugatti Veyron, one of the world’s fastest production-model cars, in Viet Nam made media headlines.

It cost US$800,000 and luxury cars are subject to import duties that can be more than 100 percent.

But cars are exempt from import and value-added taxes if they are imported as used assets by overseas Vietnamese citizens who move back permanently to Viet Nam.

Though the car’s arrival made headlines, not much more information about it was reported, except that its owner was an overseas Vietnamese who had returned to settle down in the country.

So the owner of the super fast car ended up paying no import duties, just special consumption tax of around $480,000.

The Bugatti Veyron is not the only luxury car to be imported by overseas Vietnamese in recent years and receive tax exemption.

According to the customs, 58 autos were imported in 2003 by returning overseas Vietnamese. The figure rose to 138 in 2011 and 1,100 last year.

Ninety per cent of the cars have been Lexuses, Porsches, BMWs and Audis with the occasional Bugatti Veyron and Bentley Continental Flying Spur thrown in.

In Viet Nam is there are 70 Rolls-Royces, but only two were brought in by importers; the rest were imported “unofficially,” by others, including returnees, according to a source from thanhniennews online.

The trend has prompted official agencies to start reviewing all vehicle imports by returning Viet Kieu on the suspicion that the imports are a ruse to import luxury cars without paying taxes and reselling for a profit.

In fact, many such imports of cars are suspicious due to many reasons. Firstly, the imported cars were mostly bought just a month or two before being sent to Viet Nam, and their values were much higher than their owners’ incomes.

Also, the owners of these luxury cars returned to live in Viet Nam shortly after getting permanent residence status in foreign countries. Many had registered their residences in several so that they can import more cars rather than only one that a person is allowed.

Local governments do not scrutinise permanent residence registrations very closely, and there is no proper definition of what used vehicles are.

Exporters told to meet global standards

Domestic companies must improve their product quality to meet increasing demand of importing countries, speakers said at a forum held last Friday in HCM City and organised by the Investment and Trade Promotion Centre of HCM City.

Nguyen Trung Dung, Vietnamese Trade Counsellor to Japan, noted that Japan, a key partner of Viet Nam, had strict requirements for quality, hygiene and safety.

“Seafood, fruit and vegetables, cashew, coffee, pepper, cassava, rubber and wooden products all have high export potential to this market,” he said.

Bilateral trade between the two countries has increased strongly in the past 10 years, but it was still low compared to the expectation of the two sides.

Viet Nam’s exports to Japan accounted for only 1.7 per cent of Japan’s total imports.

Under the Viet Nam-Japan Economic Partnership Agreement, some tariff lines will be reduced to zero in the near future.

He said enterprises should take advantage of this increase exports.

With its high requirements in quality, hygiene and food safety, local firms should increase co-operation with Japanese companies to take advantage of their technology strength and improve product quality, Dung said.

Viet Nam expects to earn $15 billion from exports to Japan this year, an increase of 20 per cent over last year.

Advantages and challenges in exporting to Myanmar, Australia, the US and EU were discussed at the meeting.

Nguyen Bao, Vietnamese Trade Counsellor to Australia, said Australia had a high demand for imports of labour-intensive products such as garments and textiles, footwear, wooden products and seafood.

“Bilateral trade between the two countries reached $5 billion last year, with Viet Nam enjoying a surplus.”

Bao said that to boost export to Australia, local firms must ensure product quality and meet food hygiene and safety requirements required by the market.

Speaking at the meeting, Herb Cochran, executive director of Amcham, said local companies had many opportunities to export to the US.

However, they must comply with strict requirements on product safety and quality as well as labour and working conditions set by the US.

Vu Cuong, Viet Nam Trade Counsellor to Myanmar, said many investment and export opportunities were available for Vietnamese companies in the market.

However, because foreign companies were rushing to invest in the country, local firms have to act quickly and must develop long-term strategies to exploit this potential market.

In addition, local companies must focus more on building brands for their products and companies.

Trade counsellors have asked local companies to reform export-promotion activities and conduct research on customer tastes.

Also speaking at the event, Tran Tuan Anh, Deputy Minister of Industry and Trade, said despite many difficulties last year, Viet Nam’s exports achieved a growth rate of 18.2 per cent, reaching US$114.57 billion.

Exports are expected to face many challenges this year because of the global economic downturn and the increasing number of trade barriers set by import countries.

In the domestic market, interest rates on bank loans have fallen but remain high, causing difficulties for local firms.

“However, in 2013, opportunities for increasing exports are available since the US, the EU and Japan have launched stimulus packages to increase consumption, which will indirectly create export opportunities for Vietnamese companies,” he said.

The ministry will keep a close watch on the global economic situation, and will enhance co-operation with other agencies to provide information and export opportunities to enterprises, he said.

In addition, it will offer help to enterprises so they can take part in export promotion programmes that can assist them in expanding to other markets.

Fungus blights lobster production in Cam Ranh

Since January, a mysterious disease has killed nearly 90 per cent of the lobsters in Cam Binh Commune, Cam Ranh City in the central province of Khanh Hoa.

Huynh Van Long, a farmer in the commune’s Binh Ba Dong Village, has raised nearly 3,000 lobsters since the end of 2011.

“I strictly obeyed the process for feeding and taking care of the lobsters described to me by the provincial centre for encouraging agricultural expansion, but they were still hit by the disease,” he said.

Like Long, most of the other 950 households in the commune that raise lobsters suffered significant losses of about VND600-700 million (US$28,570-33,300).

Lobsters typically sickened when they weighed 200-300g, farmers said. When the sick lobsters died, they lost their legs – where a number of tiny organisms could be seen with the naked eye – and released a foul smell.

The lobsters that remain in the cage also got weaker, ignoring their food and swimming with less vigorousness than usual.

Currently there are only a few hundred lobsters left in Lan’s cages. Dozens die every day.

Testing by the Research Institute for Agriculture revealed that the sick lobsters suffered from Fusarium SP fungus, Vibrio bacteria and Ciliphora worms, said Tran Van Hoa, chairman of the Cam Binh People’s Committee.

The Khanh Hoa Aquaculture Department advised local farmers to quarantine sick lobsters to prevent the disease from spreading. Farmers were also advised to treat the animals with antibiotics and bathe them in formalin and hydrogen peroxide, but the treatments have not seen much success.

“The treatment has been applied for nearly two weeks. But the lobsters’ condition has not improved much,” said Hoa.

So far the local authorities have no plan to provide financial assistance to farmers.

Businesses learn to combat corruption

Business community and public officials have learnt how corruption works and how to combat the scourge in a more efficient manner at a workshop in northern Hai Phong city.

The workshop was co-organised by the Vietnam Chamber of Commerce and Industry (VCCI) and the World Bank (WB) on March 23.

A report presented by the World Bank warned that corruption in Vietnam still remains serious.

It found out that 45 percent of the public officials who were surveyed for the report witnessed corrupt acts, and 44 percent of enterprises and 28 percent of citizens had to make unofficial payments. As much as 75 percent of the surveyed people said corruption was a serious matter.

 

In its report to the workshop, the Government Inspectorate of Vietnam pointed out that light punishments given to corrupt people is one of the reasons behind the prevalence of corruption.

To make the fight against corruption more efficient, the inspectorate suggested stipulating a law on access to information, building a competent public service trusted by those who report on corruption, establishing a corruption monitoring system, and raising people’s awareness on the issue.

World Bank experts presented their own solutions, including increasing transparency and publicity, continuing administrative reform, and eliminating interest contradiction in handling corrupt cases.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

BUSINESS IN BRIEF 28/3