BUSINESS IN BRIEF 25/6

Vietnam markets goods in France

Leaders from the Vietnamese and French business communities convened at a meeting in Paris on June 23, mulling over marketing and sales strategies to penetrate the EU marketplace.

Head of the Trade Promotion Agency (TPA) under the Vietnam Ministry of Industry and Trade (MoIT) Bui Huy Son briefed attendees on Vietnam’s key export products and the recent trends in global market demand.

Son stated that Vietnamese businesses have a high demand for modernized machinery and equipment to bring manufacturing efficiencies in line with international norms, increasing competitiveness.

The government is also striving to streamline the legal framework, making it less complicated for foreign investors to do business in Vietnam, he said, adding that the activity is part of the MoIT’s ongoing programmes to prop up the nation’s exports.

France is one of leading importers of Vietnamese products in the EU. Last year, two-way trade turnover between the two countries hit a record high of EUR3.5 billion, of which Vietnam’s export surplus surpassed EUR2 billion.

Most Vietnamese exports fetching high value to France comprise garments, seafood and electronic machinery and components.

Son spoke glowingly about France as an attractive market for Vietnamese goods because of its stable economy and open and transparent trade and investment policies.

There is plenty of opportunity for both business communities after the Vietnam-EU Free Trade Agreement is due to be signed later this year, Son said.

He went on to say that France is an important gateway for Vietnamese products to pierce barriers into the wider EU market.

A representative from the French province of Val-de-Marne briefed attendees on the attractiveness of the local market, introducing its advantages and the financial potential of businesses.

Jacques Fouvel, a representative from the French giant food retailer Casino Group headquartered in Val-de-Marne, expressed his delight at the success of the Big C chain in Vietnam.

He said around 95% of the retail products sold at Big C are made in Vietnam. Currently the chain of stores in Vietnam provides high quality employment for 8,000 local workers and roughly 30 French citizens.

He said Casino plans to construct additional retail outlets in Vietnam and to retail high quality Made-in-Vietnam products globally though its Casino supply chain.

First half industrial production up 5.8%

Vietnam’s industrial production is seeing improvement, with estimated growth of 5.8% seen in the first half of this year, higher than last year’s 5.3% rise.

June’s industrial production index (IPI) was estimated to increase 0.5% against the previous month, and this figure was also up by 6.5% against June last year.

The processing and manufacturing industry posted growth of 7.8% against the same period last year, while its consumption rose 9%.

The industry’s higher consumption increases versus that of production is a positive signal for the industry’s recovery and development, in particular, and for the whole economy, in general.

Officials pointed out that a number of industries showed high growth rates in the first half of the year, including rolled steel production (up 25.4%), automobiles (up 24.2%), mobile phones (up 22.7%) and leather footwear (up 22.2).

Thanks to the rise in consumption, the number of recruited workers in industrial production firms as of June 1 saw an increase of 0.8% against the previous month; the rise was 2.7% compared with the same period last year.

The Vietnam Chamber of Commerce and Industry (VCCI) in a recent report also noted that H1 2014 saw a sharp improvement in business conditions compared with H2 last year, despite the impact of various challenges.

The chamber forecast that the total consumption of domestic firms will continually rise in the second half of this year.

In a move to boost production, the prime minister last week required VCCI and other relevant ministries and agencies to resolve the requests of businesses and address their difficulties in a timely manner before reporting the issues each month to the prime minister and each quarter to the government.

The relevant bodies have been instructed to focus on improving the business and investment environment, supporting firms in accessing credit and markets, and restructuring firms.

Leather exports to top US$12 billion

Leather footwear and handbag exports are expected to top US$12 billion this year, achieving the target, the Vietnam Leather and Footwear Association (Lefaso) said.

They were worth US$10.4 billion last year to rank third in the country’s list of key exports, Diep Thanh Kiet, Lefaso’s deputy chairman, said, adding, “The exports were very good in the first half of the year, with footwear exports going up by more than 14% and handbags by over 18%.”

But Kiet and others at a June 23 seminar in HCM City agreed that small-scale production, poor development of supporting industries, and lack of skilled workers are making the leather industry’s growth unsustainable.

The industry imported nearly US$4.2 billion worth of leather and other raw materials last year, which accounted for 40% of its total export revenues, Kiet said.

Up to 70% of the leather needed for footwear and handbag production was imported, mainly from the Republic of Korea, Taiwan, Italy, and Thailand.

Only 40% of fabric and other raw materials can be sourced locally, and the country spent more than US$3 billion to import fabric and other raw materials last year, mostly from China.

But there is a growing trend of shifting production of fabric and others from China to Vietnam to take benefit of the free trade agreements the latter is negotiating.

In the next few years local production can supply more than 50% and the rest can be procured from Taiwan, Thailand and Indonesia, he said.

With lower production costs compared with China, high demand both in the local and foreign markets, and advantages from the upcoming Trans-Pacific Partnership, the industry continues to have great potential for development, Pham Thi Thu Hang, general secretary of the VCCI, said.

To capitalise on development opportunities, companies should focus on improving the skills of their workers, diversify their export markets, and pay more attention to the domestic market, she said.

They also need to restructure their organisation based on competitive advantages, strengthen their design capabilities, build brands, and improve technologies to reduce energy consumption and protect the environment, she said.

Most importantly, firms should concentrate on developing their supply chain, especially for feedstock, delegates said.

Kiet said the Government should be more pro-active in setting up industrial parks for leather tanning, a key material for the industry.

Phan Chi Dung, director of the Ministry of Industry and Trade’s Light Industry Department, said under the development plan for the footwear industry, the Government wants to raise local content in production to 60-65% by 2015 and 75-80% by 2020.

The targets are hard to realise, he admitted, but the signing of the FTA with the EU and the TPP is expected to provide a boost to the rate.

There are 812 firms are in the country’s leather and footwear industry, he said.

Ho Chi Minh City sees economic recovery

Ho Chi Minh City’s economy has continued growing stably in the first six months, recording positive changes in business production and State budget collection, according to the municipal People’s Committee.

A report released at the Committee’s June 23 meeting, shows the city’s total GDP was estimated at VND378.9 trillion (US$17.8 million), rising 8.2% over the same period last year.

The city collected VND121.91 trillion (US$5.73 million) for the State budget, equivalent to 53.87% of its target, up 14.9% against the same period last year. Of the total, VND67.8 trillion came from domestic operations and the rest remainder was from export.

According to Director of the municipal Department of Planning and Investment Thai Van Re, increase was seen in almost all income indicators as compared to those of the same period last year. Particularly, income from the economic sector rose 18.9%.

As of June 15, the city granted business licences to 11,189 enterprises with total registered capital of VND59.2 trillion (US$2.78 million), bringing the total investment to VND115.8 trillion, up 6% year on year, he noted.

It also attracted a total of US$1.08 billion in foreign direct investment (FDI), equivalent to 202% of the same period last year’s figure. Of the total, US$967 million poured in 169 new projects, while of US$110 million was added to 53 operational projects.

At the meeting, Chairman of the municipal People’s Committee Le Hoang Quan asked local agencies to apply comprehensive measures to fulfil all set targets for the year, focusing on stepping up disbursement.

He also urged local departments to review the prolonged property projects, while seeking new export markets for the city’s products.

Van Phong Thermal Power Plant 1 taking shape

Japan’s Sumitomo group anticipates obtaining its investment license, signaling the green light to proceed with the construction of a thermal power plant in central Khanh Hoa province, in July 2014.

Once approved, construction of the Van Phong Thermal Power Plant 1 is expected to be completed by the end of next year.

Sumitomo is eager to get the project underway and is intensifying its negotiations with the Ministry of Industry and Trade (MoIT) to sign a build-operate-transfer (BOT) contract and complete investment registration procedures, a company spokesperson said.

The 2,640MW Van Phong Thermal Power Plant 1 will span more than 350 ha in Ninh Phuoc commune at an estimated price tag of US$3.8 billion.

To create conditions more conducive to the attraction of investors, Khanh Hoa province pumped VND150 billion into site preparation work for the project and an additional VND135 billion for resettlement projects.

In recent years, foreign investors have found BOT power projects in Vietnam quite attractive. The Republic of Korea’s Samsung has become involved in Vung Ang 3 thermal power plant. EGATI of Thailand invested in a thermal power plant in central Quang Tri province and Toyo-Ink of Malaysia funded Song Hau 2 thermal power plant.

In recent years, foreign investors have found BOT power projects in Vietnam quite attractive. The Republic of Korea’s Samsung has got involved in Vung Ang 3 thermal power plant. EGATI of Thailand invested in a thermal power plant in Quang Tri province. Toyo-Ink of Malaysia funded Song Hau 2 thermal power plant.

Most recently, KEPCO group of the RoK has also showed keen interest in investing in Song Hau 3 power plant with a designed capacity of 2,000 MW.

South Africa welcomes Vietnamese businesses

Vietnamese pavilions, exhibiting a wide array of quality Made-in-Vietnam goods, are garnering the attention of many South African businesses at an international trade fair in Johannesburg city.

Fifteen Vietnamese businesses are showcasing their products, mostly farm produce, construction materials, electrical equipment, pharmaceuticals, and handicrafts, at SAITEX 2014, which opened on June 21, attracting 45 countries and territories from around the globe.

Notably, the Vietnamese Trade Office in South Africa is also present at the event, with a pavilion marketing Vietnamese rice, with plenty of free samples to go around.

More than 200 South African importers have shown keen interest in the Vietnamese goods and are eagerly inquiring about quality, price and import-export procedures in Vietnam. Many of them signed contracts with Vietnamese representatives.

Hanoi Department for Industry and Trade Deputy Director Phan Tien Binh, who is also heading up the Vietnamese delegation to SAITEX 2014, said the event provides an excellent opportunity for Vietnamese businesses to develop sales leads and the show is an effective marketing tool for them.

Vietnamese Ambassador to South Africa Le Huy Hoang in turn expressed his pleasure with the warm and positive reception the Vietnamese pavilions have received from South African businesses.

He emphasised there is a huge potential for expanding trade and cooperation between the two countries in a host of areas and pledged to organize more trade promotion events in the larger cities of South Africa.

Japanese firms sanguine on Hanoi’s business climate

Hanoi is a dynamic city with a good business environment that instils confidence in Japanese investors, Thailand’s Reedtradex, ASEAN’s leading exhibition organiser recently reported.

Reedtradex reports that many Japanese businesses have already confirmed their presence at Vietnam Manufacturing Expo 2014, to be held at the Cultural Friendship Palace in Hanoi on August 27-29,

They have huge expectations for business opportunities in Vietnam and will be attending the event prepared to seize on investment opportunities, Reedtradex reports.

Seiji Masuda, Sanko Fastem company Director General, spoke highly of the healthy business climate in Vietnam as well as in Hanoi.

“We are the leading manufacturer of anchor bolts in Japan. Many factories are sprouting up throughout Vietnam and our products are needed in all phases of constructing their facilities and maintaining their production lines. This is a huge opportunity for us to expand our business,” Masuda said.

Masato Hayashi, a sales manager for Hitachi Cable, said his firm is bullish on the huge opportunities in the social infrastructure industries in Hanoi. The capital city is soliciting funding from Japan for a number of environmentally friendly social infrastructure projects for the 2013-2015 period. This offers opportunities for Japanese firms across the board in a wide variety of fields including electronics, information technology, bio-technology, infrastructure, high quality human resource training, large-scale projects, as well as financing, banking, and healthcare services, he noted.

Municipal officials have committed to building an open and transparent investment environment to meet the requirements of the international integration process and have gained the trust of Japanese investors.

Monthly CPI rises in major cities

The month-on-month consumer price indices (CPI) in the country’s two biggest cities in June increased after being down for several months, according to statistics departments of Ha Noi and HCM City.

The Ha Noi Statistics Department reported that the capital’s CPI in June edged up by 0.08 per cent over May and 1.16 per cent against the same period last year.

It said the development of the CPI in June this year was similar to the rate in June last year, and also increased after reduction in previous consecutive months, reported the Thoi bao Kinh te Viet Nam (Vietnam Economic Times) newspaper.

Nine out of the 11 baskets of goods, which contribute to the calculation of the capital’s CPI data, saw an increase in prices this month. Among these, the prices of building materials, electricity, tap-water and fuel reported the highest increase of 0.84 per cent against last month.

After an increase last month, the price of gas continued to surge since June 1 by VND50,000-60,000 per 12-kg gas tank due to higher import prices.

This June also saw a surge in the prices of cultural, sports and entertainment products, as it did in June last year with a rate of 0.54 per cent because prices of domestic and foreign tours increased. The prices of tickets for entertainment products also increased on the occasion of International Children’s Day on June 1.

The hot weather also resulted in an increase in prices of categories of beverages and tobacco products and of garments, hat and footwear products up to 0.45 per cent and 0.41 per cent, respectively, against last month.

Meanwhile, prices of postal and telecom products dropped 0.17 per cent and categories of rice and food products reduced by 0.27 per cent.

Gold prices in Ha Noi dropped 0.82 per cent while the US dollar surged 0.36 per cent as compared with last month.

HCM City Statistics Department also reported an increase of 0.58 per cent in the city’s CPI for June against last month. The index had a year-on-year surge of 1.1 per cent.

The increase was expected due to a decision permitting an increase in the cost of health care services in the city since June 1.

Therefore, the categories of medicine and health care services had the highest price increase of 8.69 per cent among the 11 baskets of goods, which contribute to the calculation of the city’s CPI data, against last month. Rice and food items came second with a rise of 0.53 per cent, as the price of food items was up. But the price of rice reduced slightly due to stability in supply as the Cuu Long (Mekong) Delta provinces finished harvesting rice of the winter-spring crop.

The categories of housing, building material, electricity, tap-water and fuel had the third highest increase in prices at 0.44 per cent in June compared with May.

HCM City had three categories of goods that reported reduction in prices this month. Cultural, sport and entertainment products were down 0.13 per cent due to the low demand for tourism by the people, while postal and telecom products were down 0.35 per cent and beverage products down 0.05 per cent.

In June, gold and US dollar prices in the city rose 2.7 per cent and 0.86 per cent, respectively, against last month.

Quang Ninh seeks investment

The Ministry of Planning and Investment (MPI) has submitted to the Prime Minister a draft decision on specific incentives given to the northern province of Quang Ninh for mobilising investment capital.

According to news portal Bizlive, under the draft, the MPI proposes to set up a pilot State-owned finance and investment company in the province to better mobilise investment capital to develop the province’s infrastructure as well as other important socio-economic sectors.

The company’s model will be the same as the HCM City Finance and Investment Company in HCM City (HFIC).

HFIC, which is a wholly State-owned company with a charter capital of VND5 trillion (US$234.74 million), is targeted to mobilise capital from domestic and foreign organisations and individuals to invest directly or indirectly into the city’s prioritised sectors.

After three years of operation, HFIC gained a profit of VND1.27 trillion ($59.62 million) and its return on equity (ROE) averages 15.81 per cent.

According to the draft, Quang Ninh will also get funds for its key projects. It will be also allowed to advance investment capital of the next year for its projects based on the projects’ implementation process.

According to the MPI, Quang Ninh will implement 312 projects with State funds to boost the province’s socio-economic development during the 2013-15 period.

Quang Ninh has an important location in the pivotal economic zone in the North of Viet Nam. It is seen as an important part of the economic development triangle in the North (Ha Noi – Hai Phong – Quang Ninh).

The Government has so far decided to develop the province to form big centres serving as international exchange regions, so as to support provinces in the southern part of the Song Hong (Red River) Delta.

It will be also targeted to form big industrial centres, to develop high-tech industries such as electronics, informatics and new material production.

Consumption goods production, food processing and seaport economic development industries will also be developed. The government will take the lead in international cooperation and foreign investment attraction.

In recent years, Quang Ninh Province has achieved some remarkable economic progresses. The annual average growth rate of GDP between 1996 and 2000 was 7.54 per cent, in 2001 and 2002 it was 12 per cent and 12.65 per cent last year.

Credit growth on track to hit target

With credit growth showing a marked rise in the second quarter, the State Bank of Viet Nam’s target of 12-14 per cent for the year seems likely to be realised.

From only 1.8 per cent after the first two months, the Commercial Joint Stock Bank for Foreign Trade of Viet Nam’s credit growth rose to 3.16.per cent by the end of May.

The Military Joint Stock Commercial Bank has reported lending growth of around 6 per cent and deposit growth of 10 per cent.

The SBV’s HCM City office said as of May 31 outstanding medium- and long-term credit in the city had increased by 3.16 per cent this year.

Dang Ngoc Khanh, general director of SeAbank, said his bank expected credit growth to top 6 per cent in the first half of the year, or 50 per cent of the year’s target.

Analysts at the Viet Capital Securities Joint Stock Company said the central bank’s credit growth target of around 13 per cent for the year appears feasible.

Khanh said his bank recently signed many large credit deals with companies and was waiting to disburse the sums, he said. The bank has also lent hundreds of billions of dong in retail loans, he said.

He attributed the rapid credit growth to rising demand due to positive changes in the economy.

Business activities are recovering while inventories are decreasing, the housing market is reviving, and exports are rising, he explained.

Economists agreed, saying that the recovery in credit growth was also due to the fact that the measures adopted by the central bank to help companies battle their difficulties have begun to take effect.

Two of the most productive measures were to lower lending interest rates and bring banks and companies closer together, they said.

The central bank had urged banks to cut interest rates on businesses’ old debts to below 13 per cent and the current rate cap for priority sectors from 9 per cent to 8 per cent.

As a result, by May 25 interest rates were cut by 0.5-1.5 per cent from the levels recorded late last year.

Dr Tran Hoang Ngan, a senior banking expert, told Thoi Bao Kinh Doanh that “the recent cuts in interest rates are reasonable. But it would be better for credit growth if the rate is further cut by 0.5-1 per cent.”

He also stressed the need for measures to improve aggregate demand in the economy, and help companies access banks loans to ensure credit growth.

Analysts said since 96 per cent of the companies in the country are small or medium-sized, and most of them face difficulties with administrative procedures and assets to be pledged to borrow from banks, the Government needs to assist them.

If businesses manage to overcome their difficulties they would become stronger and contribute to the recovery of the economy and improving aggregate demand, they added.

Forbes magazine to host business meet

The monthly business magazine Forbes Viet Nam has announced its first annual business forum with the theme “Viet Nam – Fresh Opportunities” to be held in HCM City, on July 3.

The event’s keynote speakers will include Deputy Prime Minister of Viet Nam Vu Duc Dam, Forbes’ publisher Rich Karlgaard, and Malaysian billionaire Vincent Tan, founder of Berjaya corporation.

“Viet Nam’s economy has emerged from a difficult period and has been showing signs of recovery. There remain many challenges, but also many new opportunities,” he said.

“Forbes Viet Nam’s Annual Business Forum, the biggest business event this year, will gather top Vietnamese and international business leaders and entrepreneurs to engage in discussions on important economic and business issues, as well as investment opportunities as Viet Nam enters a new chapter,” a press release from Forbes Viet Nam said.

“This will be an opportunity for business leaders to discuss and explore investment opportunities, and share business development experiences,” Henry Nguyen, chairman of Interactive Media, which organises commercial activities for Forbes Viet Nam, said in a press release.

There will be more than 20 leading speakers from the government, organisations such as World Bank, Fulbright Economist School, and major corporations such as REE, IDG Ventures Viet Nam, Minh Long I, Phu My Hung, ICP, Intel, FPT, VNG, Jobstreet, Thai Binh Shoes. The more than 400 delegates will include CEOs of international and local companies.

Three major topics will be discussed: Fostering Economic Growth, Rising To the Top, and Capital for Expansion and Investing in Innovation.

Human resources key to the future

Viet Nam should focus on training human resources, especially in technical skills, to achieve its goal of industrialising by 2020, a Thai entrepreneur has said.

Speaking to the media on the sidelines of the Manufacturing Expo — ASEAN’s largest of its kind — held in Bangkok from June 19 to 22, Viroj Sirithanasart, president of the Thai Alliance for Supporting Industries Association, said Viet Nam can learn from the success of countries like Japan and Thailand in developing their industrial sector.

It could invite foreign experts to help train human resources or send leading engineers to other countries for on-the-job training so that they could come back and train other technical personnel, he said, pointing out that this was how Thailand did it.

He said Thai and Vietnamese companies and organisations could work together to improve the skills of Vietnamese workers.

Suttisak Wilanan, project director of Thai Reed Tradex Company, the event organiser, said Vietnamese companies should invest more in modern technologies to improve their competitiveness and develop the country’s industrial sector.

Exhibition and trade shows should be seen as opportunities for Vietnamese producers to update their technologies and managerial capacity to sharpen their competitive edge, he said.

Boonlert Chodchoy, managing director of Thai company C.C.Autopart Co., Ltd, said the emergence of Viet Nam’s industrial sector offered investment opportunities for foreign investors, especially small and medium-sized ones.

Besides Japanese and Korean investors, more and more Thai enterprises were also looking for opportunities to invest in Viet Nam, he said.

The abundant labour force and policies to boost the industrial sector were also among factors attracting Thai companies, he said.

His company would take part in Metalex Viet Nam, an exhibition of machine tools and metalworking technologies and assembly, to be held in HCM City in October to look for local business partners, he said.

Masashito Kishi, general director of Sansei Industry Viet Nam Co., Ltd based in the Amata Industrial Park in Dong Nai Province, said besides abundant human resources and low labour costs, skilled, friendly, and hardworking labour were among the factors that persuaded his company to invest in Viet Nam.

Despite difficulties in sourcing raw materials, Viet Nam overall remains an attractive destination for Japanese investors, he said.

Dredging clears waterway route

Deputy Prime Minister Hoang Trung Hai on Saturday attended the inauguration of the second phase of the Soai Rap channel dredging project in Hiep Phuoc Industrial Park, Nha Be district, here.

Started in 2013, the project cost nearly US$131.6 million with over $103 million financed by Belgium.

The 54-km channel is equipped with warning systems, marking buoys and other devices, allowing 50,000 deadweight tonnage vessels to traverse ports in HCM City

In the future, it will be dredged to the depth of up to 12 metres in service of 70,000 deadweight tonnage vessels.

Speaking at the event, Hai said the project formed part of the national maritime economic development strategy by 2020.

The navigation route in HCM City played the most important role in economic development as well as national defence, he added.

According to information from the Sai Gon Port Container Terminal, following the inauguration, at least five shipping companies have announced they would open direct routes from HCM City to major markets instead of relying on a transit port in Southeast Asia or Northeast Asia.

The same day, the Deputy Prime Minister visited the Da Phuoc Solid Waste Treatment Complex in HCM City and had a working session with its operator, Viet Nam Waste Solutions.

He valued the cooperation between the municipal authorities and the operator in promoting the modern waste treatment method, which helps reduce environmental pollution.

The first phase of the $150 million project was completed with a 30-hectare landfill that can handle 10,000 tonnes of waste per day. The complex is currently treating 3,000 tonnes of waste per day discharged by HCM City and 20 tonnes by Long An province.

Vietnam Railway customer service to improve, vows new director

The new general director of the Vietnam Railways Corporation (VRC) Vu Ta Tung vowed to improve customer service, which has been widely complained about in the past.

“We are aware of the importance of putting customer first when it comes to the development of the country’s railway sector,” Tung said.

He noted that the group has seen a long-term decrease in the market share, from 60% before 1975 to just 10% today.

He added that trains still rank among the most popular means of transport, and it is time to increase standards in the sector, and in order to achieve this goal, there will need to be changes in pricing and staff behaviour. To this end, he called for support to attract more investment into the sector.

“It’s obvious that private investment will flow into profitable sectors. So, in order to attract more investment, we need to make the sector more attractive,” he said.

He said that, besides making a profit, VRC is also trying to maintain their social responsibilities, including the transport of goods to remote areas.

Currently only three railway routes, namely Saigon-Nha Trang, Hanoi-Vinh and Hanoi-Lao Cai are operating efficiently, while the five remaining routes are incurring major losses, requiring government compensation.

“Our goal will be to put the customer first in all our business strategies. We also need our leaders and staff members to try to really understand the customers’ needs in order to better serve them,” he added.

Strong inflow of overseas remittances evidence global recovery

Overseas Vietnamese (OV) remittances back to the homeland are expected to remain strong throughout 2014,thanks to the solid economic recovery underway in many countries like the US, Canada and Australia.

Official statistics reflect that remittances in the five months leading up to June of this year are continuing on an upward tick consistent with the trend experienced in 2013.

Nguyen Mien Tuan, Deputy Chairman of Sacombank’s executive board, said international remittances transmitted to Vietnam via his bank hit nearly US$1 billion in the first five months;a10%jump compared to the same period last year.

Sacombank is projecting it will process a record cumulative total remittances exceeding US$1.9 billion by the end of 2014.

Remittances channeled through East Asia bank last year rose 10% to US$1.53 billion, and the bank expects the remittance inflows will increase 20-25% this year.

Deputy Director Nguyen Hoang Minh of the HCM City branch of the State Bank of Vietnam (SBV) in turn said that for the first five months of 2014, remittances to the branch were estimated at US$1.6 billion, up 3% from a year earlier.

The figure is likely to reach US$2 billion in the first half of this year and US$5 billion by year’s end, he said, outpacing the US$4.85 billion collected in 2013.

Minh said the remittances are principally sourced from the US and Europe and the lion’s share of them are being pumped into real estate, production, and business operations in the country.

He forecast a monthly growth of 20-25% in several months leading to the lunar New Year holiday.

‘Tra fish decree’ remains controversial

Controversies over Decree 36/2014/ND-CP on farming, processing and exporting tra fish, usually called “Tra fish Decree,” are still prevalent although the legal document, issued at the end of April 2014, will come into effect on June 20.

The Ministry of Agriculture and Rural Development, the Vietnam Pangasius Association (VN Pangasius), the Directorate of Fisheries and relevant agencies had a meeting with the Vietnam Association of Seafood Exporters and Producers (VASEP) to look into petition by VASEP regarding the decree. However, parties found no common voice at the meeting that took place on Monday in the Mekong Delta city of Can Tho.

Nguyen Huu Dung, chairman of VASEP, said that the decree in general was agreeable, but certain provisions therein need to be revised or even abolished before the decree took effect.

Dung claimed that the regulation on the ice content in tra fish fillets should be removed.

Almost all importers of Vietnam’s tra fish do not impose any requirements on the ice rate, as they care more about food safety instead. “Therefore, in my opinions, the decree should not be such rigid to the ice rate,” Dung said.

On the contrary, Tran Bich Nga, deputy chief of the National Agro – Forestry – Fisheries Quality Assurance Department (NAFIQAD) that helped prepare the decree, insisted on the need of the regulation on the ice content.

The regulation is needed for maintaining the prestige of local exporters, she said.

Besides, participants in the meeting also argued against another regulation that requires tra fish exporters to seek approval of VN Pangasius before making shipments.

Nguyen Thi Anh, chairwoman of Ngoc Xuan Seafood Corp in Tien Giang Province, said that the aforesaid regulation is unnecessary as it is the customs officer who is in charge of overseeing export procedures. If VN Pangasius also engages in the process, export activities will be impacted, she said.

Registering tra fish export contracts with VN Pangasius does not help, but on the contrary, it could unveil business secrets of enterprises as VN Pangasius also has its own tra fish export firm, Dung of VASEP asserted.

High-tech firms unable to meet localization targets

Representatives of some enterprises at the Saigon Hi-Tech Park (SHTP) in HCMC said that they would fail to realize the ratio of local content of 25% next year as required by the SHTP authority due to undeveloped supporting industries.

Speaking at a conference organized by SHTP and the HCMC Investment and Trade Promotion Center last week, Le Bich Loan, deputy head of SHTP, said that as enterprises had reached an average localization ratio of around 20%, the park management was looking to 25% next year and 40% in 2020.

But localization has proved hard for a number of enterprises at the SHTP. Tran Tien Dat, managing director of Datalogic Vietnam Co. Ltd., admitted it was unlikely for his firm to reach the goal.

The bar code scanner producer has posted a five-fold rise in revenue in the past five years, from nearly US$3 million in 2009 to over US$160 million now. The firm has been seeking domestic suppliers to raise local content to cut prices but it has not found suitable partners.

Datalogic has realized a localization ratio of less than 4% and has mainly bought such products as packaging and simple plastic components in Vietnam. As local supporting industries remain weak, domestic suppliers cannot meet quality and price requirements, and some suppliers even reject small orders, Dat said.

A representative of Intel Products Vietnam Co. Ltd. said that its new business scopes required lower costs and faster production. Therefore, the company has been always looking for domestic suppliers to meet the requirements.

However, the company has been able to find only around 20 domestic suppliers for simple parts, so its localization ratio is now just 10%.

Intel Products Vietnam is expanding its chip assembly and test plant and has higher demand for domestically-made components. Domestic suppliers will have the opportunity to supply parts for Intel factories globally when partnering with Intel Products Vietnam, the representative said.

According to the management of SHTP, around 40% of the enterprises at the park have reported localization ratios of up to 10%.

Osato Kazuhiko, director of the Japan External Trade Organization (JETRO) in HCMC, said a survey showed that domestic firms were able to meet over 30% of the material and parts needs of Japanese firms in this market last year, which was equivalent to half of that in China or Thailand. Vietnam’s supporting industries have not improved much over the past 10 years.

Corporate representatives at the conference said that Vietnam’s supporting industries just provided assembling and outsourcing services due to the lack of investment in research and manpower development. In addition, the Government has yet to provide sufficient incentives for the industry.

Last year, the city’s high-tech product exports hit US$2.93 billion, accounting for 14.6% of total export value (excluding crude oil). Enterprises at SHTP contributed over US$2.7 billion of the total.

Thaco commissions huge container ship

Vietnamese automobile firm Thaco has commissioned a big container ship plying HCMC-Chu Lai route.

On the launch day last Friday, Truong Hai Star 3 carrying its first shipment of 320 containers and 1,000 tons of coiled steel docked at Chu Lai-Truong Hai port in the central coast province of Quang Nam.

The total construction cost of the ship and containers is VND78 billion. This is the third such vessel built by Thaco to service the domestic route between Chu Lai of Quang Nam and HCMC.

The 8,015 DWT vessel, which meets European standards and is registered with Germany, is 133 meters long and 19 meter wide. It can cruise at a maximum speed of 17 nautical miles per hour and transport a maximum of 657 TEUs, or 313 40-foot and 31 20-foot containers.

On the same day Thaco introduced its logistics service package which comprises road and sea transport, warehousing, distribution and bonded warehousing.

Chu Lai-Truong Hai port and logistics complex covers a total area of 173 hectares, including 56 hectares of industrial land, 71 hectares of warehouse, and 46 hectares of road. The total cost of phase one of this complex is VND387.5 billion and VND127 billion in the second phase. By the end of this year the firm will have spent VND515 billion on the complex.

Ha Tinh: Ground broken for sand-based seed shrimp farm

The Thong Thuan aquatic company started construction of a sand-based shrimp farming facility in the central province of Ha Tinh on June 16, as part of its plan to supply a disease-free seed stock to the north central region.

The 3.3 million USD facility will sprawl over 7.1 hectares that accommodate 29 farms of various sizes.

The company expects that it will annually generate 3.5 billion seed shrimp for breeding.

Boasting a coastline of 137km, Ha Tinh has excellent potential for developing aquaculture.

It has so far allocated over 7,200 hectares for the sector, especially the farming of high-yield shrimp along sandy banks.

Binh Duong successful in attracting FDI for industrialisation

The arrival of FDI projects have contributed significantly to increasing the industrial proportion of Binh Duong’s economy to 62 percent at present, helping it basically meet industrialisation standards.

The southern province of Binh Duong is currently leading other localities across the country in foreign direct investment (FDI) attraction, which is described by experts as a success story of the policies it has rolled out in favour of foreign players.

Mai Hung Dung, director of the provincial Department of Planning and Investment, reported that 2,295 FDI enterprises with a total investment of nearly 20 billion USD are running in the locality, of which many have registered to add more capital.

In this year’s first half, Binh Duong lured nearly 1 billion USD in FDI with over 600 million USD added to 56 underway projects, he said.

Notably, the Japan-invested Saigon Stec company based in the Vietnam-Singapore Industrial Park 1 added additional 175 million USD to its camera circuit board production project, raising its total investment to 340 million USD. The move has enabled it to produce 224 million products per year, said Dung.

Le Thanh Cung, Chairman of the provincial People’s Committee, has reiterated that the province has regarded foreign and domestic investors alike an important resource spurring its socio-economic development.

Over the past years, the province has worked hard to remove obstacles for enterprises along with constantly improving its investment environment to ensure investors’ effective operations, he said.

The locality’s healthy, equal and positive environment has earned foreign investors’ trust, affirmed Cung.

In addition, a well-built comprehensive infrastructure system deserves keen interests from investors, he stated, noting the clearance of thousands of hectares of land to host new projects and expanded ones.

FDI projects are expected to do more for Binh Duong’s industrialization and modernization process and further raise local people’s living conditions.

Viet Nam to promote marine-resort products in Russia

A delegation led by officials from HCM City’s Department of Culture, Sports and Tourism will take part in the 20th International Trade Fair for Travel Tourism- OTDYKH Leisure 2014 in Moscow from September 16-19.

The departments of culture, sports and tourism, tourism promotion centres and travel companies from Ha Noi, Da Nang and HCM City and the provinces of Khanh Hoa, Ninh Thuan, Binh Thuan, Ba Ria-Vung Tau and Lam Dong will promote marine resort tourism products to the Russian market, which has more than 19 million outbound travelers per year.

Viet Nam’s 90-sq.m booth at the fair, titled Viet Nam Timeless Charm, will include images of famous tourist attractions, according to HCM City’s Department of Culture, Sports and Tourism.

The Vietnamese delegation will also meet with local partners from Russia and the CIS (Commonwealth of Independent States) during the event.

OTDYKH Leisure, the leading international autumn trade fair for leisure travel in Russia and CIS countries, is expected to attract 1,500 exhibitors from 100 countries and more than 62,000 visitors.

Firms turn to agriculture alternatives

While Viet Nam’s property market is sluggish, Thu Duc Housing Development Corp has decided to invest in agriculture business as a subsidiary to the major business line, company chairman Le Chi Hieu told the Doanh Nhan Sai Gon (Sai Gon Entrepreneur) newspaper.

This year, the company will sign several export contracts of forestry products, worth over US$10 million each. Thu Duc has also been pushing the export of woodchips, materials that serve the paper industry, and cassava for making alcohol to Japanese companies.

Hieu said that the turnover of agribusiness may be lower than that of property projects; however, agribusiness was likely to have lower risks .

Thu Duc Housing is not the only company with such an emerging trend with traditional business lines of trading, but investment and property companies are also struggling to survive.

An Duong Thao Dien Real Estate Trading Investment JSC made its capital contribution to Ascentro Trading Investment JSC, which specialises in trading farm and forestry products and live animals.

Hung Thuan Group Corp, which specialises in investing, developing and trading real estate, established an in-house Vina Yen Eco Investment JSC for specialising in swiftlet farming, fish farming and orchid planting in the southern province of Long An.

Vina Yen’s chairman Lam Truc Nho said that revenue from swiftlet farming was high and stable with a good provision of export to China, the United States and Japan.

In fact, Viet Nam spends $3 billion to import 2.5–3.5 million tonnes of corn every year for animal feed, even though the delta is suited to growing high-yield corn varieties. The government has hastened the development of domestic agribusiness through a wide array of privileged policies.

This was a good opportunity and lucrative new field that should not be missed, noted Bui Phap, chairman of Duc Long Gia Lai Corp.

Earlier, Tan Tao Group established a research and fragrant rice export company (ITA Rice) to cultivate rice paddies on 60.3 hectares in the Cuu Long (Mekong) Delta province of Long An. The company plans to expand its cultivation to 5,000 hectares in the coming years, according to Dau tu (Vietnam Investment Review).

At the shareholder meeting in April, Hoang Anh Gia Lai Group (HAGL), previously a major player in the real estate sector, announced that agribusiness will make up over 50 per cent of the corporate’s revenue this year. This sector accounted for 60 per cent of the total revenue last year.

HAGL’s president Doan Nguyen Duc said that one of the key factors to success was in applying high technology in every stage of agricultural production, from seeding and harvesting. Duc added that technology application cut costs of chopping cane to VND30,000 ($1.3) per tonne, instead of the average cost of VND200,000 ($9.3) in Viet Nam.

Nguyen Dinh Bich from the Trade Research Institute noted that investing money in agribusiness was a wise decision, as this sector was likely to grow as a result of the upcoming Trans-Pacific Partnership Agreement.

Bich pointed out that serious investors should not feel compelled to invest large amounts of capital into agriculture projects, and they can recover their investment capital and make a profit at a reasonably short period.

However, land fund is viewed as a hindrance to the development of an agriculture project and a substantial agribusiness economy.

Dang Kim Son, director-general of Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), was cited by Doanh Nhan Sai Gon that policies were needed to create favourable conditions for transferring, leasing and contributing land of individuals and State-run farms.

Moreover, taxation policy makers should cut or minimise relevant taxes and fees for agribusiness companies and deduct value-added taxes for imports of essential production tools.

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

BUSINESS IN BRIEF 25/6