BUSINESS IN BRIEF 13/7

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VietnamNet English - 39 month(s) ago 6 readings

No increase in petrol prices: ministries

The Ministry of Finance, Ministry of Industry and Trade have decided against increasing gasoline retail prices as well as the import tariff on some petrol products including diesel and kerosene.

The A92 gasoline price is currently VND21,300 per liter, that of kerosene is VND20,800 and the import tariff on engine oil and kerosene is five percent, as announced by the Ministry of Finance Friday.

After the Finance Ministry hiked the import tariff on diesel and kerosene on June 10, global crude oil prices have dropped but petrol product price have not, though mazut oil prices showed an increase.

Between June 6 and July 7, the average price of crude oil in the global market has decreased by 4.95 percent and gasoline prices have dropped by 0.96 percent.

The drop was 0.52 percent on engine oil and 0.84 percent on kerosene. Only the price of mazut oil has moved up by 0.91 percent.

Recently, global petrol prices have climbed up again, especially on July 7 when crude oil prices closed at US$99 a barrel. The prices of other petrol products also saw an increase.

Current gasoline prices in Vietnam are lower than in neighboring countries by about VND4,048-5,225 a liter. Diesel prices are also lower by VND2,750-5,287 a liter.

Foreign medicine prices increase again

Many foreign medicines have increased their prices quite drastically since July 7, causing patients like Mrs. Pham Thi Kham, from Ben Cat District of the southern province of Binh Duong to feel understandably depressed and comment, “It was just VND164, 000 a box (around US$8) a few days ago, now it is VND179, 000 (US$8.7), how unreasonable!”

According to an assistant from Tuan Pharmacy at Thuan Kieu Street in District 5 of Ho Chi Minh City, the price at the moment of French-made Daflon 500mg, a popular medicine to unclog veins, is VND179,000-180,000 a box (about US$8.7), 10 percent higher than 3 weeks ago. Gynofar 250ml, a gynecological cleansing fluid, is also 20percent higher than 2 weeks ago (from VND6, 000 to 7,500 or US$0.29 to US$0.37).

At the Ngan Ha 5 Pharmacy nearby, Telfasf HD 180mg for skin allergy increased to VND7, 500/pill (US$0.37) and Fastum Gel to VND54, 000/tube (about US$2.63). On the medicine street at Hai Ba Trung in District 1 prices were hiked as well.

Many wholesalers on To Hien Thanh Street in District 10 also complained about this drastic rise to distributors as it happened only one month after the price stability program.

Furthermore, almost all the notices of price increase were announced by telephone, a method to avoid government control. Most medicines with a price hike belong to specialized group for cancer cure, impotency, hepatitis and some categories of antibiotic and multi vitamins.

Of late, the Vietnam Pharmaceutical Companies Association has acknowledged a 5 -10 percent increase in medicine prices, mostly foreign ones.

The Ho Chi Minh City government has been implementing a cost control program citywide for two months but only on domestic medicines which rake in only a small profit.

Tu Phuong Pharmacy in District 7, one of the first pharmacies to implement the program, announced that most medicines on the program such as antibiotics, anti-inflammatory, cardiovascular and blood pressure medications are used widely.

It is worthwhile to know that these medicines, domestically made, are of GMP-WHO Standards and cheaper than foreign ones. For instance, Paracetamol 500mg of F.T.Pharma for flu is only VND216/pill compared with VND245/pill of Sanofi-Aventis Pharma; or Euxamus 200mg for cough of Euvipharm is VND420/pill while the one of Stada-VN J.V.Co. is VND500/pill.

Another example is the cardiovascular medicine Ladovax of Euvipharm at VND7, 900/pill (US$0.39) whereas Plavix, the same kind of medicine, of Sanofi-Aventis Pharma is VND20, 790/pill (US$1.1) or Clopistad of Stada-VN J.V.Co. at VND9, 504/pill (US$0.46).

Similarly, the antibiotic Ofmautin 625 of Domesco Medical Import Export Corp. is VND6, 195/pill (US$0.3) but the one of GlaxoSmithKline is VND11, 760/pill (US$0.57).

The director of a domestic pharmaceutical criticized that “It’s unfair to control only the prices of domestic medicine!”

Ms. Huynh Thi Lan, general director of Mekophar Chemical Pharmaceutical Co. said that “Despite facing the same difficulties, domestic pharmaceuticals cannot raise prices as easily as their foreign counterparts because of authorities’ control. Meanwhile, to avoid government attention, foreign companies don’t usually announce these rises publicly or often.”

According to Associate Prof., Dr. Pham Khanh Phong Lan, deputy director of the Ho Chi Minh City Department of Health, the department has asked medical inspectors to look into the problem and panelize offenders.

Granite industry grown but undeveloped

The central province of Binh Dinh is the country’s largest granite manufacturer, with rich deposits of the resource. However, the local marble and granite manufacturing industry remains undeveloped due to many issues.

Construction experts say local granite demand moves up strongly since builders favor natural building materials as they follow the global eco-friendly trend.

Despite the local increasing consumption and rich deposit of granite, the marble and granite manufacturing industry of Binh Dinh Province remains undeveloped.

Most local manufacturers still quarry granite manually, leaving them struggling to mine hi-quality granite in large amounts.

Therefore, the material supply meets up 60 percent of local manufacturing plants’ output, while the rests are from neighboring provinces including Phu Yen, Khanh Hoa, Gia Lai and Kon Tum.

However, the material shortage was getting worse as authorities of those provinces forbade local granite quarries from transporting the resource to other places.

Analysts say the stone industry requires well-trained workforce, but most employees working in Binh Dinh Province’s granite manufacturing industry remain inexperienced.

Domestic granite producers are under high pressures, which are piled up by the harsh competition from imported products from abroad.

Therefore, authorities and businesses in Binh Dinh Province should urgently set up measures to boost the local granite manufacturing industry.

“To boost the local granite supply, the province’s authorities have set up detailed plans on exploiting the resource for local quarries by 2015,” says Vo Mai Hung, deputy head of the department of industry management [under the Binh Dinh Province Department of Industry and Trade].

“There are 23 granite mines in Binh Dinh Province, with the total deposit of around 66 cubic meters. The amount is enough for local manufacturers until 2020.’

However, producers also have to set up long-term business plans, train their workforce and upgrade technologies and equipments to meet up the increasing consumption.

Le Anh Tuan, general director of granite manufacturer Hoan Cau says most businesses earlier hesitated to buy modern equipments to expose granite deposits as the permitted mining period of 4-5 years was too short.

The period is now extended to 15-20 years, encouraging local manufacturers with strong finance to beef up their exploitation, Tuan said.

Foreign back-packers stay for week in HCMC, survey

A research study conducted by Dr. Nguyen Duc Tri, head of the tourism faculty at the University of Economics in Ho Chi Minh City has revealed that a single foreign back-packer spends approx. VND12 million (US$600) during a stay in and around the vicinity of the back packers area of Pham Ngu Lao Street in Ho Chi Minh City.

Dr. Tri disclosed this at a scientific seminar on the Pham Ngu Lao tourism section. The seminar “Planning of Pham Ngu Lao tourism section of the district” was held by the People’s Committee of District 1 and the Department of Culture, Sports and Tourism on July 7.

Foreign travelers normally spent from a couple of days to a week in HCMC. Approx. 96.8 percent of tourists stayed in HCMC up to 22 days and spent an average of one week in the Pham Ngu Lao section. The tourism section receives on an average 1,900 visitors per day.

TV shopping firms smuggle goods; run false ads

After two TV shopping companies have recently been caught selling copycats and airing false ads, Tuoi Tre went on to inspect similar companies and discovered more violations including smuggling goods and selling fake products at exorbitant prices.

Though always described to have magical effects at dirt cheap prices, most products sold via TV shopping are in fact much more expensive than they should be.

An employee in the TV shopping industry attributed their astronomical prices to huge amounts spent on buying TV ad time.

This man added that the product’s actual worth is usually just 20 percent of the advertising fees.

Recently, TV shopping company H. has been selling its alleged Swiss gem-encrusted watches at VND2 million ($100) each on several TV channels.

But Tuoi Tre found out they are in fact Chinese glass-encrusted watches.

According to the product’s customs declaration, the watches are described as ‘having no brand name’ and their real value after import is just VND819,000 ($40).

This means consumers would be overcharged by VND1.7 million ($85) on every watch they buy.

Other products such as diamond necklaces and bracelets are also offered at millions of dongs while they actually cost no more than VND500,000 ($25) and are made in China.

Besides selling copycats at such skyrocketed prices, many TV shopping companies are suspected to engage in smuggling.

According to an ex-employee of a TV shopping company, most of the cosmetics, jewelries and clothes are imported from China at throwaway prices.

The companies would legally import part of the products and seek necessary licenses for them, he added.

At the same time, they would smuggle the remaining parts and use the aforementioned licenses to legalize them, he elaborated.

In March, the HCMC market management unit has found Happy Shopping, a company that sells products via TV channels, to be selling copycats and products with unknown origins.

The company was also found to have aired false and misleading infomercials about low quality products.

In early July, market management authorities have also busted Viet An Trade Company to be selling copycats by using brands that are copyright-protected in Vietnam.

Viet An is the producer of TV shopping program “Viet Home Shopping” aired on several TV channels since November 2008.

French investors keen on PPP projects in Vietnam

French companies have showed keen interest in the projects planned for public-private partnerships (PPP), a new form of investment to raise capital for big-ticket developments in the country, a French diplomat said.

French commercial counselor Jean-Louis Poli said one of the major goals of French investors was to develop infrastructure projects through PPP in Vietnam, as they had established strong reputation and advantage in this field.

“This is an area where I’m sure that our companies are ready to invest in,” Poli told the Daily on the sidelines of the Traditional Quality Wine Fair 2011, co-organized by the trade agencies of France, Italy and Spain in HCMC on Tuesday. He underlined growing interest of French companies in investment and trade opportunities in this ASEAN market.

“They will come (to invest in PPP projects) once the legal framework for this is okay,” Poli said, adding that transparent rules were important to draw investors to PPP projects, especially the pilot projects in the pipeline.

Poli named energy, transportation, water treatment and supply as prioritized areas that French companies wanted to invest in via PPP.

At an international conference on PPP in Hanoi in May this year, Deputy Minister of Planning and Investment Dang Huy Dong said the Government wanted to pilot some PPP projects to gradually develop an efficient PPP market and find the most appropriate model for Vietnam.

The Ministry of Transport estimated the State budget, Government bond sale and official development assistance (ODA) loans could meet only some 55% of the huge investment capital needed for transportation projects in 2011-2015, and the rest had to come from other sources.

The transport ministry and other ministries as well as local governments have proposed more than 20 infrastructure, energy and water projects be implemented under PPP. The Long Thanh international airport in Dong Nai Province is one of the projects that have their components planned for PPP.

Just last month, the Prime Minister approved a zoning plan for the three-phase airport project in Long Thanh, with the first phase in 2015-2020 consisted of a terminal able to receive 25 million passengers a year and a 1.2-million-ton cargo terminal, two parallel runways for modern aircraft to land and take off, taxiways, parking lots for airplanes, a management building, and an aviation industry park.

PPP has been targeted as one of the investment capital sources for several components of the project, including the passenger and cargo terminals. The first phase requires investment capital of more than US$6.7 billion.

French commercial counselor Poli said PPP was a necessary and effective channel for Vietnam to make big projects possible.

Poli said besides looking for investment opportunities, French companies were also striving to sell their products and to look for distributors through trade fairs and meetings with Vietnamese partners. Nineteen wine companies from France, Italy and Spain showcased their products at the wine fair in HCMC on Tuesday and would do the same in Hanoi on July 7.

France was Vietnam’s largest exporter of wines with sales worth US$9.78 million in 2010, according to the General Statistics Office. Last year, Italy exported US$1.5 million worth of wines to Vietnam while Spanish wine export sales stood at US$700,000.

Vinatex takes over Dai Cat Tuong Garment

The Vietnam National Textile and Garment Group, or Vinatex, on Tuesday formally took over the loss-making Dai Cat Tuong Garment Co. in the central province of Quang Ngai and has plans to restructure this company.

Vinatex, which recently has bought nearly VND39.9 billion worth of the garment company’s shares in an auction, plans to invest into its new affiliate with over VND50 billion.

Dai Cat Tuong in recent years has incurred losses and owes its workers salaries totaling VND1.6 billion, triggering several strikes of late.

Duong Thi Ngoc Dung, deputy general director of Vinatex, said that her corporation had plans to invest over VND50 billion into the new affiliate to boost its operations.

Vinatex will upgrade Dai Cat Tuong’s obsolete factories as well as buy new machines and equipments to create 3,000 jobs when it is scheduled to resume operation next year. Besides, the corporation will also build a dormitory for the workers.

Foreign direct investment declines

Few improvements in the investment climate are to blame for the reduction in foreign investment into the country in the first half of the year, industry insiders have said.

Figures from the Ministry of Planning and Investment's Foreign Investment Agency showed that total registered FDI capital for 455 foreign-invested projects along with capital added to existing projects reached over US$5.6 billion in the first six months of this year, equivalent to just 56.7 per cent of the same period last year.

Reaching the target of $20 billion worth of FDI set for the year will be difficult, the department said.

Economist Le Dang Doanh said aside from volatile and unpredictable policies few reforms had been made in the investment environment in Viet Nam, noting that reform must be efficient and can stabilise the macro-economy to be able to attract FDI flow into the country.

Experts said despite being a large labour market attractive to foreign capital sources, Viet Nam can easily lose out opportunities due to its investment environment.

The recent instability in macro-economic policies has uncovered several weaknesses, causing investors to delay their decisions to do business, they said.

They attributed the decline in pledged FDI capital and the rate of FDI disbursement over the past six months largely to the big impact of the slumping domestic market as well as soaring input costs and an unstable macroeconomy.

The World Bank estimated in a report on Viet Nam's economic development that the fall in FDI funds stemmed not only from the impact of the global economy but also from such macro-economic instability, power shortages and a scarcity of skilled labourers, among others.

A survey by the European Chamber of Commerce (EuroCham) on the second-quarter investment environment showed that EuroCham business members said their confidence in business prospects in Viet Nam was dropping because of the lack of improvement in macro-economic policies.

EuroCham President Alain Cany said if improvement was not made effectively then Viet Nam could lose its attractiveness compared with other ASEAN countries.

Vinacomin defends recent coal imports

State-owned miner Vinacomin’s claims that coal imports are more economical than using domestic coal have been rejected by experts.

The state-owned Vietnam National Coal-Mineral Industries Group (Vinacomin) claims prices of domestic coal from the north for southern power plants could be around $22 higher than coal imported from Indonesia.

Apart from 9,500 tonnes of coal recently imported from Indonesia, Vinacomin will continue to import more coal in the time to come, Le Minh Chuan, Vinacomin deputy general director said at a meeting on July 4.

According to Chuan, recently imported coal with sizes ranging from zero to 50 milimetres and 16 per cent humidity is under processing. Vinacomin is contracted to sell coal with sizes from zero to 20mm to southern power plants and is seeking partners to sell the rest.

The imported coal is estimated to cost $100.6 per tonne, including freight on board (FOB) costs of $73.6 per tonne and transportation fees of $27 per tonne. Vinacomin said the price was equivalent to that of domestic 10b2 coal.

According to Vinacomin, 10b2 coal is exported for $108.6 per tonne. The final price mounts to $122 per tonne, including transportation fees from the northern province of Quang Ninh’s Halong and Cam Pha area to the southern province of Dong Nai’s Cat Lai.

This means that prices of domestic coal for southern power plants are $22 per tonne higher than that of imports.

Dr. Nguyen Thanh Son, director of Song Hong Energy Company, a subsidiary of Vinacomin said that this was an unreasonable comparison.

Son asserted that in terms of the aforementioned sizes, imported coal must be in raw form, not processed. Therefore it was inappropriate for Vinacomin to equate the import price to Cat Lai port of $100.6 per tonne to domestic 10b2 coal.

He emphasised that the imported coal differs with domestic coal in terms of quality.

Son’s concern centres on Vinacomin potential miscalculation of domestic coal prices for southern power plants by only using export prices and domestic transportation fees.

He said Vinacomin should publicise other information about the imported coal, including origin, ash ratio, calorie of coal and sorting costs before making any comparison.

A professor from the Vietnam Energy Association said Vinacomin’s coal import price of $100.6 per tonne was exorbitant compared to the export price. Vinacomin is exporting coal with a calorie count of between 5-6,000 Kcal per kilo at between $60 and $70 per tonne.

Chuan said that Vinacomin may not have enough space to store coal if it stockpiled between 16-20 million tonnes.

“Another challenge is that the coal sector provides jobs for 86,000 people, including 40,000 working at open-air mines. If Vinacomin just produces coal but stops exports, it may seriously affect its workers’ lives,” he noted.

Experts from the Vietnam Energy Assocaition said Vinacomin is facing major difficulties. Almost all ODA sources go to electricity and oil and gas industries, at the expense of the coal industry.

In the meantime, coal prices for domestic consumers are still lower than the export rates. Coal price for the electricity industry is set at only between VND500,000 and VND700,000 ($24.22-$33.91) per tonne while it can earn between VND1 million and VND2 million ($58.1-$96.9) per tonne through exports. Vinacomin has been trying to boost coal exports to balance its budget and increase staff wages.

In order to settle the paradox, more efforts should be made to work out replaceable methods, according to Son.

He suggested reducing coal output by 20 million tonnes per year to minimise coal exports. By doing this, Vinacomin could save VND20 trillion ($969 million) per annum, which is equivalent to the group’s annual loans. The money saved from not having to pay interest for the loans could be sufficient to pay VND5 million ($242.2) each to 40,000 pit workers.

Son affirmed that costs to transport coal from Quang Ninh to Cat Lai must be much lower than that to carry coal from abroad.

Mekong Delta waterway renovation kicks off

Contracts on renovating waterways in the Mekong Delta’s many canals were signed in Ho Chi Minh City on July 6 to implement a $312.02 million project partially funded by the World Bank.

Contractors included the Uniconsult Company from Germany which had won a deal worth VND40 billion (roughly $1.96 million) to help the internal waterway department upgrade regulations.

Meanwhile, the Halla Engineering & Construction Corp of the Republic of Korea and the joint venture between Khanh Giang and Dredging International Asia Pacific from Singapore signed separate contracts for dredging and upgrading 110 km of canals at a total cost of VND374 billion.

Nguyen Ngoc Thach, General Director of the Project Management Unit of Southern Internal Waterways (PMU-SIW), which has been entrusted as the project executive, said the World Bank has loaned $232.66 million of the funding. The Australian Government has committed to a $25 million grant and the Vietnamese government is to contribute $76.36 million.

He said the three freshly signed contracts are just part of the project, which needs a total of 30 contracts, including the renovation of the Cho Gao canal at a cost of some VND10 trillion.

Short supply prompts local dairy investment

Local dairy giants such as TH Milk and Vinamilk have unveiled huge investment plans on pastures and dairy cow stock to cope with increasing dependence on imports and price hike of milk products.

TH Milk said it would invest $1.2 billion in raising 137,000 dairy cows by 2017, with 70 per cent in lactation to produce 500 million of litres of quality milk annually.

The Ministry of Agriculture and Rural Development estimated that the national dairy cow stock would reach 155,000 cows by the end of this year and produce 330,000 tonnes of milk. The figures are expected to increase to 263,000 and 653,000, respectively, by 2015.

Such huge investment plans aim to narrow the enlarging gap between supply and demand that forces the over 85 million-strong nation to import some 1.2 million tonnes of milk every year.

Dr Peter Lentes from the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) said Vietnam was in the world top-20 milk importers’ group.

The Ministry of Agriculture and Rural Development (MARD) reported that domestic demand rose, from 8.09 litres per capita per year in 2000 to 17 litres. As local production filled just between 22 and 25 per cent of demand, international giants have cashed in to take up to 72 per cent of the milk powder market share.

A recent survey conducted by the Ministry of Industry and Trade showed that four international companies – Abbott, Dutch Lady, Dumex and Nestle – garner 32 per cent, 16 per cent, eight per cent and 4.2 per cent, respectively, of the milk powder market.

These four milk giants, therefore, have the power to set market prices, said Light Industry Department head Phan Chi Dung from the Ministry of Industry and Trade.

Some foreign products had sometimes had their prices increased between 15 and 20 per cent.

The general secretary of the Vietnam Milk Association, Trinh Quy Pho, raised concern that, “We are losing the game right on our own playground”.

The government has since issued numerous stimuli for the domestic dairy industry, such as reductions in land lease for animal husbandry, as well as in import tariffs for milk cow breeds and feeds.

Trade deficit under microscope

New approach is needed to weigh up the foreign-invested sector’s import-export performance.

Statistics show that the foreign-invested sector’s trade surplus was chiefly attributed to its high crude oil export value.

According to Ministry of Planning and Investment’s Foreign Investment Agency deputy head Nguyen Noi, both the import and export value of crude oil should be excluded when appraising the FDI sector’s import-export performance.

“This will ensure impartiality and give accurate figures about the sector’s import-export business,” Noi said.

His proposal was upheld by economist Vu Dinh Anh.

However, when concrete import figures of crude oil trading firms are not yet in place, statistics indicated the sector’s year-on-year trade deficit hike. Accordingly, the sector incurred around $1.87 billion in total trade deficit in 2006, nearly equal to first half of 2011’s figure of $1.83 billion.

“It should be made clear whether the import hike benefits production or creates added value for the economy,” said deputy minister of Industry and Trade Nguyen Thanh Bien.

Anh assumed a higher import value might come in the wake of the sector’s shift from production into commercial trading.

Reality shows that the FDI sector and Vietnamese firms generally incurred high import values since the country’s supporting industries remained underdeveloped.

To service production and exports, a huge proportion of input materials and fuel is sourced externally. Import reliance not only badly affects the country’s balance of payments, but also erodes the competitiveness of the economy and local businesses.

Once local firms are chiefly engaged in export processing orders, their ambition to participate in the global value chain and ameliorate competitive edge is far beyond their grasp.

Industry experts suggest scrutinising why the FDI sector frequently incurred a trade deficit would be important to realise its actual contributions to national economy and find practical remedies.

Delisting short-sighted: experts

Firms are leaving the stock market in droves on the grounds that it is no longer beneficial for business, but market insiders say the move could be short-sighted.

Notably, in April Sai Gon-Quy Nhon Mining Corp (HNX:SQC) and Sai Gon Telecommunication and Technologies Corp (HOSE:SGT) abandoned the bourse, while Viet Nam Construction Co No 11 (HNX:V11) sought shareholder approval to quit the Ha Noi bourse. V11's biggest shareholder, Vinaconex, gave the thumbs up to the move.

While V11 said it aimed to restructure the company, SGT said it wanted to leave the exchange because it could not raise investor capital. Ho Ba Tinh, chief economist at a Ha Noi-based financial services company, said delisting would negate the risk of being taken over by large investors.

However, Tinh said delisting would make it difficult for a company to raise capital, and would make it less appealing to banks in terms of loans.

Recently, two more companies – Mekorphar Chemical Pharmaceutical Co (HOSE:MKP) and Interfood Shareholding Co (HOSE:IFS) – expressed their intention to leave the stock market.

Le Dat Chi, head of the Financial Investment Department at HCM City University of Economics, said private companies did not have to publish details of their business performance and were therefore less exposed to the vagaries of the market.

However, Chi warned that companies that delisted would be less attractive to investors if they decided to go public at a future date.

Mekong Delta's post-harvest rice losses hit $635m

The post-harvest loss of rice in the Cuu Long (Mekong) Delta remains high, at 13.7 per cent, or US$635 million for the year, according to the deputy director of the Institute of Agriculture Engineering and Post Harvest Technology.

Speaking at a conference in Can Tho City on Thursday on preserving rice after harvesting in the Delta, Dr Pham Van Tan said most losses occurred during the drying process, with the highest rate of 4.2 per cent.

That was followed by harvesting with 3 per cent; husking with 3 per cent; storage with 2.6 per cent; and transportation with 0.9 per cent.

Post-harvest losses could rise to 20.6 per cent, he said, adding that the loss rate of by-products of rice has reached 50 per cent.

The quality of rice after post-harvest has also deteriorated.

Most Vietnamese-grown rice is low-grade and has an export price of US$80-100 per tonne lower than that of Thailand and the US.

The Delta has about 5,000 combine harvest machines that can serve only 30 per cent of the Delta's total rice cultivation area.

To reduce post-harvest losses and increase rice value, participants at the conference said modern rice silos should be used.

These silos can inspect the quality of rice, clean and dry rice, and monitor the temperature of rice during the storage period.

They would ensure that the quality of rice would be maintained over a long period.

The silos would also create favourable conditions for companies to have enough rice for export.

Because of improved silo storage, farmers and distributors could wait for higher export prices before selling rice, thus prolonging the selling period. In addition, they could also ensure the nation's food security.

The Delta produces about 20 million tonnes of paddy a year, accounting for nearly half of the country's total rice output.

However, its storage systems have only a total capacity of about 2 million tonnes, according to the Ministry of Agriculture and Rural Development.

Market access can ease rural poverty

There is a clear income gap between the rich and the poor in rural areas at a time when access to agricultural input materials and markets are plagued with difficulties.

Deputy head of the Ministry of Planning and Investment's Central Institute for Economic Management (CIEM) Vu Xuan Nguyet Hong made the statement at a conference held to discuss the outcomes of the "Characteristics of the Vietnamese Rural Economy: Evidence from a 2010 Rural Household Survey in 12 Vietnamese Provinces" held in Ha Noi yesterday.

Hong said that the survey indicated rural residents were suffering from difficulties even though their incomes and living conditions had sharply improved.

"It means that policymakers should continue to implement support policies to benefit rural residents," she said.

She added the policies should help rural residents participate in the market and further develop agricultural production.

"The Government should provide access to information for people who have difficulty accessing input materials for production," she said.

Professor Finn Tarp from Denmark's Copenhagen University said the Vietnamese economy had improved and progress had been made.

"Viet Nam has the ability to face various crises. However, some people, especially those in rural areas, have not managed to respond well to the crisis or increase their incomes," Tarp said.

He added that agricultural production should be increased but its proportion in the economy should be smaller.

"Media plays an important role in rural development because we can see from the survey that a lack of information is a challenge. To make the right decision about what to do you need to know about prices and markets," he said.

Findings from the survey show that the proportion of households classified as poor by the Ministry of Labour, Invalids and Social Affairs has declined significantly over the years of the survey, suggesting that conditions have improved for the surveyed households.

"This [the number of poor households] declined from 23 per cent in 2006 to 16 per cent last year," said head of CIEM's Rural Development Policies Section Luu Duc Khai, adding that there had been a downward trend in poverty in nearly all the provinces with the exception of Dien Bien, Khanh Hoa and Long An.

He said it was clear that some provinces and groups remained more vulnerable than others. Large discrepancies in education by gender and poverty status had been noted while improvements in living conditions in terms of access to safe water and energy usage had been observed.

"The impact of migration on rural communities and on migrants should also be researched," he said.

The survey also show that the surveyed households experienced a significant increase in average annual income levels between 2008 and 2010.

"Agriculture remained the most important source of employment and income but poor households diversified their income sources to a greater extent than wealthier households, preventing them from enjoying gains from specialisation, " he said.

The average annual household income last year was VND80.9 million (US$3,950) while in 2008 the number was VND52.7 million ($2,570). About 28 per cent of the surveyed households operated a non-farm household enterprise which were mostly small and required only modest amounts of start-up capital.

Household enterprises have become more common among rural households with the exception of former Ha Tay, Khanh Hoa, Lam Dong and Long An provinces.

The survey found that there was a growing trend in the proportion of rice output that was sold. The commercialisation of agriculture could be an important mechanism for rural households to break out of poverty.

Khai said savings and credit had also been important mechanisms for coping with unexpected income losses

"We find that households were better able to cope in 2010 compared with 2008 but the poor remained the most vulnerable group. It was suggested that financial markets were better able to assist households in coping with shocks, in particular credit and insurance markets, but the informal sector played an important role with informal savings," he said.

Danish Ambassador to Viet Nam John Nielsen said agriculture accounted for two-thirds of the country's exports with an annual growth rate of 4 per cent.

However, he said the poverty rate in rural areas was high. The survey was expected to provide data for policymakers to develop measures for rural people to improve their lives.

Hong said the Government should develop policies to support farming households in establishing large-scale enterprises as well as services to gather them into bigger productions.

"The best way to make the improvements is to accelerate production infrastructure to help farmers benefit from commercialisation in relation to supply and demand," said director of the Institute of Policy and Strategy for Agriculture and Rural Development's (IPSARD) Agriculture Policies Advisory Centre Nguyen Do Anh Tuan.

The survey, which was first conducted in 2002, builds on the three previous surveys and provides an insightful overview of the surveyed households over a long period.

This report was based on interviews with more than 3,000 households in 12 provinces by CIEM, IPSARD, the Institute of Labour Sciences and Social Affairs and the Development Economics Group of the University of Copenhagen together with DANIDA.

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