BUSINESS IN BRIEF 20/3

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SHB awarded bank of excellent payment



The Saigon-Hanoi Commercial Joint Stock Bank (SHB) has recently won the “Excellent International Payment Bank in 2011” award for the second time.

The annual reward is granted by the Bank of New York Mellon (BNY Mellon), one of the world’s most prestigious banks, to the bank that has the highest Straight-Through-Processing standard ratio (STP) of at least 95 per cent for international payment transactions.

In Vietnam , only a few banks have received BNY Mellon’s award. It has recently presented a similar award to the Vietnam Technological and Commercial Joint Stock Bank (Techcombank).

Belgian firm keen on river dredging project

A representative of Belgium’s Jan De Nul n.v. in a meeting with HCMC vice chairman Nguyen Huu Tin on Thursday expressed strong interest to join the dredging project of the Soai Rap River.

Jan van Impe, regional director of Jan De Nul n.v., told the vice chairman that his company wants to contribute to seaport and river dredging projects in the city including the Soai Rap River dredging scheme.

Jan van Impe is among the 300 business members accompanying Belgian Crown Prince Philippe along with his spouse Princess Mathilde on a six-day visit to Vietnam starting from Sunday.

The Belgian firm is currently deploying a dredging scheme at a steel mill project of Taiwan’s Formosa Plastics Group in the north central province of Ha Tinh.

Vice chairman Tin said one part of the Soai Rap River project has been finished and the whole scheme is set for completion in the next three years. The Governments of Vietnam and Belgium have also agreed to cooperate with each other on this scheme, Tin stated.

To jointly realize the project as committed, the two Governments would sign a frame agreement and an official development assistance (ODA) contract. In this case, Belgian enterprises can join the projects via competitive bidding, he added.

Relevant authorities in HCMC last Thursday had got the nod from the Government to continue the Soai Rap project with 70 million euros to be funded by the Belgian Government and VND624 billion from the city’s reciprocal capital.

The Soai Rap River dredging scheme encompassing Tien Giang, Long An, HCMC and Ba Ria-Vung Tau provinces is expected to help replace inner-city seaports along the Saigon River by outlying ones, thus meeting rising demand for cargo transport in the city.

The construction of the dredging scheme is divided into three phases. The first phase will dredge the river to a depth of 9.5 meters for handling ships of 30,000 to 50,000 tons. The second and third phase will dredge to a respective depth of 11 and 12 meters for ships with 50,000-70,000 tons and over 70,000 tons.

The Shattered Dream

Delayed payments, unhealthy price competition and exhausting fight against supermarkets’ house brands have pushed some small businesses to the edge. They have to give up this modern trade channel. Small business owners have their supermarket dream shattered despite all the hopes to give their brands a springboard.

On January 1, 2012, MT Co., a blanket, bed cover, pillow and mattress manufacturer in Binh Duong Province, officially ceased supplying goods to two supermarket chains in Vietnam. The owner of MT says: “We had to terminate the contract because we couldn’t take it anymore. The longer we held on to the stock, the worse it would get.”

MT Co. entered supermarkets at the beginning of 2011 after bedding products under the name H had become familiar in almost all markets in Binh Duong and Dong Nai provinces. Some stores even had revenues of up to VND500-600 million a month. The purpose of supermarket penetration was to affirm the company’s brand and expand the consumer base. As a result, even though there were some inconvenient contract terms regarding supplying goods in the modern retail channel, such as high discount rates, self-transport around the country and long payment process, the company accepted them as a means of brand polishing. However, things did not appear the way they were supposed to. Costs such as discount for supermarkets during their birthdays, or when new supermarkets were launched, were not mentioned in the contract.

Besides, the pledges of supermarkets to process payments each month were rarely fulfilled. The waiting period would normally be 45 days, or even 60, with all kinds of excuses such as boss going away or unsigned papers. Meanwhile, if the monthly revenue reached over VND1 billion, supermarkets immediately asked for a higher commision.

Eventually, after a tough year doing all they could, including adjusting the quality of goods to match the price supermarkets paid, the company decided to terminate the contract, giving up the supermarket dream even though production output had doubled. After the one-year affair with supermarkets, the owner of MT Co. gained no profits and suffered losses.

Not being in the exact situation, but AK Co. after several years of business officially ceased supplying Japanese rice to some supermarkets at the end of last year. The company’s director says the reason was also because supermarkets had too many demands such as discounts, special offers and late payments. “Amid this cash shortage and high bank loan interests of over 20%, two months of delayed payment made our business impossible. So I quitted and spent my efforts on the very customers that actually need me,” this director says.

These two stories are just among many others of businesses who had to give up their supermarket dream for being unable to pursue the advantageous yet demanding retail channel. Evidently, many Vietnamese brands have been swept off supermarkets’ shelves. This vanishment, is not only because the brands were not preferred by consumers, or their revenue targets were not met, but also because they could not compete with wealthy multinational brands, and because of some other reasons.

Vu Kim Hanh, chairwoman of the High Quality Vietnamese Goods Club, says: “Last year, Vietnamese businesses were crushed by multinational companies and house brands of supermarkets. Small manufacturers could not afford favorable positions on the shelves as multinational corporations, and were not given location as good as house brands were. Thus, they had to remain almost invisible.”

In fact, in the cosmetics section of supermarkets, it is quite a challenge to find a bathroom cleaning solution from a Vietnamese company, which stands modestly at the rear of shelves, outnumbered and outshone by goods from multinational or house brands. On tissue paper shelves, every item from an independent manufacturer stands between two similar house brand products. Moreover, from the beginning to the end of the shelf, there are banners detailing the benefits of using supermarket house brand goods. That is not to mention big boards hanging from the ceiling advertising for house brands, which even multinational brands have to envy.

Till date, the percentage of house brands in the goods profile is still a one digit figure. Yet retailers have not been secretive about their plans to increase the percentage. That means small businesses trading through the supermarket channel must devise action plans before it is too late. Only change and innovation can save them from being displaced. To survive, manufaturers have to spare no effort, from market research, package design to calculating special prices for supermarkets.

Meanwhile, for small manufacturers whose brands have not been widely known, the supermarket dream is drifting further away. An owner of a frozen seafood processing business says for eight months in a row, no new products of the company could enter supermarkets because they have devoted the space to house brand items. In reality, quite a few small manufacturers are subcontractors for supermarket house brands. Their names are included in the packaging but the brands belong to the retailers. Such items have high quality but it is extremely hard for these businesses to sell their independent brands at supermarkets. Some companies while trading through the supermarket channel even receive offers to be subcontractors for supermarket house brands, i.e. affixing supermarket labels in stead of the company’s.

New chance from agriculture

In recent times, several local companies have shifted to investing in agriculture. They see the new business area as a long-term and much safer investment strategy to cope with the tough situation in which many industries are facing numerous risks and the global economic crisis is still going on.

In the backdrop of the global economic downturn, local firms tend to turn to agriculture, according to chairman Le Duy Minh of the Vietnam Agricultural Enterprises and Farms Association (VAEFA). A large number of farmers are inclined to develop their own farms nationwide. Additionally, those incentives in the agricultural area to stimulate the development of plants, poultry and cattle and agricultural investment have shown positive changes, thus attracting businesses and farmers to make investment in the sector.

The urban agriculture development program in HCMC has gained certain achievement. The cultivation of clean vegetables, orchids and ornamental fish has attracted many investors owing to high returns. Dong Duong Cao Nguyen JSC under C.T Group has developed a clean vegetable farming area covering over 10,000 square meters in Phu Trung Hamlet, An Phu Commune, Cu Chi Distrtict, HCMC. The project will provide clean vegetables, meat and eggs for restaurant and supermarket chains run by C.T Group in the coming time. As the global economic difficulties have shown no signs of abating, companies consider investment in agriculture a long-term strategy that is safer than other fields whose markets are already saturated and full of risks.

Enterprises in HCMC have also paid attention to orchid cultivation. Each 1,000-square-meter orchid farm needs investment of VND300-400 million, Minh of VAEFA said, adding the investor would harvest more than 3,000 orchid branches a month priced at least VND10,000 each, fetching a monthly sum of around VND30 million. In fact, an owner of a one-hectare orchid farm may earn a net profit of up to VND1.5 billion annually.

Similarly, afforestation is considered a stable business activity under the current climate. Phat Dat Property Development Corp. has expanded its business scale to afforestation and it plans to use the stable revenue from the new sector to prop up its core real estate business. A director of a wood export company in Binh Duong Province said investing in large-scale afforestation would bring in lucrative returns thanks to low input costs, about VND10 million per hectare. Growers can earn profit of nearly VND100 million per hectare of land after five to seven years planting keo lai (Acacia hybrid).

“Apart from stable wood sales due to steadily increasing prices year after year, growers are also able to sell carbonic emission credits to developed nations. This is the certified emission reduction (CER) credits for developed countries under the Clean Development Mechanism (CDM). Export markets of wood products are also stable given the present shortage of input materials at wood exporters,” the director asserted.

In addition, he reckoned that afforestation was favored among investors, partly because it suffers fewer crop and climate risks. Businesses should take the chance to cooperate with Japan and South Korea as soon as possible in afforestation investment to be able to export wood, he added.

Local firms have also eyed the large-scale cultivation of medicinal plants. Necessary costs for growing such plants are inconsiderable while cultivation methods are simple and the farming time is not very long.

Over the past year, the HCMC-based Huu Tin Co. has shifted to investing in agriculture and has obtained some positive results beyond expectations. After a long period of studying the potential of the industry, chairman Nguyen Van Minh of the company has decided to invest in growing medicinal plants that are popular in the local market.

Minh noted the limit of local traditional medicine supplies, insisting the highly potential sector with increasingly growing demand at home would bring about more profits for both firms and farmers in the near future. At present, the country has to import over 120,000 tons of traditional medicines from China every year, Minh stated.

Total investment capital for traditional drug development is some VND200 million a hectare, with the harvest time of four to eight months depending on each medicinal herb. Investors can even earn higher revenue, up to VND300 million per hectare, with good post-harvest care. Meanwhile, the average profit of one hectare for farmers is some VND150-200 million a year. With the cultivation area of up to 24 hectares, Huu Tin is estimated to obtain annual profit of VND5 billion, exclusive of all related input costs.

VAEFA and its partners have tried to promote cooperation opportunities with farming households to expand medicinal plant farms. The association has just clinched some preliminary agreements with Domesco, Duoc Hau Giang and Phytopharma to deploy the project of cultivating 1,000 hectare of medicinal plants in 23 provinces and cities across the country. With the scheme, entrepreneurs will act as suppliers of capital, varieties, fertilizers and technology for farmers and they are in turn entitled to buy products from the farmers. The association predicted those farmers having 2,000 square meters of growing area would reap VND10-15 million a month from the sale of drug to companies just after three months of taking care of the plants.

“Through such a project, VAEFA hopes to raise the economic efficiency of agricultural investment, allowing local farmers to enjoy more benefits from their fields,” Minh added.

Bank card payments gain popularity

Total non-cash payments in Viet Nam reached US$32 billion by late 2011, showing that consumers are increasingly using bank cards for their transaction, according to the Bank Card Association.

The Dong A Joint Stock Commercial Bank (DongABank) is one of the banks with the largest number of cards issued, with more than 6 million cards.

Non-cash payments using the bank's cards in 2011 increased by 40.64 per cent compared with the figure in 2010.

Payments through DongABank's international payment cards climbed to VND141.57 billion, accounting for 21 per cent of the total turnover.

Trinh Thuong Thuc, head of the card-payment services office of the Bank for Foreign Trade of Viet Nam (Vietcombank) in HCM City, said the bank had issued 6 million domestic payment cards and 1 million international payment cards.

Total payment via Vietcombank cards has achieved an annual growth rate of 30 per cent.

Last year, total payments via domestic cards issued by Vietcombank reached VND30 billion (US$1.43 million) per month, Thuc was quoted as saying in Sai Gon Tiep Thi newspaper.

He also said the number of payments via domestic credit cards rose more quickly than those through debit cards.

Cardholders are using more cards to pay for goods in the domestic market. Between 30 and 40 per cent of cardholders' transactions were made in the Vietnamese market, according to Thuc.

Godfrey Swain, managing director and head of personal financial services at Hong Kong – Shanghai Banking Corporation Limited (HSBC), also told the newspaper that HSBC had recorded a significant growth in credit-card services.

Over the last three years, total payments via HSBC cards grew over 90 per cent per year.

Most HSBC cardholders were Vietnamese, and 50 per cent of their card payments were made abroad, mainly in Singapore, the US, Hong Kong, the UK and Australia.

Viet Nam is considered one of the most dynamic markets for bank cards, with an annual growth rate expected to rise to 18.5 per cent through 2014, according to the US-based Research and Markets company, which issued its report at the 2011 ASEAN Banker Forum, jointly held by the International Data Group (IDG), the State Bank of Viet Nam (SBV) and the Viet Nam Banking Association and Deposit Insurance of Viet Nam in HCM City last December.

The number of payment cards, which are accepted at 13,000 ATMs and 70,000 points-of-sale nationwide, has more than doubled from 14.7 million in 2008 to 40 million.

Meanwhile, 20 banks use internet banking and eight banks offer mobile-banking services.

Independent market analysts said the domestic card market was faced with tough competition in the card-services segment among banks.

DongABank's general director said the bank planned to issue 600,000 new payment cards, while Thuc of Vietcombank noted that the bank would issue an additional one million cards.Many other banks have developed plans to increase the number of payment cards issued to customers.

Bad debt puts Hanic under bankrupcy threat

Ha Noi Investment General Corporation (Hanic) faces the threat of bankruptcy due to a bad debt of VND300 billion (US$14.35 billion) from an investment in the real estate project of the BETA BQP Joint Stock Company.

Hanic Chairman and CEO Dinh Hong Long told Cafef.vn - an online business website- that his company stood on the verge of bankruptcy because of its bad debt leading to a lack of investment in existing production and business. Therefore, its workers were forced to stop working and it had a loss of VND70 billion ($3.35 million) last year.

Long said there were five factors that push enterprises to the bankruptcy; the loss of ownership capital, productivity, salary, insurance and business activities. Of these, the loss of ownership capital is the most important thing and SHN had a loss of ownership capital of VND300 billion.

Additionally, the company had a loss of VND70 billion last year in production and business and if this trend continued, it was expected to lose VND70-80 billion total this year, Long said.

In March 2011, Hanic signed a co-operation contract with BETA to fund VND300 billion to the Thanh Ha Cience 5 real estate project located in Ha Dong District, Ha Noi and BETA committed Hanic to be the exclusive distributor of the Thanh Ha Cienco 5 project.

BETA is a joint venture operating in investment and construction sectors.

But in June 2011, BETA stopped the co-operation with Hanic as the two sides could not reach a contract where Hanic would be the exclusive distributor.

BETA committed to refund the investment of VND300 billion to Hanic, interest rate of the investment and pecuniary penalty of VND35 billion for violating its commitments but so far, BETA had not paid the bad debt, Long said. BETA general director Nguyen Anh Quan, who signed the contract, has left Viet Nam, leaving the debt, according to police.

This has poor implications for Hanic's reputation and would have a bad impact on the price of Hanic's shares with the code of SHN on the stock market coming time. The bad situation has put more than 6,000 shareholders at risk of losing capital, hundreds of employees at risk of losing their jobs, and leaving more than 2,000 employees working in foreign countries without oversight.

On March 13, Hanic decided to sue BETA to collect the debt and has chosen SMIC as its consulting law firm, Long said. The company expected the state offices would help it recover the debt and overcome the existing hardships.

Agarwood industry seeks gov't assistance

The Viet Nam Agarwood Association should work with relevant agencies to seek effective measures so that growers could feel secure in their cultivation, delegates said at conference in HCM City on Saturday.

The main product of the aquilaria crassna tree is agarwood, a resinous product that has traditionally been used as incense and medicine. Its distilled pure resin is used in perfumes.

Ngo Duy Tu, head of the Tan Phu Agarwood Club in Dong Nai Province, said cultivating aquilaria crassna trees can generate good profits for farmers but could also leave them empty handed if they applied improper technology or low-quality chemicals for making agarwood.

There were many methods and chemicals to make agarwood from the aquilaria crassna tree, however, many of them had proved ineffective since the yield was low and even killed the tree, Tu said.

About 10 kinds of chemicals for making agarwood have been introduced in the province but many of them were of poor quality, he said.

He said there were more than 100,000 aquilaria crassna trees in his locality and about half of them had been injected with chemicals in an attempt to get agarwood. However, as many as 90 per cent of the injected trees became "victims".

The situation is similar in Ba Ria – Vung Tau Province, with many aquilaria crassna trees dying after chemicals were injected into them to make agarwood, said a representative of Ba Ria-Vung Tau Agarwood Association.

Tran Hop, chairman of the association, said the biggest challenge facing the industry was finding the most effective method to produce agarwood.

The association would strengthen co-operation with foreign partners as well as local scientists to choose best seedlings and methods to make the fragrant wood.

In addition, he said, localities should have zoning plans for agar tree cultivation and help growers with capital.

With its long production circle of about 10 years, planters need capital support to sustain, he said.

Demand for agarwood in the world market is set to remain high while supply is expected to shrink, said Thai Thanh Luom, chairman of the Kien Giang Association for Conservation of Nature and Environment.

Agarwood sold in the world market used to be obtained from natural sources, with main suppliers being Indonesia, India, Bangladesh and Bhutan.

However, the natural agarwood source has been exhausted. For instance, Indonesia's agarwood export dropped from 661 tonnes in 1993 to 302 tonnes in 1997, he said.

Viet Nam exported several hundred tonnes of agarwood a year in the 1986-1990 period. Foreign buyers preferred Vietnamese agarwood because of its high quality, he said.

And like other countries, Vietnamese natural agarwood source has also been exhausted, so "we turned to planting agar trees to create artificial agarwood."

To help improve plantation efficiency, the Ministry of Agriculture and Rural Development should come up with an orientation plan for agar tree development and better manage seedlings as well as supply of chemicals used in making agarwood, he said.

Hop said the association would work to ensure outlets for agar tree planters, noting that there was high demand for agarwood in Middle Eastern countries.

Big data, cloud computing drive IT

Despite the choppy economy this year, real growth in information technology spending, cloud computing and big data were leading the era of IT transformation, said Ajit Nair, managing director, Southeast Asia Emerging Markets at EMC Corp, at a workshop on Saturday in Da Nang.

"Though the time is not ideal, there will be real growth, and Asia-Pacific is expected to grow faster than average," Ajit said.

Last year, Asia-Pacific ranked second in terms of IT spending, with an increase of 10.9 per cent, following Latin America with a rise of 16.3 per cent, according to International Data Corporation (IDC), a global market intelligence firm. This year, global IT spending is forecast to grow 3-5 per cent and Asia Pacific will lead the world with an increase of 7.3 per cent.

"Viet Nam will grow faster than most countries in the Asia Pacific," Ajit said, arguing the country was one of Asia's strongest emerging markets with increased infrastructure developments as good opportunities for both foreign and domestic investments.

Nguyen Duc Toan, country director of EMC Viet Nam said, while the top three concerns of CIOs (chief information officer) focused on limited budgets, a data boom and data security, cloud computing was considered the ideal solution to help businesses overcome such difficulties.

The cloud environment allows enterprises to get their applications up and running faster with easier manageability and less maintenance. IT resources would be provided on demand to meet the fluctuating and unpredictable business demand as well.

However, he also said cloud computing was a concept rather than a product, for which meeting the five criteria of rapid elasticity, measured service, on-demand self service, resource pooling and broad network access were necessary.

Currently in Viet Nam, DongA Bank is the first enterprise building data centre based on this model of computing and it has completed the first stage of IT environment virtualisation.

Tran Nguyen Vu, deputy director of the Ministry of Finance's Department of Financial Informatics and Statistics, also said his ministry on its way to the cloud application using EMC Symmetrix VMAX storage platform with an open environment to store, analyse and use large amounts of data.

Insurer may sell 20% stake to strategic investors

The BIDV Insurance Corp (BIC) may sell up to a 20-per-cent stake to strategic investors. By the end of last month, BIC had total assets of VND1.6 trillion (US$76.6 million), equity of VND769. billion ($36.6 million), and operating reserves of VND277 billion ($13.2 million).

Rubber company plans to cut costs by $6.5 million

Da Nang Rubber Co (DRC) will seek shareholder approval for a VND138 billion (US$6.57 million) cost reduction plan at its shareholders meeting on March 23. This year, DRC aims to earn VND2.95 trillion ($140.5 million) and post a profit of VND230 billion ($10.95 million), increases of 10 and 12.5 per cent, respectively, over last year.

Major highway may be widened

Officials from the Transport Ministry are considering a plan to widen Highway No 1 to four lanes for automobiles and two lanes for motorbikes, with a total length of 1,100 km under a Prime Minister's instruction.

Capital for the north-south highway will be mobilised from all sources under the BOT (build-operate-transfer) form, according to Nguyen Hong Truong, deputy minister of transport.

"After the project is finished, tolls will be collected, which will amount to 50 – 70 per cent of the current tolls on the existing highway," Truong was quoted as saying in Thoi bao Kinh te Viet Nam (Viet Nam Economic Times).

However, the ministry's plan for Highway No 1 expansion has been criticised by a number of experts.

"This figure that is quoted, VND105 trillion (US$5 billion), is too small. In addition, the BOT form, which would apply for both the Highway No 1 extension and North-South Express Way, will make it more difficult to seek investors," said Nguyen Ngoc Long, vice chairman of the Bridge and Road Science and Technology Association.

He said the four-year timeline for construction for a 1,100km road was too short.

"Instead, the ministry should choose which part needs to be upgraded first," he said. "That will ensure there is enough capital for the work."

Long also said that most current BOT projects were having difficulty recouping the invested money, so the ministry must carefully consider the project feasibility and the time involved.

"At present, on Highway No 1, there are too many toll stations. What happens if more stations over a very short distance collect money?" Nguyen Manh Hung, chairman of Viet Nam Automobile Transport Association, said.

Many experts have also complained that concurrent construction on both the extension and the North South Expressway would waste money.

Brokerage issues $38m in convertible bonds

Sacombank Securities Co (SBS) has successfully sold VND800 billion (US$38 million) worth of convertible bonds to New Value Co. The three-year bonds pay a yield of 13 per cent. The bond sales aimed to increase the firm's operating capital and financial capacity.

Vietnam Airlines delays IPO due to market conditions

Vietnam Airlines will delay its initial public offering (IPO) to the second half of 2013 due to unattractive market conditions, said the carrier's managing director Pham Ngoc Minh. The airline targets to become the second largest airline in Southeast Asia by the end of the decade.

Japan pumps millions into hydro plant

Nippon Export and Investment Insurance of Japan on Thursday provided US$64.5 million in Overseas United Loan Insurance to build Serepok 4A Hydropower Plant in the central province of Dak Lak.

The 14-year loan contract was signed in Ha Noi between the Buon Don Hydropower JSC, the project investor, and Sumitomo Mitsui Bank of Japan, the provider of the loan.

Before the signing of the contract, EVN Finance and SHB Bank were the major financiers of the project, which will be completed by 2013.

The VND1.7 trillion (US$81 million) project, which will have a capicity of 64MW when operational, will supply 308 million kWh to the country's power network each year.

Rice price rises as growers stockpile

The price of rice has increased steadily since Viet Nam Food Association (VFA) members began to buy up a million tonnes for its reserves on Thursday.

This is equivalent to 2 million tonnes of paddy.

Just after their harvest yesterday, farmers in An Giang Province's An Phu District sold undried IR 50404 paddy for VND4,500-4,600 a kilogramme and dried paddy sold for VND5,200-5,400, up by VND300 compared to the prices last week.

Tran Tuan Kiet, a farmer from An Khanh Commune in Dong Thap Province's Chau Thanh District, said he harvested 8,000sq.m of IR 50404 paddy and made a profit of up to VND1.7 million per 1,000sq.m.

VD fragrant and long-grain paddy is fetching VND5,600-5,700 while dried jasmine and fragrant paddy grown by the Co Do State Farm sold for VND7,200.

At these prices, farmers could make profits of VND25-30 million from a ha of high-quality varieties, Kiet said.

Nguyen Van Be, who grew three ha of IR 50404 paddy in An Giang Province's An Phu District, said traders were going around in the area to buy whatever paddy they could instead of just high-quality varieties as they did earlier.

"That is the impact of the campaign to buy 1 million tonnes of rice," he said.

He is also hoping to get higher prices for the IR 50404 paddy he has harvested.

VFA members began to buy paddy/rice for the reserve at prices of above VND5,000 per kilogramme of paddy to ensure that farmers earn profits of at least 30 per cent as required by the Government.

Pham Thai Binh, general director of Trung An Ltd in Can Tho's Thot Not District, said his company planned to buy 20,000 tonnes of rice for the reserve and his staff had bought 800 – 900 tonnes a day in the last two days.

Ho Minh Khai, director of the one-member Co Do Farming Ltd, said loans from banks had helped his company buy 8,000 tonnes of rice as instructed by the VFA.

In addition to companies in Can Tho, VFA members in other Mekong Delta provinces such as Soc Trang, Bac Lieu, Dong Thap and An Giang have also readied warehouses for the grain.

According to the VFA, in the past few years food companies have enhanced their storage capacity.

Under a plan by the Ministry of Agriculture and Rural Development, Mekong Delta provinces have created a warehousing network with a capacity of some 4 million tones of rice.

Almost half of that capacity is accounted for by the 24 subsidiaries of the Southern Food Corp (Vinafood II).

Vinafood II has announced plans to buy 3.8 million tonnes of paddy during the winter-spring crop which is likely to be fully harvested in the next month or two.

International agencies rate Vietinbank

International credit rating agencies Moody's and Standard & Poor's issued credit ratings for Vietinbank yesterday.

Moody's gave the bank a stable outlook for all ratings, except for foreign currency senior unsecured notes and foreign currency deposit and issuer ratings, which carried a negative outlook. It rated Vietinbank as B1 for long-term foreign currency debt; B2 for Not-Prime long- and short-term foreign currency deposits; B1 for Not-Prime long- and short-term local currency deposits; B1 for Not-Prime long- and short-term foreign currency issuer ratings; and B1 for Not-Prime long and short-term local currency issuer ratings.

Vietinbank's Bank Financial Strength Rating (BFSR) was rated at E+, reflecting the bank's fundamental credit strength, which was constrained by its low risk-absorption capacity and weak asset quality, as well as low loan-loss reserve coverage when compared to global peers. Moody's also cited very high single-borrower concentrations, tight liquidity, and the inherent challenges of the operating environment in Viet Nam.

"Vietinbank's Tier 1 capital ratio stood at 9.8 per cent at the end of 2011 in accordance with Basel I calculations," Moody's said, stating that Vietnamese banks needed Tier 1 capital ratios well in excess of 9 per cent in order to provide adequate coverage in the current challenging economic environment.

"The bank's asset quality is deteriorating, and its true level of non-performing loans by international standards is hard to estimate. Based on Vietnamese Accounting Standards (VAS), non-performing loans increased to VND2.2 trillion at end-2011, from VND1.5 trillion at end-2010."

As with most other Vietnamese banks, Vietinbank's liquidity position was tight, with a 114 per cent loan-to-deposit ratio at end of 2011. Vietinbank's profitability was also modest due to worsening economic conditions, Moody's said, with only 10 per cent of the bank's income derived from fees and commissions, insurance, dividends and treasury income. The bank would continue to face challenges building its retail franchise and fee-based income, the agency said.

"Vietinbank is the second-largest State-owned bank in Viet Nam by assets. It was partially privatised at the end of 2008. The Government's stake in the bank is expected to fall from 80 per cent to 51 per cent in the next three years. It is currently ranked fourth in terms of system deposits and third in terms of loans, while its lending is weighted towards the commercial segment.

"On the other hand, the stable outlook on the ratings could change to negative if there is a significant erosion in franchise value; the bank's Tier 1 capital ratio falls below 6 per cent; the mismanagement of the bank's growth strategy adversely affects its liquidity profile such that loan-to-deposit ratios exceed 150 per cent; and material losses arising from its loan book results in its non-performing loans ratio exceeding 6 per cent under IFRS."

Meanwhile, S&P assigned Vietinbank ‘B+' long-term and ‘B' short-term counterparty credit ratings. The outlook on the long-term rating was negative. The agency assigned a ‘B+' issue rating to the bank's proposed issue of senior unsecured notes.

Vietinbank has a "strong" business position, "very weak" capital and earnings, "adequate" risk position, "average" funding, and "adequate" liquidity, S&P said.

National trade initiative Part 1 gets thumbs up

The Ministry of Industry and Trade (MoIT) has approved the first phase of the National Trade Promotion Programme 2012.

To include 44 projects worth a combined VND44 billion (over US$2 million), the project will focus on exports by organising and joining overseas and domestic trade exhibitions, providing enterprises with updated trade information and promoting official capacities.

Fostering trade promotion in urban and remote areas nationwide will be an additional priority.

Investment, however, had yet to meet the increasing demand for trade promotion of localities, associations, sectors and enterprises, the MoIT said.

It petitioned the State and relevant ministries to consider adding investment to this year's trade promotion programme in an attempt to accelerate the country's exports and develop the local market, especially in mountainous and border areas.

State budget allocation for trade promotion had experienced a downward trend year-on-year with last year's allocation cut to VND55 billion ($2.6 million), half the amount in 2010 and nearly one-third the 2009 figure, said the MoIT's Trade Promotion Agency Director Do Thang Hai.

Meanwhile, enterprise demand had been reported as seven times higher than the allocated amount, Hai added.

Viet Nam's investment in trade promotion was also said to be much lower than that of foreign countries, equalling one-thirtieth of the world's average rate. This had lowered the competitiveness of local enterprises operating in foreign markets, he said, adding that local trade promotion organisations and trade offices abroad did not co-operate effectively, which hinders trade promotion.

Prospects ‘bright' for property market

The real estate service provider Knight Frank Viet Nam says it finds cause for cautious optimism about the property market this year despite 2011 being a tough year.

While the property market had been suffering from a "hangover" for the past two years, there were a number of key indicators that would have a positive effect on the market, the company said in a press release.

It cited as an example the State Bank of Viet Nam (SBV)'s announcement of a reduction of 1 per cent in the deposit interest rate offered by commercial banks, from 14 to 13 per cent.

Inflation had been on a downward trend for some months and was set to stabilise in 2012, it said.

The company noted that the stock market had been one of the world's top performing equity markets so far in 2012. The benchmark index for the main bourse, the HCM Stock Exchange, had seen growth in excess of 20 per cent so far this year.

"Due to a downturn in the market over the past two years, we believe there is a huge amount of pent up demand for real estate, in addition, the number of international investors contacting Knight Frank has risen dramatically over the past six months. For these companies Viet Nam, alongside China and India are all on the radar," the company said.

Investors will have an opportunity to purchase assets in all sectors for prices considerably lower than two years ago and with a large number of developers with deep financial burdens keen to offload their assets, "we anticipate 2012 will see increased activity."

Stephen Wyatt, Country Manager for Knight Frank Viet Nam, commented: "The difficulty for most investors is timing, predicting the future trend of the market and knowing that they are not buying at the ‘top' of the cycle.

"As with any property investment anywhere in the world, the key is location and understanding the market. There is no question that Viet Nam still offers huge upsides for any investor over the medium to long term. We are seeing strong demand for many of the investments, land and developments sites that we are currently selling. With renewed optimism and a return of confidence, 2012 is the time to start looking at investing in the country."

Many domestic real estate companies say the central bank's 1 per cent deposit interest rate reduction would not help the ailing market.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Co, said it would only be a temporary solution in helping housing developers overcome current difficulties.

Developers needed capital more than reduced interest rates to complete projects, he said, citing a number of halted developments in HCM City. Many had resorted to borrowing money at usurious rates in efforts to fulfil contracts and reduce losses.

Tightened monetary policies should be reversed to help the suffering real estate market survive, Duc stressed.

General Director of Vinh Gia Real Estate Co Ngo The Vinh said that without loosened policies, an interest rate reduction of 2 per cent or more would unlikely improve the current situation.

Former Deputy Minister of Natural Resources and Environment Dang Hung Vo told the newspaper Cong Thuong (Industry and Trade) that while the current rate reduction was a good sign, it would have little effect, seeing as commercial banks with low liquidity were unable to provide loans to real estate projects.

Nguyen Van Hung, Ha Noi Real Estate Development Board of Directors chairman, said that the rate reduction was indeed necessary and might lead to a downward trend.

He forecast that market conditions would improve by the end of the third quarter this year.

Several other experts said that due to lowered deposit interest rates, investors might transfer funds from banks to property, which could help warm up the frigid market.

Ministry eyes housing fund

The Ministry of Construction is planning a housing development fund in an effort to mobilise additional capital resources.

Two years ago, when the ministry initially came up with the idea, Deputy Minister Nguyen Tran Nam said that if 9 million workers nationwide contributed 5-7 per cent of their monthly salaries to the fund, it could ad up to billions of dong.

It was eventually decided that only those benefiting from such a fund would have to contribute to it in order to counter previous objections.

Pham Si Liem, deputy chairman of the Federation of Civil Engineering Associations, said the ministry should enrol State policies to regulate and create capital for the fund. For instance, it should tax people living in large houses or those having more than one property.

He added that provinces and cities should clear land and develop infrastructure to lure urban development and social housing investors.

Construction had been slow due to difficulties in obtaining capital from Government bonds, Liem explained.

Trinh Huy Thuc, chairman of the Viet Nam Real Estate Association, said enterprises would not be allowed to contribute to the fund seeing as they could find other ways to deal with production demand.

The Ministry of Construction expects the development fund to help low-income earners become homeowners.

Among a range of sources such as profits drawn from the State lottery, the fund would also receive 10 per cent of land-use rights fees collected from retail and residential areas along with funds from central and provincial State budgets.

Individuals wanting to support such an initiative can make a down payment of at least 30 per cent of the value of the house or apartment they intend to purchase. Fund members must contribute capital to the fund on a monthly basis for at least five years before getting a loan.

Golden Silk project valued at $85m

Vinaconex 2 (VC2) would need an estimated capital of VND215 billion (US$10.24 million) this year for its Golden Silk development project in Ha Noi, shareholders heard at their annual meeting on Monday.

Covering an area of 26.9ha with initial investment totalling VND1.78 trillion ($84.86million), land clearance for the project has already been completed.

When finished, prices are expected to be below VND20 million ($952) per square metre, according to Vu Trong Quynh, general director of VC2.

New rates for housing transactions issued

The Ha Noi People's Committee has issued Decision 05/2012/QD‑UBND outlining a new housing price schedule as a basis for calculating registration fees and personal income tax for housing transactions.

Under the Decision, the prices for newly-built houses will range between VND4.4-11 million (US$209.5-523.8) per square metre for villas, two- and three-storey houses and 20-25-storey apartment blocks, among others.

The housing price for calculating registration fees is the actual transfer price written on the payment invoice, transfer or purchasing contract, or registration fee declaration forms.

Low-income housing projects to be probed


A team of inspectors under the Ministry of Construction will inspect the management, investment and construction of six housing projects for low-income households in Ha Noi.

The projects are being implemented by property giants Vinaconex, Handico and Viglacera. The inspections are designed to weed out any shortcomings in the projects.

Local firm to produce starch in Laos


A ceremony was held in the Lao province of Bolikhamxay earlier this week to start construction on a Vietnamese-invested factory set to manufacture starch from cassava.

The project, run by the Thanh Hoa General Materials Company, will add to the celebrations of the Viet Nam – Laos Solidarity Year in 2012, the provincial economy and local standards of living, said Vietnamese Ambassador to Laos Ta Minh Chau.

Built on a 26.78-ha site, the factory has the capacity of producing 100 tonnes of starch per day. Once completed and in operation, in 18 months, it will employ over 100 local people.

Hot weather takes toll on cashew farms

More than 3,500ha of cashew trees had been inflicted with disease and pests due to hot, dry and foggy weather in southern Dong Nai Province, reported the provincial Plant Protection Department.

The cashews had been afflicted by a number of problems, including than thu – a disease caused by the Colletotrichum Gloeosporioides fungus, and infestations of stink bugs and thrips palmi bugs.

Da Nang fishermen score bumper harvest

Fishermen in Da Nang City's Thanh Khe District have scored a harvest of 1,000 tonnes so far this year, 30 per cent up against the same period last year, according to the district Farmers' Association.

The catch earned them a total net profit of VND40 billion (US$1.8 million); a promising start to the season.

The district fleet of 55 trawlers, manned by around 500 fishermen, plans to harvest a total 5,800 tonnes of fish this year.

"Favourable weather conditions in the early months of the year have helped us a lot," said Association Chairman, Le Nguyen Khanh.

Around 90 per cent of the total catch, including tuna, mackerel and grouper, has been exported.

Khanh added that, thanks to the stable price of fish, fishermen earned at least $750 from their first trip of the year.

According to a recent Department of Aquatic Products report, city fishermen harvested nearly 6,000 tonnes of fish in the first two months of the year, an increase of 2,000 tonnes compared to last year.

Le Thi Hue, owner of a newly built trawler, said her vessel caught 7 tonnes of tuna during its first trip last month, equivalent to VND350 million ($16,000).

"The catch was still modest in comparison with the boat's 50-tonne load capacity," Hue said.

Despite a prosperous start to the year, fishermen remain anxious about their financial situation due to the petrol price hike earlier this month.

The figure for each litre of gasoline rose by VND2,100 while that of diesel (the main fuel used by fishing boats) rose from VND20,400 to VND21,400.

This means vessel owners have to pay between VND5 million and VND7 million extra for every voyage lasting around 15 days.

The city has reserved a fund to financially aid fishing vessels four times in a year since 2010, Khanh explained.

"The Farmers' Association also plans to build eight new boats in the third quarter of this year to help improve productivity," he added, saying the city has yet developed a purchase and logistics service to assist fishermen prolong their trips out to sea.

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