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Developers boosting sluggish apartment sales

Struggling with poor sales, a number of property developers have launched programs in which their customers can choose to pay by installment.

What property firms did in the old days was to name the banks that were providing home loans accounting for up to 70% of the value of an apartment. However, this practice is not working at the moment since extremely high interest rates prevent home buyers from taking out a bank loan.

Certain developers now allow home buyers to make a down payment equivalent to 50% of the value of an apartment and pay the rest by installment with a preferential interest rate or even have the payment term rescheduled if needed. They said they are willing to arrange loans for home buyers at interest rates lower than those at banks.

Le Thanh Co. is keeping a close watch on market movements as it is preparing to put up for sale 100 apartments in Le Thanh Twin Tower project in Binh Tan District. The project consists of 350 units worth VND1 billion each or VND14 million per square meter.

To attract buyers, the company lets them take delivery of apartments after a 50% down payment is made while the remainder will be paid over a period of five years at a fixed monthly interest rate of 1%.

Flats in Quang Thai Apartment in Tan Phu District developed by Hoang Anh Sai Gon Real Estate Co. are on sale at VND13.5 million per square meter. Half of the apartment’s value will be paid shortly before the handover of the home and the rest will be paid over two years without an interest rate.

This sales strategy not only helps investors ride out tough times but also supports home buyers overcome financial constraints.

Other realty developers that will take part in a property fair organized by Eden Real Co. in HCMC from March 21 to 26 said some 20 condo projects across the city would be put on sale by installment plan.

If house prices were high, buyers could hardly have the opportunity to own a home. Property developers are starting to adjust down their selling prices to levels that should be, said Huynh Kim Doan, director of Eden Real.

Building material unsold in gloomy real estate market

The building material market is seeing a serious slump as lack of new construction projects have weaned away several customers from an already gloomy real estate market.

Hoang Van Tieu, deputy director of Hoang Thien Phat Company, manufacturers of high quality building material in Binh Tan District, said that sales have gone down by 40 per cent compared to the same period last year.

Several regular customers have stopped buying building material as there are no new construction projects, added Tieu.

Similarly, Nguyen Kim Thuy, director of Hoang Son Company in Tan Binh District, said that since the beginning of the year, purchasing power has dropped by 50 per cent as compared to the same period last year.

According to the General Statistics Office, cement stocks of 3.5 million tonnes, steel of nearly 400,000 tonnes, and paving tiles worth VND2 trillion (US$95 million) are lying unsold.

Vietnam Steel Association forecasts that about 20 per cent of steel businesses will go bankrupt in 2012 if the gloomy conditions continue to prevail in the real estate market.

At present, steel companies like Viet Steel and Thep Van Loi have either reduced 50 per cent of their capacity or halted operations altogether. Several other companies are operating at only 30-40 per cent capacity.

Nguyen Tran Nam, Deputy Minister of Construction, said that to overcome this difficult situation, businesses should take the initiative and seek foreign buyers.

For instance, they can attend overseas fairs and exhibitions for building materials, contact Vietnamese commercial affairs organisations in other countries and work with them to increase business opportunities.

They should also now invest more on advertising their brands, he said.

PPP yet to deliver tasty fruit

The public-private partnership agriculture model needs a boost to yield rich rewards.

In mid 2011, Thai Hoa Group Joint Stock Company came up with a public-private partnership (PPP) model in growing coffee in Lam Dong, Quang Tri, Son La and Dien Bien provinces. By that time, the company expected the PPP project could bring breakthroughs in local coffee production, creating a stepping stone to form a successful coffee production chain.

The model, however, failed after a half year’s implementation with farmers turning their backs on the project. Thai Hoa incurred losses of VND120 billion ($5.7 million) from the project in 2011.

Another PPP coffee growing project handled by Nestle Vietnam in association with some foreign firms including Yara, Syngenta, BASF, Bayer, EDE Consulting, Cisco and some others, however, is faring well.

The project, with support from an international non-governmental organisation, takes place in Central Highlands’ Dak Nong province with around $24 million in investment and attracting 17,250 farmers.

“The project is evolving so quickly,” said Nestle Vietnam’s external relations head Vu Quoc Tuan.

“Our PPP project involves businesses in diverse areas like fertiliser, pesticide and trade. Farmers get from us fertiliser, pesticide, production techniques and the promise to buy end products, a crucial factor to attract farmers,” said Tuan.

Nestle Vietnam’s PPP project success partly came from the fact that the project was planned scientifically from sourcing capital, training staff and farmers to setting responsibilities for businesses and farmers. Violators, either firms or farmers, would incur a penalty or even face filling in court procedures.

In fact, PPP projects’ success and failure mainly relies on firms’ capacity and policy frameworks. Firms argued the current PPP state regulations did not cover PPP in agriculture.

For instance, in the prime minister’s draft decision on corporate income tax incentives to companies having cooperation contracts with the state, firms signing contracts with farmers benefit from incentives, while the draft does not mention groups of companies doing the same thing.

When investment capital comes into agriculture has trended downward, PPP is expected to unblock capital channel into this field. In fact, PPP projects into agriculture are resuming quick pace with five PPP taskforces currently in place and active support from 14 multinational groups in Vietnam.

“Vietnam is viewed as rich in PPP agriculture. However, the game is not only for multinational groups but also for local companies,” said head of the Institute of Policy and Strategy for Agriculture and Rural Development Dang Kim Son.

“With current five PPP taskforces and one about to take shape there will be more PPP projects in agricultural sector in the coming period,” Son asserted.

Single-digit inflation hard to achieve: trade ministry

The single-digit inflation goal for this year is a real challenge but the Government is still trying to translate it into reality, said Deputy Minister of Industry and Trade Hoang Quoc Vuong.

Speaking to representatives of local and foreign businesses at a business luncheon organized by the European Chamber of Commerce in Vietnam (EuroCham) in HCMC last week, Vuong said the consumer pricing index in the first two months of 2012 was the lowest same-period level compared to previous years.

Inflation hit 18.58% last year and 2.38% in the first two months of this year.

“Observing what happened in the first two months compared with the records in many years before and with the measures we are implementing now, we hope that the (inflation) situation can be under control,” he said.

Vuong furthered that budget deficit would be within the target that is 4.8% of the country’s gross domestic product this year.

However, Vuong said it was a difficult task to rein in inflation below 10% this year as the Government was under pressure to allow for adjustments of prices of so many key items including gas, coal and electricity.

“So, the Government has to carefully and cautiously consider (the price adjustments) so as to keep the inflation rate under control,” Vuong responded to a question from the audience regarding how to balance the inflation target and increasing prices, particularly possible electricity tariff hikes in the coming time.

“I cannot confirm anything at the moment,” Vuong said and stressed that power tariffs would change in accordance with major input generation cost factors, including the exchange rate between Vietnam dong and the U.S. dollar.

“How much power tariffs are revised up should be carefully and cautiously weighed by the Government so that we will achieve the bigger objective of macroeconomic stability,” Vuong said.

In its latest report on Vietnam, HSBC Global Research projected the Vietnamese currency would depreciate to VND21,500 per dollar by the end of this year given concerns about connection with double-digit inflation, negative real interest rates and a sizeable trade deficit despite improvements in these fields.

“We have long been of the view that Vietnam dong still faces downside risks and have been calling for further depreciation of U.S. dollar-Vietnam dong to VND21,500 by the end of 2012. This would be largely in line with what the State Bank of Vietnam recently stated was its view for the dong in 2012 - when (SBV) Governor Nguyen Van Binh stated that he saw no more than 2-3% depreciation this year,” the report said.

The Ministry of Industry and Trade is making efforts to maintain the same trade deficit this year as in 2011. Last year saw exports increase over 33% year-on-year to exceed US$96 billion and imports near US$106 billion, leaving a trade deficit of US$10 billion, which was lower than the US$12.6 billion in 2010.

Car-makers look to hit top gear

Car manufacturers are driving to boost sales amid fears the current fee scheme will hurt business plans.

Toyota Motor Vietnam (TMV) aims to sell 550 Innova and 560 Fortuner multi-purpose vehicles per month.

However, these sales figures do not take into account fee factors like the road-use fee to be applicable from June 1, 2012 or the Ministry of Transport’s proposed vehicle circulation fee which was under government consideration, according to TMV’s general director Akito Tachibana.

TMV’s simultaneous launching of Innova and Fortuner new versions late last week were expected to bring some hopes to the stagnant market.

Innova, which first appeared in 2006, has been the best selling car in Vietnam’s auto market with an accrued sales figure reaching 60,000 units as of February 2012, making up 64 per cent of the multi-purpose vehicle market share.

Fortuner also leads mid-size sport utility vehicle segment with 20,000 vehicles being sold in three years, representing 47 per cent of this segment market share. Average sales figures were then 900 units per month for Innova and around 550 units for month for Fortuner from its debut.

Vina Mazda just aired an attractive promotion programme with price discounts and insurance preferences to Mazda 2 and Mazda 3 in March at a total value of more than VND45 million ($2,140) per car.

Mercedes Benz Vietnam rolled out the ‘golden promotional month’ programme with a discount of up to 5 per cent for passenger cars and 10 per cent for commercial vehicles this month.

Though holding high hopes for the auto market’s vibrant development in Vietnam, car manufacturers expressed worries about current fee scheme levied on automobiles.

Accordingly, except the road-use fee to be applicable from June 1, 2012 with a proposed amount from VND180,000 to VND1.44 million ($8.5-$68.5) per month, motorbike and car users incurred seven different kinds of fees such as ownership, number plate registration, petroleum, registration and quality certification fees.

Besides, in a recent working session with Ho Chi Minh City authorities, Deputy Prime Minister Nguyen Xuan Phuc said the government needed the circulation fees to restrict personal car usage.

However, TMV’s deputy general director Dang Phan Thu Huong said: “Fee hikes and a series of measures cutting personal car usage to better local traffic conditions are scaring investors. Infrastructure woes might be sooner or later addressed, while it is almost impossible to call back retreating investors.”

Binh Phuoc supports cashew

Seven cashew processing businesses in Binh Phuoc Province will be supported in upgrades to their machines, capacity and product competitiveness for exports.

Those are Hoang Son 1 Co Ltd, Son Thanh Co Ltd, VAC Co Ltd, Hoang Xuan Co Ltd, Nguyet Quy Co Ltd, Song Hy Co Ltd and Xuan Truong Co Ltd.

These businesses have been given soft loans from the provincial Science and Technology Development Fund.

Bui Van Trach, vice chairman of Binh Phuoc People's Committee said that in order to receive the support, businesses must have themselves upgraded their technologies and be members of the Binh Phuoc Cashew Association.

Volatile gold price puts buyers at risk

The domestic gold price in recent days has been nearly VND3 million higher than the global level, exposing buyers to high risks of losses.

The price gap has widened as global gold has declined up to 3.8% in the past month while the domestic price has dropped a mere 1%.

According to the Saigon Jewelry Holding Company, which dominates 90% of the domestic gold bar market, the falls in global and domestic gold prices have not been in harmony as it often takes time to seek central bank approval for gold imports. However, no gold import license has been issued since early this year.

Banks and SJC are not allowed to import the yellow metal while trading through accounts is only permitted at certain times, making the local gold supply unchanged. This has made it hard for SJC to sell large amounts of gold, thus keeping the domestic price from declining in tandem with global market movements.

Dinh Nho Bang, vice chairman of the Vietnam Gold Traders Association, said the central bank had yet to make any moves to intervene in the gold market though it had announced to choose SJC as a national gold brand. The central bank also said it would try to keep the local-global price gap below VND400,000 per tael. A tael equals 1.2 troy ounces.

At the moment SJC does not see why it should sell gold it imported at a high price.

Bang said the central bank should take action to narrow the gap and guard gold buyers against possible losses.

According to another member of the association, local trading firms are selling gold at a high price as the current price of Switzerland’s gold brands present in Vietnam is also VND2 million per tael lower than the domestic price.

So a decree on gold trading, when in force, will help cope with this problem as the domestic market is connected with the global one, he said.

However, the monopoly of gold trading and production should be taken into consideration to prevent gold buyers from any potential losses, he added.

Meanwhile, a banker in HCMC said gold trading firms and banks cannot buy a large amount of gold as they are bounded by the central bank’s regulations. The higher domestic price also results from the limited buying volume as firms can sell a large amount only when permitted, he said.

The price gap between global and domestic prices will get smaller if gold is officially imported or if traders are allowed to sell gold through accounts, he added.

According to gold experts, although the local price is much higher than the global level, there are no signs of gold smuggling because the current rules require clear origins of imported gold and importers have to get central bank approval for making SJC gold.

Exports hit with increased charges

An increase in container shipping fees has caused more financial difficulties for exporters, according to a report in the Sai Gon Tiep Thi (Saigon Marketing) newspaper.

Foreign shipping lines raised their charges earlier this month on many shipping routes from Viet Nam to many countries, including the US as well as the Middle East and Europe.

The Hong Kong-based carrier OOCL, for instance, raised its charges by US$600 per container on routes from Viet Nam to northern Europe and to countries in the Mediterranean area.

Similarly, the German-based Hapag Lloyd maritime carrier increased its charges on routes from Viet Nam to North America by $600 per container.

Other shipping lines such as CMA, Maesk Line and NYK raised container shipping fees by $800-$1,000 per container.

A representative of a shipping company said the fees were raised to recover freight charges that dropped sharply in 2008 and to make up for fuel-price rises.

Duong Ngoc Minh, general director of Hung Vuong Seafood Company, said he was shocked at the news that each export container would have to bear an additional of $800-$1,000 in shipping fees, depending on the route.

The higher container shipping fees meant each kilo of exported frozen tra fish must cost an additional VND1,000, he said.

The company began paying on March 1 an additional $10,400 on average in shipping costs to transport its frozen tra fish to the EU, the US and South America.

Many exporters of rice, cashews, coffee, garments and textiles as well as furniture said the increase of freight charges caused problems for them since many of them ship under C&F (cost and freight) delivery conditions, meaning that sellers have to bear transport costs.

A director of a cashew export company said his company had paid $1,700 per container to Europe in earlier this year, but the cost had risen to $2,500 a container now.

Nhu Hong Hanh, head of import-export at Viet Tien Garment Company, said even when the importer pays transport costs, garment and textile companies still have to pay many fees, including fuel surcharges and container imbalance charge.

Export companies said that raising export prices to compensate for the losses was not feasible, as it was difficult to negotiate with importers on higher prices.

BIDV helps farmers stockpile rice

The Bank for Investment and Development of Viet Nam (BIDV) will lend about VND150 billion (US$7.1 million) to traders in the Cuu Long (Mekong) Delta provinces to purchase rice for their reserves.

The loans, expected to help traders buy about 18,000 tonnes of rice, are part of a programme designated to buy a million tonnes of rice for reserves between March and April under the latest Government instruction.

The aim is to help local rice growers sell at reasonable prices for a bumper harvest.

Rice traders who are part of the programme will enjoy a preferential interest rate of 14 per cent per year for the loans made between March 15 to June 15.

Farmers continue to lose

Massive evictions from suburban area farmland for urbanisation and industrialisation since the 1980s had forced a large proportion of farmers to seek new livelihoods without proper preparation to become urban residents, according to researchers.

Lecturer Nguyen Van Suu from the University of Social Sciences and Humanities at Viet Nam National University said that at least 150,000 farming households in Ha Noi lost their traditional jobs in the last 10 years as 11,000 hectares were turned into non-agriculture land to develop over 1,700 urban development and industrial projects.

His data comes from a study of two suburban communes in Ha Noi, Phu Dien and Gia Minh [about 10 – 20km away from the city centre], which was presented at the 9th Viet Nam-France Economic and Financial Forum titled "Sustainable Development for Suburban Areas in Viet Nam" held in Ha Noi yesterday.

Three-fourths of the farmland had been allocated for other purposes since the 1990s while the remaining fields were scattered and small in size, he said.

Farming was no longer the sole livelihood for local residents, he said, adding that now, many former farmers rented out their houses to migrant workers or students.

"Residential urban housing projects built on seized farmland offer farmers very few jobs," he said. "The situation is better in industrial zone projects but the lack of skills and discipline prevent them from getting jobs," he said.

The shift from rural to urban lifestyle helped improve their income but challenges also arose including contradictory benefits in land-seizure-related compensation, unemployment and social evils.

In HCM City's suburban areas, the percentage of labourers working in the agriculture sector ranged from 5 per cent to 40 per cent depending on their distance to city centre, said Ton Nu Quynh Tran, director of HCM City-based Centre for Urban and Development Studies.

In urbanised areas, farmers gave up farming because of narrowing land, low income, hardship and labour scarcity. Farming service providers were also affected, she said, adding that they chose new non-agriculture jobs in sectors such as bricklaying, hair styling, and motorbike repair. However, a majority of the jobs were unstable and farmers tended to make hasty decisions in selecting a job to survive instead of caring for job sustainability, she said.

Meanwhile, job training policies in urbanised areas were not effective due to the shortage of trainers, teaching materials and the gap between training and real market need, she said.

Deputy director of the Vocational Training Department's Research Centre for Vocational Training Mac Van Tien said that job training for rural and suburban people had become an urgent need because 80 per cent of the current 36 million rural labourers were untrained.

Viet Nam targets to reduce the percentage of people working in the agricultural sector from the current 70 per cent to 30 per cent of the total workforce by 2020, equal to 19 million people.

The Programme on Vocational Training for Rural Workers through 2020, which was approved in 2009 and was the largest project ever to target rural workers, was expected to make a difference as it mobilised efforts by the Government, enterprises, scientists and the community, Tien said.

Enterprises were encouraged to get involved in designing training programmes, instructing trainees and buying products, he said.

Learners would gain an understanding of working conditions, environmental friendly production and food safety.

In his address at the two-day forum, Deputy Prime Minister Hoang Trung Hai said that mobilisation of resources and investment in urban development infrastructure was a key solution for challenges posed by the high urbanisation rate.

The public-private partnership model was an effective channel and benefits needed to be harmonised with the Government, private investors and service users to ensure sustainable development, he said.

France's former Minister of Civil Service Christian Jacob, who is also co-chairman of the forum, said that Viet Nam needed to improve its legal framework and boost the co-ordination between central and local Governments to carry out PPP projects.

Land management and re-training for people in suburban areas to adapt to urbanisation were crucial to ensuring urban sustainability, he said.

State insurers muddle through in tough times

The cumbersome organisation of State-owned insurance enterprises has driven up bad debt levels in the industry, while unfair competition within the segment has lowered premiums and negatively affected the performance of companies in the sector, said the Director of the Ministry of Finance's insurance supervisory department, Trinh Thanh Hoan, at a meeting in Ha Noi last Friday.

Deputy Minister of Finance Tran Xuan Ha said some companies continued to see shortcomings related to accounting and risk management, which led to inefficient investments and losses.

Bao Minh Insurance Corporation chairman Tran Vinh Duc told Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) that difficulties in the economy were a significant challenge to insurers, both in marketing products and collecting premiums.

While companies had managed to buck inflation and hold the line of management costs and compensation totals, premiums have remained stagnant and their incomes from financial investments have been slashed by decline on the stock and property markets.

"For insurance businesses, profits from insurance services are very important, but with the present high costs, it's extremely hard to gain profits from the services," Duc said.

Insurers last year paid total compensation of around VND16.5 trillion (US$793.27 million), an increase of 56 per cent over the prior year, while life insurance payments alone reaching VND7.7 trillion ($370.2 million), according to ministry figures. Overall, however, the insurance sector managed to maintain stable growth despite the economic downturn, and most insurers were able to assure payment capacity and capital sources.

Insurance premiums totalled about VND46.8 trillion ($2.25 billion) last year, 23.2 per cent higher than in the previous year and representing 1.85 per cent of the nation's gross domestic product (GDP), the ministry's insurance supervisory department reported. Under the national strategy for the development of the insurance market, the sector would contribute 3-4 per cent of GDP by 2020.

The Ministry of Finance last year licensed four new insurance companies, lifting the total number of domestic insurers to 57. Thirty-two foreign insurers had representative offices on the local market, the department said.

Ha said the legal framework for the sector would be gradually completed between now and 2020 to help insurers lift their governance to international standards. Weak firms would be restructured by 2015, and proper policies issued to help firms ensure capital security, risk control and information transparency between 2016 and 2020.

Going forward, he urged insurers to restructure investments and products, supplement capital to match risk levels, and assure payment capacity in every phase of their operation process.

Businesses drum up green growth incentives

Businesses have called for the Government to extend incentives to those committed to green growth investment initiatives.

Speaking at a workshop in the city last week on the Green Growth Strategy for 2011-2030, Nguyen Van Nam, deputy general director of KPMG Consulting Company, said green growth investment faced potential risk as it would take a long time to recover capital.

Investment in the sector requires creativity, finances and markets. Meanwhile, if a company creates an environmentally-friendly product, consumers may not get used to it right away.

Therefore, the Government should build up a legal framework that guarantees investors can recover their capital and have their interests protected. At the same time, the Government should help them with access to bank loans and other funding sources.

Vu Quang Thinh, managing director of Vietnam Holding Asset Management, said private enterprises would not hesitate to invest in green growth projects if the Government provided funding.

Some entrepreneurs said at the meeting that the public-private partnership (PPP) model should be developed to lure the involvement of different stakeholders such as the Government, consumers, donors and insurance firms. The Government can provide assistance for PPP projects via tax incentives.

However, there are some obstacles for the green growth strategy, Nam of KPMG said. Vietnam has yet to have policies to ensure investment in the sector while there has been no green project carried out effectively in the country.

Nguyen Quang Vinh, general secretary of Vietnam’s Business Council for Sustainable Development, said a couple of local enterprises had engaged in green growth projects. They include a power plant of Holcim that will reuse heat from the kiln system at the Hon Chong cement factory in Kien Giang Province while Saigontourist has plans to build a green hotel within the next three years.

EuroCham elects new executive

Members of the European Chamber of Commerce in Viet Nam (EuroCham) voted in a new Executive Committee last week at an annual general meeting in Ha Noi and HCM City.

The new committee, consisting of 16 senior representatives of European businesses in Viet Nam, aims to provide guidance and oversee the activities of the chamber as well as represent the interests of all EuroCham member companies in interactions with institutional partners, the Vietnamese government and the public.

The newly elected Committee will be led by Preben Hjortlund, Managing Director of the Ha Noi International Technology Centre. The new chairman replaces Alain Cany, who stepped down after seven years at the helm of EuroCham.-

China demand drives rice prices upwards

Rice and paddy prices have risen over the last week in the Cuu Long (Mekong Delta), the nation's rice basket, based on what observers say is increased purchasing power in the Chinese market.

As of yesterday , paddy and rice were selling at prices VND100 to VND120 per kilogramme higher compared with last weekend.

In Can Tho City and the provinces of Hau Giang, Vinh Long, Soc Trang, Tra Vinh and Dong Thap, undried IR 50404 paddy sold for VND4,450 – 4,550 per kilogramme, and dried paddy for VND5,400 – 5,500 per kg.

Undried long-grain paddy was priced at VND4,600-4,800 per kg and dried paddy at VND5,800 – 6,000 per kg while undried high-quality paddy sold for VND6,600 – VND6,800 per kilogramme.

Ho Quang Thai, a farmer from Vinh Thuan Trung Commune in An Giang Province's Chau Phu District, said with these prices, local farmers can earn profits as high as the winter-spring crop of 2011.

The rice reserve purchase plan (beginning March 15) and strong demand for rice from China are the main reasons behind the paddy/rice price hikes over the past few days, market observes and industry insiders say.

An exporter in the Cuu Long (Mekong) Delta who declined to be named said many Chinese traders have come to the area seeking to purchase rice, adding that the price of rice exported to China were US$15 to 20 per tonne higher than last week. Le Truong Son, general director of Docimexco Dong Thap, said that the buying power of the Chinese market has gone up in recent days.

In March alone, Vietnamese firms have registered to export to China 450,000 tonnes of rice compared with just 200,000 tonnes in the first two months of the year.

Nguyen Van Man with Tien Giang-based private firm Len Hiep said his company has been supplying supplied the Tien Giang Province Food Company with 1,500 to 2,500 tonnes of rice per week for export to China.

Many small and medium enterprises in An Thanh Industrial Zone and the Ba Dac wholesale market in Tien Giang Province have also been delivering rice to firms in northern provinces for sale to China.

Truong Thanh Phong, Chairman of the Viet Nam Food Association (VFA), told Viet Nam News yesterday that in the first two weeks of March, Vietnamese firms have signed contracts to export some 260,000 tonnes of rice to China, bringing the total rice exports to the country through the official channels so far this year to some 500,000 tonnes.

He put rice exports to China via cross-border trade over the same period at over 400,000 tonnes.

An estimated one million tonnes of rice can be exported to China in the first three months of this year (through export contracts and cross-border trade) and the figure is expected to further increase in the last three quarters of 2012 as China's demand for (Vietnamese) rice is on the rice, said Phong.

He said VFA will send a delegation next week to southern provinces of China to seek cooperation opportunities with Chinese firms after the two sides agreed to set up a centre to promote the export of Vietnamese high-quality rice.

According to VFA figures, as of mid-March, Vietnamese firms had won contracts to export 2.4 million tonnes of rice, as high as the same period last year, and 800,000 tonnes have already been shipped to buyers. VFA said some one million tonnes of rice will be exported in the first quarter of 2012.

Partnerships lift farmers' incomes

Thousands of farmers in the central province of Ninh Thuan have benefited from a project that has raised their incomes by being a partner with businesses to enhance competitiveness in agricultural production.

In addition to partnership, the Agricultural Competition Project, with chief sponsorship of the World Bank, also transfers technology and helps farmers reach markets more easily.

The project, with total investment of US$75 million, began in 2009 in the provinces of Ninh Thuan, Thanh Hoa, Nghe An, Gia Lai, Dak Lak, Lam Dong, Binh Dinh and Binh Thuan.

Under the project, Ninh Thuan received $8.24 million to implement four key components: agricultural technology enhancement, production-alliance support, essential infrastructure and project management.

Of those components, the production-alliance support, in which farmers cooperate or partner with businesses, plays the most important role in producing high-quality products and expanding the market, according to local authorities.

As part of the programme, farmers are given a 40 per cent discount for materials for agricultural production and receive free training in agricultural technologies.

In return, busineses are committed to buying products from farmers at the market price or 10 per cent higher than the market price.

The businesses are also committed to promoting the products and seeking markets for the products.

From 2009 to 2011, Ninh Thuan Province established nine agricultural production alliances (farmer-business partnerships) that have been operating successfully, according to local authorities.

In the Ninh Hai District's Xuan Hai Village, a state-of-the-art slaughterhouse has been built, which conforms to sanitation standards. It supplies 10 tonnes of fresh lamb every day.

Huynh Thien Nguyen Thanh Thoai, chairman of the sheep breeding alliance, said the partnership was set up between businesses and farmers in Ho Hai Village's Luong Cach Commune in March 2010.

The alliance received VND2.3 billion ($109,500), of which VND370 million went to businesses and the rest was equally divided among 52 farmer households.

With this financial support, the alliance improved breeding facilities, grew more grass for sheep breeding, vaccinated more than 3,000 sheep, and set up a website to promote their products.

In the last two years, businesses have bought about 52 tonnes of lamb from farmers for VND58,000 ($2.7) per kilogramme, VND18,000 per kg higher than market price.

Last year, the alliance also supplied lamb to HCM City and other northern provinces, with earnings of VND5 billion ($238,000), an increase of 150 per cent over previous years. Each farmer household earned a profit of VND40 million ($1,900) per year.

In addition, 90 green-apple growers in the province partnered with businesses to set up the Van Hai green apple alliance in June 2010. The alliance received VND2.4 billion ($114,300) from the project management board.

Since joining the alliance, the productivity of green-apple growing has risen from 38 to 42 tonnes per ha per year. Revenue from green apples last year reached VND6.8 billion ($323,800).

Another 167 farmers, who live in Ninh Phuoc District's An Hai Village, have also benefited from two clean vegetable alliances located on a 250-ha area in the province.

Tran Van Hoan, a representative from the Tuan Tu – Dai Loi clean-vegetable alliance, one of two clean-vegetable alliances, said that after one year of joining the alliance, output value reached VND5.28 billion ($251,400), an increase of 139 per cent compared to the target.

Other alliances that have been set up that have been successful include alliances for goat-breeding, corn-growing, jackfruit-growing and sugarcane-growing.

Local authorities have recommended that the model be replicated across the country.

The most important aspect about the model is that many products such as rice varieties, vegetables, green apples and sheep have attained stable outputs, bringing income to both farmers and businesses.

This bodes well for further farmer-business partnerships that would produce onions, garlic, salt and grapes, among others.

Chau Thang Long, deputy director of Ninh Thuan Province's Department of Agriculture and Rural Development, said farmers have become more aware of the environment and food-safety and hygiene standards.

For example, they have limited the use of pesticides and other harmful chemicals in growing vegetables and breeding animals in order to produce high-quality products.

Ninh Thuan Province targets setting up at least 12 agricultural production alliances by next year. It will also offer training in agricultural production technologies for 5,000 farmers.

It also aims to create 12,000 jobs for women and ethnic minority groups in the province.

The only drawback is management within the partnerships, which is still weak. Many disputes still exist among farmers and businesses, which need to be resolved, according to the project management board.

SMEs handed tax date extension

Small-and medium-sized enterprises (SMEs) and businesses hiring numerous local labourers have been given a three-month extension for their corporate income tax payment of 2011, the Ministry of Finance (MoF) reported.

According to Circular 42/TT-BTC, SMEs' corporate income tax payment for the first and the second quarters of 2011 will be extended until July 30 and October 30, 2012, respectively.

Mechanical industry needs feasible plan

The Government's plan to develop the nation's mechanical industry would only be successful when detailed and feasible policies were implemented, said chairman of the Viet Nam Association of Mechanical Industry (VAMI) Nguyen Van Thu.

Thu made the statement at a meeting with the Ministry of Industry and Trade (MoIT) on Wednesday where officials admitted that a Government strategy to develop the industry until 2010 with a vision to 2020 ratified by the Government nine years ago failed because it did not meet the set targets.

According to MoIT reports, as of the end of 2010 the mechanical industry had met only 34 per cent of the country's total demands against the target of 45-50 per cent set in the strategy.

In fact, the figure was only 25-28 per cent, Viet Nam News Agency quoted VAMI vice chairman Dao Van Long as saying.

Industry insiders attributed the strategy's failure to the fact that industry policies were too general and unfeasible.

For example, Thu said, though Deputy Prime Minister Hoang Trung Hai instructed relevant bodies to consider a VAMI proposal that would increase the use of domestically made mechanical products in the nation's thermal power projects by separating each project into ten contracts so that domestic producers could participate in the bidding process, there were no detailed policies for the implementation.

General director of the Xuan Kien Automobike Co (Vinaxuki) Bui Ngoc Huyen said though the Government's incentive policies on the industry were adequate, they were only on paper.

He used his company's VND100 billion (US$4.7 million) casting project for cars as an example. Though the Government approved the company to borrow VND250 billion ($12 million) with preferential interest rates from the Viet Nam Bank for Development in 2009, the company had yet to receive a disbursement from the bank due to complicated and inflexible procedures. Meanwhile, Huyen said, his company had invested VND400 billion ($19 million) in the project so far, which aimed a raising the number of made-in-Viet Nam components in the automobile industry.

To develop the mechanical industry, Thu said that the Government should make more detailed policies to support the industry and help increase the use of domestically made mechanical products in the country's investment projects through co-operation improvements between the mechanical industry with other industrial sectors such as thermal power, cement and petroleum.

Echoing Thu, Vinaxuki's Huyen said that China had ratified policies to require bodies and agencies that use the State budget to use domestically made products.

VAMI's Thu said that domestic mechanical products could not compete against cheap Chinese products in the local market due to the country's current bidding laws issued in 2005, which were interested only in prices but not the product origins and proportion of domestically made components.

Russia and India have adopted policies to prevent cheap and low quality products from being imported by requiring producers to have domestic maintenance and repair facilities while Viet Nam still allows imports of many cheap and low quality Chinese transformers.

General director of the Truong Hai Automobike Co Tran Ba Duong said that in the context of restricted capital sources, the Government should select only several key mechanical projects to support instead of making unfocused and scattered investment as it currently did in order to make the aid more effective. Science and technical projects in the mechanical industry, which receive aid from the Government but are unfeasible into reality, should be also removed, Thu said.

Concentrating on building steel vessels

Viet Nam Shipbuilding Industry Group (Vinashin) has begun a VND120 billion (US$5.7 million) pilot project to switch from building wooden vessels to steel covered ships, said Dinh Khac Minh, director of the Shipbuilding Science and Technology Institute.

The Government recently approved the pilot project which is expected to construct about 24,500 vessels at Vinashin's factories which are located in the southern city of Cam Ranh, central Nghe An Province and HCM City.

The vessels would be equipped with modern technology which was expected to boost the seafood industry and lower the unemployment rate, said Minh. The new vessels would also guarantee the quality of seafood and help prevent the food from being damaged during long fishing trips.

Construction of wooden vessels will cease because they pollute the water environment and kill marine habitats, while stainless steel vessels help protect the environment with their up-to-date technology and are affordable, costing only slightly more than their wooden counterparts. Each steel vessel will cost about VND4,5 billion (US$210,000) to construct and have a lifespan of about 20 years.

The first 22 steel vessels produced under the project will operate out of the central province of Quang Ngai.

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