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Future bright for cheap product brands

Experts forecast that in the next three years, one of every four products in a given supermarket would be a business's own brand product.

The prediction was made at a seminar entitled "The Movement of the Retail Market and Opportunities for Vietnamese Businesses" held in Hanoi on July 12.

Businesses' own brand products are those ordered by distributors to provide a huge quantity for specific consumers. Their prices were usually lower than competitors by 10 to 50 percent because of the amount distributors save from slashing marketing spending, the seminar was told.

Experts said that due to the recession and inflation, businesses' own brands would develop, expand and attract consumers with lower prices.

A new survey conducted by AC Nielsen shows that over 61 percent of consumers worldwide have chosen businesses' own brands during the recession and 91 percent will continue purchasing those products even when the economy recovers.

Participants in the seminar also analysed the future of the domestic retail market.

Le Linh, PepsiCo's director in the northern provinces , said that in order to serve customers better, retail businesses should build their own efficient supply chains and distribution networks.

But he added that PepsiCo had incorporated a direct model into its mostly indirect distribution system, saying that companies must tailor their models to their strategic development plans and specific characteristics, as there is no perfect model for all businesses at all times.

Mai Khue Anh, chief executive officer of Hapro Food, said her company decided to develop a supply chain of clean vegetable and foods by setting up many supermarkets in Hanoi .

At the beginning, Hapro Food performed poorly due to the well-established habits of consumers, who were used to buying vegetables and other foods very early or late in the day from street vendors or traditional markets, Anh said.

By establishing its own growing company in Dong Anh district, Hapro Food has been able to provide clean vegetables for the market and sign long-term contracts with major suppliers, currently operating 30 retail shops in Hanoi .

The seminar also discussed the retail market, which has proven to be the most lucrative sector in Vietnam .

Though the nation's retail sector ranked 14 out of 30 on the list of the most attractive emerging retail markets in the world, the market still had the capacity to develop well, experts said.

Vietnam owns the fastest-moving consumer goods market in Asia , as shown by the emergence of modern retail channels and the opening of new outlets and convenient retail shops nationwide.

In the past few years, the Government has supported Vietnamese products with the "Vietnamese use products made in Vietnam " campaign, which has sponsored a number of events and trade fairs and helped persuade consumers to buy domestic products.

At the seminar, Vu Kim Hanh, chairwoman of the High Quality Vietnam Goods Association, predicted that the domestic retail market would benefit from urbanisation and mass media services, helping retailers promote themselves and gain easy access to consumers.

She also said that Vietnam 's economy had shown signs of recovery, and credited the promotional campaigns of large retailers with the improvement.

Despite the domination of traditional markets, domestic consumers have become familiar with supermarkets, wholesale and retail shops that offer better quality products for the same prices.

Software forum attracts foreign businesses

Vietnamese IT businesses have joined more than 30 companies from Hong Kong, the Republic of Korea, Thailand and Malaysia in a forum themed “Software Park: Trends 2020” in Ho Chi Minh City on July 13-14.

At the forum, co-organised by the Quang Trung Software City and the Asia Oceania Regional Software Park Alliance (SPA), IT experts discussed software park development trends in the world and put forth forecasts for the next 10 years, thus drawing out models on the management of software parks as well as adaptability to the world economy’s new impacts.

During the event, participating businesses from Vietnam and other countries are planned to meet each other to seek business cooperation opportunities.

The Hong Kong delegation boasts the largest number of 18 businesses which want to boost cooperation in such fields as retail payment and telecom services, public relations, advertising, web development, communication solutions, mobile and banking services, and IT software processing.

The forum also offered a chance for domestic IT companies to promote their images to foreign markets.

Gold exports bring trade deficit down but not for long

The nation's trade deficit declined sharply to 5 percent of total export turnover in June, compared with 22.6 and 19.6 percent in April and May respectively.

This has helped reduce the overall trade deficit for the first six months of this year to 15.7 percent.

The sharp decline is attributed to the spurt in export of gold and gems last month, reaching 630 million USD, compared to 242 million USD in May.

However, the "significant gold export in June might not have had such a big impact on narrowing the trade deficit," Phan Van Chinh, head of the Ministry of Industry and Trade's Export – Import Department, told the Thoi bao Kinh Te Vietnam (Vietnam Economic Times) newspaper.

Chinh said that for the first six months of this year, gold exports reached 1 billion USD, accounting for 2.43 percent of the total export turnover, while for the same period last year the figures were 1.5 billion USD and 4.65 percent.

"The trade deficit of 15.7 percent is the lowest figure for the last five years," he said, adding that this reflected the effectiveness of measures taken by the ministry to tighten imports.

The ministry's effort has been recognised by the Government, which has said that the target set by the National Assembly has been met. The National Assembly had said that the trade deficit for the first six months of the year should not exceed 18 percent.

But the Government, in a first-half economic review, also noted that the trade deficit could increase in the future. It said foreign currency rates and price for imported goods had been fluctuating. All this might impact efforts to improve the balance of payments, control inflation, stabilise the market and boost production and commerce, it said.

Many senior officials also agreed that gold export was not sustainable and without it, the trade deficit was still over 18 percent.

"Looking carefully at the list, we can see that import of several luxury commodities that should have been curtailed, like automobiles and motorbikes, have increased 70 percent. Therefore, the trade deficit still needs more control," said Ha Van Hien, chairman of the National Assembly's Economy Commission.

He said that the foreign exchange rate was stable at present because of administrative management.

"The most important factor in stabilising the foreign currency balance and the exchange rate is trade deficit control, and that has not improved basically," he said.

More Vietnamese opt for long-haul travel destinations this summer

More Vietnamese are opting for outbound tours to long-haul destinations like the US and Europe this summer, travel agencies have reported.

HCM City tour operators said outbound tourist numbers to the US and Europe have risen by 30-50 percent this summer.

However, the growth rate for tours to ASEAN member countries remains almost unchanged, with numbers to China decreasing.

Perfect Tour Travel Co Ltd said from May to July it has eight groups a month, with each comprising nearly 40 tourists, compared to four groups last year.

The price of a US tour with Perfect has increased by more than 10 percent because of higher airfares, with a 10-day trip costing around 3,500 USD per person.

Viettours said the number of tourists to Europe is up 40 to 50 percent year on year.

Tran Doan The Duy, deputy general director of Vietravel, said tourist numbers to expensive destinations such as the US, Europe, and the Republic of Korea are up more than 40 percent.

Thach Khe Iron JSC thirsty for capital

Prime Minister Nguyen Tan Dung has requested Thach Khe Iron JSC (TIC) shareholders to contribute capital to the implementation of Thach Khe projects.

To date, shareholders of TIC, which is involved in iron ore exploitation in central Ha Tinh Province, have been slow in fulfilling capital contribution commitments, causing serious project delays.

The PM also instructed the Viet Nam Post and Telecommunications Group (VNPT), the Song Da Corporation, the Bank for Investment and Development of Viet Nam (BIDV) and the Viet Nam Shipbuilding Industry Group (Vinashin) to withdraw capital from TIC in order to focus more on their own core businesses.

TIC restructuring will be considered following Government approval of two of its projects related to iron ore exploitation in Thach Khe mine and the construction of a 2-million-tonne steel ingot production mill, according to the PM.

TIC, with a charter capital of VND2.4 trillion (US$114.3 million), began operations in May 2007.

TIC General Director Ho Duc Binh confirmed that, by the end of last year, shareholders had managed to contribute only 50 per cent of TIC charter capital.

Binh said that shareholders had failed in contributing VND1.3 trillion ($61.9 million) worth of capital in 2010, only contributing VND221.5 billion ($10.54 million), the amount which they should have paid in 2009.

Shareholders in TIC include the Viet Nam Coal and Mineral Industries Group (Vinacomin), which holds 30 per cent of stakes; the Ha Tinh Mineral and Trade Corporation (24 per cent) and the Viet Nam Steel Corporation (20 per cent). Additional shareholders include the VNPT (4 per cent), the BIDV (5 per cent), the Song Da Corporation (5 per cent), Vinashin (5 per cent), the Binh Minh Import-Export Company (4 per cent) and the Thang Long Mineral and Metallurgy Company (3 per cent).

Thach Khe iron mine is the largest iron mine in Southeast Asia with a total production capacity of 370-400 million tonnes, according to the Ministry of Industry and Trade.

SPA to help local firms in overseas expansion

The Asia Oceania Regional Software Park Alliance (SPA) will share software parks’ management experiences, cooperate in information infrastructure facilities and support enterprises wanting to invest abroad.

Lam Nguyen Hai Long, president of SPA and deputy CEO of Quang Trung Software City (QTSC) Development Company, said at a ‘Software-Trends 2020’ forum on Thursday that SPA member enterprises had agreed to support Vietnamese peers to invest in their countries.

In the meantime, QTSC will also support foreign SPA enterprises wishing to do business in Vietnam, he noted.

Wee Huay Neo, head of Knowledge Infrastructure Development at Malaysia Multimedia Development Corporation, said software parks (SPs) in Malaysia are based on the model of knowledge infrastructure including human resources, information technology services, research and development, education and intellectual property.

But SPs in Vietnam have been centering on physical infrastructure development, she said, adding now is the time for them to turn to human resource development, and research and development.

Cooperation among SPs in the region will contribute to solving demand on human resources, according to Suwipa Wanasathop, vice chairman of Thailand Institute Science and Technology Research.

Long said the Government plans to develop SPs in provinces and cities based on QTSC’s model. The company also intends to expand its model to other parts of the country such as Can Tho and Quang Ngai to support them in information technology.

Thirty foreign enterprises, mainly from Hong Kong and South Korea, and 40 domestic enterprises took part in the forum to seek cooperative opportunities in fields such as telecommunications, software, outsourcing and e-commerce.

Fund raising via stock markets proves difficult

The amount of capital that companies raised via the stock market in the year’s first half was trivial and barely increased from the year-earlier period due to the gloomy economic outlook.

Only eight companies sought to auction shares on the southern exchange in the January-June period, offering 145.9 million shares but selling only 32 million shares worth VND396 billion, according to the Hochiminh Stock Exchange.

The situation was similar compared to the first half last year when 11 companies offered 139 million shares via the southern bourse and sold only 22.1 million shares worth VND310 billion.

Investor appetite for risks seemed to be stronger on the Hanoi Stock Exchange.

In this year’s first half, there were five shares auctions on the northern bourse with 71.1 million shares on offer, and investors snapped up 43.6 million shares worth VND451 billion. However, the auction of Vietnam Steel Corporation alone accounted for the lion’s share, with up to 39.15 million shares finding buyers compared to 66 million shares on offer.

Among Asian stock indexes, the HNX-Index of the northern bourse fared the worst, falling as much as 34.9% in the first six months of this year, followed by the VN-Index of the southern bourse with a fall of 10.75%. Experts said the prospect for Vietnam’s stock market was still dim in the near term.

Viet Dragon Securities Co. in a report for July said investors would continue to unwind their positions to repay bank loans, thus exerting pressure on stock prices in the coming time.

According to a new draft circular of the central bank on the safety ratio of banks, credit institutions can lend a maximum of 3% of their equities for stock investment, said Viet Dragon Securities Co. Given the current total equity of banks at VND233.6 trillion, credits for stock investment should total only some VND7 trillion.

However, current regulations allow a bank to lend as much as 20% of its chartered capital to stock investors, meaning the banking industry could extend up to VND42 trillion in credits for stock investment. If the draft circular is approved, credits from banks for the stock market must be downsized by six times, and equal to just one-third of the real amount of loans for portfolio investment now.

Therefore, Viet Dragon Securities Co. predicts the stock market cannot strongly increase in the near future.

Sacomreal allocated land for villa development in Thu Duc

Sai Gon Thuong Tin Real Estate Joint Stock Company (Sacomreal) has announced it will develop a villa area in HCMC’s Thu Duc District, a week after it received approval from the city government for a residential project in District 7.

Sacomreal said on Wednesday the city had agreed to allot the company 9.2 hectares of land in Hiep Binh Phuoc Ward in the district to develop the Arista Villas project located along Vinh Binh River.

Arista Villas will design 122 row houses, some 120 villas from one to four levels and other facilities such as a school, club and park.

The company has completed the project’s compensation and site clearance, and will commence work on construction later this month, it said. As scheduled, the villa project will be launched onto the market by the fourth quarter of this year.

Last week, the local property developer received a 10-hectare site in District 7, where it plans to develop a residential complex comprising condos, villas and row houses, and a section for a school and other serviced facilities.

Sacomreal said it has met representatives of some foreign companies who came to sound out business opportunities in property project development in the near future.

Sacomreal showed Singaporean company Mapletree Investments, a real estate arm of Temasek Holdings, its potential residential projects including the Arista Villas project.

Mapletree Investments plans to establish a fund worth from US$300 million to US$500 million to invest in property projects, targeting serviced apartments, office and retail sectors in Hanoi and HCMC.

Sacomreal last June introduced its potential projects to representatives of three companies including Sung Chang of South Korea, Engel Invest of Israel and Raffles Education of Singapore.

Many hospital projects in HCMC still inactive

The health sector of HCMC still fails to answer a critical question when overload at hospitals could be reduced as many hospital projects still remain on paper, according to a Q&A session at the city’s People’s Council meeting.

Huynh Cong Hung, a member of the People’s Council, criticized that as many as 101 projects are still inactive, including 28 projects to build state-owned hospitals. He urged the city’s health officials to pinpoint reasons for this.

Hung said in the first half of this year, the health sector began work on only 31 projects, including many projects to acquire equipments for hospitals. Such a pace is unacceptable, though officials explained that many hospital projects were progressing slower than schedule because of problems with site clearance and administrative issues.

There are currently 32 state-owned and 32 private hospitals in the city, besides 13 centrally-governed hospitals, over 1,300 grassroots medical clinics and 322 medical stations.

Such facilities provide medical examination and treatment for 28 million outpatients and five million inpatients a year, with around 40% of them coming from provinces across the country.

Pham Viet Thanh, director of the HCMC Department of Health, pointed to foot-dragging site clearance and red tape in making investment procedures behind the slow progress.

“Site clearance and procedures are the complicated problems for any hospital projects in the city. We need more time to solve it. The process to map out and make procedures for each project is three to five years,” he said.

For example, Thanh said, the city government approved a plan to build hospitals in areas around the city’s gateways to reduce overload and traffic congestion in the city center and offer better health care service to residents in remote areas. Under the plan, the city had plans to start work on a children’s hospital, an eye hospital, and some others on September 2 but the schedule cannot be kept because of the prolonged site clearance, he said.

“The price of land as a condition to step up site clearance was just approved last week,” he lamented on complicated procedures.

Overload at hospitals and the poor provision of health services are making many local people spend more money on treatment in foreign countries.

“Our treatment method and professional quality are not lower than those in foreign countries but we are lacking good hospitals with full services to cater to the high demand of patients,” Thanh said.

Apart from the overload at hospitals, members of the city’s People Council on Thursday also focused on food safety and epidemic control issues.

Viet Nam forced to import coal

The nation is becoming a coal importer due to high demand and dwindling domestic supplies. Last month, the State-owned mining giant Vinacomin Group accepted the country's first-ever batch of imported coal for domestic use.

The shipment of 9,570 tonnes imported from Indonesia arrived at Cat Lai Port in the southern province of Dong Nai and would be used as fuel for thermal power plants in the central and southern regions.

Viet Nam has been a coal exporter for decades, relying on its large coal deposits, but the imports have become necessary as buying imported coal has become cheaper than extracting domestic coal, according to Vinacomin.

Importing low-energy bituminous coal for use in power generators became preferable to using domestic coal, a high-energy anthracite mainly used in chemicals and metallurgy, said Vinacomin's acting deputy director Vu Manh Hung.

"We should sell our high-quality coal and import cheaper coal," Hung said. "Power plants have been advised not to waste anthracite to generate electricity."

Earlier projections had said coal imports would become necessary in 2015, but heavy exports of domestic coal and inadequate policies for stockpiling supplies have pushed that date forward, said Vinacomin general director Le Minh Chuan.

It was also a purely economic decision, Chuan said. The price of coal imports from Indonesia were US$100.60 per tonne while the cost of domestic coal transported from the north to the south had reached $122 per tonne.

"The imports from Indonesia were done on a trial basis to test the strategy of importing larger volume in the future," Chuan said. "Finding supplies is also not easy. Previously, Vinacomin spent a lot of time negotiating with Australian and Russian partners, to no avail. Recently, however, we were able to win the agreement with Indonesia."

Viet Nam was also competing for supplies with more established buyers like Japan, South Korea, India and China, Hung said. "These importers have eaten up most of the available coal from mines in Indonesia and Australia. Viet Nam would be hard-pressed to obtain a large volume of coal from those countries."

"The important thing is to have a strategy and familiar import markets," Chuan added.

To ensure overseas supplies in the future, enterprises would need to buy rights to exploit or to the production of particular mines.

"Local enterprises need good financial conditions to invest in coal mining abroad," said the director of Vinacomin's Red River Energy Co, Nguyen Thanh Son.

China has invested $5.6 billion in Australia for the rights to exploit 30 million tonnes of coal per year, Son said.

"To ensure coal imports to meet domestic demand, Vinacomin and some other groups were working out financing arrangements for importing coal from abroad," Hung said.

Meanwhile, the group was exploring a new mine with a capacity of 1.5-3.5 million tonnes per year, Hung said.

The group also expected the Government to approve the plan on exploring and exploiting the coal basin in the Red River delta. Meanwhile, Vinacomin was co-operating with Hung Yen and Thai Binh provinces in the delta to conduct trial exploitation on small scale, with the target of obtaining coal and providing local jobs.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said the ministry would build a reasonable strategy on coal imports and exports to ensure energy security.

Vinacomin would need $1 billion annually to increase coal production to 48 million tonnes in 2015 – 8 million tonnes higher than the current output – and to 55-70 million tonnes in 2020. Demand was estimated to reach 54 million tonnes in 2015 and 150 million tonnes in 2020.

The group expects to import 10 million tonnes of coal annually this year and next, mostly low-energy bituminous coal for use in power generation. The figure was estimated to reach 100 million tonnes by 2020 to meet the urgent demand for electricity as well as demand of other industries such as steel and cement.

Binh Duong eyes Japanese investment

The southern province of Binh Duong hopes to attract Japanese businesses.

At a recent meeting between local officials and the Japanese Business Association of HCM City, the chairman of the province People's Committee, Le Thanh Cung, hailed the contribution of Japanese firms to the Binh Duong province's development and encouraged further investment.

Tran Van Lieu, director of the Binh Duong Industrial Park Authority, speaking at the inaugural ceremony of a Japanese garment enterprise yesterday, said despite the difficult economic situation, the province's industrial parks operated well and achieved satisfactory growth in the past six months.

The province has become a popular destination with foreign investors, especially Japanese, due to its good infrastructure, administrative reforms, and availability of human resources, he said.

Kawase Toshihiko, director of Toyotsu Vehitecs Viet Nam Limited Company, the new garment company that opened in the My Phuoc 3 Industrial Park, said they decided to build the factory there to escape the high competitiveness in HCM City. The factory has recruited more than 200 workers.

"We opened a representative office in Viet Nam in 1999. We decided to build the factory after carefully studying investment opportunities in several provinces and cities. Finally we chose Binh Duong. Workers here are hard-working."

There has been a growth in Japanese investment in Binh Duong recently. Of 587 foreign projects there, more than 150 are Japanese who have invested US$1.4 billion.

Import tax on raw cashews to be cut

The import tax rate on raw cashews would be cut from 5 per cent to 3 per cent from the beginning of September, according to the Ministry of Finance.

The rate is being cut following a proposal by the Viet Nam Cashew Association in order to increase the domestic cashew industry's competitiveness as well as to overcome challenges.

According to the association, the country needed to import about 450,000 tonnes of raw cashew from Africa, Indonesia and Cambodia to reach the target of reaching a cashew-based export revenue of US$1.5 billion this year.

However, the association said domestic cashew processors were facing many challenges due to high interest rates.

Furthermore, Brazil, the world's leading cashew grower, had a poor crop this year, and had to buy raw material from Africa, forcing the price up, the association added.

A report from the Ministry of Agriculture and Rural Development said that in the first half of this year, Viet Nam imported 126,000 tonnes of raw cashew.

During that time, the country exported 67,000 tonnes, worth nearly $500 million, down by 16.5 per cent in volume but up by 17 per cent in value year-on-year.

The export price in that time hit $7,500 per tonne, a year-on-year increase of 40 per cent.

The United States is the biggest customer of Vietnamese cashew processors, followed by the EU and other Asian countries.

SMEs need more support: VCCI

The Viet Nam Chamber of Industry and Commerce (VCCI) has requested the Government to consider introducing several macro-economic policies to help all businesses and small and medium-sized enterprises (SMEs) in particular overcome difficulties.

At a meeting held by the chamber in Ha Noi yesterday, Nguyen Thi Thu Hang, director of the organisation's Enterprise Development Institute, asked the State to create capital resources by slashing public investment projects.

She also asked for interest-rate support packages for SMEs. Interest rates should stay at less than 12 per cent per year, she said, adding that the establishment of a SME support fund would help.

Also, a credit rating system should be developed to help commercial banks quickly appraise and approve loans for SMEs.

Hang said that the central bank should continue limiting loans to the non-productive sector. However, projects on building or developing industrial complexes and offices for lease by SMEs should be counted as productive.

On behalf of the Vietnamese businesses community, she suggested that the Government should introduce strategies to lure foreign direct investment from value-added sectors, Hang said, adding that co-operation among domestic and foreign enterprises would sharpen the economy's competitive edge.

Representatives from associations said SMEs and exporters who used domestic input materials and were involved in support industries should be given priority regarding capital and technology.

Nguyen Ton Quyen, vice chairman of the Viet Nam Timber and Timber Products Association, said the sector aimed to reach an export turnover of US$4 billion this year.

However, members of the association were facing many difficulties because they had to import materials from abroad while the United States and the European Union placed stringent standards on imported timber materials.

Although the sector needed to borrow about $1 billion in loans from banks and credit institutions to import input materials, most members of the association have found it hard to access banks loans due to their small size, Quyen said.

He also requested the electricity sector to give notice of power cuts so that enterprises could adjust their production schedules.

Many SMEs expressed concern about high interest rates, saying they had adversely affected their operations.

According to a new survey conducted by the VCCI on 360 businesses and 34 business associations nationwide, about 62 per cent conceded that production costs had increased significantly and 44 per cent reported declining profits on each product unit.

The survey showed that as of April this year, about 44 per cent of businesses were borrowing from banks at interest rates of more than 18 per cent per year.

At the beginning of last month, some enterprises encountered higher interest rates, from 20 per cent to 27 per cent per year.

According to the Ministry of Planning and Investment (MPI), up to the end of last year, about 544,394 enterprises were registered under the Law on Enterprises. During the first half of the year, more 39,500 new businesses were added with a total registered capital of VND230.2 trillion ($11.2 billion).

Although the number of new enterprises had been increasing in recent years, the number of surviving businesses was fewer, the ministry asserted. The ministry also said that stockpiles of industrial products were challenging businesses and the industrial sector.

Instability causes foreign investment to shrink

International development partners are urging the Government to settle down the macroeconomic chaos in order to put the country back to the radar screen of foreign investors as uncertainties have caused foreign investment to fall.

Japan is the pioneer to do so. For the first time ever, the joint committee of the Vietnam-Japan joint initiative phase 4 has defined macroeconomic stability as the major condition for the country to improve the business environment.

The initiative, being implemented from July to the end of next year, highlighted concerns over the depreciation of Vietnam dong as well as other macroeconomic uncertainties.

“Vietnam dong has been continuously weakening for the past three years… Only Vietnam dong has devalued while the neighboring nations’ currencies have all strengthened against the U.S. dollar,” the joint committee said in a document issued on July 1.

Japanese Ambassador Yasuaki Tanizaki, in the meeting of the joint initiative in Hanoi this month, said many Japanese investors here were facing macroeconomic difficulties, especially the exchange rate volatility.

“Improving the macro-economic situation is essential for Vietnam to lure foreign direct investment,” he said.

The European Union announced it was mulling a plan to give Vietnam a grant of 150 million euros, or US$212 million, to support poverty reduction and the health sector in the next two years. However, the EU delegation said such financial support would only be possible if macroeconomic stability is maintained.

Emmanuel Mersch, EU Chargé d'Affaires, urged the Government to continue adhering to austerity measures to achieve stability.

“Only full implementation of the measures outlined in Resolution 11 and a commitment to macroeconomic stability over the medium term would help restore confidence in the Vietnamese economy,” he said.

He cautioned the Government against complacency, and urged Vietnam to be patient with firm intention to reduce inflation and restore stability.

These warnings show the increasing uneasiness of the international community over the country’s economic situation. Such warnings also show development partners cannot wait until Consultative Group Meetings to table their requests to the Government.

Deputy director of the Central Institute for Economic Management Vo Tri Thanh explained that the international community is looking at Vietnam with high cautions. The Credit Default Swap (CDS) for the country now stands at 350 points, twice the level of the Philippines and Indonesia, he said.

“The index shows that our situation is much worse, and the international business community is keeping low credit for Vietnam’s macro-economic stability.”

The falling creditworthiness has adversely affected foreign direct investment in Vietnam in terms of both fresh commitments and disbursement.

According to the Ministry of Planning and Investment, newly-registered FDI in the year’s first half was around US$4 billion, or just one half of that in the same period last year. Meanwhile, disbursed FDI was US$5.3 billion, also lower year on year.

The disbursed amount has dwindled from US$1.4 billion in March to around US$1 billion in April, US$900 million in May and US$750 million in June.

Vice chair of the National Financial Supervisory Committee Le Xuan Nghia said, “The slowdown in FDI disbursement can only be explained by investor concerns over macroeconomic risks in Vietnam.”

Nghia said this would pile up more pressure on the exchange rate in the coming months.

Meanwhile, Minister of Planning and Investment Vo Hong Phuc said he hoped the stability would be reached early next year.

EVN executive grilled over wind power price

Local and foreign-invested enterprises raised a slew of questions about the newly-approved wind power price and development of renewable and traditional energy sources for Vietnam Electricity Group’s (EVN) planning director at a business luncheon in HCMC on Tuesday.

Gavin Smith, director of Clean Development at Dragon Capital Group Limited, asked Trinh Ngoc Khanh whether the wind power price of 7.8 U.S. cents for one kWh was attractive enough for investors to get involved in renewable energy development.

Such a price is a difficult choice for investors to make as the level in Thailand is 18 cents, Smith told the event, co-hosted by the European Chamber of Commerce in Vietnam (EuroCham) and the Vietnam Trade Promotion Agency (Vietrade) just two weeks after Decision 37/2011/QD-TTg signed by Prime Minister Nguyen Tan Dung.

Effective from August 20, the decision sets the delivery wind power price at VND1,614/kWh, excluding value-added tax and the rate is adjustable in line with Vietnam dong/U.S. dollar exchange rate movements.

Khanh acknowledged EVN was unable to decide the buying price, which remains one of the major barriers to having more investment in renewable and even traditional energy projects. This is also the reason behind power shortages in Vietnam, particularly in the dry season.

Erdal Elver, president and CEO of Siemens Vietnam, said the price remained a question but the decision was good news. “You may know that we have been waiting for a long time for such a decision and I think that this is very positive.”

Energy experts estimated one MW required average investment capital of US$2.2 million. So, they called for the Government to provide many incentives to fuel fast wind power development in Vietnam.

The incentives in the decision include tariff exemptions for goods including raw materials and semi-finished products that are not yet produced in Vietnam and imported for wind power projects as well as corporate income tax and land rent reductions and breaks.

Elver, who is also EuroCham vice chairman, and Robert Bosch Vietnam managing director Vo Quang Hue queried plans to balance the country’s energy mix and invest in new supplies to reduce the country’s reliance on non-renewable energy.

Khanh underlined that the Government had paid special attention to solar and wind power generation given the facts that the potential of hydropower generation in Vietnam was forecast to be fully exploited in 10 years’ time, offshore natural gas was limited and the country began to import coal.

Khanh said Vietnam had invested in a number of solar and wind projects for households and family-run enterprises since 2000. But development of these new energy sources has been met with a host of obstacles, including high production costs and a lack of back-up equipment.

Khanh said investors now had more favorable conditions and support from the Government, and the decision was part of this. He encouraged investors to look for the components produced in Vietnam for their renewable energy generation.

The Government web portal quoted the Ministry of Trade as saying that there were 21 wind power projects with each having capacity of 30 MW in research and development in Binh Thuan, Ninh Thuan, Binh Dinh and Lam Dong. These central and Central Highlands provinces are expected to bring about potential design capacity of more than 2,000 MW.

As wind and solar power investments are still underdeveloped, the country still has to rely heavily on hydropower, and coal- and gas-fueled plants. Khanh said hydropower plants made up nearly 40% of the national output and this was why hydropower supply fell short in the dry season from January to June, around three billion kWh in 2010.

Khanh said 38 projects would be commissioned in 2011-2015, with 26 invested by EVN and 12 by other domestic investors. He noted 15 of the EVN projects would go online in 2011, contributing 5,000 MW to the national grid.

Last year’s electricity supply rose 14.82% year-on-year to 97,335 GWh, with 42.3% of which produced by EVN, 51.93% purchased from other sources including build-operate-transfer (BOT) plants and 5.77% imported. EVN put the total supply this year at 110,820 GWh.

Exporters get stuck in rising farm produce prices

Rising prices of several types of local farm produce have put exporters in hot water as processors cannot buy them while delivery dates approach, industry sources said.

The local coffee price is mounting sharply, to some VND50 million or US$2,440 per ton, almost on a par with the level of US$2,460 per ton on Tuesday on the London commodities exchange. This means exporters will face big losses when taking into account all costs and expenses.

But the big problem is that most coffee exporters have signed futures contracts at a much lower price, and now find it hard to fulfill the deals, especially those with delivery in July.

Doan Trieu Nhan, an expert of the Vietnam Coffee and Cacao Association (Vicofa), said no one could have forecast at the beginning of the coffee season that the coffee price would climb steadily for such a long time. That explained why many traders had agreed to sell a large amount of coffee under futures contracts, and now face the dilemma of either accepting losses to buy materials at high prices or canceling contracts with buyers.

Similarly, the rising price of local paddy has forced members of the Vietnam Food Association (VFA) to halt its annual scheme of stockpiling one million tons of rice during the summer – autumn harvest.

The paddy price usually falls at this period of year due to adverse weather and low demand, and the stockpiling scheme has been deployed in the past several years to keep paddy price from falling below VND5,000 a kilo.

But currently, the market has shifted to a buoyant state. The average price of dried paddy and unpolished rice for processing into 15% broken rice also jumped to VND6,000 and beyond VND8,000 per kilo, respectively, VND300 per kilo higher than last week.

The food association said the current price hike has caused troubles to traders who have to buy materials for delivery under contracts that have been agreed at lower prices in June. An official of the association predicted the local price could continue rising in the coming time due to strong demand.

EU import laws could hurt Viet Nam exports

Under pressure from members states, the European Union is likely to tighten regulations governing imports – to the detriment of Vietnamese exporters – trade experts said yesterday in Ha Noi.

"The practical implications of the new decision making process will likely extend the duration of the proceedings and reinforce the technical legitimacy of the EU Commission under political pressure," said Olivier Prost, a partner at international law firms Gide Loyrette Nouel's Brussel's office and former director of the legal affairs division at the World Trade Organisation.

It is likely that before the Anti-dumping Committee meets, the EU Commission will adopt provisional duties after the Appeal's Committee has acted.

The EU might also increasingly use countervailing measures and even "combined anti-dumping/antisubsidiary investigations, causing additional problems for Vietnamese exporters, Prost said.

He said there was growing demand within the EU for protection against international "trade distortions", given substantial state aid in sectors such as renewable energy and telecoms.

What Vietnamese companies should note was the increasing political role of the European Parliament in such issues as labour costs, the environment and reciprocity, Prost added.

"Future possible trends in the use of anti-dumping and countervailing duties will be more proceedings with emerging markets, under the control of the World Trade Organisation," he said.

On the subject of "zeroing" – the method used by the US in calculating dumping margins which many foreign experts consider unfair, and the EU and Japan have been trying to persuade the US to scrap – Pieter Jan Kuijper, former director of the Legal Affairs Division of WTO said: "In recent cases, the US has not used zeroing. It can be expected that this method will no longer be applied."

In addition, foreign experts and Vietnamese authorities also raised concerns over the upcoming free trade agreement with the EU.

"Signing the FTA does not mean the elimination of trade remedies," Prost said.

After the signing, the two parties could still apply these measures. This was particularly relevant to countries that were not recognised as market economies. In FTA negotiations, it was important Viet Nam be recognised as a market economy, especially in the FTA with the EU, he added.

Meanwhile, Dinh Thi My Loan, president of the Viet Nam Chamber of Commerce and Industry's Trade Remedies Council, also stressed the importance of being recognised as a market economy.

"The non-market economy status would adversely impact on Vietnamese exporters. In the upcoming FTA with the EU, we have to prepare well to be recognised as a market economy. We have to prepare for the worst situation as well. If Viet Nam is not recognised, we should at least urge to get the recognition no later than China," Loan said.

So far, the EU has conducted 10 anti-dumping investigations – particularly when it comes to Vietnamese exports. Although the number seems insignificant, it poses a high risk to this market, according to Prost.

Although he acknowledged that the number of anti-dumping cases had reduced markedly in recent years, he anticipated "antisubsidiary cases will continue to rise".

Motorbike prices down in low season

The motorcycle market has been going down given the low season, with many motorcycle dealers cutting prices or launching promotions to attract customers.

Most motorcycle showrooms in HCMC and Hanoi have experienced a tough time since early this month. Traders said they had seen poor sales of both scooters and common gear-box motorcycles.

Many traders said they had lowered prices since late last month but the market had remained quiet. Many Honda Vietnam dealers in HCMC early this month slashed prices though the motorcycle producer has yet to take any action.

Almost all dealers of Honda Vietnam in districts 1, 5, 3, Tan Binh, and Tan Phu have adjusted down retail prices by VND2 million to VND4 million per unit of PCX, Lead or Air Blade scooters.

Meanwhile, common gear-box motorcycles have been marked down by VND500,000 to VND1 million per unit. At some Honda HEAD dealers, a couple of motorcycle models, even including best-selling PCX and LEAD scooters, have been sold under Honda Vietnam-suggested retail prices.

For example, the PCX scooter assembled by Honda Vietnam is available at some dealers at VND54.5-VND55 million per unit, including VAT but excluding registration fee, VND4-4.5 million lower than the factory-suggested price.

A Honda dealer on Hung Vuong Street in HCMC’s District 5 said business since early this month had dipped 20% compared to previous months, and that there were no signs of improvement this month.

According to Honda Vietnam, the suggested retail prices of its products will not be adjusted down despite tough market conditions.

“From our experience, the motorcycle demand traditionally declines this time of year,” said Tetsuya Kawahara, assistant director of Honda Vietnam. “Our product supply has increased significantly because our second motorcycle factory completed its expansion and officially started operating in early July.

“Our total motorcycle production capacity at our two factories has been scaled up from 1.5 million units per year to 2 million units. This also helps reduce motorcycle prices significantly on the market.”

In previous months, sellers of Honda Vietnam-assembled Air Blade scooters were able to earn a huge profit, at VND6 million to VND8 million for each unit sold, but the current figure is just a half.

Other motorcycle showrooms have also felt blue. A showroom on Cach Mang Thang Tam Street, District 1 said the high-end scooter market had been quiet. “In the first six months, we sold three or four SH and SP scooters a day, but now daily sales are down to one unit,” said a salesperson of the showroom.

The showroom has marked down prices by US$100 to US$200 equivalent per unit.

Busy outlets on An Duong Vuong Street in District 5 and scooter showrooms on Ly Tu Trong Street in District 1 are on the same boat.

Vietnam tightens control of plant product imports

The Ministry of Agriculture and Rural Development has issued a circular tightening control of plant product imports into Vietnam over food hygiene and safety concerns.

The new Circular 13, with effect from July 1, has been met with no major complaints except for the Vietnam Cashew Association’s (Vinacas) call for the farm produce and fishery quality inspection agency Nafiqad to quickly clear 400 containers of imported unshelled cashew from a HCMC port, said Nguyen Van Ngai, director of the Regional Plant Quarantine Sub-Department 2.

Vinacas worries an inspection of the cashew imported for export processing as per the circular would delay the customs clearance process, thus affecting the forthcoming arrival of another 400 containers of cashew.

The cashew shipment that already arrived was contracted before the circular took effect last Friday.

Nguyen Nhu Tiep, director of Nafiqad, agreed that the 400 containers could be cleared before importers supplied to the department with the required papers. Cashew and certain grains and nuts are put on the checklist by the circular.

Tiep told local media that Nafiqad had informed all exporting countries of the new circular and that there was no reason for delaying the implementation of the new regulation that is designed to protect Vietnamese consumers’ health.

Nafiqad has recognized the U.S. as the legal supplying country of plant products for Vietnam. In addition, Australia, Canada and China are temporarily allowed to export to Vietnam until these countries supply the required papers. Those markets are also the largest suppliers of plant products to Vietnam in volume, according to Tiep.

Before the cargo gets customs clearance, importers have to provide to the regional plant quarantine department and the customs the shipment contracts, bills of lading and quarantine papers by authorities in the exporting countries.

“If we find the residual amount of chemical substances for plant protection in a certain import shipment is beyond limits, we will carry out the 30% check for the next 10 shipments, which means three out of 10 will be randomly selected for check,” Ngai said. “If samples of any of these 10 shipments are found to contain higher-than-permitted chemical residues, a 100% check will apply.”

Such cargo checks are a time- and money-consuming process for importers.

Metro line short of 167 million euros

The government of HCMC will have to reach the World Bank (WB), the Asian Development Bank (ADB) or the European Investment Bank (EIB) to ask for 167 million euros in loans to finance a metro line.

The Spanish government has agreed to provide 500 million euros in loans for the city but it is not enough to complete the first phase of the mass rapid transit line from Bay Hien intersection to the Saigon Bridge.

Issues relating to the project were discussed at a meeting of the Vietnam-Spain Intergovernmental Committee on Monday.

Jose Carlos Garcia de Quevedo, director general for Trade and Investment at the Ministry of Industry, Tourism and Trade of Spain, who led a Spanish government delegation to the Hanoi meeting, said, “We can help with contacts or introduce the project to financial organizations.”

But for its part, HCMC should take the initiative first, he said at his meeting with city vice chairman Nguyen Thanh Tai on Wednesday.

VND23 trillion for Dau Giay-Phan Thiet expressway

The Transport Minister has approved the feasibility study of a project for building an expressway connecting Dau Giay T-Junction in Dong Nai Province with the resort town of Phan Thiet in Binh Thuan Province under the public private partnership (PPP) format.

The Dau Giay-Phan Thiet expressway will stretch 101 kilometers and need total capital of VND23.2 trillion, or some US$1.13 billion, according to the study. Binh Minh Import Export Production and Trading Group (Bitexco) has been named as the first investor for the project while the second investor would be chosen via international tenders, according to the minister’s approval.

The road, which is expected to open to traffic in 2020, is among projects financially supported by the World Bank. Funds would be mobilized from private local and international investors, the World Bank’s loan and counter capital from the State Budget.

After approving the study for the project, the Transport Ministry would coordinate with the World Bank to set up the financial and management mechanisms for the project. The legal mechanism and funding for the project will be decided after the Government approves the PPP mechanism and investment plan.

According to the country’s expressway development master plan until 2020, the Dau Giay-Phan Thiet road will be the first PPP road project in the country. It will also be connected to the upcoming HCMC-Long Thanh-Dau Giay expressway.

The six-lane road will allow vehicles to travel at a maximum speed of 120 kilometers per hour. The developers will build four lanes in the first phase.

The expressway will be part of the North-South expressway system whose several sections between Dau Giay and Can Tho City are under construction, including HCMC-Long Thanh-Dau Giay, Ben Luc-Nhon Trach-Long Thanh and HCMC-Trung Luong-Can Tho.

The new expressway, once in place, will create a complete expressway route stretching nearly 400 kilometers and passing through most economic hubs in the southern key economic region.

According to the Ministry of Planning and Investment, Vietnam will need around US$170 billion for infrastructure development in the next 10 years. The State budget and ODA are estimated to cover about US$100 billion and the remainder is expected to come from private sector investors, especially via PPP programs.

BOT format still unattractive to investors

The transport authority of HCMC has acknowledged the build-operate-transfer (BOT) format is not yet a magic wand to attract investors to take part in traffic infrastructure projects due to high capital requirements and toll collection overlaps.

In BOT projects, investors must spend their own money upfront building roads or bridges, later recoup their investment capital by toll collection for a certain period of time, and finally hand over the works to authorities.

The city’s Department of Transport said problems had arisen from some BOT projects in the city recently, making investors hesitant at getting involved in such projects. As a result, the department has suggested applying the build-transfer (BT) format for key projects in the near future, said Bui Xuan Cuong, deputy director of the department.

“We cannot apply BOT for projects in the eastern gateway of HCMC such as Saigon 2 and Thu Thiem 2 bridges as there are already several toll stations in place on Hanoi Highway, which are collecting toll fees for the extended Dien Bien Phu Bridge and will collect fees for the new Rach Chiec Bridge in 2014,” Cuong said.

“It is hard to arrange toll stations on the highway if the projects are carried out under BOT.”

The prevailing rules require two toll stations on the same road to be at least 70 km apart.

Therefore, the department proposed BT for the projects, including large ones like Binh Tien Bridge, belt road 2 from the Rach Chiec Bridge to Hanoi Highway and Binh Thai interchange, although with this form it is more difficult to mobilize capital, Cuong added.

According to investors, the city has to reorganize locations of toll stations to avoid overlaps in toll collection to lure investment capital for BOT projects.

In fact, the city has transferred some BOT projects into BT ones due to problems of capital recovery. For example, the local government had to use the State budget to refund the Binh Trieu 2 Bridge project as the investor, Civil Engineering Construction Joint Stock Co. No. 5 (Cienco 5), failed to reach agreement in the capital recovery plan.

Recently, Phu My Investment Joint Stock Co., investor of the BOT Saigon 2 Bridge project, disagreed with HCMC Infrastructure Investment Joint Stock Co. in collecting tolls on Hanoi Highway. This forced the city’s government to choose BT for the project and carry out another auction to choose investors.

Investors, so far, have joined only five out of 20 BOT infrastructure projects in the city’s list of investment attractions. The rest of the projects include large-scale works such as the Cho Lon bus terminal, the second phase of North-South road and metro routes no. 3, 4 and 6.

Many hospital projects in HCMC still inactive

The health sector of HCMC still fails to answer a critical question when overload at hospitals could be reduced as many hospital projects still remain on paper, according to a Q&A session at the city’s People’s Council meeting.

Huynh Cong Hung, a member of the People’s Council, criticized that as many as 101 projects are still inactive, including 28 projects to build state-owned hospitals. He urged the city’s health officials to pinpoint reasons for this.

Hung said in the first half of this year, the health sector began work on only 31 projects, including many projects to acquire equipments for hospitals. Such a pace is unacceptable, though officials explained that many hospital projects were progressing slower than schedule because of problems with site clearance and administrative issues.

There are currently 32 state-owned and 32 private hospitals in the city, besides 13 centrally-governed hospitals, over 1,300 grassroots medical clinics and 322 medical stations.

Such facilities provide medical examination and treatment for 28 million outpatients and five million inpatients a year, with around 40% of them coming from provinces across the country.

Pham Viet Thanh, director of the HCMC Department of Health, pointed to foot-dragging site clearance and red tape in making investment procedures behind the slow progress.

“Site clearance and procedures are the complicated problems for any hospital projects in the city. We need more time to solve it. The process to map out and make procedures for each project is three to five years,” he said.

For example, Thanh said, the city government approved a plan to build hospitals in areas around the city’s gateways to reduce overload and traffic congestion in the city center and offer better health care service to residents in remote areas. Under the plan, the city had plans to start work on a children’s hospital, an eye hospital, and some others on September 2 but the schedule cannot be kept because of the prolonged site clearance, he said.

“The price of land as a condition to step up site clearance was just approved last week,” he lamented on complicated procedures.

Overload at hospitals and the poor provision of health services are making many local people spend more money on treatment in foreign countries.

“Our treatment method and professional quality are not lower than those in foreign countries but we are lacking good hospitals with full services to cater to the high demand of patients,” Thanh said.

Apart from the overload at hospitals, members of the city’s People Council on Thursday also focused on food safety and epidemic control issues.

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