Enterprises providing services for foreigners and selling imported products are still quoting prices in US dollars although it is against the law.
Along the streets frequented by backpackers – Pham Ngu Lao, Bui Vien, and De Tham in District 1 – service providers use the dollar as standard currency in trading.
Five companies on Pham Ngu Lao Street, including the Viet Nhat Trading and Tourist Joint Stock Company and dozens of stores on Bui Vien Street, quote their prices in dollars This is also true of several stores selling imported electronic products in HCM City.
Truong Thi Xuan Tien, marketing manager of Vien Tin International Joint Stock Company, defended the practice, saying: "Selling prices are in US dollars, then they are converted into Viet Nam dong for payment."
Hundreds of real estate companies also quote the prices of a house for lease or sale in on websites like nhathuesaigon.com, vatgia.com and muaban.net.
Nguyen Ngoc Le, a real estate trader, said prices of houses or offices for rent or sale in the city centre are quoted in dollar because his customers are mostly overseas Vietnamese (Viet Kieu) and foreigners.
"We sign contracts in US dollars but payments are made in Viet Nam dollar ," Le added.
An article in a Government's Decree that lists fines for violating regulations on declaring, registering and quoting prices of goods and service took effect in 2008.
The article imposes fines of between VND20 million and VND30 million for quoting prices or selling goods and services in foreign currencies without permission.
It also says that "repeated violations and recidivism" will attract severe additional sanctions including suspension of business licenses for up to 12 months or more, depending on specific circumstances.
While the law is clear and strict, enforcement has been lax, allowing the practice of quoting dollar prices to flourish, the Sai Gon Giai Phong (Liberated Sai Gon) reports.
Software technology park breaks ground in Hanoi
Construction of Ha Noi's first software technology park, invested by Hanel Company Limited, began at the Sai Dong eco-urban area, Long Bien District last week.
The 43 hectare park was designed by two Japanese designers, Azusa Sekkei Co Ltd and Espad Co Ltd, with the most advanced technologies in terms of information infrastructure and the application of clean energy technologies.
The park is divided into seven functional zones, including software outsourcing and research centres, a software technology training school, a five-star hotel, a commerce complex and a housing area for experts and technicians.
The project will provide working space for 15,000 technicians and housing for 5,000 people, said Nguyen Quoc Binh, Hanel Company general director, adding that once in operation, slated for early 2014, the project is expected to reap US$1 billion in revenue from its software production.
Addressing the ground-breaking ceremony, Nguyen The Thao, chairman of the Ha Noi People's Committee, required relevant departments, branches and sectors to create favourable conditions for the project's investors as well as construction firms during building.
Call to speed highway construction
Contractors on the Ha Noi-Thai Nguyen expressway project have been told to pull out all stops in the wake of serious overloading and deterioration of existing Highway No3.
Deputy Prime Minister Hoang Trung Hai said the project was behind schedule, the rate of disbursement was low and capital sources had not met requirements.
He made the comment on Thursday while in northern Thai Nguyen Province to inspect the four-lane expressway which is expected to cost about VND8 trillion (US$384 million).
Construction began in late 2009 on the 61.3-km expressway which links Ha Noi's Ninh Hiep Ward and Thai Nguyen Province.
About 53km has been completed and land for 58km of the expressway cleared so far.
Hai stressed the project should be given priority in both construction and investment with the target of completing site clearance by June and getting the expressway up and running by 2013.
The expressway will connect traffic routes in areas north of the capital and will speed up socio-economic development, especially in the three provinces of Cao Bang, Bac Kan and Thai Nguyen.
Ministry urged to revamp road contracts
With comprehensive regulations lacking for the upkeep of roads and other infrastructure built under build-operate-transfer (BOT) and other contracts, investors fail to maintain them, and stakeholders are urging the Ministry of Transport to create a legal framework to resolve this problem.
According to the ministry's Department of Planning and Investment, there are 29 BOT works with a total investment of VND138.8 trillion (US$6.6 billion) in the country, many of which are already operational.
Nguyen Ngoc Long, vice chairman of the Viet Nam Bridge and Road Association (VBRA), which consults on transport infrastructure, said many BOT investors were not willing to spend money on upgrading and maintaining them.
All they worry about was recouping their investment as soon as possible, he said.
Between 70 per cent and 80 per cent of large BOT projects, mostly roads and bridges, had switched to other business models after becoming operational.
For instance, Binh Trieu bridge connecting Binh Thanh and Thu Duc Districts is a BOT project but due to the inconvenience of collecting tolls at a city gateway, the municipal authorities had to take it over from the investor.
Tran Quoc Toan, deputy head of the Ministry of Transport's Department of Road and Bridge Infrastructure, said many developers of BOT works did not even make plans to maintain them once they were in use.
He blamed this on the fact that BOT contracts have no stipulations on upgrades or maintenance once they are in use.
They just said vaguely that investors should "upgrade or maintain roads and bridges after five or 10 years", and were silent on penalties for failure, he said.
Nguyen Duc Thang, head of the Department of Roads, said most operational BOT projects were of extremely poor quality. Worse still, many bridges and roads developed problems even while they were still under construction, but no one was penalised, he added.
VBRA's Long called on the Ministry of Transport to check the effectiveness of all BOT projects in the country to manage them better and ensure everyone benefits.
Land prices feed market volatility
High prices is one of the major contributors to Viet Nam's volatile and uncontrollable real estate market which posed great challenges to meeting low income housing needs, property experts have said.
Deputy Minister of Construction Nguyen Tran Nam said it was a disadvantage for property prices to be too high and added that the property market had special features which were different from other commodity markets.
The challenge for authorities was to figure out how property prices could be adapted to rising incomes and benefit businesses while still meeting social demands.
A survey of major cities revealed that property prices were too high when compared with average incomes and exceeded the real value of the property. High prices had also made a huge impact on solvency, the survey found.
Land experts attributed the high housing prices to increased input costs and greater demand for housing. But the key reason was that property prices were floating freely, they said; investors often decided selling price themselves, and people were willing to pay, which pushed property prices higher.
Nam said the increase in land price also stemmed from many other reasons such as currency devaluation, decreases in share prices, unstable prices of gold and the foreign currency market. In this context, many people moved their investment portfolios to real estate which resulted in increased housing prices, especially in Ha Noi, he said.
Speculation and the herd psychology had also contributed to pushing up property prices while volatile and unscientific planning and forecasting had led to numerous problems. The tax policy could not regulate speculation which caused the irregular increase in housing prices, he said.
Dao Trung Chinh, deputy general director of the Department of Land Administration under the Ministry of Natural Resources and Environment said, there were both objective and subjective reasons for the high price of real estate. Objective factors included global price fluctuations and economic instability while one important subjective factor was the issue of planning.
"We need to identify how many units are required for low-income earners in a given location and make a plan to expand eonomic development in that area. If the development is not feasible, land and housing will become scarce and prices will rise. This problem will never be solved without transparent information on land and housing as well as planning," he said.
Chinh also said there had been an inaccurate accounting of real estate transactions because of unregistered sales when buyers and sellers did not want to deal with cumbersome administrative procedures. The underground transactions were unregistered, meaning in a dispute buyers could lose their land, and the State had lost money, he said.
To control the property market properly, good and close co-ordination between authorities was needed for planning, information systems, tax policies and anti-corruption.
To solve the problem, authorised agencies should continue to concentrate resources on promoting the development of commercial housing and social housing programmes so as to increase supply. Stronger inspections and prompt responses to land and housing investment violations were also needed, he said.
Gas supply shrinks after 30 years of exploitation
Gas reserves of the Tien Hai gas field in the northern province of Thai Binh have been dwindling from more than 30 years of exploration, but the discovery of new, offshore oil and gas structures is expected to increase the energy supply for the region in the near future.
This information was confimed by Nguyen Vu Truong Son, general director of PetroVietnam Exploration and Production (PVEP), a unit of PetroVietnam, at the 30th anniversary of the exploitation of Viet Nam's first gas pipeline in the province on Thursday.
In 1981, the first gas field was developed in Tien Hai District, Thai Binh Province in the Hong (Red) River basin.
This was a milestone, marking the first time Viet Nam's petroleum industry was listed on the world map of oil and gas, and exposing the industry to the prospect of development.
To date, this region has detected a total of 13 reservoirs with a total of 1.3 billion cu.m of gas reserves. In 30 years, the total production and supply of gas has reached 850 million cu.m.
Pham Van Ca, vice chairman of the provincial People Committee, said the supply from the Tien Hai C gas field helped establish the 120ha Tien Hai Industrial Park (IP), home to over 40 businesses producing glass, crystal, porcelain, and ceramic tiles with an annual turnover of over VND650 billion (US$31.1 million).
However, the field's production was in decline and was not providing enough fuel to meet increasing demand from enterprises in the industrial park, Ca said.
PVE's general director Nguyen Vu Truong Son said in order to meet the gas needs of the Tien Hai IP and the northern region in general, PVEP and Song Hong Petroleum JSC had been actively carrying out exploration activities to evaluate reserves of potential reservoirs in the basin.
Newly discovered oil and gas structures, including Hac Long, Dia Long and Ham Rong, presented promising opportunities for fuel exploitation to aid manufacturing and petroleum industries, Son said.
PetroVietnam also directed PetroVietnam Gas to make an implementation plan to explore the Ham Rong field in Thai Binh from Lot 102-106 for the next four years. During this period, PetroVietnam will also give priority to developing a gas pipeline to the shore to promote the gas industry in the region.
Non-life insurance earnings jump
Non-life insurance premiums totalled nearly VND3.25 trillion (US$154.7 million) in the first two months of the year, an increase of 29.7 per cent over the same period in 2010, according to the Insurance Supervisory Authority of the Ministry of Finance.
"A growth rate of 22-25 per cent is the target set for the non-life insurance market this year," said Association of Vietnamese Insurers vice president Tran Vinh Duc.
PetroVietnam Insurance moved into first place, with VND842.6 billion ($40.12 million) in revenue and occupying 26 per cent of the market share. Last year's industry leader, Bao Viet Insurance, followed with earnings of VND709.9 billion ($33.8 million), accounting for 22 per cent of the market share.
Bao Minh Insurance and Petrolimex Insurance, with two-month earnings of VND532.2 billion ($25.34 million) and VND249.3 billion ($11.87 million), respectively, remained in third and fourth place.
PetroVietnam was able to claim the top spot by becoming the only domestic insurer dealing in energy reinsurance contracts in London and has continued to expand into such foreign markets as Singapore, Malaysia, Japan, Russia, Algeria, Venezuela and Cuba. It also won the $27 million contract insuring the Hai Thach and Moc Tinh mine projects operated by the Bien Dong Petroleum Operation Co.
Foreign insurers, although claiming less than 10 per cent of the reinsurance market share, saw the fastest growth in the first two months of the year, compared to the same period in 2010.
Groupama Insurance saw earnings of VND6 billion ($285,700) during the period, an increase of 170 per cent, while ACE Insurance Co Ltd earned VND9.3 billion, over double its earnings in the same period last year. Fubon Insurance Co Ltd earned VND12.4 billion, an increase of 88.3 per cent, while Cathay Non-Life Insurance, which only began operations in October of last year, earned VND365.4 million in the first two months of 2011.
Under the amended Law on the Insurance Business to take effect on July 1, insurers will be required to bid on insurance contracts, a factor likely to lead to more intense competition and tighter profit margins for the industry.
Province threatens to end slow projects
The People's Committee of southern Hau Giang Province is urging the Hong Kong-invested Lee & Man Group to hasten implementation of its two paper and pulp production projects, worth a combined US$628 million.
Progress on both projects has so far failed to meet the requirements set by local authorities, the committee said in its latest letter sent to the company.
Earlier, the group had pledged to commence work on all phrases of the projects this year after a long delay occasioned by the global economic crisis. It also vowed to submit an implementation schedule to the committee immediately after receiving land use right certificates.
In response to the group's petition, Hau Giang Province issued the land use right certificate in December to Lee & Man Paper Viet Nam Co, Lee & Man's local affiliate, instructing the provincial industrial zone management board to co-operate with other departments to better facilitate the projects.
However, the investor to date has failed to kick off the project as scheduled and also yet to send the committee its plan to implement the projects this year.
People's Committee vice chairman Nguyen Lien Khoa said the province had asked the group to respond to these issues no later than April 25.
"Until that time, if we have yet to receive a response, we will withdraw the investment licences of the projects," Khoa said, adding, "The provincial authorities are willing to share difficulities with the investors. We will consider extending the dealine for investors to launch the projects if they have proper reasons for these delays."
The slow-moving projects could affect the province's ability to attract investment, as the land was no longer available for other investors with sufficient financial capacity, said the director of the provincial Department of Planning and Investment, Vo Ta Thang.
"We are determined to revoke the investment licences of investors with purposes like appropriating land or transferring it to other investors," Khoa added.
"We are giving top priority to ensuring the effectiveness of domestic and foreign investment inflows," he said.
In June 2007, Lee & Man Paper Viet Nam and Lee & Man Pulp Viet Nam were granted licences to develop two projects in Song Hau Industrial Zone in Chau Thanh District. Lee & Man Paper received approval to build a $280 million packaging paper plant with an annual capacity of 420,000 tonnes, while Lee & Man Paper Pulp got the green light to develop a paper pulp mill on a site of 70ha, at a cost of $348 million.
Capital's trade deficit hits $4.6b in four months
Ha Noi's trade deficit in the first four months of this year increased slightly to US$4.6 billion, the city's Statistics Office said.
During this time the capital was estimated to have earned more than $2.6 billion from exports, a year-on-year increase of 18.2 per cent.
Meanwhile, the city had to spend $7.24 billion on imports, up 8.9 per cent in comparison with the same period last year.
In April alone, its export turnover month-on-month decreased by 2.7 per cent to $598 million, the fourth continuous monthly decline, the office said.
Most of city's key imports saw a downturn in value in April. There were only three products that increased: pepper, handicraft products and petrol imported for re-export.
Although down by 1.2 per cent against March, the city's import turnover was still high, at about $1.28 billion.
The office said that except for steel and fertiliser, import turnover of most products declined. Many garment, footwear and electronic companies had to import raw material to make products for export.
About 75 per cent of city's exports was raw materials and machines.
Brokerage firms increase fees for financial services
As many securities companies increase their fees for credit services, experts are warning that such moves in the current prolonged market downtrend will further suffocate money inflows to the securities sector.
Asia Pacific Securities Co raised its interest rates for loans yesterday, from 0.065 per cent per day (equivalent to 23.4 per cent per year) to 0.07 per cent per day (or 25.2 per cent per year).
VNDirect Securities Co (VND) on Monday also hiked interest rates charged on payment guarantees and advance payment (of proceeds from securities sales) from 0.06 per cent per day to 0.065 per cent per day.
However, the largest shocking increase came from Kim Long Securities Co (KLS), who from the beginning of this month raised their interest rate on securities mortgages to 27 per cent per year, applicable to two-month loans or longer, and to 25 per cent per year for loans of less than two months.
Other brokerage firms such as SME Securities Co and Hoa Binh Securities Co also increased the rates charged on payment advances to more than 0.066 per cent per day.
In reality, the wave of increasing lending rates at securities firms began in late 2010. Rates at that time were around 0.055 to 0.06 per cent per day, or 21.6 per cent per year.
However, adjustments have become more frequent, which companies have blamed on higher interest rates charged by commercial banks for securities lending. Securities firms play the role of a bridge between investors and banks and thus, when banks increased interest rates, brokerage firms had no choice but to raise their rates as well.
In addition, many securities companies have accumulated losses during the recent period and do not have abundant supply of capital available for lending.
Four out of six securities companies posting first quarter business results reported losses, including venerable firms such as Saigon Securities Inc (SSI) with a loss of VND102 billion (US$4.9 million); VNDirect Securities Co (VND) with over VND42 billion ($2 million); Au Viet Securities Co (AVS) with VND13 billion ($622,000); and Hai Phong Securities Co (HPC) with VND6 billion ($287,000) in losses.
Fee increases can reduce the speed of capital rotation and depress investor psychology, but many securities companies are forced to raise rates as they were trying to balance costs and capital in an effort to limit any possible losses, according to head of a securities companies who asked to remain anonymous.
"For securities firms who have not increased their rates, if they are likely to incur losses, they may be quite justified in hiking their rates," he said.
Nguyen Tien Hoang, head of marketing department of IRS Securities Co, agreed that many companies were now hoping to survive by reducing costs and some had even decided to close transaction offices.
"The biggest difficulty for securities companies now is to maintain their business strategy and still stimulate investors to participate in the market," Hoang said.
China funds low-income housing
Viet Nam is expected to receive a loan of US$1.5 billion for its low-income housing projects following an understanding reached yesterday between the Vietnamese Ministry of Construction and the China Development Bank.
Construction Minister Nguyen Hong Quan said the understanding was a step towards accessing large and reliable sources of credit for Vietnamese construction enterprises which experienced difficulties getting loans from banks.
Working groups would be established to negotiate the value of loans and interest rates as well as specific contents of the agreement, he said.
Ministry's international relations department head Pham Khanh Toan said the actual amount of the loan would depend on the demand for construction work.
"The interest rate on the loans will be lower than commercial rates," he said. "The two sides will negotiate and calculate the rate."
The ministry said housing for low-income earners was one of three main targets under the social housing programme; 37 such projects had been started, covering 750,000sq.m with a total investment of about VND3.6 trillion ($171 million).
The projects were expected to provide accommodation for 64,000 low-income earners.
Ha Noi, Da Nang, Hue and HCM City have taken the lead. In Ha Noi alone, nine projects of 3,832 apartments with an area of 270,000sq. m were completed or under construction, providing accommodation for 15,000 people.
Tuna exports forecast to increase
Exports of tuna, one of Viet Nam's key seafood export products, are expected to continue rising in the coming months, due to the growing demand from the US, EU, Israel and Canada, says the Viet Nam Association of Seafood Exporters and Producers.
The US has remained a large market for Vietnamese tuna exports, buying over US$50 million worth of the product in the first quarter, a year-on-year rise of 11 per cent.
Tuna exports have seen growth in both volume and value this year, with the average price of the product reaching $5.26 per kilo.
To further improve the product's competitiveness, the Viet Nam Fisheries Association is planning to establish a national organisation to oversee offshore tuna fishing. The organisation was expected to propose suitable forms of co-operation between fishing vessel owners and exporters to ensure the profits of fishermen.
The People's Committee of central Phu Yen Province has also signed a framework co-operative agreement with Japanese companies to boost the purchase, processing and export of tuna. Under the terms of the agreement, the Japanese enterprises will send two freezer ships to semi-process and preserve fresh tuna, transfering advanced fishing technology to local fishermen.
PetroVietnam gets $904m plant loan
A consortium of five foreign banks would provide the Viet Nam National Oil and Gas Group (PetroVietnam) a loan of US$904 million, pursuant to a credit contract inked between two sides yesterday.
The consortium included HSBC, China Development Bank, Bank of Tokyo-Mitsubishi UFJ, Credit Suisse and Italy's Intesa SanPaolo.
Under the contract, PetroVietnam would use the loan to develop its 1,200-megawatt Vung Ang 1 thermal-power plant in central Ha Tinh Province's Ky Anh District.
General director of HSBC Viet Nam Thomas Tobin said that following the contract's successful completion, the consortium of international banks would be able to continue to negotiate arrangements for other thermal power projects which PetroVietnam was carrying out, such as the Long Phu, Thai Binh and Quang Trach 2 projects.
The $1.6 billion plant is part of the Government's Electricity Master Plan VI approved by the Prime Minister in 2007.
The power plant includes two turbines, with the first expected to begin generating power in July 2012 and the second in January 2013.
When fully operational, the plant is expected to supply 6.64 billion kWh each year.
Japanese textile businesses select Vietnam
With rational labour costs, Vietnam is a good candidate for Japanese garment and textile businesses to choose when seeking a new investment destination, said a senior JICA expert.
Fumio Koyama from the Japan International Cooperation Agency (JICA) made this statement at a consultation seminar on garment and textile exports to Japan, in Hanoi on April 26.
Koyama said that a number of Japanese investors are implementing a “China+1” business strategy to open another production location, instead of focusing only on China, so as to diversify their supply sources, with Vietnam among locations that receive their attention.
For a sustainable growth of Vietnam’s garment and textile exports, Koyama said that Japanese partners can help Vietnam build production establishments overseas and train managers and labour force.
The Ministry of Industry and Trade reported that Vietnam’s garment and textile exports to Japan fetched $1.2 billion, making up 11 per cent of the nation’s total in 2010. At present, Japan is Vietnam’s third largest garment and textile importer, after the US and the European Union (EU).