BUSINESS IN BRIEF 26/6

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VietnamNet English - 42 month(s) ago 8 readings

Another Vietnamese bay becomes tourist attraction

Sanest Tourist, a travel agency based in Nha Trang, began offering sea tours to the country’s latest “national level landscape,” Xuan Dai Bay in Tuy Hoa, last Sunday.

The bay is around 50 kilometers long, and oversees various capes and islands.

It received the recognition from the Ministry of Culture, Sport and Tourism in January, which will help promote and exploit its tourism potential.

Mon Beach and Cape Dien in Phu Yen Province – in which Tuy Hoa city is situated – were recognized in 2009.

Sanest’s two-day tour starts in Nha Trang and has sightseeing in Tuy Hoa city.

It has a stop at Bai Om beach for swimming, coral diving, and lunch of fresh seafood obtained from fishing vessels.

The agency will use three vessels, each with a capacity of 50 passengers.

Fishermen do not give up on sea despite losses

Most Vietnamese deep-sea fishermen cannot make enough money to survive but yet they find it hard to leave the sea and take up land jobs since fishing is a part of their life.

Ho Ben, the owner of a dry dock in Long Dien District, Ba Ria – Vung Tau Province, says it is easy to guess if trawling is lucrative merely by looking at the number of boats in his dock.

At this time of the year there are usually only a few damaged vessels, he says, pointing to the port which is choc-full of trawlers.

It is the hardest time ever for fishermen in his 30-year experience, he says.

In place after place along the coast from Vung Tau city to Binh Thuan Province, the situation is similar.

Do Ngoc Duc, who owns 20 vessels, says fishermen are extremely worried about incurring losses whenever they go fishing.

Two out of his three trawling expeditions this year have lost money, and the profit from the successful one was not enough to cover the losses, he says.

A boat needs an estimated 12,500-15,000 liters of diesel for a one-month fishing trip, and with the price of the fuel rising by VND6,350 per liter compared to earlier this year, the extra cost is VND80-95 million (US$4,000-4,750), he says.

The cost of ice, engine oil, nets, and fishermen wages have also risen though the prices of fish and other catch have remained unchanged for many months, or even gone down, worsening fishermen’s losses, he says.

Tra Van Be, a fisherman in Ba Ria – Vung Tau, says his commune used to be considered the richest in Vietnam 10 years ago when trawling was very popular.

Many fishermen in his native Phuoc Tinh Commune had vessels worth billions of dong.

But now most are bankrupt due to continuous losses, he says.

Some fishermen who go fishing in disputed areas end up being arrested by foreign vessels, losing their vessels, and even paying ransom to rescue their crew, he adds.

But without going fishing, they have no money to repay bank loans.

Most fishermen are at the mercy of middlemen who pay whatever they please, says C., another fisherman in Phuoc Tinh.

“Even when they ask for a price at which we cannot break even, we still cannot refuse because if we do not sell the products, we can only throw them back in the sea.”

But all this does not stop them from going out to sea.

Ngo Van My, a fisherman in Binh Thuan, who has just bought a pair of trawlers worth VND6 billion, is worried he cannot recoup the investment.

But since fishing has become a part of his life, he says he has no other choice.

Some boat owners in Phuoc Tinh who have gone bankrupt say they work for other vessels to be able to work at sea.

Huynh Van Cao, a fisherman in Kien Giang Province in the Mekong Delta, says though the deep-sea fishing industry faces a lot of problems, people continue to buy vessels for fishing.

“We can only stick to the sea to earn a livelihood. We don’t know any other job.”

FinanceAsia honors 5 financial institutions in Vietnam

Hong Kong-based FinanceAsia magazine has announced its annual Country Awards for Achievement for Vietnam honoring 6 domestic and foreign financial institutions for their achievements in 2010.

They include Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Saigon Securities (SSI), VietCapital Securities (VCS), HSBC and Citi.

Techcombank tops the two important categories of FinanceAsia awards including Best Bank and Best Cash Management Bank - Best Trade Finance Bank.

The bank, said FinanceAsia, is one of the fastest growing commercial banks in Vietnam which swiftly expanded its network by opening 94 new branches and an extensive network spanning nearly 300 branches and more than 1,000 ATMs during the period under review.

It also has a solid partnership with HSBC, which has a 20 percent stake and gives it an edge in retail and finance and in risk management. Both its total loans and total deposits grew by a 61 percent and 76 percent respectively in 2010, while its non-performing loan ratio has reduced to a 2.29 percent ratio in 2010 compared with 2.49 percent in 2009.

For the first time, profit before tax of Techcombank exceeded $100 million as of the end of 2010, which enabled it to maintain the top position among commercial joint stock banks. It now serves more than 45,000 enterprise and 1.3 million individuals in the country, an increase of 17 percent and 62 percent respectively compared with 2009.

Its aggressive plans for the rest of 2011 include reducing its NPL ratio to 2.04 percent and expanding to 360 branches.

SSI was honored by FinanceAsia as Vietnam’s Best Investment Bank - Best Broker.

In terms of capital raising services, SSI raised more than VND6.7 trillion from the market during the period under review, 48 percent of which came from bond issuance.

It advised on five corporate bond issuance deals and it was the domestic financial adviser on the $90 million offering by Hoang Anh Gia Lai, which was the first and largest cross-border Vietnamese bond issuance.

At the same time, it raised VND3.5 trillion in equity issuance, a 21 percent increase during the same period under review last year. It also listed 11 companies.

On the M&A front, it advised the buy-sides on two non-controlling deals in the port industry and oil and gas industry.

SSI continues to dominate the brokerage story in Vietnam with strengthened relationships with large local and foreign financial institutions, as well as local listed and unlisted companies, said FinanceAsia, though a nod should be given to ThangLong Securities, which is increasingly building its business.

VietCapital Securities was recognized as Vietnam’s Best Equity House.

It was the lead adviser for the IPO of PetroVietnam Gas, as well as its privatization and strategic placement with Morgan Stanley. While the IPO only sold 3.5 percent of the company, or $90 million, the privatization of PV Gas was the largest in the history of Vietnam to date.

VietCapital Securities was also the sole adviser and manager for four other privatizations and IPOs – for An Giang Electricity and Water, Binh Dien Fertilizer, An Giang Export and Import and My Thoi Port.

Furthermore, VietCapital Securities, which also produces excellent research reports, has been building a solid relationship with foreign investors including the handling of a private placement of Vinamilk, which is arguably the most sought after company in Vietnam by foreign investors.

HSBC won Vietnam’s Best Foreign Commercial Bank award because its banking decisions may be good for Vietnam, said FinanceAsia.

HSBC has made a conscious decision to bank Vietnam’s middle and large corporate segment, focusing on those that are actively involved in international trade. The bank has taken the view that these companies will grow and remain loyal to HSBC.

This year, HSBC was closely rivaled by Citi, which has grown its business significantly in Vietnam.

On the consumer front, both HSBC and Citi are leading by offering internet banking solutions, and hats off to Citi for launching one of its new-fangled smart banking branches in Ho Chi Minh.

But Citi also did grasp the Best Foreign Investment Bank award this year for banking many of the multinationals doing business in Vietnam, and handles a huge percentage of the remittances from the US that have been critical to growing the nation’s economy in recent years.

Citi also brought some foreign interest to Vietnam, working as the exclusive financial adviser to Diageo on its $55 million acquisition for a 24.9 percent strategic stake in Halico, Vietnam’s largest alcohol producer.

It also raised close to $3 billion from the capital markets during the period under review, including National Power Transmission’s $200 million insured-term financing, Vietnam Airlines’ $400 million ECA-backed term loan and Nhon Trach 2 Power’s $470 million loan.

Fish processors threatened by severe fish shortage

Many local fish processors at a review meeting in Ho Chi Minh City last week said they might have to shut down in the face of a severe shortage of fish.

Nguyen Thu Sac, vice chairwoman of the Vietnam Association of Seafood Exporters and Producers, or Vasep, told association members that many processors would likely lay off workers, scale down production or even shut down business.

She explained that the total output of both natural catch and farmed fish had tumbled in recent months. The situation has become further aggravated as Chinese traders have competed harshly with local processors to buy materials from both sea-faring vessels and farmers.

Pham Xuan Nam of the Khanh Hoa-based Dai Thuan Joint-stock Company said the volume of fish his company purchased from fish ports in Nha Trang met only 30 percent of his company’s processing capacity.

To avoid breaching contracts signed with foreign buyers, local processors in vying for raw fish have pushed up prices, which may result in big losses for them.

Many processors are seeking to import raw fish from other countries, but supplies are also restricted. The vice chairwoman of Vasep said Indonesia had recently imposed a ban on the export of unprocessed seafood, making it difficult to source raw fish for their production.

The input shortage is especially critical for shrimps, according to Truong Dinh Hoe, general secretary of Vasep. Hoe said the shortage of fresh shrimps for processing would continue into next year, and many enterprises are asking for approval from the agriculture ministry to import shrimps from South America for processing.

There are around 147 local seafood processors and exporters struggling with input shortage, according to Sai Gon Giai Phong Newspaper.

Law prevents pharmaceutical firm from distributing

The Ho Chi Minh City Department of Planning and Investment has rejected the registration for the distribution license for the Mekophar Chemical Pharmaceutical JSC, whose stake is partially held by a foreign investor, saying it is against the law for a foreign invested firm to distribute medicine.

On June 2 last year, the previously state-owned Mekophar listed its shares on the Ho Chi Minh City Stock Exchange (HOSE) with the registered capital of VND92.1 billion (US$4.7 million).

A foreign investor purchased 4.7 percent of the company, while the government holds 29.47 percent.

In 2010, Mekophar, a pharmaceutical manufacturer and exporter, added the pharmaceutical product distribution to its business in their license renewal registration to the Ho Chi Minh City Department of Planning and Investment.

The department refused to grant the license to Mekophar, saying it’s against regulations stated in the Law on Investment.

According to Article 6.3 of the Law on Investment, a foreign invested firm is defined as a firm established with foreign investors to carry out business in Vietnam, or one where foreign investors have purchased shares, merged with or acquired.

It is also against the Vietnam-World Trade Organization distribution agreement for foreign invested firms in Vietnam to distribute certain products, including pharmaceutical products.

Mekophar’s CEO, Huynh Thi Lan, said the firm’s business has been greatly affected because they could not get the license to distribute medicines renewed.

She said Mekophar has been asking for help from relevant agencies since June 2010.

The State Securities Commission (SSC) sent a document sent to the Ministry of Planning and Investment on February 15 saying that Article 29.4 from the Law on Investment stated that foreign investors should have the same investment conditions as the domestic investors if Vietnamese investors hold more than 51 percent of the charter capital of an enterprise.

Therefore, the restriction is too rigid and is unfair for the other domestic firms, the SSC said.

On March 28, in a response to the SSC, the Ministry of Planning and Investment reiterated Article 6.3 of the investment law, saying that Mekophar is a foreign invested firm.

But the ministry also said Mekophar deserved the right to sell and distribute its own products.

An investigation by Tuoi Tre has found that all of the pharmaceutical firms listing shares on the stock exchange have foreign investors.

But these foreign invested firms got the licenses before listing shares, so are still allowed to distribute medicine.

However, any foreign invested firm that registers for a new or renewal license will not be accepted, which Lan said was unfair.

She said Mekophar might have to withdraw their shares on the stock market and reduce the shares of the foreign investor to zero in order to get the license.

YngShin Company asked to recall toxic fruit juices

The Ha Noi Department of Health has ordered the YngShin Food Company in Bich Hoa Industrial Park of Thanh Oai District, to recall twelve fruit juice products from the market, said to contain the toxic DEHP chemical.

According to Nguyen Viet Cuong, chief inspector of Ha Noi’s Health Department, the company had used DEHP food additives in its fruit juices made in Taiwan.

The contaminated fruit juice flavors are orange, fiber orange, carrot, guava, lemon, passion fruit, mango, mixed fruits, kumquat, custard-apple, apricot and apple.

Health authorities have asked the company to withdraw its products by June 20 and report to distribution networks of relevant agencies to confirm the same.

Cassava exports increase as China prices surge

Viet Nam exported US$638 million of cassava in the first five months of the year, nearly equal to 110 per cent of the entire export revenue of last year, according to the Ministry of Agriculture and Rural Development.

Although the domestic price has risen to VND5,800 a kg, cassava is still exported to China in large quantities because it can fetch higher prices.

In recent years, exports to China accounted for about 5 million tonnes annually.

Viet Nam has about 510,000ha of cassava planted, with an annual output of nearly 9 million tonnes.

The ministry estimates the country's domestic demand for cassava this year will be 8.12 million tonnes.

Of that figure, 1.89 million tonnes are used for producing ethanol, and the remaining volume for animal feed and confectionary products.

Pham Duc Binh, deputy chairman of the Viet Nam Animal Feed Association, said cassava accounted for 30-40 per cent of input materials in animal feed production.

However, cassava is also exported so domestic animal feed plants have not been able to buy enough for production, Binh told Viet Nam Economic Times.

Le Khac Triet, director of the Viet Nam Cassava and Cassava Starch Club, said since 2009 cassava had become an agricultural plant with high economic value.

The price of cassava has increased to VND5,700-6,000 a kg, compared to just VND200-500 a kg in 2007-08 and VND4,000 a kg in 2010.

Farmers in central provinces have expanded the area under cassava cultivation, raising concerns among local authorities about forest protection and transferring to cassava cultivation.

In Quang Ngai Province's Son Ha District, for instance, farmers have cleared protective forests upstream of the Thach Nham River to grow cassava.

Ta Tien, acting head of the Son Tra District Forest Protection Bureau, said this situation had happened over the past few months.

In 2006-10, Quang Ngai had planned for 13,500 ha of cassava in 2010, but the area had increased to 21,000ha in 2010, and is continuing to rise.

In Ha Tinh Province, hundreds of households in Ky Anh District had also destroyed protective forests to grow cassava.

Triet warned that cassava had become a hot product and when output exceeds demand, the price could drop as it did in 2007-08.

At that time, it would be difficult for farmers to switch to other crops because the fertility of the soil would be eroded after three to four years of growing cassava, he said.

To resolve the cassava material shortage, the cultivation area should not be increased, but measures should be taken to increase productivity, Triet said.

Farmers in some countries have harvested cassava output of 40 tonnes per ha a year while in Viet Nam output is only 17.2 tonnes per ha.

Measures to increase cassava productivity include applying advanced farming techniques and finding high-yield cassava strains, he said.

He added that his club had found new cassava strains with a high yield of 40 tonnes per ha a year.

Financial M&A expand slowly

Mergers and acquisitions (M&A) in the banking and financial sector have quietly expanded so far this year, with financial institutions in need of external backing to stay strong during the domestic economic turmoil. However, many experts see them as a difficult, convoluted process.

Lien Viet Bank late last month changed its name to Lien Viet Post Commercial Joint Stock Bank after VNPost bought an 18 per cent stake in the bank using money from a subsidiary as capital.

"The merger helped knock off 100 years from the time it takes a medium-sized bank to become a strong retail bank," said Lien Viet Post Bank's General Director Nguyen Duc Huong after the deal was agreed.

International Finance Corporation (IFC), a financial arm of the World Bank, has acquired a 10 per cent stake in Vietinbank for US$182 million.

An Binh Bank (ABBank) sold VND600 billion ($29.26 million) in convertible bonds to the IFC and Malaysian bank Maybank, and the Mekong Development Bank (MDB) sold a 15 per cent stake to FFH – a Temasek investment unit.

Vietinbank also plans to sell a 15 per cent stake to the Bank of Nova Scotia (Canada).

The bank's chairman Pham Huy Hung said that a stake sale to a well-known partner would create favourable conditions for the bank to take advantage of technology, risk management and training.

The Commonwealth Bank was quoted by Dow Jones earlier this year as saying that it wanted to increase its stake in the Viet Nam International Bank (VIB Bank) from 15 per cent to 20 per cent, pending Prime Ministerial approval.

"Mergers and acquisitions are an effective investment channel, a leading way to participate in the market and a solution for restructuring and increasing revenue," said Minister of Planning and Investment Vo Hong Phuc at an investment forum earlier this month.

However, only a modest six deals have been struck involving Viet Nam's 39 credit institutions, leading some industry insiders to say that M&A in the financial sector are more complicated than in others.

Bao Viet Securities General Director To Hai said that due to certain specific features of the sector, M&A could not happen on a large scale because the disclosure of financial details of the transaction, market value and contractual conditions were mostly confidential.

Hai also said that in 2010, several banks were unable to raise their charter capital to VND3 trillion ($146.34 million) to meet Government regulations, but still decided not to merge because the process was too complicated. This forced the Government to extend the deadline for banks to reach the necessary level of charter capital to the end of this year.

PetroVietnam Securities Inc (PSI) General Director Pham Quang Huy countered that M&A did not always have to be big deals, saying that banks could still benefit from smaller deals.

According to a recent survey by international consultants Grant Thornton, 17 per cent of Vietnamese businesses said they planned to boost growth through M&A this year compared to 19 per cent in 2010 and 15 per cent in 2009. Up to 20 per cent of Vietnamese businesses said they expected changes of ownership, double the global average rate.

The Competition Management Department, under the Ministry of Industry and Trade, forecasts that M&A in Viet Nam would continue to flourish in 2011 and over the next few years, growing at a rate of 30-40 per cent.

However, some experts said that the lack of a legal framework for M&A activities, stringent liquidity conditions and limited human resources and understanding of M&A would dampen this expansion.

Textile exports up though producers suffer lower profit

Textile enterprises will continue increasing exports despite suffering lowered profits, according to experts.

Dinh Phuong Phi, chairwoman of the The Hoa Textile Company based in the Song Than Industrial Zone of southern Binh Duong Province, said that her company had signed export contracts, set for the end of August, alongside a 15 per cent increase in product prices.

Pham Xuan Hong, deputy chairman of the Viet Nam Textile Association and the Sai Gon 3 Textile Company, said that Sai Gon 3 had also signed export contracts set for the end of this year.

Hong added that, although members of the association had not expanded their production systems, they have maintained stable production and gained growth in revenues.

To date Sai Gon 3 has experienced a year-on-year increase of 20 per cent in revenue to VND600 billion (US$29.3 million) while The Hoa grew by 20 per cent in terms of export value.

However, Hong said that profits have been on the decrease compared to previous years due to rising input and labour costs.

Sai Gon 3 profits have only managed to reach 45 per cent of the yearly target and only 40 per cent of what it managed to make during the same period of last year, according to Hong.

Diep Thanh Kiet, chairman of the HCM City Textile, Embroidery and Knitting Association, agreed with Hong, adding that the reputation of various trademarks and the ability to complete orders on time have also had a telling impact on production and business results.

Over time, obstacles are set to reduce due to stabilisation of the macro-economy and the increase of more favourable financial conditions will are more than likely to increase business opportunities and healthy competition, Kiet said.

Electrical cable exports fizzle this year

Export turnover of electrical wire and cable reached US$479 million in the first five months of this year, down 2 per cent over the same period last year due to a sharp decrease in shipments to Japan and the US during the past two months, the General Statistics Office reported.

After a 16.54 per cent increase to $341.1 million in the first quarter, exports of electrical wire and cable dropped sharply in March and April in the wake of the earthquake in Japan.

In April alone, export turnover of the products was only $90 million, down 28.6 per cent over the previous month. Japan topped the list with a decline of more than 60 per cent, followed by the US market - one of the largest import markets of Japanese autos - with a drop of 25 per cent.

General secretary of the HCM City Electric Wire and Cable Association Luong Cong Huynh said that as up to 70 per cent of Viet Nam's electrical wire and cable exports were used in the automobile industry, the export of the products to Japan had dropped sharply as the earthquake had seriously damaged the Japanese automobile industry.

Though forecasting that the worst was over, with exports in May inching up by $3 million against the previous month to $93 million, industry insiders said it would be difficult for the domestic electrical wire and cable industry to ensure a surge in export turnover as had been achieved last year. The industry's export value surged more than 48 per cent to $1.3 billion last year, accounting for 1.8 per cent of the country's total export revenue. Japan was the largest importer with $920 million, up 43.9 per cent over the previous year. The US followed with $153.8 million, up 68.6 per cent.

To overcome the difficulties, Huynh recommended that domestic electrical wire and cable producers should not depend mainly on the key markets of Japan and the US but boost exports to other markets.

In addition to Japan and the US, Viet Nam's electrical wire and cable is also exported to South Korea, China, Singapore, the Philippines, Laos and Cambodia.

Also, instead of focusing only on churning out products for the automobile industry, domestic electrical wire and cable producers should also diversify rapidly so that their products could be used in the civil sector and other industries, Huynh said.

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