BUSINESS IN BRIEF 28/3

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Canadian businesses eye Thai Nguyen market



More than 100 Canadian and foreign businesses in Canada attended at a seminar in Toronto on March 22 to seek and expand investment cooperation in Vietnam’s northern province of Thai Nguyen.

At the opening ceremony, Secretary of the Thai Nguyen Provincial Party Committee Pham Xuan Duong emphasized that the event offered an opportunity for Thai Nguyen and Canadian businesses to introduce their policies and potential for investment cooperation.

Margaret Vokes, South Asia Area Director at the Ontario Ministry of Economic Development and Innovation, conveyed best regards from Minister Brad Duguid, stressing that the event provided participants with updated information and opened up opportunities for doing business and boosting relations for mutual benefit.

Duong Ngoc Long, chairman of the provincial People’s Committee, answered businesses’ questions related to the province’s policies, formalities and the advantages of investment.

Vietnamese ambassador to Canada Le Sy Vuong Ha encouraged Canadian businesses to invest in Thai Nguyen, emphasizing that the Vietnamese embassy in Canada will serve as a bridge linking Canadian and local businesses.

On the occasion, Dinh Huy Chien, a representative from Forrec Canada, signed a contract to provide consultancy for the “Festival Land” project at Ho Nui Coc Tourism Resort.

Vietnamese company exports online games to 10 countries

VTC Online has signed a three-year contract to sell the copyright of two online games in ten European and Latin American nations to Nvia – a Spanish company.

Under the contract, Nvia has the right to issue VTC Online’s two games, namely Squad and Generation 3 (G3), in Spain, Mexico, Argentina, Chile, Colombia, Venezuela, Peru, Brazil, Ecuador and Paraguay.

Apart from payment for the copyright, Nvia will be responsible for sharing its revenues with VTC Online, while the Vietnamese party will be in charge of developing these products and regularly providing updated versions.

VTC Online Director Tran Phuong Huy said that the export of online games to Europe and Latin America has paved the way for introducing Vietnamese games to the international market, and reflects VTC Online’s shifting to exporting games.

VTC Online is an arm of the Vietnam Multimedia Corporation. Nvia Company was established in 2001 in Spain, headquartered in Madrid. It has branches in many countries like Argentina, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela.

Central province increases investment in Laos

Leaders of the central province of Ha Tinh expressed their desires to boost investment cooperation with Lao localities at a meeting with Deputy Prime Minister Somsavat Lengsavath in Vientiane on March 24.

Vo Kim Cu, chairman of the provincial People’s Committee, requested that the government and relevant ministries of Laos support Ha Tinh in expanding cooperative ties with its Lao border localities, by speeding up transport projects, facilitating operations at the border gate economic zone, and streamlining customs procedures.

Cu highlighted the encouraging results of cooperation projects between Ha Tinh and Lao provinces, especially in training Lao officials in Vietnamese and other subjects, and building schools in Khammouan and Bolikhamxai provinces.

Currently, more than 10 businesses from Ha Tinh are investing in rubber plantation, plaster exploitation, barbed wire production, and forest product processing in Laos, he said.

Deputy PM Lengsavath appreciated Ha Tinh’s assistance to Lao provinces, primarily in education and training, and welcomed Cu’s proposals, helping the Lao government and the sub-committees of the two countries to consider future cooperation plans.

He said he will direct Khammouan and Bolikhamxai administrations and relevant agencies to study Cu’s proposals to make decentralised cooperation between Lao and Vietnamese localities more efficient.

Businesses increase investment in Myanmar

Many Vietnamese businesses are speeding up their investment plans in Myanmar to capitalise on this untapped market.

At a joint business forum in Hanoi on March 21, the chairman of the Vietnamese investors association in Myanmar, announced a US$100 million agricultural investment, and expressed his interest in other areas, including the mobile telecom industry.

Tran Bac Ha, head of the Board of Directors of the Bank for Investment and Development of Vietnam (BIDV), encouraged Vietnamese investors to pay more attention to this neighbouring market, calling it the last golden destination in Southeast Asia.

BIDV, one of the country’s biggest State-owned banks, opened its representative office in Myanmar last year.

Ha said An Giang Plant Protection, a Vietnamese agricultural group, and VinaCapital, a fund manager, recently signed an agreement with Eden Group, a Myanmar rice conglomerate, to build a US$100 million farm produce processing factory.

Two big telecom service providers, Vietnam Post and Telecommunication Group (VNPT) and the Army-run Telecom Group (Viettel), are waiting for a licence to build mobile phone networks in Myanmar.

Hoang Anh Gia Lai, a large property group, has announced a plan to build a shopping, office and residential complex in Yangon at a cost of US$300 million.

During a visit to Vietnam on March 20-21, Myanmar President Thein Sein and his Vietnamese counterpart Truong Tan Sang agreed to raise two-way trade to US$500 million by 2015 from the current US$167 million.

Japanese company seeks to invest in Hanoi projects

Shimizu Corp. will join a local company to build the first industrial park for support industries in Hanoi at a total cost of nearly US$1 billion.

Shimizu will cooperate with N&G to build the Southern Hanoi Support Industries Park (HANSSIP) and an urban service and residential area for workers in the park under an agreement signed in Tokyo on March 23.

According to N&G, HANSSIP will cover a total area of 650 hectares and, once operational, it will be a destination for about 200 support enterprises manufacturing machinery, garments and textiles, leather shoes, electronics, and computers, as well as automobile assembly and other fields.

HANNSIP investors will be given special incentives and assistance for financing, recruitment, training, technology transfer, and sales.

Shimizu is a major construction group in Japan and involved in many large projects in Vietnam.

A representative of Shimizu said that the corporation also wants to cooperate in other Hanoi infrastructure projects including metros and elevated railways.

HCM City hosts 4th investment and trade conference

More than 300 representatives from international consulates and trade offices in HCM City, as well as foreign business associations, relevant ministries and departments, will attend the 4th exhibition and conference on Investment and Trade Promotion and a gala dinner on March 29.

The conference will focus on the city’s economic transition, industrial park complexes investment policies for hi-tech development, monetary policies and solutions for supporting businesses.

The annual event aims to help both local and foreign businesses strengthen cooperation, boost trade and investment, and exchange information on investment policies.

It is organised by the HCMC Union of Business Associations (HUBA), in coordination with the HCMC Union of Friendship Organizations, the city Departments of Planning and Investment and Industry and Trade.

Coffee, wood exports to Germany increase sharply

In the first two months of this year, Vietnam exported 49,200 tonnes of coffee worth more than US$100 million to Germany, according to Vietnam Customs statistics.

In February alone, its coffee export value to this potential market rose sharply to US$66.7 million.

Last year, Vietnam shipped 135,900 tonnes of coffee to this leading European Union member country, earning nearly US$300 million.

With a population of 81.3 million people, Germany is one of Vietnam’s major coffee importers, reported Vietnam Customs. To tap this market, businesses are encouraged to explore the consumption trends among coffee connoissecers to cater to their tastes.

In addition, Germany has a high demand for wood products for interior decoration.

German consumers require a wide variety and large volumes of wood products at low prices, as well as high quality sale services, offering a good opportunity for Vietnamese wood processors. Vietnamese businesses are advised to improve product quality to attract more customers in this demanding market. German consumers are also very aware of environmental and social issues related to the products they buy. Businesses need to learn more about their target consumers to produce goods that will appeal to consumers’ tastes.

Vietnam Customs reported that the country's two-month wood exports to Germany reached US$25.28 million, up 5.66 percent against the same period last year.

Vietnam-Japan economic cooperation highlighted

Japanese Ambassador to Vietnam Yasuaki Tanizaki has spoken highly of Vietnam-Japan economic cooperation.

In his lecture at Foreign Trade University in Hanoi on March 22, he recalled that Vietnam and Japan committed themselves to becoming strategic partners in October, 2006 during Vietnamese Prime Minister Nguyen Tan Dung’s visit to Japan.

In the first three months of 2012, the total amount of investment capital poured by Japanese businesses to 208 projects reached US$1.8 billion. Vietnam now ranks second in Japan’s list of official development assistance (ODA) recipients.

Ambassador Tanizaki said the Japanese Government has highly appreciated Vietnam’s economic growth and its efforts to reduce hunger and poverty. With its rate of poverty dropping from 58 percent in 1993 to 14 percent in 2008, and its GDP per capita rising from US$144 in 1992 to US$1,000 in 2008. Vietnam has joined the group of middle-income countries.

However, he said, there remain some issues that require Vietnam to address properly. If not, its economic growth will slow down, he warned.

The diplomat added that the Japanese Government is working with Vietnamese agencies such as the Government Office, the Ministry of Planning and Investment, the Ministry of Industry and Trade, and the Ministry of Finance to help build a strategy for national industrialization.

Asked about cooperation between Vietnam and Japan and other countries in the region, Mr Tanizaki said there is a plan afoot to develop links in the Mekong region for the benefit of the ASEAN community in future.

Vietnam and Japan are carrying out infrastructure projects in the East-West Economic Corridor stretching from Danang through Laos and Thailand to Myanmar, and the Southern Economic Corridor from HCM City to Cambodia, Thailand and Myanmar, he said.

Welcoming carpet laid out for powerhouse foreign SMEs

Vietnam is in a great position to lure investment from Japanese enterprises and build up its fledgling supporting industry.

However, experts warn it won’t be all plain sailing. According to Japan’s Small and Medium Enterprise Agency, there were 220,000 companies operating in the Japanese manufacturing industry. Of which, merely two per cent have invested in foreign countries. This means there is great scope for Vietnam to lure Japanese investors into its supporting industry.

“While Vietnam is focusing on developing its supporting industry, many Japanese small- and medium-sized enterprises (SMEs) seeking ways to expand their production abroad to diversify risks owning to natural disasters and the high value of the yen. This makes the conditions favourable for Vietnam to attract these businesses,” said Japanese ambassador to Vietnam Tanizaki Yashuki.

Makoto Ryouke, assistant director of Manufacturing Support Division in Osaka, said Japanese SMEs faced many difficulties inside the country so they were looking for investment opportunities abroad, with Vietnam and Thailand being top choices.

“I come from Osaka – the city has selected Vietnam as its leading partner and top priority for SMEs [interested] in investing in South East Asian nations. In Vietnam, Japanese investors find cheaper labour costs and lower infrastructure fees,” Ryouke said. Up to 75 per cent of Osaka’s SMEs are targeting Vietnam as their South East Asian production base.

Meanwhile, Vietnam’s Deputy Minister of Planning and Investment Nguyen Van Trung said: “The character of Japanese SMEs is very suitable with Vietnam’s investment attraction orientations. We will now try to create more favourable conditions in terms of infrastructure, legal framework and incentives for Japanese SMEs.”

Kenichi Ohno, leader of GRIPS-NEU Research Project, a collaborative project involving Japan’s National Graduate Institute for Policy Studies (GRIPS) and Vietnam’s National Economics University (NEU), said despite improvements over recent years, Vietnam’s investment environment lagged behind that of its neighbours such as Thailand and Malaysia.

“When investing in Vietnam, Japanese SMEs still encounter several difficulties. Industrial park infrastructure in Vietnam has failed to meet Japanese investors’ requirements. Electricity shortages and blackouts remain a big barrier to Japanese businesses operating here,” Ohno said, adding that “improving infrastructure and the workforce’s skills are urgent tasks.”

Atsushi Uehara, president of Long Duc Investment – a Vietnam-Japan joint venture developing $100 million Long Duc Industrial Park in southern Dong Nai province, said that to accelerate Japanese investment into supporting industries, the Vietnamese government should immediately issue new regulations on tax incentives for foreign invested projects. Construction of Long Duc Industrial Park, which prioritises attracting Japanese supporting industry investors, was kicked-off on March 19.

According to the Ministry of Planning and Investment’s Foreign Investment Agency, by February 20, 2012, Japan had 1,692 investment projects in Vietnam with the total registered capital of more than $24.7 billion, outstripping Singapore to become the biggest foreign investor in the country.

Rubber exports: need to seek more markets

The first two months of 2012 witnessed a sharp year-on-year increase in exports of rubber products. However, statistics have shown that rubber exports remain dependent on a limited number of key markets.

Total revenue of the sector in the period jumped 55.2 per cent over the same period last year to $56.8 million.

According to the General Department of Customs, top markets of Vietnamese rubber include China , Japan , the US , and the Republic of Korea , beside some minor markets such as Cambodia , Taiwan , Malaysia , Indonesia , Hong Kong and India .

As the largest consumer of Vietnamese rubber, China bought more than $5 million worth of rubber products from Vietnam in January and $7.7 million in February, year-on-year increases of 26.6 per cent and 21.8 per cent, respectively.

With the main mode of export through unofficial trade with small volume, Vietnamese rubber enterprises have remained in a passive situation when they have had to depend on the border trading policies of China , their key market.

Orders from large Chinese rubber firms reduced after the lunar New Year (Tet) holiday, and Vietnam ’s rubber latex exports fell by 6 per cent year-on-year in the first two months of 2012.

The Vietnamese rubber sector has set a target of planting one million hectares of rubber trees and earning $5 billion from exports by 2015.

The Vietnam Rubber Association has pointed out that in the context where abundant rubber materials have been sold cheaply, in order for rubber enterprises to effectively implement the sector’s strategy, it is essential to step up exports of finished products such as household commodities and industrial products.

Parallel with improving product quality, the sector should also be active in expanding export markets, lessening its dependence on key markets.

The General Department of Customs also reported that Vietnamese rubber has appeared in some new markets such as the UK , Germany and Netherlands . Although the export revenue from these markets is still modest, the markets appear to offer future benefits.

Real estate brokerages switch to selling ... pho

After mushrooming during the prime time of the real estate sector in 2007, many property brokerages in Ho Chi Minh City have since collapsed along with the sluggish market, and have ended up switching to selling everything but realty projects.

At the entrance of the Ng. Phi Hung real estate trading floor on Nguyen Thi Thap Street, District 7, what is noticeable these days is not the number of parked motorbikes as in mid-2009, when the floor was opened, but a stand to sell pho (rice noodle), and a couples of tables and chairs.

At around 9am every day, the former property brokers arrive and begin their jobs as food vendors.

“There are only five of us left,” said Tran Dinh C., a sales executive of the trading floor.

“We have to sell pho to earn a little more profit amid this slumping market.”

In its early days, the Ng. Phi Hung real estate trading floor set an ambitious target of becoming the country’s top contractor, housing trader, and brokerage.

“But now that we have to wait expectantly to earn a single penny from brokerage, how could we think of developing?” an employee of the floor said.

Not far from the “pho trading floor,” at the junction of Nguyen Huy Tho and Nguyen Van Linh streets is a shop selling mattresses, pillows, and quilts. This is the successor of the Gia Phuc Real Estate Co.

“We had to cease operations due to a myriad of market difficulties,” said T., the company’s director, adding that her family has used the space to open the quilt shop.

Stuck with a similar fate is Tuong Nghia, a realty brokerage on District 2’s Tran Nao Street, which used to be a “real-estate market” with dozens of brokerages and is now functioning as a beverage distributor.

N., who works for the company, said at the peak for this 10-year-old brokerage in 2007 there were as many as 100 employees, all of whom have recently been laid off.

“But 98 percent of the realty companies on this street have shut their doors,” said N.

“Most of those remaining open are companies with their own spaces, and thus do not have to pay rent.

“But they still have to do other businesses to earn their daily bread.”

While the brokerages were forced to transform their functions, the owners of the real estate trading floors have themselves had to move their posts.

T., who used to be the head of Tin Thanh trading floor in District 7, had to close his company early this year, and moved to work for another brokerage in Tan Phu District.

“After all, I am following the real estate career, while other floor owners have to change their jobs,” shared T.

Similarly, L, the owner of HL trading floor, also shut down his own facility to work for another company. However, at the end of last year, L had to leave again since his new destination was also stricken by difficulties.

Meanwhile, a large number of property companies on Cao Thang Street have had to die young after blossoming in 2007.

“Brokerages trying to stay in the market are still operating with difficulty since there is almost no liquidity on the market,” commented Ta Quang Vu, chairman of Dat Ngoc real-estate company.

For his part, Le Hong Phuc, chairman of Nha Viet Co, said it is costly to maintain a realty trading floor.

“Total expenses, including space rental, telephones, and wages, are as much as VND70 million (US$3,360) a month,” elaborated Phuc.

“Since they have no sales and no revenues, real estate brokerages have to shut down, or narrow their operations to secure capital.”

The brokerages are not the only ones suffering from the frozen markets, as even the giant realty companies are sharing the same fate, with their unsettled debts amounting to hundreds of billions of dong at exorbitant interest rates.

Phat Dat Real Estate Co, for instance, only posted a revenue of VND1 billion in the third quarter of 2011, with most of the money coming from parking and house renting activities.

Meanwhile, the company has to pay annual interests worth more than VND100 billion for its long-term loans worth VND584 billion.

Similarly, Quoc Cuong Gia Lai Co said the exorbitant lending interest rate is the main cause for its VND104-billion loss in Q4/2011.

The same culprit is observed from the financial reports of a series of realty companies, including the Ocean Group Corporation, and Song Da Urban & Industrial Zone Investment and Development JSC.

Meanwhile, Song Da-Thang Long Co is facing threats from its loans worth thousands of billions of dong, while the real estate market has yet to show any brighter signs.

Local gold trader expands operation to Laos

The Vietnam Gold Investment and Trading Corporation, or Vietnamgold, has recently set up the subsidiary VietnamGold.LTD in Laos, functioning as a gold and jewelry processor and exporter.

The initial investment in the offshoot is US$3 million, and VietnamGold is set to develop a gold refinery to turn Laotian gold sources into high content products for domestic use and export, according to Saigon Times Online.

“Laos is a small, but potential market,” said VietnamGold CEO Nguyen The Hung in a statement.

“The country is rich in gold resources, which supply raw materials to produce high value products for export.”

Previously, many other local gold traders, including Saigon Jewelry Co, and Phu Nhuan Jewelry Co, have also mulled entering the Laotian market.

However, they have yet to make any further steps, due to the complex paperwork required, and the fear of a low consumption force in the market.

Automaker association calls for delaying traffic fees

The Vietnam Automobile Manufacturers Association (VAMA) has called on the government’s administrative agencies to stop implementing the suggestions related to traffic fees that were recently proposed by the Ministry of Transport.

The association has filed its documents to the National Assembly Standing Committee, the government, and relevant ministries and agencies, newswire Saigon Times reported.

It also called on the said bodies to provide feedback for the Ministry of Transport and relevant agencies to restudy the proposals in a more comprehensive way in order to issue synchronized solutions to improve local traffic problems while not affecting the development of the automobile and supporting industries.

“The fee of VND20 million – 50 million a year to be applied to individual vehicles, as proposed by the transport ministry, is too high, and is unaffordable to the majority of local citizens, even those who owned, currently own, or will own a sedan,” said VAMA in its petition.

The association added that the proposal to collect fees from vehicles entering the city at rush hour is also unfeasible.

The Ministry of Transport proposed that every car with less than seven seats pay a VND30,000 fee if it is entering the city downtown during rush hours.

“This is not feasible since we have yet to develop the automatic ticket machines at the city’s gateways,” VAMA said.

“If the fee is applied, there will be traffic congestion at all of the gateways to the city center.”

VAMA also said that in order to own a sedan, consumers already suffer too many fees and taxes, including the import, special consumption, value-added taxes, and license plate and car registration, and fuel fees.

Hence, if the proposed feeds are applied during these hard economic times, the buying force on the automobile market will slump, severely affecting the car manufacturers and assemblers in the Vietnamese automobile industry.

In the short term, the automakers will suffer huge damages from a high unsold inventory index, VAMA warned.

Moreover, with the manufacturers’ sales declining, payments and wages of hundreds of thousands of their employees will also fall, leading to lower collection for the state budget, it added.

The local automobile industry has attracted a total investment of US$1.8 billion, creating 50,000 direct jobs, and hundreds of thousands of indirect laborers, while contributing around $2 billion to the state budget every year, VAMA said, citing figures from the Ministry of Industry and Trade.

Vinamilk strives for world status

The Vietnam Dairy Products Joint Stock Company (Vinamilk) is striving to enter the world’s top 50 largest dairy producer list with annual revenues of US$3 billion by 2017.

The target has been set at the company’s annual shareholders’ meeting recently held in Ho Chi Minh City .

The company also works towards an average revenue increase of 20 percent annually and a pre-tax profit growth of 13 percent in 2012-2016.

To fulfill the targets, the company will continue focusing on its strength in producing dairy products, while expanding its business scope to soft drinks using the latest technologies to ensure international standard quality for their products.

Vinamilk now possesses a total asset worth nearly VND16 trillion.

The firm’s CEO and chairwoman, Mai Kieu Lien, is the only Vietnamese woman to be named among Asia's 50 Most Powerful Businesswomen by Forbes magazine.

Association suggests building small condos

The HCMC Real Estate Association has suggested developing residential areas with small apartments of 20 to 70 square meters for singles and small families.

As Vietnam is still developing, building small-sized apartments in accordance with the urban planning of each locality is now the most appropriate and necessary solution, said HoREA chairman Le Hoang Chau at a seminar on solutions to unfreeze the property market held in Ho Chi Minh City recently.

Binh Duong-based Becamex IDC has recently kicked off a project to construct 3,000 apartments of 30 square meters each, worth VND90 million per unit, which is considered a breakthrough to realize the dream of low-income people to own a home.

Chau said this model should be deployed on a national scale.

He said the realty market had experienced tough times since 2008, causing many problems to project developers, investors as well as consumers.

Most property firms have to struggle with capital shortages, difficult access to bank loans, and sky-high lending rates of 24 percent -25 percent.

Property trading remains dull, leading to a slump in the market liquidity, which is associated with the liquidity of the banking system. Relevant industries like cement, steel, and interior furnishing are also struggling.

To cope with the general difficulties, property enterprises must come up with solutions such as restructuring business and investment, postponing projects, offering discounts along with various promotion programs to stimulate consumer demand.

The market has yet to pick up since the deposit rate ceiling was lowered by one percentage point last week. The HCMC government said it was considering buying unsold mid-end apartments for resettlement purposes.

The outlook of the realty market is still dreary in 2012, with the biggest challenge being to improve sales and market liquidity, handle the unsold units and regain consumer confidence.

HoREA suggested there should be a specific schedule to reduce lending rates to 11 percent - 12 percent per year. In addition, the Government should adopt policy to offer consumers preferential interest rates for their first house purchase.

The association also proposed removing the land use fee slapped on property projects and imposing a tax rate of 10 percent - 15 percent instead.

Portable-goods mini supermarkets in Hanoi

Mini supermarkets specializing in selling foreign products from Korea, Germany, and Thailand have recently mushroomed in Hanoi, putting on shelf a number of products which are, however, not officially brought to the country.

Most of the products at these mini shops are hang xach tay, a local term to describe portable goods that are brought to Vietnam as personal belongings, and thus are not subject to any import tariffs.

Another common characteristic of the supermarkets is their small area, which is usually around 30 – 60 square meters.

At the 30-square-meter Minimart Thailand at 291 Tay Son Street, for instance, a series of products, from shampoo, clothes, to confectionaries and soya milk are on sale, all of which have been brought from Thailand, according to Hung, the owner.

The minimart is always full of customers, though prices are higher than domestic ones.

Similarly, the supermarket specializing in Korean goods at 9 Ly Nam De Street sells beverages, confectionaries, and other Korean specialties.

The mart attendants also claim that all products originate from the land of Kimchi.

“Those without Vietnamese labels are hang xach tay, with quality ensured,” one of them confirmed.

The products are also more expensive than Vietnamese products. For example, a pack of sausage costs VND43,000, more than double the cost of a similar product manufactured in Vietnam.

What is worth noticing is that most of the customers of these foreign goods supermarkets are local citizens, according to Hoang Viet Ha, a minimart owner.

“Vietnamese customers are willing to pay high prices to buy the products to give as gifts, while foreigners usually choose locally-manufactured goods at lower prices,” she said, explaining why she has not opened new marts in areas with a large population of foreigners.

Ha said Korean food brought to Vietnam is usually on sale at prices 1.5 times higher than prices in Korea, since she has to hire people to bring them home via airlines, while the products have short expiry dates.

Most of the foreign mini supermarkets claim they have high revenues, and have planned to expand operations.

When asked about the origins of the goods, and how to handle the case of customers getting poisoned by the products, attendants at the minimarts always claim that “it is impossible for the goods to be of poor quality,” since “they are foreign products.”

Meanwhile, a large number of the goods on the shelf do not bear Vietnamese labels and manuals, making it hard for customers to know if the goods are genuine.

An official of the Market Management Agency under the Ministry of Industry and Trade said businesses are allowed to open supermarkets to sell imported goods as per Vietnamese law.

“However, the imported products must have invoices and receipts, with ensured origins and quality,” he said.

“They are also required to have labels in Vietnamese with specific information about the product features and expiry date.”

Rice exports set to rise 15% in Q1

Vietnamese companies are expected to win contracts to export some 3.2 million tonnes of rice in the first quarter of 2012, a year-on-year increase of 15 per cent, according to the Viet Nam Food Association (VFA).

As of March 25, the companies had signed contracts to export 2.8 million tonnes of rice for this year, mainly to Asian markets like China, Indonesia, Malaysia and the Philippines, Le Thanh Phong, VFA Chairman told Viet Nam News yesterday.

So far this year, nearly 900,000 tonnes of rice have been shipped to buyers through the export contracts, said Phong.

He also said that Viet Nam was selling 5 per cent broken rice for US$450 per tonne, $10 per tonne higher compared with early March.

Meanwhile, paddy harvested from the winter-spring crop was selling for VND5,300 to VND5,400 per kilo, up by VND300 to VND400 per kg.

Prices of dried low-quality IR 50404 paddy stood at VND5.200 per kilogramme while long-grain paddy was selling for VND5,600 per kg for the past couple of days, Phong said.

"We have seen optimistic signs for the country's rice export right in the first quarter of this year," he said.

China alone has imported some 500,000 tonnes of rice, mainly the high-quality 4 per cent broken rice, through official channels from Viet Nam.

Besides this, some 400,000 tonnes of Vietnamese rice, over half of it lower-quality rice, have been sold to China through cross-border trade.

"The high demand for rice from China has helped boost export of rice from Viet Nam," Phong said.

The increase in China's imports have compensated for the 25 per cent decrease in rice exports to African markets, Phong said.

Vietnamese rice now accounts for 30 per cent of the Hong Kong market which requires "very high" quality, Phong said.

In addition to the Chinese buyers, local firms have won contracts to sell 190,000 tonnes of rice to the Philippines.

Malaysia will buy some 650,000 tonnes of medium quality rice which will be shipped from late February to December 2012.

With 1.1 million tonnes of rice reserved from last year and 3.5 million tonnes of rice from the 2011-2012 winter-spring crop, the country has a total of 4.6 million tonnes of rice for export in the first half of 2012.

Phong said 1.2 million tonnes will be shipped to buyers in the first quarter and some 2 million tonnes in the second quarter, so the country will have 1.6 million tonnes in stock for the second half of the year.

"The local rice market has stabilised," Phong said.

He said there was stiff competition for low-priced rice from India and Myanmar and for high-price rice from Thailand, so Viet Nam should focus on medium-priced rice for now.

Phong said 89 VFA members have bought some 300,000 tonnes of rice during the first ten days of the plan to buy one million tonnes for reserves. The plan is scheduled to run until April 30.

Ha Noi plans socio-economic future

Ha Noi's socio-economic development strategy through 2030 targets the development of a knowledge-based economy, with a priority on industries which apply advanced technology and generate high added value.

Under the strategy recently approved by the Prime Minister, Ha Noi would be a metropolitan with a population of about 9.2 million by 2030 with an annual growth in gross domestic product (GDP) averaging about 10 per cent.

GDP-per-capita would increase ten-fold to about US$17,000 per year.

The services sector would grow at the highest rate annually, at between 9.5 per cent and 10.5 per cent, and employ up to 60 per cent of workers in the city by 2030.

The proportion of workers in manufacturing and construction would reach 35 per cent, while the percentage of agricultural workers would fall to only 5 per cent. The resulting service-based and industrialised economy would maintain an unemployment rate of below 4 per cent.

Whether the goals could be achieved would depend on many factors, said the head of the Ha Noi Institute for Socio-Economic Development's Economic Research Division, Nguyen Minh Phong.

One of the most important factors was whether the city could successfully develop a co-ordinated transport infrastructure that would ease current traffic congestion and promote economic development, Phong said.

The city also needed to focus on promoting the application of advanced science and technology in production to increase the quality and competitiveness of the city's industries while protecting the environment, he said.

High-quality services such as banking, insurance, telecommunications, public transportation and tourism would also play key roles in the city's economy, he added.

It was estimated that the city would need investment of $190 billion in the next decade, and another $320 billion during 2020-30, to reach these goals.

Car imports unlikely to slow down

The country will have to spend up to US$12 billion yearly on imported cars until 2025 if the automobile industry's meagre development continues its current state, according to the Viet Nam Business Annual Report 2011.

The report, released by the Viet Nam Chamber of Commerce and Industry (VCCI) recently, is concerned with how the domestic automobile manufacturers could compete against foreign rivals when the country's automobile import tax for ASEAN (AFTA) will be reduced to 50 per cent by 2014 and zero per cent by 2018.

According to the report, the country's automobile industry is currently less developed as 80 per cent of assembly components needing to be imported. The automobile market has roughly 150,000 vehicles per year.

The country had 314 automobile assemblers by the end of 2010, of which 52 per cent were domestic and private, 42 per cent were foreign invested and only 6 per cent were State-owned. The assemblers' total design capacity was roughly 458,000 vehicles per year, but the assemblers ran only at half of this capacity.

Le Thi Hai Van from the Ministry of Planning and Investment's Foreign Investment Agency (FIA) said in the report that in general, technology and equipment of the country's automotive industry progressed at a medium or even backward level.

The current so-called technology of the industry was only welding, painting, assembling and product testing, Van said.

Meanwhile, supporting industries were small and incomprehensive. The country currently has roughly 210 enterprises involved in manufacturing automotive components and parts, creating jobs for roughly 26,163 workers. But the enterprises could produce only simple components such as chassis, container vehicles, tires, radiators, wires, springs, exhausts, gearboxes and steering wheels.

Van reported that investment in automotive component manufacturing was poor and the products were small in both volume and variety. Every year, the automotive industry still has to import about $2 billion of parts.

According to statistics of the Ministry of Public Security, the country's total number of cars in circulation was 1.63 million units by the end of 2010. Thus, the nation's automobile market has great potential. However, the country hasn't so far got any large-sized producers whose products could be exported and compete against that of other rivals in the region.

As planned, Viet Nam has set a target to increase Vietnamese automobiles of less than nine seats to at least 50 per cent. However, the localisation rate currently reaches less than 15 per cent – too low of a rate to be able to develop the automotive industry. The localisation rates for other vehicles, such as cars with more than 10 seats, are also only 30-40 per cent against the target of 60 per cent.

The report attributed the shortcomings of the automobile industry to domestic automobile producers not being dynamic or sharp in their approach to customers. They are not also confident nor familiar with the concept of building a "mutually beneficial" relationship with customers. Supporting enterprises that produce components for the industry could churn out only poor-quality products at high prices due to outdated technology.

Therefore, there is always a big gap between the requirements of product quality, price and delivery deadlines for foreign companies and the ability to meet the requirements by Viet Nam's suppliers.

A loose linkage and inconsistency between FDI and Vietnamese enterprises in the automotive industry is also a cause hindering the industry's growth. A survey of 23 FDI manufacturers in the automobile industry in 2010 by the FIA, the General Statistics Office and the VCCI showed that six out of 23 of the manufacturers did not buy components from Vietnamese suppliers. Only about 15 per cent of the inputs used by the FDI manufacturers were from Vietnamese suppliers.

Therefore, the report said, the localisation rate of Viet Nam's automotive vehicles was very modest, causing the industry to depend mainly on foreign investors and the domestic car market be flooded with imported cars from Japan, South Korea and Germany.

SBV to bail out banks in trouble

Insolvent banks unable to cover payment demands from depositors will receive support from the State Bank of Viet Nam or other commercial banks if their defaults were likely to have a negative impact on the entire banking system, according to a new circular issued by the central bank last week.

Issuance of Circular No 06 is also being viewed as an opening salvo in the regulatory process required to implement the nation's plan to re-organise the banking industry by 2015.

Under the circular, the State Bank would play a key role in requiring stronger credit institutions to refinance debt loads for weaker banks or would provide financing directly.

Credit institutions which have lost their payment capacity due to serious problems will receive loans at preferential rates equivalent to the re-financing interest rate announced by the central bank. If the banks receiving the support fail to repay the loans when due, they will be charged interest on past due amounts at 1.5 times of the initial rates.

The borrowers must use funds from preferential loans to pay their individual depositors. Using the loan proceeds to cover institutional depositors may proceed with the approval of the State Bank Governor.

A number of banks have low liquidity because they have used short-term deposits to fund medium- and long-term lending. Under pressure to meet credit growth and profit forecasts, banks have also lent a significant amount of money to the high-risk real estate and securities industries.

Although the central bank has allowed banks to use up to 30 per cent of short-term deposits for medium- and long-term loans, a number of banks have lent up to 70 per cent. At a meeting held in Ha Noi last week, State Bank Governor Nguyen Van Binh said that the nation now had nine poorly-performing credit institutions. These were now under supervision by the central bank in order to prepare for their reorganisation.

Under a plan approved by Prime Minister Nguyen Tan Dung earlier this month to restructure the banking by 2015, domestic commercial banks would be classified into three groups – healthy, temporarily short of liquidity, and fragile – in order for authorities to approve suitable measures, such as re-organisation, merger or acquisition, reform of risk management systems, or the interference of the State Bank or other agencies.

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