More than 200 businesses from across the country gathered at a meeting in Nghe An on July 19 to discuss measures to boost sustainable development.
At the meeting, the Vietnam Association of Small-and Medium-Sized Enterprises (VASME) pointed out problems with credit loans, financing, market management, production, trade promotion and the quality of workforce.
Businesses are short of capital for production but find it difficult to access loans because of high interest rates. Around 30 percent of businesses are able to access bank loans but the remainder must use their own capital or borrow from other sources.
Nguyen Quoc Hung, Deputy General Director of the Bank for Agriculture and Rural Development (BARD) said that the bank focuses its loans for agriculture and rural development and considers small-and medium-sized enterprises (SMEs) to be strategic partners. The bank provides around VND15,000 billion in loans to businesses every year.
Participants at the meeting discussed measures to help SMEs develop sustainably in the future.
Vietnam has more than 500,000 SMEs, accounting for 98 percent of all businesses with a combined registered capital of more than VND2,000 billion. They create more than 40 percent of domestic consumer and export goods, make up nearly 45 percent of the total gross national product and contribute to nearly 40 percent of the State budget. They also generate more than a million new jobs each year, which contributes to reducing poverty and ensuring social welfare.
High prices forecast until end of year
The price of many essential goods is expected to remain high until the end of the year, following a report by the Ministry of Industry and Trade on July 19.
The price of rice would rise slightly due to an increase in Thailand's export rice price while other food prices are at their highest ever due to crop diseases, higher input costs and a boost in exports to China and Cambodia.
However, the Ministry of Agriculture and Rural Development predicted the price of livestock products on the domestic market would fall 10 to 15 percent in August.
Milk product and sugar prices would remain high, with the latter at VND21,000-22,000 per kilo, the ministry said.
The prices of domestically produced drugs are expected to fluctuate depending on input costs, while imported medicines and raw materials would be subject to import prices.
Fertiliser prices would increase till the end of this year due to rising import costs but the prices of essentials such as animal feed, steel, cement and paper are forecast to remain unchanged.
The cost of retail domestic gas would fall slightly due to the downward trend in the price of imported liquefied gas.
Salt prices would remain stable in northern and central provinces and rise slightly in the Mekong Delta. Salt is up 50 percent in price over the same period last year, now standing at VND4,000-5,000 per kilo.
Vietnamese, Malaysian businesses cooperate in IT
A Vietnam-Malaysia business forum on information technology and communication was held in Hanoi on July 18.
The event, co-organised by the Ministry of Information and Communication, the Malaysian Ministry of Science, Technology and Innovation and the Malaysian embassy in Vietnam, attracted more than 100 delegates from 35 leading IT businesses in Vietnam and Malaysia as well as representatives from relevant ministries of both countries.
Addressing the opening ceremony, Minister of Information and Communication Le Doan Hop said that the forum is of great significance to promoting and strengthening the friendship between the two countries as well as enhancing IT cooperation in the future.
Minister Hop spoke of major plans and projects to turn Vietnam into a strong IT nation in the next ten years.
Representatives from 15 leading businesses from Malaysia highlighted Vietnam’s development achievements and expressed their keen interest in cooperating with Vietnamese partners in implementing such projects to develop IT technology and communication.
At the forum, businesses from Vietnam and Malaysia signed eight cooperative agreements in terms of services, technology transfer, e-commerce, e-government, and e-banking.
Investment in Dung Quat economic zone
Dung Quat economic zone in the central province of Quang Ngai has 113 investment projects worth more than VND120,000 billion in total.
However, the flow of investment capital into the zone in the past six years has followed a downward trend, according to the Management Board of Dung Quat Economic Zone.
In the first half of the year, the management board granted only two investment licenses with registered capital of nearly VND2,000 billion.
The decline is attributed to the impact of the global economic downturn, improper investment policies and slow administrative procedure processing in the province.
Business environment favourable for investors
Vietnam’s business environment has many favourable conditions for foreign investors , said President Nguyen Minh Triet.
President Triet said this while receiving a delegation from the Al Ghurai Group of the United Arab Emirates (UAE), led by its General Director, Saeed Al Ghurai, in Hanoi on July 18.
Mr Triet also emphasized Vietnam’s abundant human resources, which can meet the requirements of foreign investors, and the country’s advantages in agricultural development.
He expressed his wish that the Al Ghurai group will plan to invest in Vietnam.
Al Ghurai said he hoped to invest in Vietnam for a long time. He said that energy and food are strategic issues for all nations in the world, and these are two major fields for cooperation between both countries in the future.
He added that the Al Ghurai group is now operating in the fields of oil and gas, finance and banking, and hotels and restaurants. As the General Director of the group, he considers investing in Vietnam very important, especially in the fields of oil and gas.
FPT Software earns major revenues in Japan
In the first half of the year, FPT Software earned US$14.6 million in the Japanese market, accounting for 53 percent of the company’s total revenue.
Ogawa Takeo, director of FPT Japan under FPT Software, said that even though Japan’s economy encountered many difficulties due to the earthquake and tsunami earlier in the year, the company has achieved nearly 45 percent of its yearly plan.
According to FPT Japan, the results can be attributed to support from its parent and subsidiary companies, as well as customer trust.
FPT Software has a wide network of customers in the US, Europe, Japan and Asia-Pacific nations such as Malaysia, Singapore, Thailand and Australia.
As part of its strategy to become one of the world’s leading software providers, the company has focused on developing high quality human resources to contribute to the company’s growth.
Mekong rice prices rise again
Rice prices have risen in the Cuu Long (Mekong) Delta despite the Viet Nam Food Association's (VFA) recent announcement about a temporary suspension in the purchase of rice for reserves.
Compared to prices that prevailed on July 11 when the VFA said it would stop purchasing rice to maintain 1 million tonnes as reserves, current prices are VND300 to VND500 per kilo higher.
Nguyen Trung Kien, general director of Gentraco Can Tho, a member of the VFA, said the demand for large volumes of rice for export could be one of the reasons for the temporary suspension.
Kien said banks have given priority to loans for exporters to purchase paddy (unhusked rice) from the summer-autum crop.
Mekong farmers have harvested some 600,000 ha of the over 1.6 million ha under the summer-autumn rice crop.
The yield of the summer-autumn crop in the region is estimated at 5.6 – 5.8 tonnes per ha, bringing the total output to 8.9 million tonnes, 356,000 tonnes higher than the output of last year's summer-autumn rice crop.
Mekong farmers believe that local exporters' purchase of large volumes to fulfill rice export contracts to be shipped in the third quarter is one of the reasons behind the recent hike in prices.
However, the volume of paddy bought by exporters has not been as high as expected. Kien said. Gentraco bought just 900 to 1,000 tonnes of paddy per day, 400 to 500 tonnes lower than its target.
Pham Van Quynh, Director of Can Tho Department of Agriculture and Rural Development, said most of the 84,000 ha under the summer-autumn rice crop of the city have been reaped, with an average yield of 5.6 tonnes per ha, 200kilo higher than last year's crop.
He said the change in the rice varieties is one of the reasons behind the higher yield of the summer-autumn crop this year.
Quynh also asked the VFA to maintain the effort to purchase 1 million tonnes of paddy for reserve to help minimise the risk of a slump in rice prices during peak harvest season.
Vietnamese exporters have shipped 3.912 million of rice in the first six months of 2011.
In the second half of the year, Viet Nam will be able to export some 3.2 million tonnes of rice, bringing total exports of the grain in 2011 to 7 – 7.4 million tonnes.
Firms named to handle customs
Nine enterprises were recognised as "authorised economic operators" by the Viet Nam General Department of Customs yesterday.
The enterprises will be given special preferences in customs procedures such as an exemption from inspections of detailed customs documents and goods or exemption from post-entry audits.
Enterprises will be able to perform e-customs 24 hours a day, seven days a week and pay customs tax and fees monthly through banks, among other preferences.
Preferential enterprises include three FDI companies of Japan and South Korea and six local companies working in food production, aquaculture and energy fields.
"Our export-import activities would be improved dramatically thanks to customs procedures exemptions," said Ofuchi Ryuhei, general director of Sumi Denso Viet Nam, one of nine recognised enterprises.
"Recognised as an authorised economic operator, our production activities will be speeded up after a stagnant period due to the impact of the earthquake in Japan," Ryuhei said.
Customs After Clearance Inspection Department director Pham Thanh Binh said the exemptions were an important step in reforming Customs in preparation for the sector integrating into regional and international Customs.
"The regulation would have a positive effect on export-import activities and the country's economic development as well," Binh said.
The Ministry of Finance announced regulation 63/2011/TT-BTC in May.
The regulation gives special preference in customs procedures for exporters-importers working in three categories of goods: Viet Nam purely originated aqua-agriculture products, crude oil and high-technology.
Preferences target low-risk exporters-importers who satisfy certain conditions, such as having a turnover of at least US$350million a year for normal product exporters-importers or turnover of at least $70million a year for Viet Nam original aqua-agriculture and crude oil product exporters-importers.
Exporters-importers must also have a transparent accounting system; effective business activities, banking payments and e-customs procedures; a willingness to be recognised as a preferential enterprise.
The Customs department said the regulation targeted 250 big ex-importers that have ex-import turnovers between $100-500 million.
Cashew output slumps below targets
Raw cashew production this year is likely to be just 300,000 tonnes, or far below the target of 380,000 tonnes, the Viet Nam Cashew Association has said.
Association members blamed the shortfall partially on unseasonable monsoon rains in major cashew-growing areas during the flowering period.
The advanced age of many cashew trees was another reason for the drop in output, which was above 380,000 tonnes in the previous two years, said Nguyen Anh Tuan, deputy director of the coffee and agricultural product quality assessment agency Cafecontrol.
The fall in output is a big headache for the cashew processing industry because its current production capacity is almost three times the output.
"We are at the very end of the harvest. Demand is going higher and higher. Processors in upcountry provinces are prepared to pay for dried raw cashew at VND40,000 (US$1.94) per kilo, VND5,000 higher than a month ago," said Nguyen Thai Hoc, chairman of VINACAS.
"To ensure the cashew export target of $1.5 billion this year — $400 million higher than last year — we have to import 450,000 tonnes of raw cashew from Nigeria, Ghana, Ivory Coast, Indonesia, and Cambodia," he said.
The Ministry of Agriculture and Rural Development said 126,000 tonnes of raw cashew were imported in the first half of this year.
This month, 10,000 tonnes have arrived in Cat Lai port in HCM City and are awaiting customs clearance while another 100,000 tonnes are en route to HCM City ports.
The average import price is $1,250-1,350 per tonne.
"Luckily, we could buy [large] volumes thanks to bartering rice for raw cashew with African countries at an earlier stage," Hoc said.
"Otherwise, we could have missed out due to tough competition in buying from India and Brazil, the two big producers and exporters after Viet Nam."
The biggest problem for VINACAS members was the very high bank interest rates of 22-24 per cent, an association official said.
To offset this, VINACAS has successfully lobbied the Ministry of Finance to reduce import tariffs on raw cashew from 5 per cent to 3 per cent from September.
The Ministry of Industry and Trade said Viet Nam exported 69,000 tonnes of cashew nut for nearly $520 million in the first half, nearly 15 per cent down year-on-year in terms of volume but up 22 per cent in value.
Since 2006, Viet Nam has been the world's biggest exporter of cashew nut. Last year, it exported around 190,000 tonnes for $1.14 billion, or more than half of the total global export.
The US, China and Europe were the largest importers of Vietnamese cahew nut.
In addition to the more than $1 billion revenue it brings in annually, the cashew industry has also contributed significantly to the Government's hunger eradication and poverty alleviation programmes by providing thousands of jobs in remote areas around the country.
Dealing With Murky Waters
The National Assembly’s Economic Commission has recently offered its take on the Ministry of Planning and Investment’s report on Vietnam’s first-half socio-economic performance
Vu Tien Loc, chairman of the Vietnam Chamer of Commerce and Industry, contends that the discussion on interest rates, one of the most pressing concerns in the first six months, is inadequate. Given an interest rate of 20%, the profit rate should surpass 30% to ensure healthy business. However, this is unthinkable for many enterprises.
The report also tends to focus on growth issues and fails to determine the number of enterprises pushed beyond the verge of shutdown, which, according to Loc, was twice as much as that in the first half of 2010. Even more worrisome is the woeful performance of businesses still in operation.
Ha Van Hien, chairman of the National Assembly’s Economic Commission, casts aspersions on efforts aimed at slashing public investment. He says that the only indisputable target is a 10% fall in planned credit for the year (VND3 trillion). Other targets, are arguably impractical, including a VND15-trillion fall in the amount of capital mobilized by government bond issues. After all, the amount raised last year was VND60 trillion and that approved by the National Assembly for 2011 equalled VND45 trillion. Besides, the Ministry of Planning and Investment aims for a reduction of approximately VND15 trillion as there is no advance allocation of capital for 2012. In view of the disparity between policy formulation and policy implementation, Hien wonders how public investment reduction goals can be attained.
Vu Viet Ngoan, vice chairman of the Economic Commission, expresses concerns about the 14.3% rise in first-half industrial output, against the backdrop of stagnant labor and capital supply. Could it be that industrial output expansion arose from costlier inputs rather than productivity increase? The discrepancy between national and local gross domestic product (GDP) is also highlighted. It makes little sense that Hanoi and HCM City, both economic powerhouses, posted GDP growth of 9.3% and 9.9% respectively while Vietnam saw its national income climb by merely 5.6%. If the overall growth was correct, then those of the growth engines should be in doubt.
Iran adds to demand for Vietnamese tuna
Viet Nam exported 43,430 tonnes of tuna in the first half of the year, earning US$220 million, an increase of 10.1 per cent in volume and 33.1 per cent in value, according to the Viet Nam Association of Seafood Exporters and Producers (VASEP).
VASEP expert Nguyen Minh Tam said that tuna exports to Iran had reached high growth rates in both volume and value, but that the average prices based on these exports were still lower than those associated with the top 10 largest importers of Vietnamese tuna.
In the first six months of 2011, Iran imported 4,565 tonnes of Vietnamese tuna, valued at nearly $7 million, an increase of 347 per cent in volume and 435 per cent in value.
Tuna exported to Norway also shot up, reaching 4,000 tonnes, valued at $15.3 million, an increase of 20.2 per cent.
Average export prices during the first six months of the year hit $4.16 per kilo, 20 per cent higher than that last year.
Meanwhile, tuna exports to the US remained stable at 1,000 tonnes, valued at $6.5 million, an increase of 40.4 per cent in value and 19.6 per cent in volume.
Viet Nam managed to export 840 tonnes of tuna, valued at $3 million, to the EU. During June, tuna exports to Germany accounted for 40 per cent of the country's total export turnover, making it Viet Nam's largest partner in the European market with the average export prices set at over $3 per kilo, a 13 per cent increase compared to the $2.68 per kilo of last year.
Since the beginning of this year, eight Vietnamese enterprises managed to export tuna to Germany, earning $7.8 million on the back of nearly 3,000 tonnes, an increase of 41.6 per cent in value. Canned tuna made $6.7 million while tuna based material hit over $1 million.
Despite positive growth, Vietnamese exports are set to face challenges in accessing the EU market during coming months with the implementation of exploitation certificates related to marine resources, according to enterprise representatives.
The Viet Nam Fishery Association plans to set up an organisation for the supervision and protection of tuna fishing in order to improve the competitiveness of Viet Nam's tuna products while protecting the interests of tuna producers.
Vinatex plans big investment to boost apparel export
The Vietnam National Garment and Textile Group, or Vinatex, will invest roughly VND43 trillion (US$2.1 billion) into new production facilities between now and 2020 with an aim to boost exports and earn higher added value.
Under its development strategy just issued, the group said the huge investment would enable it to achieve an annual increase of 12%-14% in production value and a 15% surge in export turnover.
To fulfill these targets, Vinatex will build key factories, especially facilities for producing raw materials, invest in new equipment and technology, and boost productivity.
Le Tien Truong, deputy general director of Vinatex, told a recent review meeting that the group and implement development plans, especially programs to improve human resources and to expand raw material cultivation areas.
The group targets to produce 300,000 tons of fiber by 2020, 675 million square meters of fabric and 706 million garment products per year with the export turnover of more than US$5 billion, he said.
Accordingly, the group will develop 31 fiber plants, 21 fabric plants, and 164 garment plants in the next ten years, Truong said.
The investment fund will be mobilized from various sources, including proceeds from auctioning its land in highly-urbanized areas as the group has plans to relocate its inner-city factories to the countryside.
Other capital sources will come from bank loans, privatization of enterprises, and foreign sources.
Vinatex will expand raw materials zones in eight provinces including the Central Highlands provinces of Dak Lak and Dak Nong, and Ninh Thuan Province as well as the northern mountainous province of Son La.
The apparel group will also seek to increase the added value in its production.
In order to achieve this target, Truong said, local clothing manufacturers need to increase the ratio of local content in their products to increase their value. Top priority would also be given to diversifying designs and improving quality, he noted.
“The garment industry is striving to evolve from sub-contracting to original design manufacturers (ODM) to increase value,” Truong said.
Vinatex, the country’s leading garment group, posted a six-month revenue of over VND19.37 trillion, a year-on-year increase of 33% or equivalent to 55% of its annual target.
During that period, it also exported about US$1.23 billion worth of goods, surging 32% over the same time of last year. It aims to obtain a revenue of VND17.5 trillion and an export value of US$1.2 billion in the second half of this year.
The country’s total apparel export value in the year’s first half amounted to US$6.16 billion.
Vietsovpetro to build largest drilling platform
The Vietnam-Russia petroleum joint venture Vietsovpetro will start building soon the country’s largest drilling platform for offshore oil and gas exploration able to operate at a water depth of 2,280 meters, an executive said.
Le Minh Tuan, deputy general director of Vietsovpetro, said last Friday that the drilling platform, expected to cost US$600 million, would be a ‘haft floating - haft sinking’ facility, and construction would complete in 30 months.
“This will be the most modern and largest drilling platform in the country. At the moment, Vietsovpetro is selecting some international contractors to build the platform,” Tuan told a press meeting on the occasion of its 30th anniversary.
Current drilling facilities in the country are able to operate at a maximum water depth of 90 meters only, he said.
Beside its core business of prospecting and exploiting oil and gas, Vietsovpetro is also expanding operation to building drilling platforms to supply other companies at home and abroad.
The joint venture said building platforms locally will help local oil and gas companies to save on 30% of budget compared to the purchase of platforms from other countries.
At the moment, Vietsovpetro exploits around five million tons of crude oil each year, but the joint venture expects to raise the annual exploitation capacity to seven million tons by 2015.
After 30 years of operation, Vietsovpetro has already exploited a cumulative 193 million tons of crude oil, equivalent to 76% of the total crude oil output of the whole country. Throughout its history, the joint venture has attained total revenue of US$55 billion, and paid some US$35 billion in taxes to the State coffer and US$8.8 billion in profits to the Russian partner.
Vietsovpetro is the joint venture between Vietnam National Oil and Gas Group, or PetroVietnam, and Russia’s Zarubeznheft Company. The joint venture has a work force of 7,000 people, including some 700 engineers from Russia.
* Vietnam Petroleum Institute (VPI) last Saturday started construction of a center for analyzing and researching oil and gas at Saigon Hi-Tech Park in HCMC’s District 9.
The center with total investment capital of VND1.1 trillion will include a nine-story office for VPI, a four-floor building for analysis and research facilities, and other auxiliary works. The construction of the whole center will be completed within 24 months.
The center will help improve the effectiveness in oil and gas exploration, exploitation and processing of the country, as well as reduce the negative impacts on the environment in the oil and gas industry.
Instability causes foreign investment to shrink
International development partners are urging the Government to settle down the macroeconomic chaos in order to put the country back to the radar screen of foreign investors as uncertainties have caused foreign investment to fall.
Japan is the pioneer to do so. For the first time ever, the joint committee of the Vietnam-Japan joint initiative phase 4 has defined macroeconomic stability as the major condition for the country to improve the business environment.
The initiative, being implemented from July to the end of next year, highlighted concerns over the depreciation of Vietnam dong as well as other macroeconomic uncertainties.
“Vietnam dong has been continuously weakening for the past three years… Only Vietnam dong has devalued while the neighboring nations’ currencies have all strengthened against the U.S. dollar,” the joint committee said in a document issued on July 1.
Japanese Ambassador Yasuaki Tanizaki, in the meeting of the joint initiative in Hanoi this month, said many Japanese investors here were facing macroeconomic difficulties, especially the exchange rate volatility.
“Improving the macro-economic situation is essential for Vietnam to lure foreign direct investment,” he said.
The European Union announced it was mulling a plan to give Vietnam a grant of 150 million euros, or US$212 million, to support poverty reduction and the health sector in the next two years. However, the EU delegation said such financial support would only be possible if macroeconomic stability is maintained.
Emmanuel Mersch, EU Chargé d'Affaires, urged the Government to continue adhering to austerity measures to achieve stability.
“Only full implementation of the measures outlined in Resolution 11 and a commitment to macroeconomic stability over the medium term would help restore confidence in the Vietnamese economy,” he said.
He cautioned the Government against complacency, and urged Vietnam to be patient with firm intention to reduce inflation and restore stability.
These warnings show the increasing uneasiness of the international community over the country’s economic situation. Such warnings also show development partners cannot wait until Consultative Group Meetings to table their requests to the Government.
Deputy director of the Central Institute for Economic Management Vo Tri Thanh explained that the international community is looking at Vietnam with high cautions. The Credit Default Swap (CDS) for the country now stands at 350 points, twice the level of the Philippines and Indonesia, he said.
“The index shows that our situation is much worse, and the international business community is keeping low credit for Vietnam’s macro-economic stability.”
The falling creditworthiness has adversely affected foreign direct investment in Vietnam in terms of both fresh commitments and disbursement.
According to the Ministry of Planning and Investment, newly-registered FDI in the year’s first half was around US$4 billion, or just one half of that in the same period last year. Meanwhile, disbursed FDI was US$5.3 billion, also lower year on year.
The disbursed amount has dwindled from US$1.4 billion in March to around US$1 billion in April, US$900 million in May and US$750 million in June.
Vice chair of the National Financial Supervisory Committee Le Xuan Nghia said, “The slowdown in FDI disbursement can only be explained by investor concerns over macroeconomic risks in Vietnam.”
Nghia said this would pile up more pressure on the exchange rate in the coming months.
Meanwhile, Minister of Planning and Investment Vo Hong Phuc said he hoped the stability would be reached early next year.
Macro uncertainties to hurt steel consumption
The Vietnam Steel Association (VSA) is concerned that macro uncertainties would deeply hurt the local steel industry in the rest of this year despite agreeable growth in the year’s first half.
Speaking at a seminar in Hanoi last Friday, VSA vice chairman Dinh Huy Tam said steel consumption would decline compared to last year. The sector earlier targeted a growth rate of 8-10% in 2011.
“We can affirm that the target is unachievable and the figure may even decrease against last year,” Tam said.
Tam attributed the gloomy forecast to concerns on shrinking foreign direct investment (FDI) capital disbursement while the real estate market has been frozen for a long time.
According to the Ministry of Planning and Investment, FDI disbursement in the first half of 2011 was US$5.3 billion, or a slight fall of 2% year on year. More worryingly, the figure is on the downtrend, falling from US$1.4 billion in March to US$1 billon in April, US$900 million in May and US$750 million in June.
Tam also pointed out the challenges facing large steel projects in the country. The US$4.5 billion Tycoon-E.United ISM steel mill project in Dung Quat, Quang Ngai Province is facing financial difficulties after the Government approved it in May. “We are concerned that the project will be mired in unpredictable delays,” Tam said.
Meanwhile, the Government has withdrawn the investment license of a steel project in Ninh Thuan Province as investors Lion Group and Vinashin have failed to push it forwards. Meanwhile, the US$7.5-billion Formosa steel project in Ha Tinh Province is in still its first steps of site clearance after being licensed for several years.
Last year, the local steel sector fetched US$1 billion in export value while it spent up to US$7 billion on imports of both materials and finished products.
In fact, the sector still posted growth in the first half of 2011. According to VSA, construction steel consumption reached over 2.4 million tons, a 12% year-on-year increase while steel output was 2.6 million tons.
Consumption of steel pipe, cold rolled steel and plated iron sheet grew by 20%, 24% and 43% respectively.
Woodwork exports hit US$1.7 billion
Vietnam in the first six months of 2011 obtained around US$1.7 billion in woodwork and handicraft export revenue, up by US$200 million year-on-year, as foreign buyers earlier signed large import contracts given low prices.
However, the Handicraft and Wood Industry Association of HCMC (Hawa) said local enterprises would be hesitant at large export contracts in the second half of 2011 due to input cost hikes.
Speaking at a seminar on woodwork and handicraft export market expansion in HCMC last Thursday, Hawa chairman Nguyen Chien Thang said input woodwork materials surged by 15% to 20% in prices while output prices rose only 3%.
As local firms do not want to sign big contracts given fears of losses, many importers have shifted to Malaysian exporters, Thang said.
Chinese traders recently acquired large volumes of wood, making the material surge 30% to 50% in prices compared to the average level.
Tran Van Thanh, director of Dong Nai Province-based Kien Phuc Co., said the enterprise this year bought wood at 30% higher than it originally budgeted for to secure existing contracts.
The nation now has over 2,500 enterprises in the woodwork and handicraft export sector of which 75% has less than 10 laborers. As many small firms will have to close down due to high input costs, the sector may fail to reach the export revenue of US$4 billion as predicted earlier this year.
Exporters get stuck in rising farm produce prices
Rising prices of several types of local farm produce have put exporters in hot water as processors cannot buy them while delivery dates approach, industry sources said.
The local coffee price is mounting sharply, to some VND50 million or US$2,440 per ton, almost on a par with the level of US$2,460 per ton on Tuesday on the London commodities exchange. This means exporters will face big losses when taking into account all costs and expenses.
But the big problem is that most coffee exporters have signed futures contracts at a much lower price, and now find it hard to fulfill the deals, especially those with delivery in July.
Doan Trieu Nhan, an expert of the Vietnam Coffee and Cacao Association (Vicofa), said no one could have forecast at the beginning of the coffee season that the coffee price would climb steadily for such a long time. That explained why many traders had agreed to sell a large amount of coffee under futures contracts, and now face the dilemma of either accepting losses to buy materials at high prices or canceling contracts with buyers.
Similarly, the rising price of local paddy has forced members of the Vietnam Food Association (VFA) to halt its annual scheme of stockpiling one million tons of rice during the summer – autumn harvest.
The paddy price usually falls at this period of year due to adverse weather and low demand, and the stockpiling scheme has been deployed in the past several years to keep paddy price from falling below VND5,000 a kilo.
But currently, the market has shifted to a buoyant state. The average price of dried paddy and unpolished rice for processing into 15% broken rice also jumped to VND6,000 and beyond VND8,000 per kilo, respectively, VND300 per kilo higher than last week.
The food association said the current price hike has caused troubles to traders who have to buy materials for delivery under contracts that have been agreed at lower prices in June. An official of the association predicted the local price could continue rising in the coming time due to strong demand.
Many hospital projects in HCMC still inactive
The health sector of HCMC still fails to answer a critical question when overload at hospitals could be reduced as many hospital projects still remain on paper, according to a Q&A session at the city’s People’s Council meeting.
Huynh Cong Hung, a member of the People’s Council, criticized that as many as 101 projects are still inactive, including 28 projects to build state-owned hospitals. He urged the city’s health officials to pinpoint reasons for this.
Hung said in the first half of this year, the health sector began work on only 31 projects, including many projects to acquire equipments for hospitals. Such a pace is unacceptable, though officials explained that many hospital projects were progressing slower than schedule because of problems with site clearance and administrative issues.
There are currently 32 state-owned and 32 private hospitals in the city, besides 13 centrally-governed hospitals, over 1,300 grassroots medical clinics and 322 medical stations.
Such facilities provide medical examination and treatment for 28 million outpatients and five million inpatients a year, with around 40% of them coming from provinces across the country.
Pham Viet Thanh, director of the HCMC Department of Health, pointed to foot-dragging site clearance and red tape in making investment procedures behind the slow progress.
“Site clearance and procedures are the complicated problems for any hospital projects in the city. We need more time to solve it. The process to map out and make procedures for each project is three to five years,” he said.
For example, Thanh said, the city government approved a plan to build hospitals in areas around the city’s gateways to reduce overload and traffic congestion in the city center and offer better health care service to residents in remote areas. Under the plan, the city had plans to start work on a children’s hospital, an eye hospital, and some others on September 2 but the schedule cannot be kept because of the prolonged site clearance, he said.
“The price of land as a condition to step up site clearance was just approved last week,” he lamented on complicated procedures.
Overload at hospitals and the poor provision of health services are making many local people spend more money on treatment in foreign countries.
“Our treatment method and professional quality are not lower than those in foreign countries but we are lacking good hospitals with full services to cater to the high demand of patients,” Thanh said.
Apart from the overload at hospitals, members of the city’s People Council on Thursday also focused on food safety and epidemic control issues.
Binh Duong pledges strict control of wastewater
The environmental authority of Binh Duong Province said it would strictly control all industrial wastewater discharged from 24 industrial parks and 40 largest industrial manufacturers around the province by the end of 2012.
The provincial Department of Natural Resources and Environment has just said authorities would install automatic monitoring systems and cameras to observe the discharge of industrial wastewater at all aforesaid facilities.
Last Tuesday, the department launched automatic monitoring devices to keep watch of wastewater discharged from six industrial parks including the Vietnam-Singapore IP, Dong An, Viet Huong 1, Song Than 1, Song Than 2 and My Phuoc 1. The installation of automatic monitoring systems cost some VND30 billion.
At the moment, Binh Duong has 24 industrial parks with 1,200 enterprises inside. The province also has eight other industrial clusters with 1,450 manufacturers, beside some 8,140 enterprises operating outside the industrial parks.
These industrial enterprises are discharging around 240,000 cubic meters of wastewater into the environment each day.
However, large amounts of the wastewater are still improperly treated compared to the permitted standards. According to the province’s Environmental Protection Agency, less than 20% of the discharged wastewater from industrial firms meets the stipulated environmental standards after a recent investigation.
Safety measures for titanium exploitation discussed
Scientists on Monday called for urgent measures to enhance radiation safety in titanium exploitation in Binh Thuan Province, as the local community is increasingly exposed to health risks there.
At a conference jointly organized by Binh Thuan Province’s Department of Natural Resources and Environment and the Vietnam Union of Scientific and Technical Associations, scientists said dangers of radiation were more apparent now, especially in water sources.
Due to the lack of effective preventive solution, titanium exploitation and processing heightens the risks of radioactive substances being leaked into the environment. Furthermore, as a huge volume of water is used for exploiting and cleansing titanium ore, the water source after being used is also polluted by radioactive substances, they said.
Scientists at the gathering placed emphasis on assessing the impacts of titanium exploitation on the environment, especially the water sources in the locality. They said titanium-exploiting workers and local people are those most vulnerable to the health danger.
Areas used to contain wastes in the production process must be built with non-absorptive materials, they said.
Titanium ore is being exploited rampantly in Binh Thuan Province, as many organizations including hotel and resort developers have engaged in exploitation.
Reports from the central region’s Geological Federation showed that Binh Thuan has the biggest titanium reserve in South Asia, with 558 million tons spanning a total area of 774 square kilometers.
The reserve is worth some US$138 billion, according to mineral experts.
There are 20 units allowed to exploit titanium ore with total volume of 500,000 tons in the province.
American billionaire eyes Vietnam property market
An American billionaire is looking for opportunities to invest in real estate sector in Vietnam, saying that the local property market remains potential for long-term investment though it is challenging for developers now given the credit tightening policy.
Jay H. Shidler, founder and managing partner of the Honolulu-based real estate investment firm Shidler Group, told the Daily on Monday about his plans, showing his confidence in the office building and warehousing segments.
Shidler made his first trip to Vietnam on a private jet to attend a graduation ceremony of the University of Hawaii’s Executive MBA Program held at the White Palace convention center in HCMC’s Phu Nhuan District on Sunday. In 2006, the billionaire donated US$25 million to upgrade the business school and offered scholarships to students of the executive MBA program.
Shidler revealed that office building and warehouse were two segments the company would probably invest in Vietnam in the next two years through partnership with local companies.
He, however, declined to elaborate on the size of the future investment, saying that it depended on the cooperation with local partners and it would be a significant amount.
Explaining why he chose the two sectors to invest in the market, Shidler said among five types of real estate including retail, residential, office, warehouse and hospitality, the company was not knowledgeable about others but the two named above.
“If we come to Vietnam and invest, we would probably invest in the same kind of real estate that we have invested in the United States,” Shidler said.
Commenting on the local market, he said property development was cynical, especially in the young market like Vietnam, and that the current difficulties created swings in the local market but it was just a short term phenomenon.
Shidler said long term was an appropriate way to participate in the real estate market, and he looked at the big picture in Vietnam for his investment.
Purchasing the first building in Hawaii in 1972, the Shidler Group has an investment portfolio of 2,000 properties in the United States and Canada.
Tanimex focuses on warehouse services
Tan Binh Import-Export Joint Stock Corp., or Tanimex, is now focusing on warehouse services instead of realty projects as the property market has cooled down, said an executive of the company at its 30-year anniversary late last week.
Tran Quang Truong, deputy general director of Tanimex, told the Daily at the ceremony that his company would pour more than VND200 billion to expand its general warehouse area for lease inside Tan Binh Industrial Park in HCMC. The industrial park developer has already operated a general warehouse in the park but the facility covering more than 23,000 square meters has been fully occupied.
Tanimex will develop 10 hectares more for the general warehouse area to meet the demand of its customers in the industrial park as well as tenants outside. He said that the warehouse is part of the expansion of Tan Binh Industrial Park as all space in the IP has been leased out to long-term tenants.
Tanimex has cooperated with Indo-Trans Keppel Logistics Vietnam Co. Ltd. (ITL) to set up ITL-Trans Keppel Tanimex Logistics Co. Ltd. to supply logistics services.
Nguyen Minh Tam, chairman of Tanimex, said that investing in the logistic service chain was the new strategy of his company.
Tran Quang Truong said that his company has now halted its real estate projects in the country, including apartment and office building projects.
The company will also cooperate with two other local partners to establish a company in the U.S. to trade in processed food imported from Vietnam and invest into the real estate sector stateside. He said that Tanimex would hold a stake of 40% to 49% in the new venture capitalized at some US$3 million.
The company’s shareholders in a general meeting early this year had approved the plan to cooperate with two local partners active in the food and fiber industries to set up the joint venture in California, Truong said.
The new company will distribute processed food products from Vietnam including sauces, instant noodles, and other seafood products to supermarket chains in California as well to other Asian retail store chains stateside, he said.
The venture will serve as a springboard for Tanimex to penetrate the U.S. market, especially in the real estate sector. He said that as housing in the U.S. had tumbled 50-70% in prices, his company found a good opportunity to invest in the sector to own low-priced houses in the U.S. and to resell them once the market recovers.
Tanimex expects to obtain a revenue exceeding VND885 billion this year and an after-tax profit of over VND93.7 billion, a 24.1% increase year-on-year.
Hi-tech experimental dairy farm to get going next month
The high-tech experimental dairy farm with Israel’s financial and technical supports will start work next month in HCMC, said Israeli ambassador Amnon Efrat when he met with city chairman Le Hoang Quan last week.
Located in Binh Chanh District, this 9.8-hectare project will come into operation later this year. The project requires total investment capital of US$6.3 million, including Israel’s ODA loan of more than US$1million.
Talking to Quan, the ambassador pledged that Israeli technology will help to increase the yearly productivity to 7,000 – 8,000 liters per milk cow.
“We hope this dairy farm will be not only a hi-tech experimental facility but also a good training center,” said Efrat.
Nguyen Phuoc Trung, deputy director of the HCMC Department of Agriculture and Rural Development, said the hi-tech dairy farm will initially choose 100 milk cows from farming households for trial rearing, and would raise the herd by an additional 80 head of cattle later.
“Because the total cost of imported Israeli cows is too high, the two sides had agreed to tap local cows that have been chosen from best strains” explained Trung.
Trung also admitted that the project has been delayed for so long due to complicated procedures, as the related memorandum of understanding had been signed with Israel since 2007.
At the meeting, Efrat also talked about a hospital project with Israeli support, saying that the hi-tech children hospital project has gone through all procedures.
The ambassador hoped “the city government will facilitate the project by providing preferential treatment.” This project by a group of Israeli investors has total investment of US$45 million.
SPA to help local firms in overseas expansion
The Asia Oceania Regional Software Park Alliance (SPA) will share software parks’ management experiences, cooperate in information infrastructure facilities and support enterprises wanting to invest abroad.
Lam Nguyen Hai Long, president of SPA and deputy CEO of Quang Trung Software City (QTSC) Development Company, said at a ‘Software-Trends 2020’ forum on Thursday that SPA member enterprises had agreed to support Vietnamese peers to invest in their countries.
In the meantime, QTSC will also support foreign SPA enterprises wishing to do business in Vietnam, he noted.
Wee Huay Neo, head of Knowledge Infrastructure Development at Malaysia Multimedia Development Corporation, said software parks (SPs) in Malaysia are based on the model of knowledge infrastructure including human resources, information technology services, research and development, education and intellectual property.
But SPs in Vietnam have been centering on physical infrastructure development, she said, adding now is the time for them to turn to human resource development, and research and development.
Cooperation among SPs in the region will contribute to solving demand on human resources, according to Suwipa Wanasathop, vice chairman of Thailand Institute Science and Technology Research.
Long said the Government plans to develop SPs in provinces and cities based on QTSC’s model. The company also intends to expand its model to other parts of the country such as Can Tho and Quang Ngai to support them in information technology.
Thirty foreign enterprises, mainly from Hong Kong and South Korea, and 40 domestic enterprises took part in the forum to seek cooperative opportunities in fields such as telecommunications, software, outsourcing and e-commerce.
Many SMEs resort to loan sharks as credits choked off
Many small and medium enterprises are resorting to loan sharks, accepting extremely high interest rate to maintain their business as access to official channels for them have almost been stonewalled, heard a seminar on Friday.
Nearly 60 representatives of young businesses associations nationwide gathered together in HCMC, voicing their concerns over the dwindling capital sources amid the credit squeeze. Their opinions would be collected and then sent to the Prime Minister to seek the Government’s assistance.
Tran Xuan Mai, chairman of Nam Dinh young business association, told the Daily on the sidelines of the seminar that he had to access short-time unofficial loans with monthly interest rate of 9% from black-market moneylenders to meet his urgent needs, such as salaries for workers.
Mai has two companies producing bamboo handicrafts for overseas markets, and needs capital to maintain operations to supply foreign buyers under signed contracts. However, when Mai came to banks to seek loans for his businesses, the banks said they themselves met difficulties and could not offer him credits.
Therefore, Mai had to come to loan sharks on the black market for quick loans.
“I just sought unofficial loans for two-month term each. When I receive money from customers after two months, I will repay the loans. We now receive not a penny from banks,” said the association’s chairman.
“The State is making efforts to contain the rising inflation by tightening credits. We agree with the goal. But producers should be allowed to access bank loans because they are making goods, creating jobs and collecting foreign currencies from exports,” he said.
Nguyen Thi Hue Ly, head of Kon Tum young business club, complained that banks were mobilizing capital from depositors, and then they lent the funds to other banks which failed to increase capital as required. Meanwhile, local producers mired in financial hardship could not access capital, and had to borrow from black-market lenders to maintain their production and businesses.
“They may go bankrupt. The Government doesn’t see the current situation in which (small and medium) businesses have to use unofficial loans,” she said.
According to economist Huynh Buu Son, reasons behind the rising inflation include the global price hike, inefficient public investment, budget deficit, and the policy on credit loosening for property and securities in previous years since 2006.
Therefore, if the Government uses the monetary tightening policy as a major tool to curb the inflation, SMEs are those to suffer first, he said.
The economist suggested that the Government reconsider and have a selective credit policy, giving priority to those who really need help, such as SMEs producing goods for export.
Besides, SMEs also recommended that credit should be accessible for good projects that are nearly finished but have currently ground to a halt due to the lack of capital.
United Airlines upbeat about Vietnam aviation market
Vietnam’s growing attraction to international travelers is creating a lot of opportunities for United Airlines to maintain business growth momentum in this Southeast Asian country, said the airline’s vice president for Asia Pacific.
James Mueller told reporters in HCMC last week that Vietnam was emerging as a tourist destination and more travelers had been interested in this country. Moreover, many more Vietnamese-Americans return home and people here go stateside to visit their relatives as well.
“Vietnam will continue to attract more tourists,” Mueller commented when he was in Vietnam last week to meet clients and employees of United and to get a deeper understanding of the market.
The Vietnam National Administration of Tourism (VNAT) said the country attracted more than 2.96 million international visitors in the six months to June this year, a year-on-year increase of 18.1%.
Nearly 239,000 Americans visited Vietnam in the first half of this year, up 3.4% over the same period last year and making the U.S. the fourth largest visitor-generating market for Vietnam after China, Korea and Japan. The number of Americans coming to Vietnam in 2010 rose 6.9% to surpass 430,900.
Leisure travelers are a very large and important market segment for United, and the airline has spent a lot of time on trying to capture the opportunity, Mueller said. He also said the business traveler segment was growing in Vietnam from a much lower base than Hong Kong, Singapore and some of the other markets in Asia Pacific.
Mueller said United had registered steady business growth in Vietnam since it started service in 2004. But he stressed how much its business would grow in this country depended much on the expansion in the number of business travelers and the economic conditions in Vietnam and the U.S., as well as the number of companies that invest in this marketplace.
“I think these economic factors are very important, especially to our business in the future,” Mueller responded to the Daily’s question about United’s growth in Vietnam over the past years and challenges arising from high jet fuel prices and uncertainties worldwide.
United is the only U.S. operator of daily service between Vietnam and the U.S., but Mueller said there was quite a lot of competition for the route between the two countries. At the moment, not only just United but also the airlines from Korea, Taiwan and Japan serve customers between the two destinations through their hub airports in Northeast Asia.
Mueller said United was doing well in the very competitive marketplace because of its globally wide network coverage, particularly after the merger of United and Continental that has created convenient connections for customers at strategic hub airports located around the world.
He gave an example that customers in Vietnam were now able to take United’s daily flight to Hong Kong and then get on non-stop service to New York besides options for the flights to San Francisco and other destinations in the U.S.
United looks to launch service from Hong Kong to Tokyo later this year and connect this to its flight from Vietnam in order to provide one more connection opportunity for both leisure and business travelers departing from Vietnam.