BUSINESS IN BRIEF 31/1

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Tra Vinh Province grants license for three infrastructure projects



Dong Van Lam, deputy chairman of the People’s Committee of Tra Vinh Province, on January 27 said the province had granted three investment licenses to the Ha Long Investment Development and Commercial Joint Stock Company having a total registered capital of VND24,500 billion ($1.2 billion).

These will be the first projects to be licensed in the newly developed Dinh An Economic Zone.

The three projects include development of infrastructure for Ngu Lac Industrial Park, Duyen Hai Urban Area and Dan Thanh 2 Resettlement Area.

Earlier, Prime Minister Nguyen Tan Dung had approved a plan to develop Dinh An Economic Zone over 39,000 hectares of land with 42 kilometres of coastline.

The Dinh An Economic Zone will include areas for industrial production, trade, services, tourism, agriculture, forestry and fishery. Ports, roads and other facilities for education, vocational training and research will be built within the zone, which is designed to boost Tra Vinh's economy, presently one of the poorest provinces in South Vietnam.

Dinh An Economic Zone will open up many opportunities for socio-economic development in the region as well as in the Mekong Delta as a whole.

The province will create favourable conditions for investors to operate effectively and contribute to improving the living standards of local people, said Lam, deputy chairman of the provincial People’s Committee.

Small business group dismisses possible interest-subsidy fund

Viet Nam Association of Small- and Medium-sized Enterprises chairman Nguyen Xuan Son is calling impractical a ministry plan to set up a development fund for small businesses.

The Ministry of Planning and Investment is seeking Government approval for the plan, which would aim to support small- and medium-sized enterprises (SMEs) to enter or expand into overseas markets. The fund would support SMEs in the fields of manufacturing, information technology, seafood processing, bio-technology, marine services, food processing and tourism.

The fund, if approved, would come into operation this year and would provide loans to SMEs at preferential interest rates at 80 per cent of prevailing market interest rates.

But with prevailing interest rates of over 20 per cent per year, Son said, the fund assistance would still leave SMEs struggling under crippling credit costs.

With the Government to entrust the fund capital to commercial banks to offset their interest reductions to SMEs, Son warned that the money could end up being retained by banks or allocated to the wrong purpose.

"Many SMEs are on the brink of bankruptcy, and foreign funds clearly lack money to invest in Viet Nam," Son said. "The Government needs to do something else to increase capital inflows."

Earlier, the Government approved a corporate income tax deferral for SMEs and labour-intensive enterprises in a bid to help them through the hard economic times. But Nguyen Trong Hieu, deputy head of the ministry's Enterprise Development Agency, noted, "Corporate income tax deferrals or reductions wouldn't even help SMEs much at a time when they can't access bank loans and interest rates are still high."

According to Ministry of Finance figures, the private sector alone was spending VND220 trillion (US$10.47 billion) annually in interest on bank loans, while their combined net profits are only VND25 trillion ($1.2 billion), Hieu added.

"It is obvious that businesses run mainly to feed the banks," he said.

Hieu urged the Ministry of Finance and other relevant authorities to come up with stronger assistance for SMEs.

"We have proposed that the Government provide initial capital of VND3 to 5 trillion ($148 million to 248 million) for the fund, with funding in the long term to be provided by foreign development assistance," he said.

Son also said the Government needed to select social banks that could be entrusted to use the funds to help SMEs access loans. Audit teams would also be needed to verify the uses of the funds. But the key measure, he said, would be to lower lending interest rates to cut business costs.

"The Association was not asked for advice about setting up this fund," Son added. "The fund still is a draft with no clear regulations for its operation. It will be difficult to make it a reality."

More bank M&As expected in 2012, says HSBC expert

Despite initial difficulties, there will be more bank mergers and acquisitions (M&A) in 2012 and they will happen swiftly, according to an HSBC expert.

In a recent interview granted to the Vietnam Investment Review, HSBC Vietnam CEO Sumit Sutta stressed that the State Bank of Vietnam’s decision to merge three commercial banks in late 2011 shows the country’s strong resolve to restructure its banking system.

He pointed out difficulties the banking system is encountering implementing the restructuring process. Accordingly, big stakeholders will be put at a disadvantage as a consequence of M&As and they will try to prevent the process.

Sutta said restructuring the banking system is not just simply a matter of merging small banks with larger banks, but optimizing their operational efficiency as well.

The central bank is now requiring greater transparency in financial reports from commercial banks in order to introduce appropriate solutions for specific cases. It is hard to create effective remedies if bank reports are not transparent, he said.

The CEO also noted that merging banks is not as easy as it was several years ago because small banks’ operational and financial scales are now quite different.

However, he said he believes that with their potential financial capacity and managerial experience, foreign banks are willing to support the central bank and commercial banks in their restructuring process.

The CEO revealed that HSBC Vietnam is increasing cooperation with two of its strategic partners: the Vietnam Technological and Commercial Joint Stock Bank (Techcombank) and Bao Viet Bank.

If the central bank gives the green light, Sutta said HSBC Vietnam will expand its transaction network across the country in 2012, providing clients with premium products and services.

It will help Vietnamese businesses seek overseas partners and foreign businesses sound out opportunities in Vietnam.

Although its full financial report for 2011 will not be released until March 2012, last year was a successful year for HSBC Vietnam as its pre-tax profit in the first half hit US$82 million, up 116 percent against the same six-month period in 2010.

Global brands allow retail stores to flourish

Many domestic businesses are opening more store chains to retain market positioning in the face of mounting competition of foreign retailers.

Last year, Nguyen Kim, a retailer of electronics and home appliances, has spent hundreds of billion of Vietnamese dong to open five shopping centres in HCM City, Da Nang and Vung Tau and Bien Hoa provinces.

This year it plans to open 12 more centres, raising the total number to 30 by the end of 2012 and 50 by 2015.

Nguyen Kim will spend at least VND600 billion (US$28.8 million) to open about 40 stores in the next four years to retain a strong presence in the market.

Phan Linh Phuong, marketing deputy director of Nguyen Kim, said revenue from items such as mobilephones, televisions and laptops in Viet Nam would increase sharply in the next five to seven years.

In December, Vinatex Mart, a retail textile and garment department store under the Viet Nam National Textile and Garment Group, opened five stores in HCM City and the provinces of Hoa Binh, An Giang, Tay Ninh and Gia Lai.

Total investment capital was more than VND100 billion ($4.8 million).

It plans to open 200 stores throughout the country by 2015.

Nguyen Thi Hong Huong, director of Vinatex Mart, said this year it would open 12 new stores, raising the total number to 75 by the end of this year.

Even though the Ha Noi Textile and Garment Joint Stock Company has nine stores and 69 agents in the country, it plans to expand its network. It has just opened the Hanosimex Trade Centre in Ha Dong District in Ha Noi.

Chu Tran Truong, general director of Hanosimex, said in the 2011-2020 period Hanosimex would make a major investment of VND4.541 trillion ($218.3 million) to expand and re-organise a network of agents and stores to fully exploit growth opportunities in the local market.

Domestic retailers are beefing up their presence as many international brands, including The Gap, Warehouse, Karen Millen, E-Mart and AEON have opened in the country recently.

The Gap, a US leading garment retailer, has opened two stores in HCM City, and plans to open more in Ha Noi and HCM City this year.

Firms invest $2 billion in foreign projects

Vietnamese companies are investing in more overseas projects, with total registered capital amounting to US$2.12 billion last year, according to figures from the Ministry of Planning and Investment.

The investments were for 75 new overseas projects licensed in 2011, and 33 other projects already operating abroad.

The biggest of the overseas projects were in the energy and telecommunications sectors, an MPI report said.

Major projects licensed in 2011 include the Se San Hydro-Power No. 2 Project in Cambodia with total registered capital of $806 million from the Electricity of Viet Nam (EVN); a $408 million telecommunication project invested by the Vietnamese Military Telecommunications Group (Viettel) in Peru; and the $275.2 million Se Kong 3 Hydro-power Project invested by Song Da (Black River) Corp in Laos.

Most of these overseas projects are progressing smoothly. These include a project to cultivate 10,000 ha of rubber trees invested by Dak Lak Rubber Co; a project to cultivate 5,000 ha of rubber trees to be exploited by Hoang Anh – Gia Lai later this year; and a $273 million Senkaman Hydro-power project No. 3 invested in by Song Da Corp. in Laos.

By the end of 2011, Vietnamese firms had invested in 627 projects abroad, with total registered capital up to $10.8 billion.

Disbursements of these overseas projects are estimated at $2.7 billion.

The largest disbursements for overseas investment projects were made by Viet Nam Oil and Gas Group (PetroVietnam) with some $347 million remitted, followed by Viettel with $185 million; Song Da Corp. with $161 million; Viet Nam Rubber Corp. with $134.6 million; Hoang Anh – Gia Lai Group with $39 million, and Indochina Green JSC with $23.7 million.

Vietnamese companies have been licensed for overseas projects in 55 countries and territories.

In addition to major investments for projects in neighbouring countries such as Laos and Cambodia, investments from Vietnamese companies are also in Venezuela, Russia, Peru and Mozambique.

Big tuna catch for Phu Yen fishermen

After nearly a month of fishing out at sea, hundreds of vessels have come ashore, bringing back hundreds of tonnes of tuna for export and domestic use.

Dozens of trawlers anchored at Ward 6 and Dong Tac fishing ports, Tuy Hoa City, on January 23-24, the first two days of the lunar New Year, carrying nearly 100 tonnes of tuna. Each trawler caught between 20-30 tunas.

Tran Van Xep, a local fisherman in Ward 6, said one of his two trawlers has returned to the shore safely, carrying more than 1.5 tonnes of tuna.

“With this big catch, I will make an estimated profit of nearly VND100 million – a significant amount on the first day of the lunar New Year,” said Xep.

He revealed that the second trawler, now on its way back to shore, has caught even more tuna than the first one.

Mai Thanh Minh, owner of a trawler, shared Xep’s joy saying his fishermen have caught more than 1.5 tonnes of tuna following nearly a month of offshore fishing.

“Tunas are gathering in large groups at this time of year and we will not miss this chance. We plan to set out again after enjoying the New Year celebrations with our relatives for several days,” said Minh.

Nguyen Thi Xinh, a tuna dealer, said her enterprise has purchased nearly 10 tonnes of first-grade tuna for export and 10 tonnes of second-grade tuna for processors.

Le Van Loi, another tuna dealer, said his enterprise has bought nearly 20 tonnes of tuna, meeting the criteria for export.

Last year, the National Office of Intellectual Property under the Ministry of Science and Technology granted a collective brand name of “Phu Yen oceanic tuna” to the provincial Oceanic Tuna Association.

According to the Ministry of Trade and Industry, Tra fish, shrimp and tuna are Vietnam’s three key seafood exports.

Strategic projects add fresh impetus to HCM City’s development

In 2011, many key transport projects were put into operation in HCM City, giving a strong boost to its development in the lunar New Year of the Dragon.

These days, the southern region is experiencing chilly weather. Standing in Khanh Hoi in District 4, you can have a panoramic view of the whole city and on the other side of District 1, you can see the lotus bulb shaped Bitexco Building towards Nha Rong Wharf and Ho Chi Minh Museum. Near Bitexco Building is Vo Van Kiet Boulevard running along Ben Nghe Canal. The most beautiful and modern road is found on one third of the East-West highway, connecting Binh Chanh, Binh Tan districts, districts 8,6,5,4,1, and running through Thu Thiem Tunnel underneath the Saigon River, opening up quick access to district 2.

Thu Thiem, the most modern river tunnel in Southeast Asia, is the most important section of the East-West highway project to ease congestion in the inner city as well as from the downtown area to the Mekong Delta Region.

The Thu Thiem Tunnel, a road project designed to cross the Saigon River in the largest city of Vietnam, began in 2004 with US$189m capital provided by Japanese ODA (official development assistance) and by a consortium of four Japanese contractors: Obayashi Corporation, Taisei Corporation, the Kumagai-Kajima consortium and Toa Corporation.

New technology was used to build a 1,490 m tunnel under the Saigon River as one of the Thu Thiem project's most ambitious features.

The tunnel comprises four sections, each 93m long, 33m wide and 9m high, and weighing 27,000t. The tunnel has six lanes, four for automobiles and two for motorbikes. It also has two emergency exit lanes on the sides. The tunnel has a designed speed limit of 60 km per hour and a lifespan of 100 years.

On September 21, 2010 the tunnel connected the two riverbanks of the Sai Gon River, and District 1 and District 2. The Thu Thiem Tunnel and the East-West Highway officially opened to traffic on November 20, 2011, an important event for HCM City.

The 13th HCM City People’s Council, at its third session, recently agreed to rename the Thu Thiem Tunnel to the underground road crossing the Saigon River, as the name Saigon and the Saigon River has long, close associations for people in the 300-year-old southern land.

80-year old Nguyen Trong Xuat, alias Sau Nhan, a researcher and historian of Southern Vietnam who was the first to visit the tunnel after its inauguration, said, “This is a high-tech transport project under which Vietnamese engineers had a good chance to learn technical experience from their counterparts, thus helping them carry out similar modern projects to serve the nation.”

Along with Thu Thiem Tunnel, the East-West Highway is considered the most beautiful of HCM City and a key project for its urban traffic infrastructure system. The highway was built at a total cost US$762 million, of which 65 percent comes from Japanese Government ODA loans and the rest from the city’s budget.

The 22 km highway connects the East and West of the city by a single route with a travel time of less than 30 minutes. The route, running through the eight districts of 1, 2, 4, 5, 6, 8, Binh Tan and Binh Chanh, is an artery linking HCM City to southeast and southwest provinces.

During a fact-finding tour before the inauguration of Thu Thiem and the entire East-West Highway, Chairman of the Ho Chi Minh People’s Committee Le Hoang Quan expressed his delight in the completion of the project. He said the project showed the brainpower and great efforts made by municipal authorities and people, as well as domestic and foreign experts and engineers. All have joined hands to overcome six years of difficulties to reach the goal on schedule.

Mr Hai said, “The project aims to deal with inner-city transport issues and create favourable conditions for boosting economic development in the South and the East, turning the Thu Thiem new urban area into a financial and trade centre of the city in the future. In the context of the financial and economic crisis, the municipal Party Committee, authorities and people have still exerted every effort to mobilize all resources for this strategic project.”

The Nhieu Loc-Thi Nghe Canal upgrade project in 2011 also contributed to improving drainage and environmental sanitation in the city.

The city is currently carrying out a project to upgrade the road section along the Nhieu Loc-Thi Nghe Canal running from Le Van Sy to Nguyen Huu Canh Street, with total investment capital of more than VND400 billion.

Despite the difficulties and challenges presented by the global economic downturn in 2011, HCM City ironed out all obstacles to reach a GDP growth rate of 10.3 percent, 1.7 times the national average, and ensured social welfare.

By late 2011, the household poverty rate under the city’s new criteria dropped to 5.3 percent, making the city the leader with the lowest number of poor households.

Such new projects and impressive figures will provide fresh impetus for the city to move forward and develop steadily in 2012.

Spanish enterprises eye Vietnamese market

A group of Spanish businessmen will attend the Spain-Vietnam Business Forum to be held in Ho Chi Minh City from April 16-17.

According to the Madrid Chamber of Commerce, the Spanish businesses are involved in agriculture, garments, electronics, renewable energy and infrastructure.

The Chamber affirmed that Vietnam is an open economy with a high growth rate, thanks to developing foreign trade.

It also highlighted favourable conditions for Spanish enterprises in the Vietnamese market, including agreements between the two sides in transport infrastructure and the Free Trade Agreement between Vietnam and the EU, which is expected to be signed soon.

The chamber said that two-way trade reached 1.51 billion EUR in 11 months of 2011, in comparison with 1.23 billion EUR for the whole of 2010.

Earlier, in 2008 and 2010, the Madrid Chamber of Commerce organised tours for Spanish enterprises to visit Vietnam to seek business partners.

Exports of agricultural products continue to be stable in 2012

The Ministry of Agriculture and Rural Development (MARD) has forecast stable export prospects for agricultural products in 2012.

Accordingly, while both volume and value were impacted by world market movements in 2011, exports of agricultural products are forecast to be stable this year.

For rice exports, MARD expects that the volume of exported rice in 2012 will be around 6.8-7.3 million tonnes.

Rice export volume is forecast to drop in the world’s two largest rice markets of Vietnam and Thailand in 2012. Specifically, Vietnam will see a reduction of 300,000 tonnes in volume of rice for export while Thailand’s volume will decrease by about 2.5 million tonnes.

The volume of rice to some major importers in the world is also forecast to fall sharply. In particular, rice imports of Indonesia will reach 1 million tonnes this year, much lower than the 2.77 million tonnes in 2011.

For coffee exports, MARD forecast that export turnover will only reach more than US$2 billion in 2012. This is due to a reduction trend in world prices and predicted domestic output lower than last year.

For rubber exports, according to forecasts by MARD, the volume in 2012 will likely reach more than 880,000 tonnes, higher than the 846,000 tonnes of 2011. However, the figure is only equivalent to a value of more than US$2.1 billion.

According to MARD, rubber demand is expected to continue to rise in 2012. Demand for synthetic rubber increased 5 percent in 2011 and will rise 9 percent in 2012. Demand for natural rubber saw a slower increase of 3.8 percent in 2011 and will rise 5.4 percent in 2012.

For cashew exports, MARD forecast the volume of cashew nuts for export in 2012 will reach more than 200,000 tonnes with a value of US$1.75 billion, up from 178,000 tonnes and US$1.5 billion, respectively, in 2011.

Other agricultural products such as tea and seafood products are forecast to continue to be stable and even rise in 2012. In particular, according to MARD, tea exports in 2012 will likely see a rise in volume to an estimated 140,000 tonnes (from 131,000 tonnes last year) but a slight decrease in value to US$190 million (US$198 million last year).

Seafood exports in 2012 will continue to increase to an estimated US$6.6 billion in export turnover, up from US$6.1 billion in 2011.

Private investors not keen on support industries

Private-owned businesses pay little attention to support industries because of their small market scale and the absence of incentive policies for this field.

While support industries play an important role in the economy, they have not received sufficient attention from the state. In fact, the country has not introduced any long-term measures, considerable investment, or an explicitly favourable legal and business climate for the development of support industries.

Dr Tran Van Phung, from the Academy of Finance, affirmed the importance of support industries in attracting foreign direct investment (FDI).

Phung cited the fact that all developing countries want to lure FDI from developed countries and especially multi-national corporations, which often look for political stability, cheap labour, and developed support industries when selecting countries for their investment.

Cheap labour is an advantage for Vietnam; however, this advantage is decreasing as labour only makes up a small proportion of total costs. For instance, in the production of home electric appliances and electronics, labour costs account for approximately 10 percent, while costs for spare parts reach nearly 70 percent.

Another expert, Tran Dinh Thien, from the Vietnam Economics Institute, said most developing countries fall into trade deficit as they have to import materials and by-products for domestic assembly. Developing support industries solves the fundamental trade deficit issue in developing countries, he said.

In reality, Vietnam’s state management agencies are gradually recognizing the importance of developing support industries, but are doing so at a snail’s pace.

Dr Truong Thi Chi Binh, an official from the Ministry of Industry and Trade, gave evidence for this. “So far, there has been no state management institution exclusively for support industries. Consequently, there have been few policies and programs on developing the nation’s support industries.”

“We have gone too slowly and have squandered too much time not paying due attention to this issue,” said Truong Dinh Tuyen, former Minister for Trade. “It’s high time we took strong action to make up for that.”

Tuyen said the selection of products to develop must be based on criteria such as compliance with the strategy to develop support industries over a long period of time, and having domestic manufacturing and assembling establishments.

Due to limited sources, support enterprises, which are mainly small- and medium-sized, should initially focus on products such as mechanical, electric and electronic spare parts, and on casting moulds.

Tuyen highlighted that only by using sufficiently strong preferential policies can Vietnam develop its support industries in the context of its late entry into the field, its minimal protective barriers and the tough competition it faces.

Dr Binh said that Vietnam has so far attracted major FDI businesses to fill industrial zones and create a surge in industrial value, paying little heed to support enterprises.

The role of associations and state management agencies in assisting support industries is not prominent enough, he added.

Meanwhile, Dr Pham Tien Dat, an expert of corporate finance in the Academy of Banking, underscored the need to invest in a concentrated way.

“State budget is limited. To create focused investment, it’s necessary to set standards and an order of priorities, based on support industry development strategies, in close connection with the strategy to develop science and technology.”

Steel consumption expected to rise in 2012

The growth rate of steel consumption is expected to reach 4 percent by the end of this year, says the Vietnam Steel Association.

The prediction is based on the fact that steel consumption in 2011 fell by 10 percent compared to the previous year, due to a series of difficulties.

Slow consumption in 2011 made businesses cut production to avoid overstock. By December 2011, steel output reached 6.44 million tonnes, down 1.5 percent against the same period the previous year.

Besides, Vietnam’s two main steel importers, Japan and China, decreased steel consumption.

Vietnam set to be largest seafood exporter in the world

Although exports of aqua-products faced many difficulties in 2011, export revenues touched US $6.1 billion, ranking Vietnam at fourth place in aqua-exports.

In 2012, the country’s turnover of aqua-exports is expected to reach $6.5 billion, a target set by the Ministry of Agriculture and Rural Development and Vietnam Association of Seafood Exporters and Producers.

The Department of Agriculture and Rural Development in Ca Mau Province said that since January 26 (fourth day of Lunar New Year), many shrimp processing and export enterprises have resumed operations so as to complete pending export orders.

Ca Mau Province presently leads the country in shrimp exports and is likely to increase its export production this year.

Shrimp exports in the province reached a record high of $910 million last year and the target in 2012 is expected to reach $1 billion, said a representative of the Department of Agriculture and Rural Development.

According to Chau Cong Bang, deputy director of the Department of Agriculture and Rural Development in the province, there are many positive signs for the export of shrimp products in 2012. Many processing units have been upgrading their technology for this purpose.

In addition, the province will develop larger shrimp cultivation areas using advanced technology, curb diseases, maintain hygiene and safety standards for making shrimp-feed, and upgrade breeding environment.

On January 28 (sixth day of Lunar New Year), Go Dang Seafood Joint Stock Company re-opened again after the Tet holiday break.

Nguyen Van Dao, director of the company said they were working hard to deliver their aqua products to customers in the European countries.
Dong Thap Province, which has played a key role in exporting tra fish (pangasius), raked in $332 million from exports of tra products, $2 million more than the goal set for the entire year, said Pham Thien Nghia, director of the Department of Industry and Trade.

Export value of tra fish is expected to hit $390 million in 2011.

In Tien Giang Province, tra fish earned $592 million, 2 percent more than the yearly target.

Tran Thien Hai, chairman of VASEP said that fluctuation in world economy will continue affecting the country’s exporters. However, with aqua- exports touching $6.1 billion in 2011, the country has a proud record, he added.

To reach their goal of $6.5 billion in aqua-exports, enterprises needed strict implementation of Vietnam’s Good Agricultural Practices (Viet Gap) to meet requirements in food safety and hygiene, product origin, environment protection and bio-diversity.

In addition, the aqua-export industry must overcome challenges such as lack of raw material for processing while promoting product quality, food hygiene and safety, competitiveness and the development of the export market, the association said.

Processing units currently face a serious lack of raw material, forcing them to spend $500 million on imports to meet demand, the association added.

To solve the problem, the industry plans better management of aquaculture in terms of food quality and hygiene along with the application of modern technology to increase the capacity and quality of raw materials, reduce costs and develop value added export products.

Beside its traditional markets like the US, Japan and the EU, aqua product exporters will penetrate other high potential countries like Korea and China.

Exporters are encouraged to work closely with farmers to develop and expand farming areas to have adequate input material for processing and exporting.

The fisheries industry targets an export turnover of $10 billion by 2020, transforming the country into one of the largest seafood exporters in the world, according to VASEP.

City revokes Thu Thiem Software Park license

The Ho Chi Minh City People’s Committee has withdrawn the investment license it had issued to TA Associates Vietnam Ltd. Co to develop the US$1.2 billion Thu Thiem Software Park in the city’s District 2.

Mr. Le Manh Ha, deputy chairman of the city People’s Committee, has signed a decision for the license withdrawal.

Under the decision, the company has to submit the original investment license to the Thu Thiem New Urban Area Construction and Investment Management Board, and return its seal to authorities.

The People’s Committee issued the investment license to the company in July 2008 but the company did not fulfill its commitments to develop the project. A stalemate followed and for more than three years after groundbreaking, the land allotted for the park remained unused.

Under Vietnamese law, HCM City has authority to revoke the license two years ago. However, over the past three years, the People’s Committee has created conditions for the company to proceed with the project but it did not do this.

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