BUSINESS IN BRIEF 31/7

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Gov’t promises to continue to cut spending: official

As its effort to reduce public spending in the first half of this year has shown results, the government has promised to remain thrifty in the second half, said Nguyen Dang Binh from the Ministry of Investment and Planning.

Binh, who is the deputy head of the ministry’s Department for National Economic Issues, told Tuoi Tre on Wednesday that the government’s effort to curb inflation by reducing public spending has yielded some positive results.

Binh said according to statistics from the Ministry of Planning and Investment, the government has reduced a total VND80.5 trillion (US$4.027 billion) worth of public investments.

While some experts said the number is insignificant, Binh said it accounts for over 9 percent of total social investments this year.

The reduction has had significant effects on inflation as the total social investments in the first half of this year have slipped to 38 percent of GDP, compared to 48 percent last year, Binh said.

Binh also emphasized the government’s firm determination to combat inflation by rejecting the demands of some localities and ministries to start new public investments.

In the second half of this year, the government has promised to monitor closely public expense reduction of state-owned enterprises, as well as their foreign debts, he said.

Vietnam Mekong Housing Bank IPO misses fund raising target

Mekong Housing Bank (MHB), one of Vietnam's five remaining wholly state-owned lenders, sold fewer shares and raised much less than targeted in its IPO amid concerns about its valuation and profit outlook as credit growth slows.

MHB's initial public offering is part of a drive by Vietnamese banks to raise funds, which also include selling stakes to new foreign investors and existing shareholders.

Japan's Mizuho Corporate Bank is expected to buy an up to 20 percent stake in Vietcombank, sources familiar with the matter told Reuters on Wednesday, in a deal worth more than US$500 million. That would mark Vietnam's largest-ever inbound acquisition.

Vietnam's banking sector is struggling to cope with constraints on credit growth, as the government seeks to fight inflation, which in June topped 20 percent on an annual basis.

Ho Chi Minh City-based MHB raised VND196.84 billion ($9.57 million) after it sold 17.9 million shares at an average price of VND11,025 per share, well below the 64.6 million shares on offer, the Ho Chi Minh Stock Exchange said in a statement issued late on Wednesday after the auction.

No foreign investors have registered to buy MHB shares, even though they were allowed to buy all the shares on offer, the exchange said.

Investors were put off by MHB's weak performance compared to rivals and by a slide in the local market in general, brokers said.

The VN Index on the main exchange in Ho Chi Minh City has dropped 14.8 percent this year to 413.06 points on Thursday, and the Hanoi market also shrunk 37.5 percent to close at 71.35 points.

Weak investor sentiment has sparked concern over the upcoming IPO by Hanoi-based Petrolimex, the country's largest oil product importer and distributor, slated for July 28.

Domestic investors bid for MHB at between VND11,000 and VND15,000 per share, compared with the bank-set initial price of VND11,000, the exchange's statement said.

After the IPO on Wednesday, MHB is now 3.95 percent owned by Vietnamese investors, 12 of them institutional shareholders and 3,730 individuals, based on the exchange's statement.

It was not immediately clear when MHB is going to make its share debut. IPOs and share listings are two separate processes in Vietnam, which opened its first stock market in July 2000, with debuts often taking place months or years after the IPO.

In a separate development, the government will only allow a maximum of three strategic investors to buy shares in a state-owned company that undergoes privatization, Prime Minister Nguyen Tan Dung said in a decree seen by Reuters on Thursday.

Strategic investors are not allowed to transfer shares within five years, said the decree, signed on July 18 and which will come into force on Sept. 5. Vietnam does not currently limit the number of strategic investors in a domestic firm.

Companies dealing with insurance, banking, post and telecoms, aviation, coal mining, crude oil and gas production will have to secure government permission before selling shares to strategic investors, the decree said.

Two commercial banks, Agribank – the country's largest by assets – and BIDV, as well as policy lenders Vietnam Development Bank and Vietnam Bank for Social Policies remain 100 percent owned by the government. ($1 = VND20,570)

HCM City sees office rents down for 10 quarters: Cushman & Wakefield

Average office rentals in Ho Chi Minh City continues to soften for the 10th successive quarter, with Grade A rents in the region of US$36 per square meter, Cushman & Wakefield said Tuesday.

Grade B rentals in the metropolitan are in the region of US$22.5 psm, the real estate service firm said during Tuesday’s release in the city of its quarterly report on Vietnam offices and residences.

Leasing activity improved in the second quarter as compared with the first quarter, but it is some 40% lower than the same period last year, said Robert Johnston, associate director, Tenant Strategies and Solutions.

The city’s total office stock amounts to 1,126,000 square meters, with Grade A 140,000 sqm, Grade B 520,000 sqm and Grade C 466,000 sqm, he added.

“The wealth of supply that has come to the market has come over the past 12-18 months, coupled with low absorption levels, has had a depressing effect on rents across all sectors.

“There’s a significant office development pipeline over the next 12-18 months. However, we anticipate that a lot of this supply will be delayed due to the current economic uncertainty.”

Tenants are currently renegotiating with their existing landlords for favorable lease terms or relocating to alternative new supply with attractive incentives, added Johnston.

Regarding quality, he said building quality of new supply was continually evolving, bringing higher standards of specification.

Cushman & Wakefield projected that rents would continue to soften in the second half of this year and beyond, and the overall vacancy rate would remain elevated in the coming time given new supply continuing to increase.

According to the firm, the supply of Grade A and B office spare in HCM City will increase in the short to medium terms. Significant projects are due for completion in 2012.13 include President Palace (9,300 sqm), Le Meridien (9,000 sqm), BIDV Tower (30,000 sqm), Saigon M&C (49,000 sqm), HMTC Building (26,000 sqm), and Richland Hill (22,500 sqm) in District 9.

Ninh Thuan to license titanium mining project

The Government has instructed Ninh Thuan Province to license and manage a titanium mining project which is part of the province’s bigger nuclear power plant and coastal road project.

The area to be approved for titanium mining is 148.7 ha.

The government also asked Ninh Thuan’s People’s Committee and other responsible agencies to complete site clearance by 2013.

State bank warns against online deposits

The State Bank of Vietnam has warned people against making any online monetary deposits, as a certain fraudulent company has recently been seen taking commissions for online deposits.

According to the bank branch in the Mekong Delta province of Dong Thap, some organizations and individuals, working on behalf of the company, were seen mobilizing funds by persuading people to make online money deposits, for a commission incentive fee.

When one person deposits a sum of VND8 million then he or she convinces another to deposit the same amount, and then convinces yet another to make a similar deposit until the total number of deposits reach 14. After every 14th deposit, the initial depositor receives a US$1,000 commission payment.

Authorities believe that this chain method of mobilizing capital, free of interest charge, is currently being provided by a commercial joint stock company.

The company is only an internet company with no specific address or office. Should the company decide to liquidate without leaving any trace; people will be unable to recover their deposits.

Eight million 3G subscribers in Vietnam

Since 18 months of its launch in Vietnam, the 3G or third generation telecom service has attracted approximately eight million subscribers nationwide, a spokesperson from the telecom department under the Ministry of Information and Communication claimed yesterday.

The ministry hosted a conference to review the 3G services offered by the telecom companies in Vietnam. The performances of various service providers was discussed including Viettel, VinaPhone, MobiFone, Hanoi Telecom and EVN Telecom that have all built over 30,000 base transceiver stations and have attracted eight million subscribers nationwide.

Most cities and crowded residential areas in the country are now covered under 3G network.

The 3G service providers have invested over VND1.7 trillion (US$81 million), accounting to four percent of the total fund they had pledged to invest in the 3G network during the first three year period. Their earnings now touch nearly VND3.6 trillion ($171 million) from 3G services, mainly from voice services and data transmission.

VN creates first polyester fiber thread

The Dinh Vu polyester plant in the northern city of Hai Phong has made a major breakthrough, for the first time in the history of Vietnamese textiles, by successfully creating the first ever polyester fiber thread.

a product announcement meeting, Vu Dinh Duy, a director in the Textile Company, stated that these polyester fibers, filament fibers and polyester chips were produced in accordance with international standards using German technology. They were strong, durable and heat-resistant, easily meeting technical requirements for weaving, dying and sewing.

With capacity to produce 175,000 tons of fiber per year, the plant is able to supply around 40 percent of raw material needed for the Vietnamese textile industry, saving approximately US$400 million per year on imports of foreign made fiber, as well as providing jobs to nearly 700 people. Profits could reach VND6, 000 billion (approx. US$286 million), contributing VND600 billion (approx. US$28.6) per year to the country’s revenue.

Dinh Vu polyester plant, built on an area of 15 hectares in the Dinh Vu Industrial Zone in the northern province of Hai Phong, is worth US$325 million and was built jointly by Hyundai Engineering Co, LG International Corp. and Petro Vietnam Construction Corporation.

Following the success in manufacturing this fiber, the company is now cooperating with Vietnam National Textile and Garment Group to build other plants in the northern provinces of Hai Phong, Nam Dinh, Ha Nam, Thanh Hoa and the central province of Nghe An.

Chinese buys tons of sweet potatoes daily in southern Vietnam

An increasing number of Chinese traders are taking tons of sweet potatoes from the Mekong Delta province of Vinh Long every day, from fields hired and cared by local residents.

Doan Ngoc Chien, head of Vinh Long Department of Natural Resources and Environment (DNRE), says “Only the chairman of the province people’s committee can give approval to let foreigners rent land in the province.”

“Chinese traders, meanwhile, used many different tricks to farm sweet potatoes in the province,” Chien says.

Reports from the economic department of the province’s Binh Minh District shows that sweet potatoes have been packaged up and labeled in Chinese, which violated Vietnam’s law.

The traders have rented large fields for cultivation and built up warehouses, under the names of local residents.

Figures from the department also shows that 19 Chinese traders have rented an area of over 3,400 square meters in the district to build 10 warehouses.

They have also hired more than 480 local residents and paid them VND10,000-15,000 (less than US$1) per hour to work at the warehouses.

Binh Minh District in the province is very famous for sweet potatoes.

More than 46 hectares in Thuan An Commune of Binh Minh District have been leased to plant sweet potato, with an annual rent of VND35 million per hectare.

They pay locals VND80,000-120,000 per day to take care of the farming fields.

Phan Thi Be, head of the district’s economic department, says “Most Chinese traders have had locals hire land for warehouse at an annual rent of VND10 million (US$500) for 500 square meters.”

“Around five trucks of 35 tons carry sweet potatoes from local fields to China every day,” Be says.

However, local farmers are at risk of heavy losses as the price of the root will definitely slump if the foreign traders stop buying, she warns.

Nguyen Van Liem, the province’s DNRE deputy director, says the province’s authorities have checked on sweet potatoes farms and found unlabeled agriculture chemicals and fertilizers.

Chien says using unlabeled agricultural remedies will likely to damage the province’s entire sweet potato cultivation and pollute the environment.

Most of Chinese traders have violated the Vietnamese law as they have hired more than 10 local employees without business license.

In an effort to stop the activity, Vinh Long Department of Agriculture and Rural Development says it will ask the local plant protection department to check on sweet potato fields of Chinese traders.

Nguyen Van Diep, chairman of Vinh Long People’s Committee, says local sweet potato has relied too much on China’s market.

Diep encourages farmers to enter other foreign markets including Singapore, Malaysia, Laos and Cambodia.

Seven-month pepper exports record high value

Vietnam shipped abroad 78,000 tonnes of pepper in the first seven months of the year, earning US$420 million, equal to the value of the entire 2010.

According to President of the Vietnam Pepper Association (VPA) Do Ha Nam , the US and Germany are the two largest importers of Vietnamese pepper, while the Netherlands , the United Arab Emirates and Egypt also bought large volumes.

At the moment, Vietnam has almost completed this year’s pepper harvest with an estimated output of 100,000-110,000 tons, equal to the volume of 2010.

The exports price of pepper from now till early 2012 is forecast to stay high as supplies from major producers like Vietnam , Brazil and Indonesia cannot meet the world’s demands.

The Ministry of Agriculture and Rural Development expects that the country would earn over US$766 million in 2011, US$346 million more than the figure of 2010.

Vietnam adds $4 bln to foreign reserves: govt

Vietnam's central bank has bought nearly US$4 billion so far this year to add to the country's foreign reserves and would continue to increase the reserve level by year-end, the government said in a report on Thursday.

The report, delivered by Deputy Prime Minister Nguyen Sinh Hung to the National Assembly's opening session on Thursday, did not give the latest level of Vietnam's foreign reserves, which the Asian Development Bank said stood at $12.4 billion at the end of 2010.

Raw material drain to China draws fire

Many manufacturers of processed rubber, seafood and sugar are now blaming their associations for not doing anything to stop the export of raw materials to China.

Rubber manufacturers, for instance, are saying that they’re unable to buy raw rubber from the companies belonging to the Vietnam Rubber Association (VRA) now because these companies are exporting most of their products to China.

In response, Tran Thi Thuy Hoa, VRA’s general secretary, said associations can’t intervene in their members’ businesses. What VRA can do is thus simply to give advice and this, VRA has done.

“VRA can only advise these members to seek other markets with lower risks than China,” she said.

The same input drain is also happening to the sugar industry. According to the Ministry of Agriculture and Rural Development, China has imported 100,000 tons of sugar between August 2010 and mid June 2011 from Vietnam.

As the domestic market is now being filled with smuggled sugar, such statistics is igniting criticisms.

However, Nguyen Thanh Long, head of the Vietnam Sugar and Sugarcane Association, said the association could not restrict the markets that its members want to export to, or ban them from exporting to China.

He said the association only plays the role of a representative organization for sugar manufacturers and businesses.

Firms’ target export markets should be put under the management of the industry and trade authorities, Long said.

Truong Dinh Hoe, general secretary of the Vietnam Seafood Exporters and Producers (VASEP), said it is beyond his association’s power to make any intervention into Chinese traders’ import of raw materials.

The main function of VASEP, as well as other associations, is to report problems to higher authorities on members’ behalf, he said.

Multiple distribution levels push up drug prices

With drugs having to pass through several layers of distribution channels ranging from importers to pharmacies, Vietnamese consumers are forced to pay up to seven times their original prices.

Tuoi Tre tracked the path of a Bangladesh-made drug, Maxazith Suspension 20ml, from a distribution company until it reached a hospital in Hanoi and found how prices rise from dirt cheap to exorbitant.

According to its customs declaration, pharmaceutical company PM imported 1,000 boxes of Maxzith at US$0.75 (VND16,000) each.

PM sold them to TA Company, another pharmaceutical firm, at VND32,000 each.

When the medicines reached PV Pharmaceutical Company, the price rose to VND71,238 a box.

PV sold 104 boxes to the hospital pharmacy at VND92,380, before the final link in the chain, the patient, paid VND106,500.

Many other pharmaceutical products go through the same process, leaving people wondering why the Ministry of Health, despite knowing about the process, does not crack down on it.

The ministry has been talking about it since 2003, but has not done anything except draft a decree on medicine prices which has yet to be issued despite being promised for the fourth quarter of last year.

The decree envisages a ceiling on the profits earned by importers and wholesalers.

If it took effect, distributors would not be allowed to sell medicines at seven or eight times the original prices, the ministry said.

Danang ICT industry market worth $340 mln: report

The Danang information and communication technology market was worth US$340.1 million last year, the central city’s Department of Information and Communications said.

IT revenues had topped $87.4, including $11 million from exports.

Revenue from telecom had been worth $247.5 million, 15 percent higher than in 2009.

There had been 1.8 million mobile phone subscribers at the end of 2010, a 14 percent rise, and almost 110,000 internet subscribers.

More China trade to benefit small business

Vietnamese small- and medium-sized enterprises (SMEs) will soon have the opportunity to take part in cross-border trade activities, according to experts.

"With ASEAN members set to form an Economic Community by 2015 and a free trade agreement singed with China, Viet Nam is set to become a centre point for the transport of cargo," said Nguyen Cam Tu, deputy minister of Industry and Trade.

"Due to an increase in cargo, trade activities and services are expected to significantly develop along Viet Nam's borders with China, Laos and Cambodia." Tu said.

According to the ministry, many enterprises have already had much success in cross border trading.

Nguyen Xuan Quynh, director of the Quynh Anh Ltd Company in northern Lao Cai Province, said that his SME had been representing Vinamit, Trung Nguyen and Kinh Do on the Chinese market, exporting dried fruit, coffee and confectionery products, valued at US$3 million per year.

Cross-border trade activities had provided effective channels in expanding export markets, Quynh said.

Despite initial success stories, however, cross-border trade infrastructure still leaves much to the imagination, according to the Ministry of Industry and Trade (MoIT). It added that current weaknesses negatively affected both the efficiency and quality of cargo handling, transport, packaging and payments, reducing the competitiveness of Vietnamese exports.

Hoang Tho Xuan, an economic expert, affirmed that Vietnamese enterprises often came under pressure from foreign partners due to a lack of proper services and infrastructure.

"The State should implement specific policies related to enterprises involved in cross border trade," Xuan said.

"Cross-border trade cannot operate without proper information, consulting and market research services," he added

"Viet Nam is in desperate need of an association representing enterprises conducting cross border trade in order to effectively develop this area of the export market," said economist Vo Dai Luoc.

Infrastructure could not sufficiently develop without investment from the private sector, seeing as the State had tightened its purse in order to deal with the current economic crisis, he added.

Tran Bao Giam, head of the ministry's Mountainous Market and Border Trade Department, said that cross-border trade needed effective distribution systems in order to effectively expand into neighbouring markets while providing locals with Vietnamese products, minimising the necessity for imports. During 2010, Viet Nam made $30 million via cros-border trade activities.

IFC loans record amount for trade

International Finance Corporation (IFC) has loaned a record US$505 million for the fiscal year 2011 so Vietnamese banks can help local companies increase foreign trade and create jobs through its Global Trade Finance Program.

The programme, since its launch in Viet Nam in late 2007, has helped improve the capacity of nine banks to cover the risks of granting trade financing to local companies, mostly small and medium enterprises.

Under the programme, the banks have issued 268 guarantees to support $1 billion in trade finance transactions.

This year Lien Viet Bank, Orient Commercial Bank, Tien Phong Bank, and VIB Bank joined the programme.

IFC's other partners in Viet Nam are An Binh Bank, Asia Commercial Bank, Sacombank and Eximbank.

"IFC's Global Trade Finance Program has helped extend our capacity considerably to deliver trade finance for local importers and exporters over the past few years when trade lines have been limited," said Do Diem Hong, Techcombank's Executive Vice President.

Techcombank, an IFC partner since 2007, has been the programme's largest user in Viet Nam.

Simon Andrews, IFC regional manager for Viet Nam, Cambodia, Lao and Thailand, said that IFC helped ensure continued trade flows vital to enterprise growth despite liquidity constraints and helped Viet Nam's banks attract more trade lines from other foreign banks.

Vietnam, Japan cooperate in food and foodstuff production

Vietnam’s Dong Nai Food Industrial Corporation and Japan’s Marubeni Corporation on July 21 signed a strategic cooperation agreement on food and foodstuff production.

The aim is to serve strategic agriculture projects by supplying agricultural produce for the cattle-feed processing industry, as well as minimizing losses after harvest and increasing the use of domestic materials to reduce imports.

The two sides will cooperate in building infrastructure and invest in the Dong Nai-Agropark industry and agriculture complex which will use modern technology to raise the quality of manufacturing, processing and distribution.

A chain of safe food stores will be established to meet the growing demand of customers.

A multi-national corporation headquartered in Japan, Marubeni has 119 branches operating in 69 countries around the world.

Shoe exporters told to foster trademarks

Despite being the world's third-largest producer of leather and footwear, Vietnamese businesses have not been successful in building global trademarks, industry officials have said.

Diep Thanh Kiet, Vice President of the Vietnam Leather and Footwear Association (Lefaso), said that Vietnamese footwear products have not been branded well and are not of high quality.

Addressing a two-day seminar that began on July 20 in HCM City, Kiet said that Vietnamese footwear producers have not made their trademarks known world-wide.

"People only know about footwear made in Italy, Hong Kong and mainland China, not in Vietnam," he said.

Co-hosted by the European Delegation and Lefaso, the seminar is being held to promote the building of brands and to improve competitiveness in the industry.

Kiet said that Vietnamese footwear companies' main disadvantage is they are not fully aware of the importance of building trade-marks.

Vietnamese producers have difficulties in branding their trademarks as they lack investment in developing and training human resources to create and design high-value products. Designers in local firms often copy product samples.

The leading producers in Vietnam such as Biti's, Vina Giay, Thuong Dinh, An Lac and Dong Phuong, have managed to create new designs only in intermediary and secondary products.

Currently, Vietnam ranks fourth in the world in leather and footwear exports, with export value at around US$3 billion in the first six months of the year, up 30 percent against the same period last year, according to Lefaso.

To help the local industry fulfill its 2020 target of increasing exports and helping local producers achieve an 80 percent market share, Lefaso has signed a partnership with Italian and Belgian businesses.

European partners are helping Vietnamese footwear producers improve their international trade knowledge, and Italian technology and skills are being transferred to local footwear manufacturers.

The two-day seminar is part of the IN – TRADE project on "innovation and trademarks as tools for competing in the global market."

The project is part of the EU's Multilateral Trade Assistance Project EU-Vietnam (MUTRAP III), sponsored by the EU Delegation to Vietnam.

The main goal of MUTRAP III's second stage is to help local enterprises reform footwear design and improve fashion collections. Branding strategy development is another focus of the project in the second phase.

The European Commission has provided EUR225,000 for MUTRAP III to improve Vietnamese shoe exporters' competitiveness by developing brands on the international market.

The project offers training courses in technical and marketing subjects to shoe companies in Hanoi and HCM City.

The MUPTRAP III project, which began in August 2008 and ends in June 2012, assists Vietnam in implementing its socio-economic development plan as well as its post-WTO Action Plan, which calls for sustained pro-poor economic growth through stronger integration into the global trading system.

Vinashin exports wood carrying ship to Taiwan

The Sai Gon Shipbuilding Industry Company (SSIC), a member of Vinashin, on July 20 handed over the ship “New Lucky VII” to its owner, Franbo Lines Corp. of Taiwan (China) and inaugurated the largest dry dock in southern Vietnam.

The 6,850-tonne New Lucky VII, a cargo ship with a special function of transporting timber products, measures 102.79m in length, 17m in width and 8m in height. It was built at a cost of US$7.27 million.

The ship was designed by two Japanese companies, Kitada and AZ, and built with advanced technologies of Spain, the Republic of Korea and the US.

Meanwhile, the dry dock is the first of its kind that has been designed and constructed by Vietnamese engineers and workers. The 186m x 30m x 8.2m dry dock is considered the largest one in the southern region that can launch or repair ships with capacity of up to 25,000 DWT.

Business confidence plummets in second quarter

The business confidence index (BCI) in the second quarter reached just 88 points, down 21 points against the previous quarter, representing the biggest drop since the index was first adopted in Vietnam in 2008.

WVB Vietnam Financial Intelligence Services (WVB FISL) surveyed 127 businesses in 11 primary sectors and industries in Vietnam between May 18 and the beginning of July. Of those that responded, 78 percent were small – and medium-sized companies.

Most businesses expressed a lack of confidence in the country's economic recovery this year. Respondents said more time is needed for the Government's macroeconomic policies to bear fruit and restore business confidence.

Just 38 percent of firms questioned said that they thought the overall economic outlook had improved compared to a year ago, while 12 percent thought it had worsened. However, 53 percent of companies were confident the economy would improve over the next 12 months, while 10 percent predicted a dismal 2012.

Despite the bleak predictions, 44 percent of enterprises said they planned to increase their work force, while 33 percent said they would invest more in fixed assets over the next 12 months.

A mere 20 percent of businesses were confident sales revenues would increase over the next year – a 47.8 percent decrease compared to the previous quarter. Meanwhile, 41 percent thought their profits would increase in 2012 – a 23 percent decline over the first quarter.

The WVB FISL also asked businesses to comment on hot issues, such as wage rises to offset the impact of rising inflation, Government measures to halt the unofficial interest rate war among banks, sluggish stock market, Vietnam's trade balance and inflation.

In response, 51 percent of enterprises said pay rises would depend on business results, while 71 percent said the central bank should impose caps on both deposit and lending rates.

Only 23 percent said the poorly performing stock market had affected their business, while 45 percent thought Vietnam's trade deficit would continue to increase. Meanwhile, 72 percent expected annual inflation this year to reach 15-20 percent.

Central region maintains strong industrial growth

The central coastal and Highland region reported an annual industrial growth of 14.3 percent to almost VND50.18 trillion (roughly US$2.46 billion) in the first half of the year.

The figure, however, showed that the region, which consists of 14 provinces and cities, achieved just 45.6 percent of the yearly target, the Ministry of Industry and Trade said at a conference in the central coastal province of Quang Ngai on July 20.

The private economic sector played a key role in industrial production, contributing almost 48 percent to the regional output. The sector registered a year-on-year increase of 18.2 percent in industrial output value to over VND24 trillion in the first six months of the year.

It was followed by the State economic sector, which made up almost 36 percent of the regional industrial output.

Foreign-invested businesses managed to raise industrial production output by 16.8 percent over the same period last year to more than VND8.13 trillion, contributing 16.2 percent to the regional total.

Cement producers face hard times

Domestic cement consumption this year is expected to be as low as 52.5 million tonnes due to a reduction in the number of local building projects, the Viet Nam Cement Association has said.

Aggravating the situation was an oversupply throughout the industry, while local and export demand was sluggish, the association said.

By mid-July, the cement industry had sold about 26 million tonnes, accounting for 45 per cent of the predicted annual consumption of between 54.5 and 56 million tonnes.

The country's cement industry has 110 production lines with a total designed capacity of 64 million tonnes annually. However, many plants do not yet run at full capacity. As a result, total production this year is expected to reach 57 million tonnes.

The association added that there were 4 million to 5 million tonnes of stockpiled cement. To offset reduced local demand and the pressure of inflation, producers were looking to boost exports. However, export prices were low while transport costs were high, the association said.

Similar problems last year meant the Viet Nam Cement Industry Corporation (Vicem) failed to reach its export target of 1 million tonnes.

Nguyen Ngoc Sy,õ director of Tam Diep cement company, said most of his firm's products were sold domestically. He added that it was difficult to break into new foreign markets because the export price was lower that the domestic price.

Dao Ngoc Binh, director of the Hoang Thach Cement JSC, said local consumption had decreased while there was an oversupply of cement. If firms stopped production they would incur further losses due to high input costs, he said.

Le Van Chung, chairman of Vicem, said competition among producers would become more intense when production increased, addingthat Vicem planned to open seven cement plants in the near future.

He also said investment in cement projects was normally in hard currencies, which meant repayment of high-interest loans would be a financial burden on producers. He said a number of firms were likely to either default on payments or be forced into mergers.

According to a Vicem report, cement demand would decrease by 1.3 per cent. In the first six months of this year, Vicem's profit reached just 25 per cent of its yearly plan. Even large firms such as Bim Son and Ha Tien have incurred losses.

This year, Tam Diep cement plant must repay VND370 billion (US$17.8 million), while Ha Tien must fork out $19.3 million. Hai Phong cement meanwhile owes $11 million and Bim Son cement, $7 million.

Deal signed for Mong Duong power plant

The US-invested developer of the US$2.1-billion Mong Duong 2 Thermal Power Plant in northern Quang Ninh Province signed here yesterday an adjusted build-operate-transfer (BOT) contract with the Ministry of Industry and Trade.

"The re-signing of the contract which was first signed on April 22, 2010, is due to a change of investors," said Hoang Quoc Vuong, deputy minister of industry and trade.

Under the earlier contract, the developer was the Mong Duong AES-TKV, a joint venture of American Electric Supply Inc (AES) and the Vietnamese State-owned mining giant, the Viet Nam National Coal and Mineral Group (Vinacomin).

However, Vinacomin exited the project in March to focus on other power plants.

Now, the sponsors of the project are affiliates of the AES (51 per cent), Posco Power Corporation of Republic of Korea (30 per cent) and China Investment Corporation of China (19 per cent).

"The contract signed yesterday marked success in improving the investment environment as well as attracting foreign investors to large power projects in Viet Nam," Vuong said.

"The Mong Duong 2 power project represents an important addition to Viet Nam's energy production. With this, Viet Nam has taken an important step toward meeting its energy challenges," said Jessica Webster, economic Counsellor at the US Embassy.

"As the largest US investment to date in Viet Nam's energy sector, this project is yet another sign of the growing co-operation and economic ties between the US and Viet Nam. It also shows the positive contribution that Public Private Partnerships and a strong investment environment can have in Viet Nam's overall development strategy."

Ian Fox, AES general director and head of the Mong Duong 2 project, said the AES on July 11 officially announced that financial sources for the Mong Duong 2 project had been formally completed.

He said a consortium of two South Korean government Export Credit Agencies and 12 commercial banks would provide commercial and political risk guarantees and debt facilities for the project for more than $1.46 billion.

The total cost of the project covered by debt and equity is $1.95 billion. The capital is expected to be disbursed for the first time in August.

The comprehensive guarantees for commercial and political risk are being provided by Korea Eximbank (KEXIM) and Korea Trade Insurance Corporation (KSURE). KEXIM is also the largest single lender.

Commercial lenders include BNP-Paribas, Credit Agricole, HSBC, ING, Mizuho, Natixis, SMBC, Societe Generale, Standard Chartered, Unicredit, CIC Bank and DZ Bank.

The project is being implemented under Viet Nam's Build-Operate-Transfer (BOT) regulatory regime. The Mong Duong 2 is the largest private sector power project in Viet Nam.

The project will have an estimated capacity of 1,200MW and an annual output of 8.1 billion kWh when it becomes operational in 2015.

Lang Son, Guangxi discuss grapes planting

The Department of Science and Technology of the north border province of Lang Son hosted a scientific workshop on July 20 on cooperation in planting grapes with Guangxi province of China .

Attending the workshop were leaders, technicians from the two provinces’ Departments of Sciences and Technology along with some concerned departments and sectors and representatives from Lang Son province.

The workshop reviewed results of the trial cooperative project of grapes planting between the two provinces, agreeing that the two grape strains introduced by the Chinese side showed good adaptation to local conditions in Lang Son.

In order to expand the area of planting and ensure productivity and fruit quality for sustainable development in the coming time, the managers and experts of both provinces were urged to transfer production techniques to their farmers.

Plastics industry needs $8.5 bln to develop

Vietnam's plastics industry will need VND175.53 trillion ($8.52 billion) for its development until 2020 under a plan approved by the Ministry of Industry and Trade.

The plan aims to raise the sector's industrial production value to VND78.5 trillion ($3.81 billion) by 2015 and VND181.57 trillion ($8.81 billion) by 2020.

It plans plastics will make up 5 per cent of the country's overall industry by 2015 and 5.5 per cent by 2020. Currently it is 4.48 per cent.

It targets an annual export growth rate of 15 per cent to reach $2.15 billion and $4.3 billion by 2015 and 2020, respectively.

Priority will be given to high quality, competitive products with diversification of product design to meet domestic and export markets.

Investors will be encouraged to recycle and introduce technologies to produce degradable plastic products.

The nation now has 1,064 plastics producers, 80 per cent of which are in the south, including provinces of Binh Duong, Dong Nai, Long An and Ho Chi Minh City.

The industry exports products to 55 foreign markets, with last year's exports valued at $1 billion, a year-on-year increase of 20 per cent. Packaging products made up half the export revenue, followed by household plastic items, 15 per cent, and technical plastic goods, 10 per cent.

The biggest obstacle for the industry is its heavy reliance on imported materials, the ministry's Industry Policy and Strategy Institute said. Of 2.2 million tonnes used a year, about 85 per cent is imported. This also exposes producers to foreign exchange risk and world oil price volatility which affectes competitiveness, the institute said.

Shoe exporters told to foster trademarks

Despite being the world's third-largest producer of leather and footwear, Vietnamese businesses in the industry have not been successful in building global trademarks, industry officials have said.

Diep Thanh Kiet, vice president of the Vietnam Leather and Footwear Association (Lefaso), said that Vietnamese footwear products have not been branded well and are not of high quality.

Addressing a two-day seminar that began on July 20 in Ho Chi Minh City, Kiet said that Vietnamese footwear producers have not made their trademarks known world-wide.

"People only know about footwear made in Italy, Hong Kong and mainland China, not in Vietnam," he said.

Co-hosted by the European Delegation and Lefaso, the seminar is being held to promote the building of brands and to improve competitiveness in the industry.

Kiet said that Vietnamese footwear companies' main disadvantage is a lack of awareness of the importance of building trade-marks.

Vietnamese producers have faced difficulties in branding their trademarks as they lack investment in developing and training human resources to create and design high-value products. Designers in local firms often only copy product samples.

The leading producers in Vietnam such as Biti's, Vina Giay, Thuong Dinh, An Lac and Dong Phuong, have managed to create new designs only in intermediary and secondary products.

Currently, Vietnam ranks fourth in the world in leather and footwear exports, with export value at around $3 billion in the first six months of the year, up 30 per cent against the same period last year, according to Lefaso.

To help the local industry fulfill its 2020 target of increasing exports and helping local producers achieve an 80 per cent market share, Lefaso has signed a partnership with Italian and Belgian businesses.

European partners are helping Vietnamese footwear producers improve their international trade knowledge, and Italian technology and skills are being transferred to local footwear manufacturers.

The two-day seminar is part of the IN – TRADE project on "innovation and trademarks as tools to successfully compete in the global market."

The project is part of the EU's Multilateral Trade Assistance Project EU-Vietnam (MUTRAP III), sponsored by the EU Delegation to Vietnam .

The main goal of MUTRAP III's second stage is to help local enterprises reform footwear design and improve fashion collections. Branding strategy development is another focus of the project's second phase.

The European Commission has provided 225,000 euros for MUTRAP III to improve Vietnamese shoe exporters' competitiveness by developing brands on the international market.

The project offers training courses in technical and marketing subjects to shoe companies in Hanoi and Ho Chi Minh City .

The MUPTRAP III project, which began in August 2008 and ends in June 2012, assists Vietnam in implementing its socio-economic development plan as well as its post-WTO Action Plan, which calls for sustained pro-poor economic growth through stronger integration into the global trading system.

Inflation soars in largest city

Ho Chi Minh City 's consumer price index increased by 1.07 per cent from June, according to the city 's General Statistics Office.

In comparison with July and December last year, the city's CPI rose by 17.89 per cent and 12.73 per cent, respectively.

The prices of 10 out of 11 commodity groups surged in July, excluding the post and telecoms group.

The prices of food groups have seen a continuous increase since the beginning of the year, with the highest rise of 2.05 per cent in May and the lowest surge of 0.35 per cent in July.

Of the total seven months of the year, prices of food saw an accumulated increase of 7.93 per cent.

The foodstuff group experienced a movement similar to the food group.

Gold is not included in calculating the CPI, however, the prices of gold surged by 0.85 per cent from June and 34.1 per cent from one year ago.

Meanwhile, prices of US dollar decreased by 0.03 per cent in the last month.

Leasing market in city remains stable in Q2

Unlike the residential sales segment which has experienced a lot of difficulties due to a severe market downturn, the serviced apartment market has registered stable growth thanks to having a limited supply and targeting a narrow segment of customers, mostly the expatriate community.

The leasing market saw positive signals and had stable growth during the first half of this year, with occupancy increasing to 91% for Grade A and 85% for Grade B serviced apartment buildings in HCMC in the second quarter, according to property services provider Cushman & Wakefield.

Rental levels increased slightly to US$30 per square meter for Grade A and to US$26 per square meter for Grade B facilities in the second quarter.

The serviced apartment market in HCMC has 3,500 units, in which Grade A has 690 units, Grade B 1,900 units and the rest are Grade C facilities.

There were no significant projects launched during the second quarter, with only small boutique projects such as Mai Har Lan with 38 units and IWA Tower with 28 units in District 1. Continuing a trend seen in previous quarters, most projects are developed by local developers.

CB Richard Ellis Vietnam Co (CBRE) agreed, stating that more boutique serviced apartment projects were expected to be developed in the central business districts due to the lack of available land for developing large-scale projects.

The company said some projects would be able to provide a combination of central location, five-star service and luxurious fit-out similar to that of Grade A to attract tenants with more affordable rents.

Commenting on the market, Cushman & Wakefield said occupiers would have more choice than ever before as new boutique-style serviced residences entered the market with apartments offered at reasonable rates.

Therefore, there was a developing trend of tenants relocating from existing grade C to newly completed developments in the same or higher grades.

According to Cushman & Wakefield, the serviced apartment market will continue to be the best performing residential asset class, with stable occupancy and rental rates through to the end of the year.

It is expected to see some 1,100 new units delivered to the HCMC market in the next two years, with major developments including the Vista in District 2 and Times Square in the downtown area.

Some residential developers with projects in the central business districts and in the fringe areas look set to convert their sales projects into serviced apartments due to the weak sales market.

Central Highlands rubber bounces

Provinces in Tay Nguyen (Central Highlands) have planted rubber trees on more than 64,000ha in the last two years, taking the region's total area under rubber to 174,720ha, the Tay Nguyen Steering Committee said.

Kon Tum, Gia Lai and Dak Lak provinces have the largest areas under rubber.

The trees have mostly been planted on infertile forest land.

The development of rubber cultivation in the region has created stable jobs and raised the incomes of tens of thousands of people, especially belonging to ethnic minorities.

Under the Government's policy of converting infertile forest land into rubber plantations, Central Highlands provinces have created hundreds of projects.

Gia Lai plans to grow rubber on 50,000ha of such lands in 2009-15.

Kpa Thuyen, director of the Gia Lai Province Department of Agriculture and Rural Development, said local companies had planted rubber trees on 502ha this year.

This year, the province would meet the target of covering 12,000ha, taking the total area under rubber to 22,564ha, he added.

Dak Lak plans to plant rubber trees in 77 communes, hoping to increase area under the crop to 41,530ha by 2015 compared to the current 11,530ha.

The region's provinces together plan to develop 32,000ha this rainy season.

Tran Minh, deputy director of the Viet Nam Rubber Research Institute's Tay Nguyen Research and Technology Transfer Centre, said his centre would develop two models to help ethnic minority farmers in Kon Tum grow rubber trees.

They will be implemented in Kon Tum City and Dak Doa District on an area of 21ha each with the participation of 30 households.

The centre would provide all the rubber saplings and 50 per cent of fertilisers needed for growing the trees and help the households with planting techniques, Minh said.

The centre's experts would monitor the growth of three trees for three years, he added.

PV

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