Unable to cope with difficulties caused by the global economic crisis, 26,340 Vietnamese businesses have suspended operations or shut down in the first six months of 2012, a year-on-year increase of 5.4 per cent, the General Statistics Office (GSO) says.
According to figures released by the GSO in Ha Noi last Friday, the number of enterprises dissolved, 4,105, marked a year-on-year increase of 35.4 per cent, showing businesses were finding it increasingly difficult to survive in the current environment.
In June 2012, 4,110 firms declared bankruptcy or suspended operations. Of these 610 were dissolved.
Of the 11,329 foreign-invested enterprises, 232 firms (two per cent of the total number of registered FIEs in the country) have temporarily suspended operations, 696 enterprises (6.3 per cent) are about to be dissolved because of losses or changes in the investment environment.
In addition, 92,700 other private firms have "disappeared." Nguyen Bich Lam, deputy head of GSO, said these companies were founded for "invoice selling" and have never paid taxes.
Some 1,000 other FIEs, including nearly 800 from HCM City, have also "dispappeared," he said.
About 23,000 State-owned enterprises (SOEs) have suspended operations while over 30,000 other SOEs could be dissolved.
Lam said SOEs, which are most "vulnerable" in the current state of economic turmoils, needs more support from the Government.
As of 1 January 2012, enterprises that temporarily suspended operations in several provinces and cities amounted to 10 to 20 per cent of the total number of registered firms – 19.4 per cent in Soc Trang, 19 per cent in Can Tho and 15.8 per cent in Hai Duong.
Lam said 70 per cent of these enteprises reported losses, 28 per cent cited insufficient capital and nearly 15 per cent said they could not sell their stock.
Over 35 per cent of the enterprises said they were unable to cope with interest rates of over 19 per cent. Nearly 90 per cent of them said they can accept interest rates on loans of less than 15 per cent.
According to the GSO, 27 per cent of surveyed interviewed said high interest rates are the biggest challenge facing their business; 19.5 per cent blamed high inflation and economic changes; 17.4 per cent cited difficult access to capital; 9.7 per cent, high transportation costs; 7 per cent, unstabe electricity supply and another 7 per cent, macroeconomic policices.
Meanwhile, the HCM City Department of Labour, Invalids and Social Affairs has reported that over 4,800 HCM City-based businesses reduced their work force in the first four months of 2012.
According to the results of a survey conducted recently by the department, over 16,700 workers from the construction, chemicals, mechanics and service sectors have been sacked.
The survey also revealed that the workers were sacked because their employers faced bankrupcy, disintegration, suspension of operations and other difficulties due to the economic crisis.
In addition, many other businesses have had to reduce the work hours of their employees due to a shortage of orders for their production and processing lines.
Petrol and oil prices keep falling
The Ministry of Industry and Trade and the Ministry of Finance cut prices of petrol, kerosene and oil on the domestic market yesterday following a fall in world prices.
The price dropped by VND600 per litre to VND20,600 for A92 petrol, by VND300 per litre to VND17,650 for fuel oil, by VND200 per litre to VND19,900 for diesel oil, and to VND20,050 for kerosene.
Tran Ngoc Nam, deputy general director of the Viet Nam National Petroleum Group (Petrolimex), said on the world market yesterday, the price of crude oil fell by 1.73 per cent to US$83 per barrel against the previous day, the lowest rate since April last year.
Yesterday's reduction was the fifth time since the beginning of the year. The previous fall was on June 21.
The two ministries decided to maintain the VND300 per litre contribution of petrol companies to the petrol price stabilisation fund.
The ministries plan to increase the import tax for petrol and oil products by 2 per cent in the future.
Essar Energy says ENI buys stake in Vietnam block
India-focused Essar Energy Plc said it agreed to sell a 50 per cent stake in an offshore gas exploration block in Vietnam to Italian oil major Eni SpA.
Eni will assume operator status for the block under the terms of the transaction.
Further investment is required to establish gas reserves in the block and no gas is being produced at present, Essar Energy said.
Block 114 is located in shallow waters off the coast of Vietnam and has undiscovered inplace resources of about 1 trillion cubic feet of gas, according to Essar Energy's website.
The company was not immediately available to comment on further details of the transaction, including the value of the deal.
Shares in Essar Energy - 77 percent-owned by privately held Indian conglomerate Essar Group - closed at 122 pence on Friday on the London Stock Exchange.
First Solar’s manufacturing facility offered for sale
US solar-panel manufacturer First Solar has appointed Cushman & Wakefield Vietnam as the exclusive agent to sell its 113,000 square-meter manufacturing facility at Dong Nam Industrial Park in HCMC’s Cu Chi District.
The company originally built the plant to produce photovoltaic solar panels but have since declared the site surplus and now are looking to sell the facility in 2012.
Cushman & Wakefield Vietnam is seeking buyers for part or the whole of the facility which was completed in April of this year by M+W Group from Germany.
“This facility is brand new and been constructed to international standards by a global engineering and construction firm,” said Chris Brown, General Manager of Cushman & Wakefield Vietnam.
“It is suitable for a variety of industrial production or logistics uses and offers a unique ‘ready to operate’ opportunity, because of this we are already witnessing strong interest from overseas manufacturers and investors,” he added.
Increased direct foreign investment to Vietnam in the manufacturing sector from other regional countries such Japan, Korea, Singapore and China will make this an attractive prospect to base their operations, said Cushman & Wakefield Vietnam.
The aforementioned regional manufacturing hubs are becoming less competitive due to increasing labor costs, foreign exchange rates, and utility costs coupled with government policy on tax and export duties.
Companies are increasingly looking towards competitive markets such as Vietnam to pare down expenses.
“We are confident that given the strong interest in Vietnam from manufacturers in the region and beyond, we will be able to secure a buyer sooner rather than later,” Brown added.
Dong Nam Industrial Park (IP) occupies a strategic position near to two key hotspots: Ho Chi Minh City and Binh Duong Province, the nation’s top regional recipient of foreign direct investment and location of many high profile industrial operations.
National highway 13 is only 5 minutes from the site providing quick access to Binh Duong, Tan Son Nhat International Airport, Ho Chi Minh City’s central business district and the port at Cat Lai.
The IP also has the advantage of easy access to other inland transportation and waterway links and there is an active labor pool within close proximity to the site.
The owners of the 342 hectare park, Saigon Vietnam Rubber Group, will give priority to clean and efficient hi-tech operations in sectors such as mechanical engineering, information technology, chemical processing, construction materials, furniture manufacturing, and sports equipment manufacturing.
Their vision is to develop the park as a centre of high-tech processing and low-impact environmental emissions.
The facility itself consists of 107,000 square meters of industrial space divided into two production areas and a large logistics area whilst there is an external office building of approximately 6,000 square meters.
It is set on a 23 hectare plot with a further 21 hectares set aside for expansion and has ample water and electricity supply for high production manufacturing uses.
Cushman & Wakefield Vietnam has advised Y&R in relocating their head office in District 1 from Miss Ao Dai Building to the 12th floor of HMC Building, 193 Dinh Tien Hoang.
The main drivers for the relocation are to accommodate significant head count growth and to provide a creative working environment for Y&R employees, said Matthew Collier, CEO of Y&R Vietnam.
Da Lat visitors plagued by fake delicacies
Almost all of the food manufacturers operating behind a ‘Da Lat specialty’ banner in the namesake tourism city do not have a license, and their products are bought from various sources before they are sold to visitors at prices three to five times higher than in the city’s market.
Figures from the local people’s committee and the city’s tax agency show that there are as many as 37 jam facilities on Mai Anh Dao and Nguyen Tu Luc streets, none of which have been granted a license.
As Da Lat is renowned for its strawberry jams, most of the factories woo tourists by hanging banners that read “jams made from our own strawberry gardens,” and only when they consume the fake specialties bought from these unlicensed stores do customers learn of the trick.
One such customer is Nguyen Thanh Binh, a banker from Ho Chi Minh City, who bought more than VND1 million worth of jams from the Thanh Hang store on Nguyen Tu Luc Street.
Binh said his tour guide took the tourist delegation to the store, saying they were going to experience a traditional facility that specializes in making Da Lat delicacies.
“I could not help but convince myself that I was in a big food making facility, as the attendants there kept claiming that the products were home-made, and many jams were put in nicely decorated packaging,” said Binh.
But the products were in fact sourced from another facility, whose workers are willing to place the labels of any name their clients wish.
The owner revealed that, “I have many customers who have opened stores on Mai Anh Dao and Nguyen Tu Luc streets.”
He took a Tuoi Tre reporter into his facility, where dozens of workers were putting labels that bear the name of some ‘specialty facilities’ on the products.
“I can also supply strawberry juices for you to mix into your own products, which can yield bigger profits,” he offered.
Meanwhile, the My Quyen jam factory was advertised as one of the biggest strawberry gardens in Da Lat, a claim which helped it attract a large number of visitors.
But when Tuoi Tre reporters joined a tourist group from Binh Duong to visit the store, the attendants there refused to take the visitors to the production facility, saying they “had to stop for a few days due to unsold stock.”
The tourists’ wish to visit the strawberry garden too was rejected, as the attendant said, “I do not have the key to the garden, and its keeper is away.”
According to T, who used to run a specialty store, many products that are advertised as Da Lat specialties at these facilities are in fact not made in the city, but are bought from other sources.
“The stores selling fake Da Lat products have duped visitors into thinking that Da Lat is the kingdom of all kinds of jams, while most of the products have dubious origins,” he revealed.
Most of the fake products are sold at exorbitant prices, as the factory owners have to pay commission to a huge numbers of brokers to lure customers for them.
The brokers have to collude with the drivers or guides of the tourist groups to receive commissions worth 20 – 30 percent of the total money visitors spend on purchasing the goods.
“Some also pay a driver or tour guide VND3 million if they bring a 45-seat bus to their facilities, and VND1.2 million for a 29-seater, no matter if the tourists buy their products or not,” a hotel owner revealed.
While the fake specialty businesses reap whopping profits from visitors, more than 200 small traders in Da Lat’s market have fallen into penury as there are almost no customers, despite their much cheaper selling prices.
“Not only do the brokers to take away customers, they also tell visitors that products sold in the market are poor quality,” T, a jam seller, lamented.
In first half of year, 53,000 firms went bankrupt
In the first six months of the year, 53,000 public, private, and foreign-invested businesses declared bankruptcy or began the process, figures from the General Department of Statistics show.
That includes as many as 4,100 companies in June alone.
“Nearly 70 percent of the companies said the main cause for their dissolution is business failures,” department deputy head Nguyen Bich Lam said at a meeting Friday to announce the numbers, adding that 28 percent “blamed capital shortage, and 15 percent said they could not sell their products.”
More than 33 percent of those that took out bank loans said they incurred a 19-percent interest rate, while nearly 90 percent said they only could afford rates below 15 percent.
Of the total companies, 23,000 have completed bankruptcy procedures.
Most that have ceased operation were in the non-state sector. Lam said those companies need government assistance because they are the most vulnerable to the economic slowdown.
Department figures also showed particularly high bankruptcy in the provinces of Hai Duong (15.8 percent), Can Tho (19 percent), and Soc Trang (19.4 percent).
Speaking at the same meeting, one official said the consumer price index rose only 6 to 7 percent since last year, proof that efforts to curb inflation were working.
But Nguyen Duc Thang, head of the Price Agency under the General Department of Statistics, added that the slowing acceleration of the index did not indicate deflation.
Similarly, department head Do Thuc said Vietnam hasn’t fall into deflation because the price index only fell below zero for one month in the past year.
“But we have one negative point here, which is the falling demand,” Thuc said. “It will consequently affect production.”
Companies listed six main obstacles to doing business, topped by exorbitant lending rates, as voted by 27 percent of firms. Another 9.7 percent complained of high and unstable inflation, while 7 percent each went to unstable power supplies and inadequate economic management.
Vietnam’s H1/2012 macroeconomic indicators unveiled
Vietnam’s gross domestic product (GDP) is estimated to have reached VND270.115 trillion ($12.93 billion) in the first half of this year, up 4.38 percent year on year, according to the General Statistical Office of Vietnam (GSO).
This figure, with the base year of 1994, is lower than the 5.57 percent and 6.16 percent growth in H1/2011 and H1/2010, respectively.
Based on current prices, the country’s GDP is estimated at VND1,252.5 trillion ($59.6 billion).
Regarding economic sectors, the service field posted the best growth with a 5.57 percent year-on-year rise in H1, followed by the agro-forestry- fisheries and industry-construction sectors, with 2.81 percent and 3.81 percent year-on-year growth, respectively.
Vietnam is targeting 6 percent GDP growth this year, higher than the 5.9 percent expansion in 2011.
The biggest engines of the country’s GDP growth are industrial production and construction, accounting for 40.26 percent, followed by the service and agro-forestry- fisheries sectors, with 37.61 percent and 22.13 percent respectively, said GSO.
In Q2/2012 alone, the country’s GDP growth was 4.66 percent year on year, higher than the growth of 4 percent in the previous quarter, and higher than the forecast of 4.5 percent given previously.
According to the GSO, the country’s economic growth slowed down in the first half of 2012 due to difficulties in production and business and product consumption of many sectors.
Industrial production accounts for a large proportion, but its growth was inadequate.
However, from Q2/2012, the country’s economy has seen positive changes, especially in the industry and construction sectors.
The added value of these sectors in Q1 this year increased only 2.94 percent from the same period last year, and in Q2/2012, the growth was 4.52 percent year on year, of which the industry sector increased from 4.03 percent to 5.4 percent.
Several municipal statistics offices publicized their H1/2012 GDP growth before the national office, of which, Hanoi reached economic growth of 7.6 percent, Ho Chi Minh City hit 8.1 percent, Da Nang 10.2 percent, Binh Duong 10 percent, and Can Tho 8.63 percent.
The GSO’s report also showed that the country’s Index of Industrial Production (IIP) in June rose 8.0 percent from a year earlier, accelerating from an increase of 6.8 percent in May.
In the first six months of this year, the country’s unemployment rate was estimated at 2.29 percent, specifically in urban areas the rate stood at 3.62 percent, and in rural areas the figure was 1.65percent, said GSO.
The rate of underemployment of labor in the first half of 2012 was 3.06 percent; the urban/rural split was 1.92 percent 3.6percent, respectively.
The national labor force from age 15 and up in 2012 is estimated at 52.7 million people, 1.3 million more than in 2011, of which, male laborers account for 51.6 percent, and female workers make up 48.4 percent.
The working-age labor force is 47.1 million, up 0.6 million people, of which, male laborers account for 53.7 percent, and female workers 46.3 percent.
Laborers older than the age of 15 who are working in the economy in 2012 are estimated at 51.6 million people, up 1.3 million from 2011, in which laborers in agriculture, forestry and fisheries sectors account for 48 percent, industry and construction 20.9 percent, and the service sector 31.1 percent.
Vietnam’s total retail sales and services in the first six months of this year are estimated to have reached more than VND1.137 trillion, rising 19.5 percent year on year.
If the price factor is excluded, the increase was equivalent to a 6.5 percent year-on-year rise, said GSO.
Trade activities, hotel and restaurant, services, and tourism constituted VND880.7 trillion, VND132.8 trillion, VND112.2 trillion, and VND11.7 trillion, accounting for 77.4 percent, 11.7 percent, 9.9 percent and 1 percent of the total value, respectively.
Their year-on-year growth rates were at 18.9 percent, 20.2 percent, 22.3 percent and 26.6 percent, respectively.
The number of international visitors to Vietnam in the past six months is estimated to have reached 3.363 million arrivals, up 13.9 percent from the same period last year.
Visitors to Vietnam for tourism and resort purposes, business purposes, and relative visits reached over 1.9 million tourists, 581,900 people, and 595,700 arrivals, up 12.7 percent, 18 percent, and 16.1 percent year on year, respectively.
During the period, Chinese tourists took the lead with 682,300 people, up 3 percent year on year, followed by South Korean, Japanese, American, and Taiwanese visitors, with 369,900 people (+41.3 percent), 289,000 people (+22.8 percent), 244,900 people (+2.6 percent), and 222,500 people (+23.8 percent), respectively.
The total state budget revenue from early this year till June 15 has been estimated at VND316.8 trillion, equaling to 42.8 percent of the year’s estimate.
Of which, local collection, collection from crude oil, and collection from export and import activities constituted VND203.2 trillion, VND52.3 trillion, and VND58.9 trillion, or 41.1 percent, 60.1 percent, and 38.3 percent of the year’s estimate.
Revenues from state-owned enterprises (SOEs) and from foreign-invested enterprises (FIEs-excluding crude oil) contributed VND71.1 trillion and VND36.2 trillion, or 45.8 percent and 37.1 percent of the year’s estimate.
Meanwhile, the total state budget expenditures from the beginning of the year until June 15 were estimated at VND376.8 trillion, or 41.7 percent of the year’s estimate.
Thus, the state budget deficit in the first six months of this year was estimated at VND60 trillion.
HCMC leaders hear concerns of agricultural enterprises
Agricultural enterprises have felt more encouraged after Ho Chi Minh City leaders have met with them to discuss and understand the many difficulties faced by them such as access of capital, project approval delays and high land rents.
Le Anh Dung, director of Hai Thanh Company that specializes in exotic fish exports, said his partners want to observe his company’s functioning methods before they sign any new contract.
Earlier, his company merely delivered the product as per customer requirement but now the contract can be cancelled if it does not meet with their specifications.
Hence, to expand production, Dung spent time in a farm in Trung An Commune in Cu Chi District and spent tens of billions of dong to train local residents and another tens of billions on improving infrastructure. However, his upgraded project has still not been approved.
Besides this delay, he has to pay a 20 percent tax for breeding fish, which is very high for any enterprise. Therefore, Dung has proposed to the government to exempt fish breeding from tax.
At the meeting with HCMC leaders, other enterprises expressed their concerns over the high lease payment for land.
Participants at the meeting said they have not received any preferential treatment from the government such as tax exemption for the first two years of operation, or any capital support either.
Addressing the meeting, Le Minh Tri, deputy chairman of the People’s Committee of Ho Chi Minh City, promised to look into all the issues raised and help remove snags and resolve difficulties wherever possible.
Farmers hit by fall in pork prices, crop diseases
Farmers in Vietnam have been severely hit by continuing fall in pork prices as well as crop diseases that have devastated large farming areas of snout otter clam in the northern province of Quang Ninh and shrimp crops in the Mekong Delta.
About 650 households breeding snout otter clam have suffered losses of at least VND200 billion (US$9.5 million) due to diseases in Van Don District of Quang Ninh Province, according to statistics of the Department of Agriculture and Rural Development in the district.
Farmers expected to harvest their clam sown in May last year by July this year, but disease has destroyed the crop since early March.
According to test results done by the National Center for Veterinary Diagnosis under the Ministry of Agriculture and Rural Development, the snout otter clam crop has been infected with parasite Perkinsus Spp.
This disease has spread quickly and local authorities have not found any effective measures to fight it and also failed to warn farmers to stop farming clams till a remedy was found.
Last year, residents in Van Don District tripled their clam farming area compared to that in 2010. They bought 60 million clams to propagate from various provinces around the country and even from China.
Meanwhile, pork prices have kept tumbling in the Mekong Delta. On July 1, the price was only VND3.4 million (US$162) a quintal, a reduction of about VND1.6-1.8 million compared to the same period last year.
The low price and spread of the blue-ear pig disease has depressed pig breeders in the delta region and many have even given up breeding pigs.
The agriculture department in Dong Thap Province said that the number of pigs in the province have reduced to only 200,000 now, half the normal number.
Long An Province saw a reduction of 50,000-70,000 pigs. Hau Giang, Vinh Long and Bac Lieu Provinces also faced the same situation.
The Department of Livestock under the Ministry of Agriculture and Rural Development is worried about a shortage of pork in the next few months.
The Directorate of Fisheries, also under the ministry, said that diseases have continued to ravage shrimp farms in the Mekong Delta. A total of 39,000 hectares has suffered damages, causing a loss of VND5.5 trillion (US$262 million) for local farmers.
Dead shrimps have put processing plants in severe shortage of raw material, while price of tiger shrimp is still very low in Ca Mau, Bac Lieu and Tra Vinh Provinces.
Property market for grave sites flourishing in Da Nang City
While the real estate market is facing a slump and construction companies are on the verge of bankruptcy, the property market for dead souls seems to be flourishing in the central city of Da Nang.
Of late people are flocking to the Hoa Son Cemetery in Hoa Son Commune of Hoa Vang District to buy plots of land in the graveyard.
A property broker tried to cash in on two small land plots of 83 square meters at VND550,000 per square meter, saying that other plots of land had already sold out, and if anyone wanted to buy they should rush to make a down payment or else there would be no more land left later.
However, the seller of the plot would only be able to write out a transfer deed for property rights of the land plots to the buyer as the land was actually orchard land.
The broker even offered to sell land plots on two hectares that the People’s Committee of Da Nang City had allocated for a cemetery for the Vietnam Association of Fellow Countrymen from the northern province of Nam Dinh in 2010.
There are more than 100,000 graves in the Hoa Son Cemetery that covers an area of more than 200 square hectares, while Hoa Ninh Cemetery, eight kilometers away has over 10,000 graves but no more available empty plots.
Phung Quyt, in charge of Da Nang Cemetery, said land prices in Hoa Son and Hoa Ninh Cemetery have increased due to shortage of plots. As per a schedule, about 37,000 graves will be moved to Hoa Son and Hoa Ninh Cemeteries later this year.
In addition, according to new regulations, a grave must be limited to 1.3x3 meters only. Graves will not be allowed to be built higher than 1.5 meters either.
However, many people cannot decide the direction of the grave which plays a very important role in many Vietnamese people’s minds, said Quyt.
Most wealthy people wish to construct a large grave and choose the direction of the grave just because of religious beliefs. Hence they want large plots so they can have their choice of direction. This has led to costs of large land plot sizes in the cemetery to go up.
Tran Kim Dinh, deputy head of the People’s Committee in Hoa Son Commune, said that it is very difficult to unearth this land sale racket in the cemeteries as deals takes place surreptitiously and most people sell off plots by just writing a property rights transfer paper, which is difficult to detect as no one has a record of it other than the buyer or seller.
City Garden condos ready for handover
The City Garden condo project in HCMC’s Binh Thanh District is near completion and will be handed over to buyers in July, said the project owner City Garden Apartments Vietnam Ltd.
The 21-story Avenue Tower, one of the five buildings of the project, will be handed over first. The entire 117 apartments of the tower have been sold at US$1,800-2,700 per square meter.
The condos of the Boulevard Tower are also in the final stage. Some 80% of them has been sold and will be handed over to customers in October
The developer said the project’s infrastructure and landscape is being finalized, with 74% of the project area covered with green space, children’s playgrounds, swimming pool, gym and jogging path.
City Garden is a high-grade condo project covering 23,000 square meters. The project comprises elliptical towers of 21-30 stories designed by the U.S.-based Belt Collins.
VietJetAir recruits more pilots for expansion
Vietnam’s lost-cost VietJetAir has employed more pilots and sent the first group of these newly-recruited pilots to training facilities of Airbus in France and the United States for comprehensive training in line with a cooperation agreement of the carrier and the European aircraft maker.
VietJetAir told the Daily last week that it was sending some 30 newly-recruited pilots in groups for overseas training courses with each course running within one month. Currently, the carrier has more than 50 pilots but will find more to support its ambitious strategy for expansion of network and aircraft fleet.
The second budget carrier of Vietnam after Jetstar Pacific will need over 150 pilots to operate around 15 planes by late 2015 for flights on both domestic and international routes.
Pritam Singh, deputy general director of VietJetAir, said passengers having flown with VietJetAir had given positive feedback on its new planes and competitive prices, and quality of the food on board among others.
VietJetAir is striving to find more crew members to help enhance services.
“Our strategy is to have experienced and well trained flight crew, who are updated with modern technologies and international standards,” Singh said.
VietJetAir began domestic services in December 2011 and has since set up air links between HCMC, Hanoi, Danang and Nha Trang. The carrier plans flights to airports in Southeast Asia and Northeast of Asia by the end of this year or early next year depending on aircraft delivery and approval of the aviation authorities in those markets.
* Thai Airways International is studying demand for air travel to Danang and opportunities in this city before having decisions to service this economic and tourism hub of central Vietnam, the airline’s general manager in Vietnam said.
Narinthorn Purnagupta mentioned Danang as the third destination of Thai Airways in Vietnam after HCMC and Hanoi when he told his guests in HCMC about THAI Smile, which is a new business unit of Thai Airways and will commence flights this month.
Narinthorn did not clarify when Thai Airways would fly to Danang but told the Daily that this growing coastal city was a potential destination for both leisure and business travelers, especially MICE (meetings, incentives, conferences and exhibitions) guests because of many hotels and resorts up and running with international-recognized brands there.
Visitors to Danang will be able to explore neighboring places of historical, cultural and natural values such as the UNESCO sites of Hoi An, Hue and My Son. Moreover, Central Vietnam has many industrial zones home to domestic and foreign investments.
Therefore, Narinthorn said Thai Airways would offer both passenger and cargo services to Danang and would manage to cash in on the opportunities in this city after THAI Smile launched international flights in July as scheduled. This carrier will be a provider of traditional services but offer low-cost fares.
THAI Smile will use Airbus A320 for the flights of three-hour flying from Bangkok, with the first international services to Macau this month and Sapporo of southwest Hokkaido in Japan later.
Narinthorn said daily flights of Thai Airways from HCMC and Hanoi would be connected with domestic and international services of THAI Smile. Passengers of this new carrier will be allowed to check in 20kg luggage free-of-charge for economy- and 30 kg for business-class seats.
EU to remove 90tax lines after FTA
The first round of free trade agreement (FTA) negotiations between Vietnam and the EU will take place in early autumn with 90 tariff lines to be lifted if the deal is concluded.
The EU and Vietnam signed the Partnership and Cooperation Agreement (PCA) last week to replace a previous agreement from 1995, marking a new step forward in bilateral trade development between the two sides, said Franz Jessen, head delegate of the EU.
The EU is preparing documents to identify the scope of FTA negotiations, according to Jessen. Both sides will sit down to discuss customs tax, intellectual property and trade facilitation.
Apart from food safety conditions, both sides will talk about market access and investment protection. “Thus this will be a trade agreement that covers a broad range of aspects,” said Jessen.
Vietnam will enjoy benefits with the FTA. It will be exempt from 90 tariff lines within seven years, which means Vietnamese products will enjoy zero tax when being exported to the EU.
EU exports to Vietnam will surge in the near future, offering local consumers a wide choice of products at competitive prices.
There will also be a remarkable increase in FDI inflow into Vietnam as European investors plan to flock to Vietnam for investment as there will be more incentives after the FTA deal is stamped.
Policy rates cut furtherto boost growth
The central bank’s policy rates were reduced by another percentage point on Sunday, representing an effort to stimulate economic growth through loosened monetary policy.
In particular, the refinancing rate was lowered from 11% to 10%, while the discount rate was slashed from 9% to 8%. The overnight lending rate in inter-bank e-payment was pulled down from 12% to 11 %, according to Decision 1289 of the central bank issued last Friday.
The analysts at Vietnam Capital Securities Co. (VCSC) said this decision would not leave any significant impact on inter-bank transactions, as overnight rates were now relatively low, 4%-5.5 % for one-week terms and 6% for two-week terms.
The discount rate of 8% can be seen as a rate cap if the inter-bank market is in fever. Moreover, this signals that the central bank may further cut or even remove the deposit rate ceiling since the new discount rate is 1% lower than the current deposit rate cap of 9%.
The central bank’s statistics show that in the week from June 18 to 22, Vietnam dong deposit rates ranged at 1-2% per year for non-term deposits, 1% for terms of less than one month, 8.8-9% for terms of one month to below 12 months, and 10-12% for terms of 12 months or longer.
Meanwhile, U.S. dollar deposit rates were popular at 2% for individual deposits and 0.5-1% for deposits of economic entities.
The annual lending rate of 11-13% was offered for the priority groups of agriculture and rural, export, small and medium-sized enterprises and supporting industries. Other manufacturing and business sectors could take out loans with interest rates of 14-17%, while the lending rates for non-manufacturing sectors ranged from 16% to 20% a year.
The common greenback lending rates were 5.5-7.5% for short-term loans and 7.5-9% for medium and long-term.
In the inter-bank market, the interest rates for short-term transactions cooled down and the market remained stable. Most transactions centered around short terms of overnight to two weeks, with lending rates of 5.5-6.5% for terms of overnight to one week, 7-8% for 2- to 3-week terms, and 8.5-9% for one-month term, said a report of the Capital Department of BIDV last Thursday.
The central bank cited the reports of the credit institutions saying that the total transaction values in the inter-bank market in June 18-22 amounted to more than VND132.7 trillion, an average of around VND26.5 trillion a day. Transactions in U.S. dollar reached some VND79.03 trillion, or a daily average of over VND15.8 trillion.
Short-term transactions in Vietnam dong totaled nearly VND99.5 trillion, or 75% of the total dong transaction values. Meanwhile, short-term transactions in the greenback reached some VND60.19 trillion, 76% of total U.S. dollar transaction values.
VCSC analysts said though the repo rate remained unchanged under the latest decision of the central bank, it was now no longer necessary as the bidding process via open market operations (OMO) had been changed to avoid applying the repo rate of 10%.
“The change in the bidding process makes repo rate fall to 8%. These moves clearly show the effort to further ease the policy rates as economic growth is now the top priority in the last six months,” said a market report of VCSC released last Friday.
Experts said this move of the central bank was aimed at further loosening the monetary policy to support economic growth.
The General Statistics Office announced last Friday revealed that the Q2 gross domestic product increase by 4.66%, higher than 4% of the first quarter. To achieve a GDP growth of 6% by year-end, GDP in the second half must grow by at least 7.6%.
Duxton chiefs aim at Ba Ria
Singapore-based Low Keng Huat, owner of Duxton hotel chain in Vietnam, is set to build a new five-star hotel, residential and office building complex in southern Ba Ria-Vung Tau province.
The firm’s representative in Vietnam Dang Di Nghia said the detailed project 1:500 plan was approved by Ba Ria-Vung Tau provincial authority and it had filed an application for acquiring 3.15 hectares in Vung Tau city’s Bai Truoc area.
“Land is always a big issue for any project development in Vietnam, we expect to be handed over land in a short time,” said Nghia. The project, licenced in 2009 and jointly developed by Low Keng Huat and National Oil Services Company of Vietnam, comprises an 18-floor Duxton hotel, a 25 floor office building and two 21-floor residential blocks.
Low Keng Huat and its Vietnamese partner planned to pump about $80 million into this project to make it one of the most luxurious hotel and residential complexes in Vung Tau. The developers’ original plan to complete the project by 2014 had been knocked back due to delays in handing over the land.
Low Keng Huat owns and manages the four-star Duxton Hotel Saigon in Ho Chi Minh City.
Nghia added that current economic challenges did not affect the company’s investment plan in Vietnam as the Singaporean developer considering Vietnam a priority market.
Duxton Hotel Saigon is one of the most effective four-star hotels in the second city. Meanwhile, the growing number of tourists to Ba Ria-Vung Tau is promising a huge potential for the firm’s project there, said Nghia.
Ba Ria-Vung Tau in recent years has attracted many foreign developers to set up tourism property projects. US’ Winvest Investment LLC is developing a $4 billion resort in the province.
Canada-based Asia Coast Development Limited is building $.4.1 billion Las Vegas-style Ho Tram Strip integrated resort there.
Abandoned land complicates economic restructuring in rural areas
A conference held by NA's Economic Committee discussed the process of developing industrial and urban areas in rural areas. Participants agreed that land was being let go to waste due to inefficient use and slow project implementation.
Forested land covers nearly 14 million hectares but contributes just 1% of the country’s GDP and 3-4% of both economic and environment value.
According to IPSARD research, the total land that state forest enterprises and farms are holding is worth at least USD47 billion. However, their ratio of revenue divided by capital is only 0.61, the ratio of profit divided by capital is 0.07 lower than the rate of private enterprises which is 1.5 and 0.14.
In reality, the land used by state forestry enterprises and farms might be even less.
During the restructuring process, enterprises rarely do any field surveying. The Steering Committee for Innovation and Enterprise Development reported that large areas of land haven't been recovered after they were rented out or borrowed.
The land still remains unused. By 2005, 6.5 million hectares of barren lands sat idle in Vietnam's Northwest and Northeast despite the low forest resource in these two regions. Not only this is wasteful but also danger for the environment.
In 2007, Vietnam had about 9.4 million hectares cultivated land, with agricultural land per capita at just 0.16 hectares, less than one third of Thailand and Cambodia. Research of Danish International Development Agency in 2010 showed that the farmers have many scattered lands. These scattered lands prevent them from large scale farming and the farmers gain less profit even though they have many lands.
However the ability to accumulate farm land is currently low. In addition, without credit support, they can not buy or rent land. As a result, the land has been mostly bought by speculative investors for ineffective businesses.
People prioritise staples amid inflation
Supermarkets in Hanoi saw a sharp decline in the sale of non-food products in the first six months of this year as customers increasingly focused on daily necessities.
Chairman of the Hanoi Supermarkets Association Vu Vinh Phu said during the period the number of customers to the local supermarkets dropped by half. Food and foodstuff products for their daily meals account for up to 80% of sales and the value of each basket reduced by 20%.
Promotional programmes for other products have proved unattractive.
A survey by the General Department of Statistics in 2010 showed that people have to spend up to 52.9% of their income for daily meals, revealing declining spending power and earnings.
Duong Thi Quynh Trang, PR Director of Big C supermarket chain said people have focused on buying staples such as rice, meat, eggs and sugar, while the sales of other products such as clothes, TVs and fridges have declined.
In the commodity basket of 10 groups for CPI calculation, food and restaurant services often account for up to 42.85 percent of a consumer’s shopping.
According to a survey on consumer demand among shoppers in HCM City conducted by Sai Gon Tiep Thi Newspaper in 2011, food accounted for 34.3% of their total income. Another 30% of the income was used for investment and savings, with the remaining 30% for rent or housing costs, healthcare, entertainment and shopping.
Economist Tran Hoang Ngan said, lower economic growth and high inflation has caused more difficulties for people. There had also be an increase in people falling back into poverty.
Vietnam’s June CPI is estimated to have decreased 0.26% against May and December 2011. However, it remains high if compared to June 2011.