BUSINESS IN BRIEF 5/4

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VietnamNet English - 35 month(s) ago 12 readings

Basic interest rate in VND continue to decrease, forecasts HSBC



A report recently released by Hong Kong-Shanghai Banking Corporation (HSBC) showed that Vietnam’s economy would be more stable as interest rates in Vietnam dong (VND) were following a downward trend.

HSBC said that the Vietnamese Government’s efforts to reduce demand seemed rather successful. In March, the prices of petrol and gas increased by 10 percent, but the rate of inflation dropped to 14.2 percent from 16.4 percent in February.

Judging from the current low level of domestic demand, HSBC forecast that inflation would continue to slow down this year, and the State Bank of Vietnam might reduce interest rates in VND by 1 percent each quarter.

HSBC predicted Vietnam’s economic growth rate at about 5.7 percent this year as domestic demand would drop to a level lower than expected.

Mentoring programme for SMEs launches

The Small and Medium Sized Enterprises (SMEs) Networking and Mentoring Programme, funded by the US Department of State, kicked off yesterday in the capital.

The US$40,000 programme aims to contribute to Viet Nam's sustainable development by helping 52 selected SMEs from across the country deal with tough challenges such as economic depression, gain up-to-date business know-how and hear about lessons learned from well-known Vietnamese mentors who are business leaders, economists and economic advisors.

"Accounting for nearly 95 per cent of the country's total, young small and medium sized enterprises play an important role in Viet Nam's development which should be of great concern to the nation," said Dr Vo Tri Thanh, vice director of the Central Institute of Economic Management (CIEM).

Hoang Le Vinh, the founder of the programme, said the SME pilot would help young enterprises by putting them into small working groups, a new approach to mentoring programmes in Viet Nam. In their groups, the SMEs will have the opportunity to share experiences and debate with each other. Their mentors will also help them thoroughly understand the challenges they face.

The project is expected to help train qualified human resources with excellent knowledge and skills to aid the country's development.

Meetings will be held monthly in Ha Noi and HCM City with various activities such as discussions about enterprise improvement plans, workshops and other topics.

HCM City: nearly 6,000 businesses dissolved in Q1

Almost 6,000 businesses were dissolved or temporarily stopped operating in Ho Chi Minh City in the first quarter of this year.

Of these, 930 already completed procedures for dissolving and more than 5,000 businesses announced a temporary suspension of operations.

The HCM municipal People’s Committee has instructed banks to reduce lending interest rates, and create favourable conditions for small-and medium-sized enterprises, particularly involved in import-export businesses to access loans from now until the end of this year, which are estimated at VND400,000 billion in total.

Garments become nation's top export

Export value of garments and textiles reached US$1.15 billion in March, making them the country's largest export earners with $3.23 billion in total earnings during the first quarter, the General Statistics Office reported.

The figure represents a 15.4 per cent increase over last year's first quarter.

The office said that garments and textiles were the only export staples that earned the country more than $1 billion in March, adding that it was an impressive result in the context of a shrinking export market due to the global economic slowdown.

The Viet Nam Textile and Apparel Association (Vitas) said the country's textile and garment exports to traditional markets such as the US and Japan in the first quarter maintained stable growth.

The US remained Viet Nam's largest importer of the products, accounting for nearly 52 per cent of the industry's total export earnings. Vitas expected that exports to the market in the next months would be optimistic as the unemployment rate in the US has been decreasing, a positive sign for economic recovery.

Exports to Japan also surged more than 30 per cent as domestic exporters have continued to benefit from the tax reduction policy that Viet Nam enjoys under the Viet Nam-Japan Economic Partnership Agreement signed in 2009.

However, Vitas expressed concern about the export slowdown to the EU market due to the bloc's public debt crises. Despite rising by 3.5 per cent, export growth to the market was low when compared with a 33 per cent increase last year.

To offset the slowdown in the EU market, domestic exporters are now speeding up exports to other markets including South Korea, Russia, New Zealand, Chile and Brazil.

Exports to South Korea were impressive with a surge of 55 per cent thanks to the tax reduction advantages that domestic exporters enjoy under the ASEAN-South Korea Free Trade Agreement.

However, Vitas deputy chairman Pham Xuan Hong said that domestic textile and garment exporters were also facing fiercer competition from regional counterparts including India, Bangladesh, Pakistan, Indonesia and Cambodia. Due to the globally decreasing consumption demand, the exporters were also offering competitive prices to attract customers, Hong said.

He said that the move of contracts in the sector from China to neighbouring countries, which had benefited Vietnamese exporters in recent years, was also decreasing as Chinese exporters currently had to accept small export contracts due to the economic difficulties. Meanwhile, Viet Nam doesn't enjoy a competitive advantage over China as the latter has access to local raw materials.

Seafood business debts leaving farmers in the lurch

The recent bankruptcy of three seafood businesses has resulted in great losses of more than VND200 billion for hundreds of farmers in the Mekong Delta, according to preliminary statistics.

It has also caused dozens of businesses that deal in cattle feed and veterinary medicine to go into debt.

In 2011 and early 2012, the Binh An Seafood Joint Stock Company and the An Khang Company,,Ltd in Can Tho, and the Van Hung private enterprise in Soc Trang, three large seafood enterprises in the Mekong Delta, ran up debts worth dozens of billions of VND they owned to banks and over VND300 billion to farmers.

In late 2011, the An Khang Company in Tra Noc industrial park, Can Tho city, owed farmers nearly VND26 billion for fish it had bought, but the company could not pay them, leaving 26 farmers and nearly 1,000 labourers in the lurch.

Le Minh Chien from O Mon district (Can Tho) said that An Khang owed him more than VND2 billion for the fish they had purchased from him and he already sent a petition to the Can Tho municipal People’s Committee and the police asking them to make the company pay him. Mr Chien said that dozens of households have sold fish to An Khang but are struggling to earn their living because the company fails to pay its debts.

After the An Khang Company went into debt, commercial banks in Can Tho city began to tighten credit control, making it difficult for seafood enterprises to access capital. Binh An Seafood JSC in Tra Noc industrial park has stilled owed 40 farmers a total of VND261 billion.

Nguyen Van Lien and Pham Thi Mai of Thot Not district (Can Tho) sold more than 800 tonnes of fish to Binh An Seafood in May 2011, but until March 6, 2012 the company still owed them nearly VND16 billion. The two farmers recently filed a lawsuit at the O Mon district People’s Court demanding that the company pay its debts to them. In the preliminary court session in mid-March, the company was forced to pay the two farmers a total of more than VND18 billion and additional losses against profits.

As the lawsuit was time-consuming, the farmer had to sell their fish ponds at half price (VND2.5 billion) and work as hired hands to pay back their bank loans worth over VND15 billion with an interest rate of 1.8 percent per month.

Thirty farmers in Soc Trang province also could not get paid for the fish they sold to the Van Hung private enterprise, which has still owed them around VND20 billion for fish purchases over the past three years. Local police are investigating these cases but it appears to be a long story before they are able to get their money back.

Struggling HCM City firms seek assistance

The HCM City Enterprise Association (HEA) has proposed that the municipal administration take urgent measures to financially support local small- and medium-sized enterprises (SMEs), an association source says.

It said in a proposal last week that 60 per cent of SMEs in the city needed capital to maintain their operations, and only 20 per cent were capable of surviving a prolonged economic crisis.

The situation is set to worsen for enterprises this year as global and local economic instability continues.

The biggest difficulty facing local enterprises was a sharp increase in input costs (cost of direct material, direct labour and other overheads incurred in the production of a good or service), the association said.

Input costs had gone up by 30 per cent due to high interest rates and social insurance fees in addition to increases in prices of input materials and services, including electricity and petroleum products.

Meanwhile, selling prices of products had only increased by between 5 and 7 per cent, it said.

The association also pointed out other obstacles that local industries were having to cope with.

The stagnant real estate sector has brought the construction industry to a standstill, virtually. Consequently, the building materials production industry is confronting large stockpiles and declining sales.

Many enterprises producing building materials have stopped operations or announced bankruptcy.

The amount of goods in stock in the processing and manufacturing industries saw a year-on-year increase of 17.4 per cent.

The amount of processed fruits and vegetables in stock increased by 80.6 per cent. Fertiliser stock is up 71.9 per cent; cement, up 61.8 per cent; and steel, 53.4 per cent.

Since the beginning of the year, the garment and textile industry has seen a serious decrease in the number of export orders because purchasing power in the US and European markets has gone down.

Other difficulties facing apparel enterprises include shortage of workers and land for production, and complicated administrative procedures.

Nguyen Trong Hanh, deputy director of the municipal Taxation Department, said the number of enterprises declaring losses in 2011 increased by 15 per cent over the figure in 2010.

The HEA called on the city to provide priority capital support to agriculture enterprises as well as SMEs involved in production of essential consumer products and export products.

SMEs involved in the apparel, leather footwear and fisheries industries should be offered tax deductions or allowed to delay tax payment, it said.

Measures to keep the exchange rate stable were also very necessary, it added.

Firms involved in the real estate sector should be provided with access to capital, with priority given to projects that had at least 70 per cent of their construction work completed, the association said.

Dang Duc Thanh, general director of the Can Nha Mo Uoc Joint Stock Company, said the Government would benefit more if it allowed individuals and enterprises to pay lower land-use fees.

When enterprises were supported thus, they would do better business and pay higher taxes, Thanh explained.

Hanh of the tax department suggested the Government strictly control banks' lending operations.

At present, many banks were ready to provide credit to other banks but not enterprises, he said.

Le Manh Ha, depuy chairman of the HCM City People's Committee, said the local administration would consider the association's proposals and hold further discussions with its members on measures that could be taken to address difficulties facing them.

Loans inaccessible for firms to upgrade technologies

While a large number of local businesses have been operating with very poor or even outdated technologies, upgrading them is beyond their reach, with the banks refusing to offer loans.

Undeveloped technologies have resulted in low productivity, high cost prices, unstable quality, and low competitiveness for the businesses’ products, economic website Saigon Times Online reported.

Huynh Van Hai, director of the Bao Long Food Technology Production Co, has repeatedly failed to borrow the VND2 billion (US$96,000) needed for his plan to upgrade the company’s technology.

The company can afford VND8 billion of the VND10-billion plan, and it expects to cover the remaining from the special loan at interest rate of only 7 percent a year, as offered by Ho Chi Minh City’s master plan to enhance production technologies of firms operating around the city, the director said.

However, over the last year, Hai has yet to receive any response from the Fund for Scientific and Technological Development of HCMC on his files asking for a loan.

“Though it may take five or ten more years, I’m determined to access this source of capital,” he said.

Also the chairman of the Business Association of Hoc Mon District, Hai said other firms in the area also facing capital shortages for their technology upgrading plans.

“They are all rejected by banks.”

Not as patient as Hai is Nguyen Van Nam, deputy CEO of Dai Phat Group, who said his company had to borrow loans at exorbitant rates to implement their upgrading plan.

“The paperwork for the preferential loan is too complicated,” said Nam.

“We now have to clear bank interest worth VND6 billion annually for the huge loan of VND30 billion.”

According to a recent survey by the United Nations Development Program, which polled 100 businesses in Hanoi and HCMC, only 3 percent of the firms’ total revenues are earmarked for enhancing machinery and technology.

Meanwhile, most of the plans for loans are turned down by banks and credit funds for several reasons which businesses said have been used for years” “the companies do not know how to develop a plan,” “the plan has low economic effectiveness,” or “ineffective plan to repay debts.”

“The assessment experts of the banks are not industry insiders, so they cannot evaluate our plans accurately,” the businesses accused.

This is also the reason why many medium- and small-sized enterprises cannot access bank loans, though their plans are well developed.

“I have even asked a friend of mine, who is the director of a credit fund, to review the plan before sending it to the bank, but nothing has changed,” said Hai of Bao Long Co.

US$4 bln petrochemical complex to be built soon in Ba Ria-Vung Tau

Deputy Prime Minister Hoang Trung Hai has asked the Ministry of Transport, the People’s Committee of Ba Ria-Vung Tau province, and PetroVietnam Group to prepare and hand over land for the project to build a large petrochemical complex in the province.

In his dispatch, Hai requested these agencies and the project investor to agree on the amount of funding for construction of resettlement areas and roads to Long Son industrial park.

The Southern Petrochemical Complex has a total investment of nearly US$4 billion and a design capacity of more than three million tonnes of products per year.

It will be built on an area of 400 hectares inside Long Song industrial park, next to the Long Son oil refinery.

Once operational, the complex is expected to meet 65 percent of the country’s demand for polyetylen and polypropylene and stabilize the supply of input materials for the petrochemical industry.

Inflation expected to see modest reheating in April

Inflation in April is expected to rise by a one-month rate of as much as 0.5 per cent, representing an increase over last month's very gradual increase in the consumer price index of just 0.16 per cent, according to experts at a meeting held last week by the Ministry of Industry and Trade's market management team.

They pointed to recent hikes in energy prices, including petrol, as likely to lead to a modest reheating of inflation. Higher transport and distribution costs have already led some major retailers to increase retail prices on goods by 3 to 4 per cent in recent days, and rising healthcare costs were also helping drive up inflation, experts said.

Only a declining trend in gas prices worldwide has allowed domestic cooking gas distributors to plan price reductions of an estimated 16 per cent this month.

Other optimistic signs expected to keep inflation in check included sufficient supplies of food and food products in the market.

At the Government's monthly meeting last Saturday, the Ministry of Finance also reaffirmed that goods subject to State price controls or required by the State for public purposes or national programmes would continue to be closely monitored between now and the end of the year. Prices of other consumer products, including agricultural and food products, would continue to be set by the market, with all price control systems to be lifted gradually, according to the ministry.

Electricity rates would only be allowed to increase slightly and would not be adjusted to reflect disparities between domestic and foreign currencies or the power industry's accumulated losses in 2010, the ministry said. Coal prices would also be adjusted to the equivalent of 90 per cent of the price for comparable types of coal for export.

Fuel prices would continue to be managed under Government Decree No 84, the ministry said. Under the decree, petrol distributors could adjust petrol prices by up to 7 per cent when global prices fluctuate by up to 7 per cent within the past 30 days. When the global oil prices rise by 7-12 per cent, these enterprises would be allowed to increase prices by an amount up to 60 per cent of the global increase, while the balance to be offset by import tax adjustments and the fuel stabilisation fund.

The costs of healthcare, education and other public services would be allowed to increase according to market forces in order to ensure providers remain solvent and provide high-quality services, the ministry said.

China to receive favourable conditions

Viet Nam will continue to create the most favourable conditions for Chinese firms to conduct business in the country, Deputy Minister of Planning and Investment Dang Huy Dong told a business conference yesterday.

During the conference, with the participation of over 500 enterprises from the two nations, Dong spoke highly of the effective contribution of Chinese enterprises to Viet Nam's socio-economic development.

He encouraged Chinese firms, especially those from Yunnan Province, to speed up co-operation with their Vietnamese counterparts to cement the bilateral relations.

China's Yunnan Province Governor Li Jiheng called for further improvement to transport infrastructure linking facilities Yunnan and Viet Nam, along with increased exports of quality Vietnamese goods to the province and further investment by Chinese firms in Viet Nam.

Six contracts worth a combined US$724,000 were also inked between businesses from Viet Nam and Yunnan yesterday in the areas of agricultural products, food, fertilisers, wood processing, chemicals and beverages.

China is one of Viet Nam's leading partners in trade and investment. Two-way trade has increased significantly recently, reaching $35.7 billion last year, a year-on-year increase of 31 per cent. Of the sum, $11.1 billion came from Vietnamese exports, up 52 per cent against last year.

Chinese firms have to date pumped $4.3 billion into 842 projects in Viet Nam, ranking China 14th out of 96 countries and territories investing in the country. Most Chinese investment is focused on industry and real estate.

Viet Nam has invested only $13 million in 10 projects in China, mainly involved in the trade and services sectors.

In addition to traditional areas such as agriculture, trade and tourism, Chinese and Vietnamese firms are seeking more co-operation opportunities in the manufacture of machinery and equipment.

Shantui, one of the leading construction machinery manufactures in China, has appointed the Ha Noi-based Viet-Nhat Construction Machines and Trading Co as its sole distributor in Viet Nam in an attempt to enhance its market presence.

"Viet Nam is a promising market for construction machinery manufacturers due to its significant economic growth rate and increasing demand for construction machinery," said Shantui Vice General Manager Wang Feng during a press conference late last week.

During the event, Shantui also introduced several new product lines, targeted at clients looking for high performance, reasonably priced machinery, and good after-sales service.

Petroleum services hit record high

The National Petrol Oil and Gas Group (PVN) made a record VND207 trillion (US$9.8 billion), 30,8 per cent of its total turnover, in petroleum services during the first year of a 2011 - 2015 plan.

The figure was 25 to 30 per cent higher than the set target. Amongst subsidiary companies, Petrol Technical Services Corporation (PTSC) earned by far the highest of over VND29 trillion ($1.4 billion), a profit of VND1,9 trillion (approximately $100,000 million).

In order to achieve such a profit, PVN and its subsidiary companies established 20 dock warehouses, 15 mechanic factories, 8 drilling rigs and 13 surface godowns, amongst others, with a total asset value of VND140 trillion ($6,7).

Additionally, its labour force of over 50,000 allowed it success in projects such as operating 2D and 3D viscoelastic earthquake vessels along Viet Nam's continental shelf without foreign assistance.

This year, PVN has raised its petroleum service turnover target by 30 - 35 per cent.

Work starts on $60m wind power station

Construction of a 30MW wind power plant started yesterday at the Nhon Hoi Industrial Park in Binh Dinh Province.

Clean Energy JSC and CP Phuong Mai Wind Power JSC will invest a total of VND1.2 trillion (US$60.25 million) in Phuong Mai Wind Power Plant No 1.

The plant, covering 143ha, will be located on Phuong Mai Pennisula where the IP is situated.

Operating in an average wind speed of 12 metres per second, the 12-turbine plant will be able to generate 82 million kWh per year.

Investors in the plant have signed a contract to sell electricity to national power utility Electricity of Viet Nam (EVN) for VND1,600 per kWh.

The plant will make a major contribution to the development of clean energy in Viet Nam when it starts operations in the second quarter of 2012.

To utilise its great potential for production of clean energy, Binh Dinh Province has set aside 283ha of land in Nhon Hoi IP for wind-power projects, including Phuong Mai Wind Power Plant No 1.

Province bans shellfish harvesting out of season

The central southern province of Binh Thuan has reminded fishermen they must not harvest shellfish before August.

The temporary four-month ban was first issued in 2010 as a way to conserve shellfish numbers, said Le Tien Phuong, chairman of the provincial People's Committee.

Only shellfish of at least 55mm to 60mm could be harvested, Phuong said.

Those who broke the law would face a fine of up to VND30 million (US$1,430) and the confiscation of their fishing permits for six months, Phuong said.

Lumber yards must not be next to forests

Wood processors must be located at least 3km from the edge of natural forests, under a draft decision by the Ministry of Agriculture and Rural Development.

Processors must also ensure the timber they receive has been legally logged.

Authorised agencies will carry out periodic inspections of wood yards every two years, in addition to impromptu inspections, the ministry said.

Vietnam Airlines to slash fares in April

Domestic airlines have announced new local and international flight discounts for April.

National carrier Vietnam Airlines will cut 40 per cent off its two-way flights from HCM City to Ha Noi, Hai Phong, Da Nang and Phu Quoc Island.

The reduced fares will apply to flights undertaken from April to the end of December.

Meanwhile, Jetstar Pacific will apply cuts to flights purchased between April 1 and 5.

One-way Ha Noi-Singapore flights will be priced at VND950,000 (US$45.2), HCM City-Kuala Lumpur flights at VND645,575 ($30.7), Ha Noi-Manila flights at VND1,816 ($86.5), HCM City-Jakarta flights at VND794,051 ($37.8) and Ha Noi-HongKong flights at VND2,145,199 ($102).

Province to halt delayed projects

Provincial authorities in Ca Mau will revoke licences associated to long-delayed real estate development projects, according to People's Committee Chairman Pham Thanh Tuoi.

The projects cover a total area of 500ha as part of a residential area development scheme.

Delay has been attributed to insufficient investor capital.

Helping hand offered to business

HCM City authorities have agreed to focus on efforts to help companies sustain and develop their business activities.

Speaking at a meeting to review the city's socio-economic performance in the first quarter, chairman of the municipal People's Committee Le Hoang Quan told local and Government agencies to help businesses tackle their difficulties.

The city would work with the State Bank of Viet Nam to lower bank lending interest rates and ensure companies could access credit.

Lending priority would be given to export-processing, processing, and support industries, and small- and medium-sized enterprises with larger numbers of workers.

The city would also strive to boost the manufacturing and construction sectors.

It would hold discussions with industries to help them expand production and thus create more jobs.

At the same time it would speed up implementation of social-welfare policies like the hunger eradication and poverty alleviation and price stabilisation programmes.

Government agencies should focus on boosting the city economy by restructuring State-owned companies and the finance and banking sectors.

His instructions followed reports of poor economic performance in the first quarter when GDP grew by just 7.4 per cent compared to 10.3 per cent a year ago.

The services and industrial and construction sectors grew at 8 per cent and 6.6 per cent, down from 10 per cent and 10.9 per cent.

The only silver lining was the downward trend in the consumer price index during the period.

Amata aims $20b at park development

Thailand's leading developer of industrial park facilities Amata Corp, alongside fellow investors, plans to pump a massive US$20 billion into an integrated industrial estate in Long Thanh Commune, Dong Nai Province.

The Amata Express City will cover 1,300ha close to the new Long Thanh international airport in HCM City and Dong Nai River.

The project would include a 760ha urban area next to the river, a 420ha high-tech industrial area and another 105ha urban site, said General Director of Amata Viet Nam Huynh Ngoc Phien.

With design complete, construction is scheduled to commence early next year, first phase development expected to finish by 2015.-

Indebted seafood company lays off employees indefinitely

Binh An Seafood JSC, or Bianfishco, yesterday told its 2,400 workforce that their layoff has been extended indefinitely, according to Huynh Van Tuan, chairman of the labor union of the Can Tho export-processing zones and industrial parks.

The beleaguered seafood company with an outstanding debt of US$61 million has three times extended their employees’ layoff since last month, each time with a promise to call them back to work within 2 weeks, said Tuan.

On March 5, Bianfishco workers were told to stop working for a week due to a shortage of raw materials. However, when the workers returned on March 12, they were asked to wait for seven more days.

When the day came, they were once again asked to wait until Aril 2, as the company was overhauling the machinery and streamlining its personnel in preparation for a new salmon-processing contract, said Tuan.

“For this latest announcement, as in the previous ones, the company said it would pay their laborers 70 percent of their basic wages,” he added.

“The decrease in wages has led many workers to seek other jobs.”

Passengers get greater choices to fly between Vietnam and America

Passengers traveling between Vietnam and the US now have more flight options to select as United Continental Holdings and All Nippon Airways (ANA) have started expansion of its trans-Pacific joint venture.

The expansion allows United Airlines and ANA to coordinate fares and schedules between the two countries, effective on April 1.

This means passengers in Vietnam have more choices on flights to the US either via Hong Kong or Tokyo, including transfers between carriers, said Joe Mannix, United’s country manager for Vietnam and Thailand.

United operates daily service to the US from Ho Chi Minh City via Hong Kong. Meanwhile, ANA of Japan offers daily flights to the US from Ho Chi Minh City via Tokyo’s Narita International Airport.

“The launch of our joint venture with United here in Vietnam will offer travelers greater choices, more convenience and flexibility for their trans-Pacific travels,” said Ryoichi Fujisaki, ANA’s country manager in Vietnam.

United launched its Vietnam service in December 2004, making the airline the first American carrier to fly to the Asian country since 1975.

Special eco-commercial zone sinking with low consumption

The VND500-billion (US$24 million) Lao Bao Special Economic – Commercial Zone in the central province of Quang Tri has fallen into disuse over the last few years as there are almost no customers.

The Lao Bao Commercial Center, where most of the commercial activities of the zone gather, last month saw nearly 50 percent of its 200 booths shut their doors.

Those opting to remain open find almost no customers these days.

“Never before has business been this slack,” said Lien, a stand owner.

Sharing the same fate is the Dong Nam A supermarket, one of the three largest of its kind in the zone, which has nearly shut down operation. The two remaining such stores, Thien Nien Ky and duty-free Thailand Mucdahan supermarkets, see their number of customers steadily fall day by day.

“As customers are restricted to buying no more than VND500,000 worth of duty-free goods, most come for window shopping,” said Nguyen Van Minh, managing director of the Mucdahan supermarket.

Meanwhile, Nguyen Van Binh, deputy head of the management board of the local economic zones, said several investment projects in the Lao Bao special economic-commercial zone have been delayed due to the low consumption.

Besides the global economic turbulence, the situation will be exacerbated when the government cuts some incentives for the zone in the near future, added Binh.

“The duty-free policy targeting automobile and motorbike will be removed, and the corporate tax exemption extension will be cut to only 15 years, making investors hesitant to open their pockets,” elaborated Binh.

Binh said restoring these incentives is the lifebuoy for the sinking economic zone.

The provincial People’s Committee has called on the government for more incentives on the business and trading activities at Lao Bao, all of which have yet to be approved, he said, adding that another solution is to create conditions for the businesses to access bank loans to revitalize production.

“We have tried our best to save the zone, but it still has low effectiveness,” he said sadly.

Indian firms upbeat about VN prospect, urge more reforms

The Indian business community in Vietnam remains upbeat about Vietnam’s medium and long-term economic outlook, but suggests accelerating reforms to spur economic growth, said a recent conference.

“Despite some slowdown, Vietnam is still one of the fastest growing economies in Asia, though its GDP growth rate slowed down to 5.9 percent in 2011,” said Abhay Thakur, Consul General of India in his opening remark at the conference.

“In the last 25-year period since 1986, Vietnam has grown faster than any economies in Asia, except China, and faster than India,” he said at the event co-held by Indian Business Chamber in Vietnam (Incham) and the Vietnam Chamber of Commerce and Industry (VCCI) in Ho Chi Minh City.

However, “it would be a challenge to achieve the 6-7 percent growth rates in the future if productivity and the skills set in Vietnam were not improved,” he added.

Therefore, Vietnam would need to move beyond low-wage labor to new areas of comparative advantage by investing more in training, education, and infrastructure development, he said.

Vietnam should also provide a friendlier environment than hitherto for foreign investors, rather than waiting for them to come to Vietnam. In addition, it also needs to usher in more economic reforms, reducing bureaucracy and bringing in greater transparency, he said.

The fact that more and more local firms are undergoing bankruptcy has sounded the alarm for the coming time, said Nguyen Trong Hanh, deputy head of HCMC Tax Bureau, citing data on financial and audit statements reports submitted to the agency.

The 2010-2011 period saw profits slumping in many sectors, and the rate even dropped further in Q1/2012 compared to Q4/2011 and the same period last year.

The number of firms declaring losses has surged 30 percent year on year, he said.

“We have found that prolonged macroeconomic instability and credit constraint have knocked out many firms, especially those operating the real estate and construction businesses and related segments like steel and cement.”

“With the consumption slump and surging unsold inventories, local firms are scaling down their business en masse, which leads to sharp decrease in tax revenues.”

“The cause of the situation, in our opinion, besides the global economic turmoil, is the overextension in credit and investment in real estate, and the boom of the Vietnamese commercial banks.”

“Most of such commercial banks were upgraded from small banks operating in specific sectors or those owned by individuals who made their money by investing in realty sectors in the past.”

“As a result, when the real estate sector got frozen due to monetary tightening policies, it dragged the whole system down, leading those lenders to increase the depositing rate to secure their liquidity capacity and leave no room for the businesses to borrow.”

“We can observe that most of the money mobilized from the people is now being channeled back and forth within the interbank market to help them save the day, and so, it is nearly impossible for businesses to access bank loans.”

“Not to mention the fact that many unknown groups are trying to take over banks in good health. These mostly are people owning unhealthy banks who want to merge their banks with the better so that they can borrow more from depositors and lend more to businesses.”

“All of this bars local firms from getting any cash to revive their business.”

The current bullish trend of the stock market in the face of macroeconomic turbulence has also signaled the possibility, as investors want to buy more stocks of listed firms or financial institutions by soaring the stock price to prepare for future takeover.

Interest may go down by the end of H1/2012 as year-on-year inflation is likely to return to single digits by late Q2/2012, preparing for the rate-cutting cycle, said Amit Arora, country head of Consumer Banking of Standard Chartered bank Vietnam.

“Vietnam inflation peaked at 23 percent last August, and has slowed for 5 consecutive months, so we expected the rate to drop under 10 percent by June 2012.”

With this, there will be more support for the dong, at least in the short term, he said.

“But further possible increase in power prices may pose upside risk to inflation.”

“As trade deficit has been under control, at $106 million in January-February compared to $2.8 billion a year ago, pressure on foreign currency liquidity has been relieved.”

“But there might be mild depreciation to VND21,700 against the greenback by the year-end.”

“If Vietnam can keep up the good work, we expect the GDP growth this year would be 5.8 percent compared to 5.9 percent last year.”

Cavifoods commissions rice mill in Phnom Penh

Cambodia-Vietnam Foods Company (Cavifoods) has inaugurated a US$7.7 million rice million with an annual processing capacity of 40,000 tons in Cambodian capital Phnom Penh.

Covering 18,000 square meters, the facility has two lines using technologies imported from Japan and Vietnam, with the latter being the world’s second largest rice exporter.

However, for now just one processing line is up and running with a capacity of 20,000 tons after eight months of equipment installation. The other line is expected to come on stream next month.

Doan Anh Sang, chairman of the company, told the inauguration last Friday that with the mill in place, the company was looking to export 115,000 tons of rice and 100,000 tons of other farm products this year.

The firm’s targets for 2015 will be a rice export volume of 250,000 tons, equaling one fourth of the Cambodian government’s rice export goal for that year, Sang said, adding the company was planning to build a packaging factory and an instant noodle facility after the rice plant was well in place.

Cavifoods has total registered capital of US$8 million, with the Bank for Investment and Development of Vietnam’s Investment and Development Company of Cambodia (IDCC) contributing 33%, Vietnam Southern Food Corporation (Vinafood 2) 37% and Cambodia’s Green Trade the remaining 30%.

Hoan My opens new general hospital

Hoan My Medical Corporation, marking its 15 years of operation, has put into service a new general hospital worth VND700 billion in HCMC.

Hoan My Saigon Hospital at 60-60A Phan Xich Long Street in Phu Nhuan District has 200 beds, 42 doctors’ consulting rooms and eight operating theaters, and can serve up to 2,000 patients a day.

However, this new hospital has no maternity ward.

The corporation’s chairman, Doctor Nguyen Huu Tung, said at the opening ceremony last Saturday that 95% of the hospital’s equipment had been imported from Japan, America and Europe, such as an MSCT 64 scanner, MRI 1.5 tesla scanner, imaging device using digital subtraction angiography (DSA) and digital X-ray machine.

The inpatient rooms are all air-conditioned and equipped with LCD TVs connected to cable services, bedside tables, foldable chairs for patients’ relatives to rest, water heaters, and others.

Replacing the Hoan My hospital on Tran Quoc Thao Street in District 3, the new hospital is the corporation’s fifth in the country, with the other four located in Danang City on the central coast, Can Tho City and Ca Mau Province in the Mekong Delta, and Dalat in the Central Highlands. In addition, it has four clinics.

Vishal Bali, CEO of India’s Fortis Healthcare, said Fortis last year reached agreement to acquire a 65% stake in Hoan My Medical Corporation for US$64 million, becoming a strategic shareholder of the local medical services firm.

Fortis will be joining hands with its local partner to expand the Hoan My Hospital network in the country, he added.

International carriers launch more cargo flights to Vietnam

Global express services provider DHL has introduced a new, additional intercontinental service connecting key trade lanes and destinations in Americas, Europe and Asia, including Vietnam while Saudi Airlines Cargo has started service to HCMC.

Ken Allen, chief executive officer of DHL Express, said in a statement obtained by the Daily last week that the new round-the-world flight by DHL would bring benefits to customers in all sectors in Asia, Europe, the United States and Canada, and deliver reduced transit times on some of the world’s most important trade lanes.

With the transit time capability between Asia and the Americas, a greater number of Asian locations, including key trade hubs Singapore, Kuala Lumpur, Bangkok, Manila and Chinese cities will benefit from next-day connection to Los Angeles and much of Western U.S. and Canada. “This represents the first time that customers in many Asian cities will be able to enjoy a one-day express delivery service with any carrier on this important intercontinental lane,” DHL said.

DHL said capacity and service on the new route would be enhanced by the three Boeing 777F freighters operated by Southern Air. Last September, DHL announced a multi-year agreement with Southern Air Holding Inc. to perform B777F freighters on intercontinental routes linking the Americas, Asia and the Middle East, with the first route from Hong Kong to the express hub in Cincinnati to Bahrain and back to Hong Kong already in operation.

Christopher Ong, general director of DHL-VNPT Express, said that the new round-the-world capabilities extended DHL’s global network to further offer services to Vietnam-based customers.

“The connections from Hong Kong open access to key trade lanes to Europe, the U.S. and Canada, providing our customers with reduced transit times and wider reach for their products,” Ong said.

Also last week, Saudi Airlines Cargo announced launch of its new Boeing 747-400 freighter flight connecting airports in Hong Kong, HCMC, the Middle East and Germany’s Frankfurt. The carrier will conduct the service at Tan Son Nhat International Airport two times a week on Wednesdays and Fridays in the initial time and plans to link Noi Bai International Airport in Hanoi in the future.

Peter Scholten, Vice President Commercial at Saudi Airlines Cargo, said the new service would enable the airline to expand its network into the region in response to changing market conditions.

“HCMC is an emerging market. With China becoming more expensive, production is increasingly being moved to Vietnam and other developing countries,” Scholten said.

Saudi Airlines Cargo operates around 12 freighters for its scheduled cargo services and sells the belly-capacity on 140 passenger aircraft for Saudi Arabian Airlines spanning a global network of 225 destinations. The cargo airline also provides charter flight solutions.

* United Continental Holdings, Inc. and ANA have announced the expansion of a trans-Pacific joint venture, enabling both United Airlines and ANA to provide passengers in Vietnam with a broader selection of fares and flights to the United States.

The joint venture expansion also includes transfers between carriers. Currently, United performs daily service from HCMC to the U.S. via Hong Kong, while ANA conducts daily service to the U.S. from this economic hub of Vietnam via Tokyo’s Narita International Airport.

Ryoichi Fujisaki, ANA’s country manager in Vietnam, said in a statement released last week that launching the joint venture with United in this country would offer travelers more choices, convenience and flexibility for their trans-Pacific travels.

Joe Mannix, United’s country manager for Vietnam and Thailand, said the venture expansion with ANA to the Vietnamese market would benefit customers with increased service and products in addition to more fare options and expanded flight schedules to the U.S.

Rail rates up 2%

Railway charges are up by 2% early this month in a measure taken by Vietnam Railway Corporation (VRC) to make up for higher fuel costs, according to the corporation.

The new prices began applying to domestic and international cargo transport, exclusive of value-added tax, from Sunday, a salesperson of VRC told the Daily.

As for cargo transport over a distance of below 30 km, rates will be the same as cargo transport over a distance of 30 km.

The rate increases at a lower level than the 7% and 15% last year.

Sluggish trades weigh on indices

Stock prices lost the gains from Tuesday, plummeting on the two national stock exchanges, while investors worried about uncertainties in the market.

On the HCM Stock Exchange, the VN-Index lost 1.35 per cent to finish yesterday at 439.77 points. Total market value decreased by 21.5 per cent on Tuesday, to VND652.5 billion (US$31.1 million), while trading volume declined by 15 per cent, to 50.7 million shares.

Only two of the 30 leading stocks posted gains, leaving the VN30 Index down 1.09 per cent, to stand at 500.28. Among the few winners were Refrigeration Electrical Engineering Corp (REE), up 1.38 per cent to VND14,700, and PetroVietnam Finance (PVF), up 2.43 per cent to VND12,600.

Telecommunications equipment provider, Sacom Development and Investment (SAM), saw the highest volume, with 3 million trades, with their stock value climbing by 3.28 per cent to settle at VND6,300.

FPT Securities Co analysts said that investors were avoiding risks after Tuesday's rally for fear of short-term losses. They said that what the market needs more consistent rises rather than unpredictable and sudden ups and downs.

The Ha Noi Stock Exchange was more active, with trading volume on the floor up 20 per cent from the previous session, to 79.2 million shares, worth a total VND665.6 billion ($31.7 million).

The benchmark HNX-Index, however, fell 1.66 per cent, to 73.25 points, as losses outstripped gains by 219 to 57.

Ha Noi-based lender Habubank (HBB), the most active stock on the Ha Noi bourse, with 15 million shares traded, edged up 1.4 per cent to close at VND7,000, on the heels of the news that the State Bank of Viet Nam approved the plan for a merger with Sai Gon-Ha Noi Bank (SHB).

Ha Noi General Investment Corp. (SHN), on the verge of bankruptcy, has had 11 successive bad sessions on the trading floor. However they were second in terms of liquidity, with 11 million shares traded. Their share price rose by 6.66 per cent for the first time after a long losing streak, closing yesterday at VND3,200.

Foreign investors continued to purchase Vietnamese stocks on both exchanges, buying up a combined VND51.2 billion ($2.4 million) worth of shares.

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