BUSINESS IN BRIEF 5/6

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Vina Kyoei to start work on steel mill next week



Steel maker Vina Kyoei will kick off construction of another steel mill with an annual capacity of 500,000 tons in Phu My 1 Industrial Zone in Ba Ria-Vung Tau Province.

The groundbreaking ceremony for the US$220 million facility is scheduled for June 8. The mill will be up and running by the end of next year.

Vina Kyoei Steel Co., Ltd (VKS) currently has a steel factory with a designed capacity of 450,000 tons a year. Covering 17 hectares Phu My 1 Industrial Zone, it produces several types of construction steel such as steel tendon, plain steel bars and rolled steel, with

90% of the plant’s output for domestic sale and the remainder for export.

The steel manufacturer plans to develop a steel billet factory with total output of 500,000 tons annually. The presence of the new plant will raise VKS’s annual capacity to nearly one million tons.

VKS, a joint venture between three Japanese firms – Kyoei Co. Ltd, Mitsui & Co. Ltd, and Itochu Corporation – and Vietnam Steel Corporation, came into existence in 1994.

The steel industry’s total capacity is a staggering 9.2 million tons while domestic consumption is projected to reach six million tons, according to the Vietnam Steel Association.

The association has repeatedly warned of an oversupply in the industry. However, many provinces have still approved large-scale steel projects in recent times.

Textile producers struggle as orders get scarce

The domestic textile and garment industry has entered the peak export season but producers have secured fewer export orders than in previous years, according to the Ministry of Industry and Trade.

In a report on the January-May performance of the industry and trade sector, the ministry said orders had been falling as major markets such as the U.S. and the EU had seen slowing winter-spring clothing sales and distributors had suspended new imports.

Moreover, local textile and garment firms are facing other problems, such as difficult access to bank loans, material shortage, rising input costs, and environmental tax on plastic bags used for export products.

In the first five months of the year, the textile-garment sector gained total export turnover of US$5.3 billion, up 7.7% year-on-year. Import of materials and accessories declined in both volume and value, in which the value of cotton import dipped 33.7%, fiber slid 29.3% and fabrics dropped 1.8% year-on-year.

Dang Thi Phuong Dung, vice chairwoman of the Vietnam Textile and Apparel Association (VITAS), told the Daily that inventories of apparel producers for domestic consumption are surging.

Some enterprises that supply products for the local market like Viet Tien, Garment 10 and Phuong Dong are grappling with increasingly high volumes of unsold products, said Dung.

To deal with inventories, apart from discounts, enterprises should boost trade promotion in new export markets such as Japan, South Korea, Cuba, Russia and West Asia in the second half of the year, she suggested.

However, enterprises need to restrict processing and enhance FOB production modality so that their products can penetrate new markets.

Pangasius breeders face huge losses in Mekong Delta

Pangasius fish breeders in the Mekong Delta are currently facing huge losses of VND1 billion (US$48,000) per hectare, according to Duong Van The, deputy head of Directorate of Fisheries.

The fish breeders are now losing VND3,000 on each kilogram of pangasius fish, which now fetches only VND22,000-23,000 a kilogram.

Several businesses have had to reduce the price, in a bid to sell and recover part capital. A kilogram of pangasius fillet exported to the European market has dropped from US$3 to only $2.6 a kilogram.

The Mekong Delta Association of Seafood Exporters and Producers said that fish breeders and businesses now need VND20 trillion ($952 million) to recover and develop production. However they are finding it hard to access sufficient capital.

Vietnam to receive World Bank support from 2012-2016

The International Development Association (IDA) of the World Bank has announced a support of SDR2.8 billion (equivalent to about US$4.2 billion) to Vietnam for the period 2012-2016.

The announcement was made on May 31 when World Bank and Vietnam’s Ministry of Planning and Investment launched the new Country Partnership Strategy (CPS) for Vietnam, in which it outlines a strategic direction for the World Bank’s engagements in Vietnam from 2012 to 2016.

This will be Vietnam’s largest IDA allocation and reflects Vietnam’s strong performance as well as an increase in IDA resources overall.

Vietnam will also have access to IBRD resources, proposed to be around US$770 million through mid-2014.

Increasing competitiveness, sustainability and access to opportunity are key pillars of the new strategy, cross-cutting governance, gender, and resilience.

The new strategy will support reforms and investments vital to Vietnam’s transition to a successful middle income country.

The CPS is aligned with Vietnam’s Socio-Economic Development Strategy (SEDS) 2011-2020, and Socio Economic Development Plan (SEDP) 2011-2015, which focuses on structural reforms, environment sustainability, social equality, and emerging issues of macro-economic stability.

It will support investments, programmes and advisory services organised in a strategic framework of three pillars and three cross-cutting themes.

The pillars will strengthen Vietnam's competitiveness in the regional and global economy including economic management and business environment, quality and efficiency of infrastructure services, innovation and value addition; enhance sustainability of its development; and broaden access to social and economic opportunities for poor and hold resilience to shocks as well as basic public service delivery and access.

The cross-cutting themes will strengthen governance, promote gender equality, and improve resilience in the face of external economic shocks, natural hazards, and the impact of climate change.

The CPS also gives significant attention to results. It aims to achieve more timely delivery of results from the World Bank’s financing including through the use of simpler result-based financing instruments and through accelerated implementation.

Since re-engaging with Vietnam in 1993, the World Bank has provided nearly US$14 billion to help the country sustain growth and fight poverty.

12 Latin American travel agencies to flock to Vietnam

Asian Trails Co., Ltd is joining forces with foreign partners to bring 12 travel agencies in Latin America to Vietnam this September to get hands-on knowledge of the local tourism market.

The foreign travel agencies believe Vietnam is a new market but it is full of development potentials, according to Asian Trails.

Bui Viet Thuy Tien, managing director of Asian Trails, said some 12 travel agencies from Brazil, Chile and Argentina would travel across Vietnam in eight days to explore travel services, tourist sites, hotels and entertainment sites in Vietnam.

According to the firm’s partners, there are more tourists in Latin America paying attention to destinations in Vietnam, and thus sales agents want to study Vietnam’s tourism services.

“The number of travel agencies visiting Vietnam in September has yet to be finalized, but there will be at least 12 firms. We have only started welcoming tourists from Latin America but development potential is deemed great,” Tien said.

According to Tien, local travel firms will enjoy more advantages of developing the Latin American markets thanks to the easier transport and affordable airfares. Currently, to visit Vietnam from Latin America, tourists can take flights of Singapore Airlines or Qatar Airways, and other Middle East’s airlines such as Emirates and Etihad Airways will also open flights to Vietnam.

“The easier transport and airfares being more competitive have facilitated tourists. We only had hundreds of tourists last year, but the market is promising and we have started to carry out marketing activities,” she said.

Asian Trails is also in cooperation with Vietnam Airlines to organize a special tour to get acquainted with some ten travel agencies from France this month.

Shrimps: A key export for Vietnam

The turnover from Vietnamese fisheries exports in May hit US$500 million, raising the sector’s total export revenue for the first five months of this year to $2.3 billion, up by 9.8 percent over the same period last year.

The key products are still shrimp, fish and shellfish.

Japan remains the largest market for Vietnamese shrimp, making up 26.9 percent of the country’s total shrimp export revenue, followed by the US which imported US$150 million worth of shrimp, a four percent year-on-year increase.

Asia proved to be a promising market for Vietnamese shrimp, while the Australian market saw an impressive rise of 70 percent in shrimp imports, passing Canada and has become Vietnam’s 6 th largest shrimp market.

Meanwhile, several experts pointed out that there are still no positive signals coming from the EU market due to impacts of public debt and the recession in Europe, compounded by tariff barriers. A significant drop could be seen in all three of Vietnam’s main EU markets, namely Germany , the UK and France .

Nguyen Thi Thu Sac, Vice President of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that few of its members can meet the high standards demanded by the EU on imported shrimp.

After falling in price for quite a while, the cost of prawns for processing has now recovered to reach from between VND140,000 to VND195,000 per kilo, an increase of VND3,000 to VND5,000 per kilo over last week.

Forum to boost investment trade with South America

Policymakers and businesses from at least 27 South American countries are expected to attend the first ministerial level Vietnam-South America forum on trade and investment, scheduled in Hanoi between July 5-6.

Prime Minister Nguyen Tan Dung, ministers, cities' leaders, and CEOs are scheduled to attend. The forum will focus on ways to increase ties between Vietnam and South America, especially in areas of trade, economics, commerce, telecommunications, transportation, agriculture and energy.

With GDP totaling more than US$5,500 billion and a population of 580 million, the region presents great investment opportunities for Vietnamese companies, said Le Cong Tien, deputy head of the Foreign Affairs Ministry's Department for South America .

"Many of our top corporations are already implementing major projects in South American countries especially in oil and gas as well as telecommunications," he said. "So this forum will allow both policymakers and businesses from both sides to explore further opportunities."

Trade turnover between Vietnam and South America totaled $4.5 billion in 2011, nearly 15 times higher than the $300 million in 2000.

Ministry neglects feedback on income tax law

Although receiving a great deal of feedback about its draft amendment on the personal income tax law, the Ministry of Finance has not taken any of it into account, displeasing the taxpayers and insiders.

In its draft law submitted to the government, the Ministry of Finance has maintained its proposal to lift the threshold for taxpayers from VND4 million to VND6 million a month, and the deduction rate for dependents, from VND1.6 million to VND2.4 million a month.

Taxpayers and experts have critized both of the suggested rates as being too low, and have suggested many other options.

For instance, the Ho Chi Minh City’s People’s Committee said in its feedback that the deduction for taxpayers themselves should be increased to at least VND9.1 million a month.

Meanwhile, Nguyen Thi Thin, deputy chairwoman of the Vietnam Tax Consultancy Association, has also suggested lifting the income threshold for an individual to be considered a dependent.

“It’s currently stipulated that a person will be deemed a dependent if he or she earns no more than VND500,000 a month,” Thin said in a statement.

“But the rate should be double as prices are constantly soaring .”

However, the ministry seemed not to be listening to any of the feedback.

“The ministry does not listen to the feedback of the public, the experts, and the taxpayers,” accused lawyer Tran Xoa.

“The Ministry of Finance should publicize all of the feedback they have received,” he urged.

Sharing Xoa’s view, Le Khanh Lam, deputy CEO of DTL auditing firm, said the ministry should make public the opinions regarding the tax amendment, to show that they are being heard. “The ministry should also submit different plans for the National Assembly to choose from, rather than just one,” he told Tuoi Tre.

“The personal income tax should not be amended with an objective to ensure the state budget collection, but should aim to stabilize taxpayers’ lives.”

In the latest development, Tuoi Tre interviewed Minister of Finance Vuong Dinh Hue on the sidelines of the NA convention, regarding criticism on the ministry’s neglect of the public’s contribution.

“Everything is still under consideration, and we are still listening to the public and will report to the standing committee of the government this month,” he confirmed.

$20 bln package under consideration to partially boost realty sector

A VND500 trillion ($20.1 billion) package is under consideration to be partially used to revive the local real estate sector, according to a recent conference.

It includes a VND120 trillion ($5.75 billion) public investment package and a VND300 trillion ($14.41 billion) package of bank and official development assistance loans, according to the conference held to explore the revival of the real estate market held in Ho Chi Minh City by the Real Estate Association of Vietnam and Lao Dong newspaper.

Vice Minister of Construction Nguyen Tran Nam told the conference that the government is stepping up public investment disbursements including the VND12 trillion package, VND3 trillion from government bonds, and VND17 trillion from other investment instruments.

As planned in 2012, credit growth of about 15-16 percent is needed, but up to this point the rate has been negative.

This means that in the remaining 7 months, the rate has to increase by 2-3 percent on average, or around VND300 trillion in total, in addition to ODA funding, and other investment channels.

"The cash flow will certainly stimulate economic growth, having a positive impact on many industries, including real estate," Nam said.

Nam also said that the people's money will flow into real estate when interest rates start cooling down, while the remaining investment channels have began losing their appeal.

Banks with surplus capital will offer more loans, creating a stepping stone to support the real estate market. BIDV has launched a VND4 trillion package of real estate loans within 2 years. ACB and several other banks are also expected to offer such packages.

Sharing Nam’s view, Le Xuan Nghia, former deputy chairman of the National Financial Supervision Commission (NFSC), believes that the disbursement will promote a positive impact on the economy, including real estate.

The overdose of anti-inflation policies has led to GDP decline, as the economy has shown many signs of deflation with rising inventories.

Therefore, promoting public investment expenditure in accordance with the approved plan of 2012 is necessary to restore the growth of the economy.

This could gradually pull the real estate market back on track, though at a slower rate, by the end of the year.

"I have never seen so much attention paid to the real estate sector, as the government is working on a program to find solutions to revive the industry.”

“The government has begun to mark it as the platform for the whole economy, since if it wobbles, the economy will likely face a certain death "Nghia said.

Vice Minister of Construction Nguyen Tran Nam also told the conference that the ministry will submit two proposals for the establishment of two housing funds to the government next week.

They include a fund subsidized by the state budget for the poor to buy houses, and a fund for middle and higher income earners to save their own money to buy houses.

Also, the ministry has shifted the focus to rental housing development, with the support of the state budget, as demand for the segment is huge.

Currently, housing firms are not keen on the segment because no mechanism of state support exists and there is no legal guarantee for persons with rental properties.

The Ministry of Construction is also continuing to recommend that the purchase of social housing be 100 percent free of value added tax (VAT), and a 5 percent VAT slapped on commercial houses with area and pricing less than 90 m2 and VND 20 million per m2 with bank lending support.

Le Hoang Chau, president of the Ho Chi Minh City Real Estate Association, said the government needs to consider real estate as an important component of the economy.

The government should not let the real estate businesses stand aside while the business groups enjoying preferential interest rates.

Resolution No.13 should be amended so tax breaks will also be applied for the real estate business.

The most urgent need is to fix Decree No.69 on the collection of land use fees worth 100 percent of the market price, he said.

According to Mr. Chau, real estate inventory is very large, impacting industries such as cement, iron, steel, building materials, and furniture. With more than 90 percent of real estate business suffering losses in 2012, the government should take action as fast as possible, before it's too late," he said.

While experts believe the government's cash flow, worth hundreds of trillions, pumped into the market will revive real estate by the end of 2012, many businesses fear the opposite.

The housing market experienced three years of crisis, and many economic experts said it cannot be saved in a such a hurried manner.

Dr. Pham Do Chi, Deputy Director of VinaCapital Investment Fund, said that the expectation that the real estate market will prosper again in the coming months is too optimistic.

Real estate markets in more developed countries, such as America and Japan, and even the those on the same level of development, like Thailand, take decades to recover from crisis, and having still not yet fully recovered.

"Old lessons about the real estate of our countries do not need to be relearned here. Measures to save the housing market need to be studied more carefully," said Chi.

General Director of Vietnam Trust Company, Nguyen Lam Son, said the funding should only be channeled to home buyers, as too much support for businesses can lead to market distortions.

This expert said the government should develop new valuation mechanisms for a new period as the housing market has declined so strongly, and building capacity index of homebuyer credit, such as a policy to offer interest rate subsidies for first-time home buyers.

"Corporate tax incentives can only be viewed as temporary, while long term incentives for new home buyers are the keys," he said.

Chinese fish farmers use unclear feeds and breeders

The Chinese fish farmers disguised as aquaculture experts in Cam Ranh Bay in the coastal province of Khanh Hoa have been using feeds and breeders allegedly imported from China of dubious origins and quality, provincial agricultural inspectorate said Thursday.

Deputy Head of the inspectorate Le Van Dung said his institution raided fish cages in the waters of Cam Ranh Bay, following a Tuoi Tre news report that roughly 10 Chinese nationals have been raising lobsters and groupers there without licenses.

Authorities said the Chinese work as aquaculture experts, but local residents have confirmed that they have in fact been raising the fish and shipping them back to China over the last ten years.

Following the inspection, officers found three Chinese men on a large-scale fish cage, raising mostly groupers. Though the cage is registered under the name of a man based in Ho Chi Minh City, the three Chinese men are the representatives, while there are four Vietnamese hired to work there.

“The fish cage has breached certain aquaculture regulations,” said Dung.

“First, they used feeds whose labels are only in Chinese, while it’s stipulated that imported products must have sub-labels with Vietnamese content.

“Next, those with the fish cage failed to present documentation certified by Vietnamese authorities on the origin and quarantine of the groupers they are farming,” he continued.

Dung told Tuoi Tre that it is dangerous for imported feed and breeders to be used without undergoing any quarantine time or tests as they can spread certain diseases to other creatures raised in the waters.

He added that the inspectors also found some dead groupers in the fish cage.

“The inspectorate is completing procedures to impose penalties on the Chinese fish cage farmers,” he stated.

Meanwhile, Tran Son Hai, standing deputy chairman of the Khanh Hoa’s People’s Committee, yesterday sent an urgent document requesting the people’s committee of Cam Ranh City to inspect and report on the Chinese fish farmers in the city’s Cam Ranh Bay.

“Tuoi Tre Newspaper has reported that Chinese farmers have been raising and exporting fish in Cam Ranh Bay for years with impunity from local authorities’ management,” the document read.

“It’s ordered that the city’s government complete an inspection and report the case by June 8."

EC delegation launches 2012 Blue Book

The delegation of European Union (EU) in Vietnam launched the “EU Blue Book 2012,” the annual publication on EU development in Vietna , on May 31.

Head of the EU delegation to Vietnam, Ambassador Franz Jessen said EU is still one of the leading foreign development assistance providers for Vietnam, with committed aid totalling 745.3 million EUR (1 billion USD) in 2012, representing 13.24 percent of the total committed foreign assistance for Vietnam. Of the amount, non-refundable aid accounts for 32.5 percent, or 245.21 million EUR.

According to the Ambassador, the Vietnam-EU relations have been expanded beyond development cooperation programmes.

He described the upcoming signing of the Vietnam-EU Partnership and Cooperation Agreement (PCA) this year as a manifestation of the wide and unceasingly developing cooperation between EU and Vietnam.

The two sides have also finished the preparation for the start of negotiation on their bilateral Free Trade Agreement (FTA), he said.

EU has become Vietnam’s second biggest trade partner after the Southeast Asian country boosted its exports to EU by 33.5 percent in 2011, the Ambassador added.

In the context of economic crisis in Europe in particular and in the world in general, EU’s remarkable committed assistance to Vietnam reflected the importance of the Vietnam-EU relations, he said.

EU hopes its non-refundable aid and loans to Vietnam will stimulus policy change and growth in target areas, such as public finance management and economic reform, private sector development, poverty reduction, administration, social affairs and technology, Ambassador Franz Jessen said.

Boosting exports - a viable solution

To cushion the impact of the current economic slowdown, an export-driven economy like Vietnam is advised to boost exports by expanding its outlets and capitalising on established free trade areas (FTAs).

Major economic indicators show that the Vietnamese economy is in the doldrums, with the growth rate estimated to fall from the set target of 6-6.5 percent to 5 percent this year.

In a worrying sign of the ailing economy, more than 17,000 companies filed for bankruptcy in the first quarter of this year, causing a significant rise in unemployment. In addition, the low demand resulted in growing inventories.

Despite high growth, exports are not completely in a good light as Vietnam’s major importers are taking great pains to weather the economic storm sparked by the European debt crisis. The public debt crisis is likely to spread far and wide in Europe, which consumes a great many Vietnamese exports.

Worthy of note is that major Vietnamese exports such as garments, footwear and seafood are vying for the lion’s share globally against similar products from Indonesia, Sri Lanka, Bangladesh and India, which enjoy tax preferences from Europe.

Huynh Buu Quang, an official of the Hong Kong and Shanghai Banking Corporation (HSBC) Vietnam, says although global and domestic economic difficulties are expected to affect Vietnam’s trade in the next five years, HSBC is upbeat about the country’s trade growth till 2025.

Quang explains that solid growth is achieved as Vietnam is integrating deeply into the distribution chain in the Asia-Pacific region. Vietnam has no choice at present but to ride out the economic crunch by making full use of its human resources and reform capacity.

A recent HSBC report forecasts that Vietnam’s exports to India, Brazil, Saudi Arabia and South Africa will increase considerably in the coming time. Exports to Slovakia, an important link in the supply chain of electronics and consumer goods, are expected to grow substantially.

This means Vietnamese exporters are seeking to expand outlets, besides traditional markets such as Japan, the US and Europe, to seize opportunities and avoid economic instability in Europe.

In the next five years, printing equipment, machinery and accessories are predicted to top the list of exports with an annual growth rate of 12.88 percent. They are followed by clothing and footwear exports to the US estimated at 4.41 percent per annum till 2016.

Meanwhile, Vietnam’s imports will also be on the rise, mostly from China, with oil, gas and textiles being its major imports.

An opportunity that Vietnam should grasp is to take advantage of emerging export corridors, Switzerland for instance which is a destination for Vietnamese commodities.

While its traditional markets are shrinking or facing economic difficulty, Vietnam is advised to seek new outlets for its exports, and Africa, the Middle East and South America are primary targets.

This is a great challenge for Vietnamese exporters who must spend time exploring these markets, their tastes and consumer demands. This is a practical option for exporters in the coming years until domestic demand bounces back.

In their new strategies, businesses have to dig out new markets and look for financial and trade partners to successfully promote their products overseas. In this process, they can ask for support from international financial institutions that have high financial capacity, long experience and widespread networks of branches.

HSBC is a case in point. The financial group has committed US$750 billion to trade exchanges globally in 2013. In Vietnam, HSBC achieved an impressive growth rate of 17 percent in 2011 thanks to providing financial support for local import-export businesses.

Joining free trade areas (FTAs) helps Vietnam not only boost exports but also receive new foreign investment flows, management skills and modern technology from developed economies. This is considered an important step towards restructuring the national economy.

Reality shows that trade lends a helping hand to an economy in crisis. The Vietnamese economy has grown and flourished with many impressive achievements since it began the Doi Moi (Renewal) process in 1986 by gradually facilitating trade liberalisation.

To make full use of the economic potential of FTAs, policymakers will have much to do, and the primary tasks are to restructure the country’s banking system, streamline administrative procedures, upgrade infrastructure, and develop human resources.

Five-month exports hit US$42.9 billion

The total export turnover for the past five months hit nearly US$42.9 billion, representing a year-on-year increase of 24.1 percent, according to the Ministry of Industry and Trade (MoIT).

In May alone, export value reached US$9.1 billion, up 1.5 percent compared to the previous month and 25.8 percent against the same period last year, with foreign-invested businesses contributing US$4.78 billion (excluding crude oil).

The MoIT said that the average export prices have also risen, including pepper (up 24 percent), crude oil (10.3 percent), petrol (12.4 percent) and minerals (230. 2 percent). However, cashew nut, coffee and tea prices fell during the period.

Vietnam’s key markets in May were Japan (up 41.6 percent), the US (up 19.8 percent), EU (21.6 percent), ASEAN (19.5 percent) and China (33.3 percent).

Japanese group helps train local workers

Japan’s Forval Group and Tin Nghia Corporation have signed a cooperation agreement to establish a vocational training centre in Nhon Trach district in the southern province of Dong Nai.

The centre will train local workers for Japanese small- and medium-sized enterprises (SMEs) operating in the support industry.

In a meeting with representatives of Forval Group on June 2, Vice Chairman of the Dong Nai provincial People’s Committee, Phan Thi My Thanh, said that the province will provide venues, machines and facilities and cover accommodation and daily expenses for Japanese trainers, while Forval Group is responsible for conducting market research, building training programs and generating jobs for local workers after their courses.

Tin Nghia Corporation will work together with Forval Group to recruit workers and balance input and output.

Forval is a trusted consultant to Japanese enterprises wanting to expand operations in foreign markets. It offers information, telecommunications counselling services and management consulting to SMEs.

Philippines, Vietnam foster aviation cooperation

Vietnam Airlines (VNA) and Philippines Airlines (PLA) held a ceremony on June 1 in Ho Chi Minh City to celebrate 25 years of Vietnam-Philippines aviation cooperation.

Addressing the ceremony, Minister of Transport Dinh La Thang said that the establishment of direct flights between the two countries marks a milestone in bilateral cooperation relation and contributes to strengthening the economic, trade and tourism cooperation between both countries.

He urged the two airlines to continue boosting cooperation, aiming to gain new achievements, promote economic development and open more opportunities for both countries to nurture their bilateral relationship.

Over the past years, cooperation between the two nations has seen significant growth. Despite the economic crisis, the aviation market between Vietnam and the Philippines served more than 107,000 passengers in 2011, an increase of 12 percent compared to 2010.

On this occasion, Minister Thang also presented a friendship insignia to chairman and CEO of the Imex Pan-Pacific Group, Johnathan Hanh Nguyen, for his contributions to building and enhancing cooperative relations between Vietnam and the Philippines.

Ministerial forum on Vietnam-Latin America business scheduled

Senior officials and business representatives from 27 Latin American countries are expected to attend a ministerial forum on Vietnam-Latin America trade and investment, slated for Hanoi on July 5-6.

According to the Ministry of Foreign Affairs press release on June 1, the event, which will take place at My Dinh National Convention Centre, aims to boost policy-making and discuss bilateral cooperation in trade and investment between Vietnam and Latin America.

It will offer a good opportunity for businesses on both sides to exchange information, seek investment opportunities and sign cooperation agreements.

Prime Minister Nguyen Tan Dung will lead a delegation of Vietnamese ministers, provincial leaders, mayors and CEOs to the forum, which will focus on strengthening economic ties between Vietnam and Latin America, especially in trade, telecommunications, transportation, agriculture and energy.

A symposium on opportunities and challenges to boosting trade and investment between the two sides will also be held under the chairmanship of Minister of Industry and Trade, Vu Huy Hoang.

Le Cong Tien, deputy head of the Ministry of Foreign Affairs Department for South America, said with a GDP of more than US$5,500 billion and a population of 580 million, Latin America represents great investment opportunities for Vietnamese companies. Their two-way trade turnover reached US$4.5 billion in 2011, 15 times higher than the US$300 million recorded in 2000.

Purchasing power shows recovery

Residents' purchasing power tends to rise slightly and is reflected in a month-on-month increase of 0.6 percent of the total retail sales value of goods and services.

According to the General Statistics Office (GSO), in the first five months of this year, the total value reached VND952.16 trillion (US$45.34 billion), up 20.8 percent from the same period last year.

Of which, the increase mainly stemmed from the higher turnover of industrial goods, a VND732.66 trillion (US$34.88 billion), a year-on-year rise of 19.5 percent, as it accounted for 77 percent out of the total retail sales value of goods and services.

The revenue from hotels and restaurants rose 18.6 percent to VND108.12 trillion (US$5.14 billion) while value from other services hit VND101.91 trillion ($4.85 billion), representing a high growth at 34.2 percent.

Vu Manh Ha, an economist from the GSO, attributed the increase of the total retail sales value of goods and services to the fact that the consumer price index (CPI) had been curbed to maintain a slow growth at 0.05 percent in April and 0.18 percent in May.

This helped raise the goods consumption by 3.5 percent in May. Of which, sugarcane consumption increased strongly by 44 percent; processing vegetables and fruits up 36.1 percent; milk and butter up 23.6 percent; bricks up 20.8 percent; motor vehicles up 34.6 percent.

Thus, this has assisted in maintaining a decreased rate at 29.4 percent of the manufacturing goods inventories in May in comparison with the strong reduction at 32.1 percent in April and 34 percent in March.

"The rising rate of the total retail sales value of goods and services is still low, only equal to a half of the increasing of past time and thus we hope that the State will issue policies and methods to ignite consumption," he said.

Manufacturing PMI in May down to lowest level

Vietnam’s Manufacturing Purchasing Managers’ Index (PMI) dropped from 49.5 in April to 48.3 in May, the lowest level over three months.

This was according to the recent report, jointly conducted by the Hongkong and Shanghai Banking Corporation (HSBC) and the Markit Economics.

The latest reading was one index point lower than the average since the survey began in April 2011 (49.3).

This pointed to a moderate deterioration of overall business conditions, and thereby extended the current period of decline to two months.

May data indicated a sharper decline in output levels than in the previous month, which survey respondents linked to less favourable economic conditions and an associated reduction in new business intakes.

Manufacturers reported a moderate decline in new order volumes during May, which represented the first decrease for three months.

The trend in new export business was more resilient than for overall new work, with stronger demand from China helping offset weaker spending among clients in Japan and Europe.

The latest survey still pointed to a marginal overall drop in new export work, which was the first reduction since January.

Manufacturers in Vietnam indicated that a marginal rate of net jobs growth was maintained in May, which extended the current period of employment growth to three months.

Survey respondents mostly attributed this to longer-term expansion plans at their units. Higher staffing levels in turn contributed to a moderate decline in work-in-hand.

Lower backlogs have now been recorded in seven of the past eight months, reflecting increased operating capacity and, in some cases, relatively subdued new order inflows.

Lower production volumes and a return to new business contraction led to tighter inventory policies in May.

Latest data highlighted falls in both input stocks and post-production inventories, although in each case the rates of decline were only marginal. Meanwhile, purchasing activity declined for the second month running and at the sharpest pace since February.

In line with lower input buying, manufacturers indicated shorter delivery times from suppliers for the thirteenth successive month.

Input price inflation meanwhile remained robust in May, which stretched the current period of rising cost burdens to four months.

The latest increase in input prices was the slowest seen over this period. Companies that reported a rise in their cost burdens generally attributed it to increased oil-related prices. Output charges in the manufacturing sector nonetheless fell in May for the first time since January, with firms mostly linking price discounting to strong competition for new work.

Trinh Nguyen, Asia Economist at HSBC said: “The decline in manufacturing activities in May reflects the continued weakening conditions of domestic demand in Vietnam. Credit contracted in the first quarter, reflecting Vietnam's tough operating conditions. Businesses are either unable to access loans due to high interest rates or lacking the collateral to get credit. With inflation easing to single digits, as reflected in the slowing of input costs, the State Bank of Vietnam (SBV) cut policy rates by 1 percent on May 28 to support businesses.”

Viet Nam to switch to digital by 2016

Viet Nam Television (VTV) expected to stop broadcasting with analogue technology and convert to digital services by December 2016, said a meeting of the Viet Nam Communications Association yesterday in Ha Noi.

The association's members said that VTC (Vietnam Multimedia Corporation), AVG (An Vien Television) and Viettel Telecom were also leading the way towards digital broadcasting transmission.

According to the association, the recent launch of the Vinasat-2 satellite from Guyana was an important step on the path to technical adaptation, and opened new opportunities for television in Vietnam. Together with the Vinasat-1 satellite launched in 2008, Vinasat-2 would help the country meet satellite demand until 2020.

The association said that digital television was far better than analogue because it had high definition and superior sound quality. Furthermore, digital television could provide multiple programmes on the same channel, helping to save on operating and investment costs.

Logistics boats help fishermen

Fishermen in the Cuu Long (Mekong) Delta coastal province of Bac Lieu are supported by logistics boats that provide them with fuel and other necessary support.

The offshore logistics boats have been operating with the fishermen units for the last three years as part of the province's policy.

Without such teamwork and support, fishermen far offshore would find it difficult to have good yields and make a decent profit.

The expenses for working out at sea have also increased recently.

By setting up logistics teams, which are responsible for supplying fuel and transporting seafood between fishing grounds and the coast, each fishing boat saves VND15-VND20 million for each trip out to sea.

With such coordination, the fishing boats can also stay longer at sea.

Prior to the province's policy on teamwork, fishing boats could operate only 15 to 20 days at sea as all fuel, food and ice were used up after that period of time.

Now the boats can fish for 30 to 40 days offshore.

Ho Ngoc Thuan, owner of four boats at Bac Lieu's Nha Mat Ward, said fishing offshore was a difficult job that sometimes ended in accidents.

He said that, previously, there was no coordination and their profits were low.

Duong Van Ngoan, a border guard in Nha Mat Ward, said the fishermen's association had proved effective.

More than 90 per cent of boats in the locality now operate frequently and there are fewer idle boats on land.

Bac Lieu has more than 1,200 fishing boats, yielding an annual fishing capacity of 100,000 tonnes of fish.

The province set the annual fishing growth rate at 14 per cent between 2012 and 2015. That figure is expected to bring the province US$240-US$300 million in export turnover.

Farmers ignore warnings, plant low-quality rice

Farmers in the Cuu Long (Mekong) Delta are planting large quantities of low-quality rice, despite warnings from the agriculture sector about restricting its use in the summer-autumn crop.

The Ministry of Agriculture and Rural Development has warned farmers in the Delta, the country's rice granary, that the high-yield and short-grain IR 50404 must be planted on less than 20 per cent of the total area.

This kind of rice was told not easy to sell, but it is currently bringing high prices.

Farmers in Hau Giang Province have planted 76,000 ha of the summer-autumn crop and the variety IR 50404 accounted for more than 20 per cent.

In Hau Giang, farmer Nguyen Quoc Viet in Chau Thanh A District, who is now planting one ha of IR 50404, said that if the price was a little lower than or equal to long-grain rice varieties at the crop end, farmers would still have high profits.

"So farmers grow IR 50404 not only for the winter-spring crop when the weather is fine, but also with other crops because of its high profits," he said.

The average yield of IR 50404 is often one to two tonnes per ha higher than other rice varieties, while the cost of fertiliser and pesticide is much lower than that used for other rice varieties.

Farmer Nguyen Van Hoa in Dong Thap District in Dong Thap Province said he was planting 1.2 ha of the IR 50404 rice.

In the last winter-spring crop, IR 50404 had a good harvest and its price was high, so many farmers chose to plant it for the summer-autumn crop because its yield and profit were higher than long-grain rice varieties, according to Hoa.

"Over the past few years, the agriculture sector had warned farmers not to plant this variety because of its low quality. It was also difficult to sell," he said.

However, farmers earn profits from planting IR 50404, so they plant it although they know the high risk of difficulty in selling it, he said.

For another reason, farmers in Thap Muoi, Cao Lanh and Tam Nong districts chose to plant IR 50404 because it has a short gestation period of 87 to 90 days.

If farmers plant IR 50404 in the summer-autumn crop, they can continue planting the autumn-winter crop before the flooding season begins.

In Kien Giang Province, farmers have planted 200,000 ha of the summer-autumn and IR 50404, which accounts for up to 32 per cent of all rice planted.

Tran Quang Cui, deputy director of the Kien Giang Province Department of Agriculture and Rural Development, said farmers were aware of the high price of IR 50404, so they planted it despite the warning.

The quality of IR 50404 paddy is often low in the summer-autumn crop because of unfavourable weather conditions.

When farmers began planting the summer-autumn rice crop, the price of IR 50504 had increased to VND5,300-5,600 a kg, nearly equal to the price of high-quality and long-grain rice varieties.

Nguyen Thanh Hong, a trader who buys rice in Hau Giang and Kien Giang provinces, said that the price of IR 50404 rice had recently gone up because processors had bought more of the rice for export.

However, farmers in Mekong Delta provinces have planted more than 20 per cent of the total rice area with IR 50404.

Farmers have rushed to plant this rice because of high prices offered by rice companies.

The Delta is expected to plant about 1.63 million ha of rice for the summer-autumn crop.

Micro-organic fertiliser boost cassava productivity in Quang Tri

The average productivity of cassava in Huong Hoa, a mountain district in the central province of Quang Tri, has increased by 25-30 per cent thanks to the development of a micro-organic fertiliser.

The increase is due to a US$423,000 project to make markets work better for the poor, managed by the Ministry of Planning and Investment and the Asian Development Bank, with financial support from the UK Department for International Development.

This highly innovative project has developed a slow-release micro-organic fertiliser derived from the brown skin (solid waste) of cassava starch processing. It has also trained poor, less-educated Paco and Van Kieu farmers in Quang Tri to use this product to fertilise their cassava for better yields and quality.

The project has been implemented by the State-owned enterprise Quang Tri One-member Trading Company Limited. The micro-organic fertiliser was first tested in 2009 and the company's technical team was awarded the third VINFOTEC prize for this innovation.

Initial estimates suggest that the project has benefited over 1,800 local households through improved incomes from cassava cultivation. A further 350 workers have also benefited through seasonal jobs with improved incomes in farming, transport and processing.

The project's team leader, Buddhika Samarasinghe, said it was too early to give a precise figure on the impact of this project. A random survey conducted with 37 participating households found that they had earned about VND2.5 billion from farming 60 hectares of cassava, marking an increase of VND 21 million per hectare with an average yield of 22.7 tonnes.

The project also has a positive environmental impact, in terms of less solid waste pollution by the cassava processing company, less deforestation as a result of the ability to continue farming on the same land, and more fertile reclaimed land.

Gas traders exploit drops on world gas market

When world gas prices increase, domestic prices rapidly follow, yet when world prices drop, the domestic price has tended to drop at a slower rate and by less.

On May 31, deputy head of Business Department of Saigon Petro, Do Trung Thanh said, "From June 1, we will reduce by VND2,500 (USD0.12) per kilo." Following the price cut, a 12-kilo cylinder now costs VND340,000 (USD16.3)

Thanh said the price dropped VND30,000 (8%) because of a decline in the world gas contract price dropping by USD130 per tonne (16%).

In April and May the gas prices also dropped VND72,000 (15%) and VND35,000 (8.6%) per 12-kilo cylinder because world gas price dropped USD212.5 (17.6%) and USD140 per tonne (14%).

This was the third price cut since the beginning of 2012. However, it is very noticeable that the drops are always slower and less than the world price.

For example in January, the world price increased by USD85 per tonne (VND1,800 per kilo) and in Febuary it increased again by USD145 (VND3,000) then the domestic price rose VND2,000 and VND3,500 respectively. In March, the world gas price increased by USD180 per tonne (about VND3,800 per kilo) then the domestic retail price increased more than VND4,300.

Although the drop in world gas price since January until June is USD107.5 per tonne but the domestic price only dropped by VND5,000 for a 12-kilo cylinder (USD20 per tonne).

Management a key factor to restructuring of state firms

The quality of human resource management plays a decisive role in the restructuring of State-owned enterprises (SOEs), officials said.

Financial policies should be accompanied by better management strategies to ensure sustainable development for SOEs

Dinh Quang Tri, Deputy General Director of Electricity of Vietnam Group (EVN), said at a meeting that financial policies are only one factor in the success of restructuring.

Deputy Minister of Finance, Tran Van Hieu, said that mass recruitment without focus on quality has resulted in a substandard labour force at many SOEs.

“Despite having an abundant pool of human resources, our country still lacks qualified highly skilled labour, especially competent executives,” Hieu said.

He suggested that more attention be paid to ensuring quality of human resources for SOEs at all levels.

“The recent crises at some SOEs was a result of incompetent leadership and inefficient management. Financial policies should be accompanied by better management strategies to ensure sustainable development for these enterprises,” he added.

Dang Van Thanh, Chairman of Vietnam Association of Accountants and Auditors (VAA), said the corruption at Vietnam Shipbuilding Industry Group (Vinashin) and Vietnam National Shipping Lines (Vinalines) was the result of incompetent administration by the companies' leaders. This, he said, was a result of lax oversight by Government agencies.

As part of the SOE restructuring process, Tran Van Hieu emphasised the importance of capital withdrawal from non-core business activities.

The former Minister of Industry and Trade Truong Dinh Tuyen, stressed the need to sell off unprofitable businesses as soon as possible to prevent further losses.

The former Minister of Planning and Investment, Tran Xuan Gia, proposed that unprofitable projects with Government investment should be sold, even at low prices, so the capital can be used for sound investments.

However, Dinh Quang Tri, said that the Ministry of Finance does not allow the sale of unprofitable enterprises at rates lower than the 'book value'.

Dr. Vu Dinh Anh, an economist, worried that it would be difficult to find investors for inefficient State-funded projects and State-owned enterprises.

Dr. Le Xuan Ba, an Associate Professor and Director of the Central Institute for Economic Management (CIEM), said Vietnam should follow other countries in decreasing the proportion of contributions by SOEs to the GDP to between 4%-5%, instead of current 37.3%.

EVN may be allowed a 5% price increase

The Electricity of Vietnam Group (EVN) may be authorised to increase power prices by 5% upon an equivalent rise in the generation costs, according to a draft law.

The Ministry of Industry and Trade (MoIT) delivered the amended and supplemented Draft Law on Electricity at the National Assembly’s meeting on May 31.

The draft law said that retail power prices may be adjusted based on the average selling prices. The minimum period between changes to power prices would be three months.

EVN may be allowed to apply a 5% increase in the average power prices for the following year if the estimate for the next year indicates a rise 5% compared to the current average.

The group would have to seek approval from the Ministry of Industry and Trade for a hike of over 5% in the average power price for the following year, the regulation recommended.

The draft bill suggested that EVN be authorised to increase selling prices by 5% upon a correspondent rise in fuel prices and foreign exchange rates after making a report to the MoIT.

If fuel prices and foreign exchange rates increase by over 5%, EVN may have to wait for a decision by the Ministries of Industry and Trade and Finance for a 15-day period. After that time, EVN might temporarily be allowed to increase prices by 5% if it has yet to receive any reply from the ministries.

According to the draft Law on Prices, which was delivered at the NA meeting on May 28, the Government may decide prices for power transmission and support services, as these are State-monopolies.

Meanwhile, the Government would only set a framework for power generation, wholesale and retail prices and allow power companies to decide detailed prices.

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