BUSINESS IN BRIEF 7/3

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VietnamNet English - 47 month(s) ago 6 readings

Fruit exports increase 9% per year

Domestic fruit exports have achieved an average growth rate of around 9 per cent in recent years, according to a report by the Viet Nam Fruit and Vegetables Association.

"In 2010, the country's fruit export turnover reached US$471 million, a year-on-year increase of $33 million, taking the country's fruit trade surplus to $150 million for the second consecutive year," the association reported.

The association said along with the increasing value, Vietnamese fruit had established a foothold in a number of large markets including the EU and the USA.

"In recent years, Vietnamese fruit has mostly been exported to the EU, the USA and mainland China," said the association chairman Dinh Van Huong.

Huong said Viet Nam's biggest advantage was its climate, that allowed high-quality tropical fruit that cannot be cultivated in many other countries to thrive.

"Cheaper cost is also another advantage," Huong said.

"Vietnamese dragon fruit and pineapples have become favourite fruit among consumers across the world. The quality is even better than in many other fruit producing nations such as Thailand," Huong added.

It was not very difficult to push the export value up. Viet Nam just needed to ensure the quality and quantity of dragon fruit, said a fruit exporter.

Vietnamese dragon fruit has also become popular in South Korea. With this potential, experts believed that fruit would break into many other markets this year.

"With the current growth rate, Viet Nam's fruit exports will reach the target of $1 billion in 2015," Huong said.

However, the fruit industry must overcome several challenges to hit that figure.

The biggest challenge was ensuring quantity and food safety, experts said.

Post-harvest processing in Viet Nam was not as good as in other countries, said Tran Thi Thanh Hien, an expert from the HCM City University of Natural Sciences.

Foreign fruit imported into Viet Nam stayed fresh for several months, she added.

Hien also said to achieve a higher export turnover, Vietnamese farmers needed to increase food safety. Meanwhile, the association believed that fruit could bring more cash into the country if there was a clear development plan.

There are 780,000ha of fruit plantations in Viet Nam, 270,000ha of which are in the Cuu Long (Mekong) Delta, supplying 7 million tonnes of fruit to the market every year.

Nation needs more support industries

Delegates at a conference in HCM City last Saturday said Viet Nam needed a major focus change to improve economic growth.

If the government adapted to meet changing global challenges, Viet Nam would become a modern-oriented industrialised country by 2020, said Tran Dinh Thien, director of the Viet Nam Institute of Economics.

Obstacles included the transportation sector, energy supply and urban infrastructure, he said, adding long term strategies were needed, as short term fixes were not sustainable.

Dr Nguyen Ngoc Vinh from HCM City University of Economics said despite being one of the fastest growing economies in the region, the growth was hobbled by poor management of human and natural resources, low national competitiveness and an increasing Incremental Capital Output Ratio (ICOR).

ICOR assessed the marginal amount of investment capital necessary for an entity to generate the next unit of production. Higher ICOR value indicated inefficient production, he said.

The need for more supporting industries had cost the country millions of US dollars to import material for production, a major contributor to the trade deficit, he said.

Delegates agreed government agencies needed to focus on economic management capacity and the education and training sector.

Other issues discussed were better management of natural resources, development of the country's supporting industries and better control of public spending.

Delegates said it was important the country focus more on developing national strong points such as agricultural processing, seafood, garment and textile and footwear to increase their competitiveness in the global market.

Thien said the country's growth model in the long-run had to be towards high technology.

Vietnam Airlines plans IPO

Major companies including Viet Nam Airlines and Viet Nam Industry Construction Group are determined to make initial public offerings this year.

The Viet Nam Mobile Telecom Services, which operated the MobiFone mobile network, would equitise this year to restructure and improve its competitiveness, Minister of Information and Communication Le Doan Hop said last week.

Related parties would begin discussions for it next month, he added.

Last year MobiFone had a pre-tax profit of VND5.86 trillion (US$272.5 million) on a turnover of VND36 trillion ($1.67 billion).

Viet Nam Airlines chairman Nguyen Sy Hung said an equitisation plan was being worked out for submission to the Government.

The carrier's general director Pham Ngoc Minh said Viet Nam Airlines was considering the best time for an IPO.

Last year, it reported a turnover of VND36.3 trillion and a pre-tax profit of VND350 billion, up 47 per cent and 100 per cent from 2009, respectively.

The Viet Nam Industry Construction Group plans to equitise nine affiliates, with three of them – Viet Nam Machinery Erection Corp (Lilama), Infrastructure Development & Construction Corp and Construction & Engineering Corp – expecting to do so this year, according to the group's general director Duong Khanh Toan.

The businesses are, however, concerned about possible difficulties.

Toan said the pace of the equitisation would largely depend on factors like the state of the country's economy and stock market.

High inflation would contribute to high interest rates that usually limited the flow of funds into the country's stock market.

Hung also shared this worry, saying that Viet Nam Airlines' IPO depended on whether the securities market offered favourable conditions.

Viet Nam Airlines was included in a Government list of State-owned enterprises to go public in the 2007-10 period.

The plan failed to take off due to various reasons, including the declining stock market.

Proposal for two airports to service HCM City

The municipal People's Committee has submitted to the Ministry of Construction a request to keep Tan Son Nhat Airport operational for the city's development even after Long Thanh International Airport becomes operational.

The committee said Tan Son Nhat International Airport has a strategic location and plays an important role in the socio-economic development of the city and the region.

It has mobilised resources to build transport infrastructure that links to the airport, including Nguyen Van Troi-Nam Ky Khoi Nghia, Tan Son Nhat - Binh Loi-ringbelt road and urban railway routes No 2, 4 and 5.

The committee has also proposed to build transport routes that connect to the southern Dong Nai Province-based airport, including the Thu Thiem-Long Thanh railway, the HCM City-Long Thanh - Dau Giay Highway, the Ben Luc - Long Thanh Highway and the Bien Hoa - Vung Tau Highway.

The US$6 billion project invested by the Southern Airports Corporation was approved in 2005 by the Prime Minister. The airport is about 40 kilometres away from HCM City's centre, 43 kilometres east of the Tan Son Nhat International Airport and 48 kilometres from Vung Tau City.

Long Thanh International Airport will become one of the biggest transit airports in the region with a designed capacity of handling 100 million passengers and 5 million tonnes of cargo every year. The airport will receive 90 per cent of international flights and 20 per cent of local flights to and from HCM City. The project was expected to begin in 2018.

Construction of Long Thanh International Airport in Dong Nai will be divided into two phases. Phase one will be completed in 2020 and phase two by 2035.

Two major works under the first phase of the project, the runway and the terminals, will be built with $1.277 billion and $1.4 billion, respectively. In the first phase (2020-30), the airport aims to serve 44.5 million passengers and 1.2 million tonnes of cargo.

Vietnam to repay $4 bln debt in 2011

Vietnam will repay VND86 trillion ($4.11 billion) in debts this year, according to the Ministry of Finance which has estimated budget revenues and expenditures for 2011.

It is 22.4 percent higher than last year and accounts for 11.9 percent of total expenditure.

Total revenues are estimated to be VND595 trillion ($28.52 billion), a 12.7 percent rise, and expenditures, VND725 trillion.

Revenues will fall by VND2 trillion ($95.8 million) as 2,000 tariff lines will be cut to fulfill international commitments though they will rise by VND352 billion ($16.874 billion) from business activities, 20 percent higher than last year.

Revenue from the state sector is estimated to rise by 19.9 percent and from the private sector, by 22.2 percent.

Vietnam Airlines says IPO timing uncertain

State-owned Vietnam Airlines has relaunched plans to go public but exactly when is not clear, a spokesman for the carrier said on Tuesday.

The longstanding plan for an initial public offering in Vietnam has been revived after several delays, Le Hoang Dung told AFP.

'This plan was relaunched at the start of the year with government agreement but its implementation is not certain this year,' he said. There are still 'many formalities' to be completed, Mr Dung said without elaborating.

He said the airline could not yet reveal how much of a stake it expects to offer for sale.

Vietnam Airlines is looking to position itself as one of the region's leading carriers. Last year it became the first airline in Southeast Asia to join the SkyTeam global airline alliance, which includes Air France and Delta Air Lines of the United States.

In late December the company said it was expecting a pre-tax profit jump of 130 percent year-on-year to US$17.5 million in 2010, thanks to improved passenger numbers.

German credit institute finances two projects

Metro line No 2 in Ho Chi Minh City The German Reconstruction Credit Institute (KfW) will sponsor Ho Chi Minh City ’s metro project and the Norwegian mixed credits programme with funding of 62 million EUR.

Two contracts to this effect were signed in Hanoi on March 1 between Vietnam ’s Ministry of Finance and KfW.

The 28 million EUR contract for a project to build metro line No 2 in Ho Chi Minh City includes 10 million EUR in non-refundable aid and 18 million EUR in loans. The project is being carried out using capital sourcing from the Asian Development Bank, the European Investment Bank (EIB) and KfW.

The sum is part of the German Government’s capital for the 240.75 million EUR project.

The other contract, worth 34 million EUR, will finance six projects (out of the total 12) on clean water supply and environmental hygiene in a number of Vietnam ’s localities.

The Norwegian Government has pledged to provide finance for these projects as agreed in a memorandum of understanding signed on Oct. 22, 2003 between the Vietnamese and Norwegian Governments.

Under the MoU, Vietnam will borrow capital from a bank to implement selected projects and the Norwegian Government pledged to support all interest rate and other fees of the loan. KfW was selected by both sides to provide commercial loans to implement the preferential credit programme.

Vietnam cattle feed imports cost $428 mln

Cattle feed worth US$428 million has been imported in the first two months this year, a 21.3 percent rise year on year, according to the Ministry of Agriculture and Rural Development

Major suppliers in the local market have increased prices twice this year, the latest one being by VND200 – VND300 per kilogram. There had been 15 price hikes last year.

The hikes are blamed on the shortage of raw materials like corn and wheat and higher prices on the world market as a result.

Cooking gas price up 2nd time this year

Cooking gas distributors have announced a hike in prices effective today, the second this year, due to a rise in global prices and transportation costs.

The price of a 12-kilogram cylinder rises by VND9,000-10,000 to around VND330,000 (US$15.8), major suppliers like Saigon Petro, Petrolimex Gas, and Vina Gas said.

Gas prices have risen by US$25 per ton on the world market, or equivalent to just VND7,000 per cylinder. The remaining VND2,000-3,000 is reportedly due to higher transportation costs as a result of increased gasoline prices.

Gas supplied by Vietnam’s sole refinery at Dung Quat is $15 higher than on the world market.

The price hike is the second this year after an earlier one of VND7,000 in early January.

Long An attracts small Japanese investors

Twelve small and medium-sized Japanese firms have received licenses to invest in the Long Hau Industrial Park in Long An.

They have a combined capital of over US$6 million and will each get between 250 and 3,000 square meters of space which will come with facilities like waste treatment plant, closed-circuit camera system, and others.

The 98-hectare Long Hau IP, built in 2007, has 35,000 sq.m of ready-built space earmarked for small and medium-sized firms.

It has attracted 83 foreign investors with a total capital of $259 million so far.

Bank credit flowing into realty, not manufacturing

Credit growth data shows that capital is flowing into the property sector, not manufacturing, a senior central bank official has said.

Credit growth rose 3 percent in December 2011 and 1.7 percent in January, deputy governor Tran Anh Tuan told Tuoi Tre on the sidelines of a meeting between the State Bank of Vietnam and commercial banks.

Interest rates have topped 20 percent at some banks but he said efforts will be made to lower them and redirect lending to the production sector.

The rates could start declining in the third quarter since curbing inflation is a priority this year, but he said the SBV will provide businesses support before that.

A series of supportive policies is expected to be announced today by SBV governor Nguyen Van Giau.

The government hopes to cap credit growth at 20 percent this year, but coordinating many banks to achieve the target is expected to be a difficult task.

Tuan admitted that the penalties slapped on small banks for hiking deposit interest rates above the cap of 14 percent are not as severe as they ought to be.

But bankers said at the meeting that the cap is inappropriate at a time when fighting inflation is a priority.

They asked the central bank to pump more dollars into the system to stabilize it, but Tuan said instead that commercial banks should do that, reducing their forex holdings.

The dong’s devaluation on February 11 saw banks’ ratio of dollar purchases/sales plummet from 1.58 percent to minus 1.18 percent, indicating that they have directed the greenback into the market, Tuan added.

Asia Pacific leads property market

The Asia Pacific region was leading the global property market recovery after the global financial crisis, a Singaporean real estate expert told the fifth Annual City Development Meeting in HCM City.

Lim Lam Yuan, President of Singapore's Institute of Surveyors and Valuers said an increasing number of high net worth individuals were keen on prime residential property both for lifestyle and investment reasons in the region.

The increasing interest regionally and internationally has made Asia emerge as an attractive market for property developers, Yuan said.

The attractiveness of the Asian markets were the growth in population and economic resources and relatively low wages compared with nations in Europe or the US, he said.

Yuan said there were four reasons to invest in foreign real estate, including competitive yields, diversification, globalisation, and expertise in real estate.

The property market in the region improved significantly in 2010 as compared to 2009 with prices of private residential properties, offices, shops and industrial properties for the whole year of 2010 increasing by 17.6%, 18.9%, 8.6% and 23.7%, respectively.

Rentals for private residential properties, office, shop, and industrial properties rose by 17.9%, 12.6%, 2.9% and 11.7% last year.

China's property sector grew rapidly since 1998 with property sales last year reaching over 4.7 trillion yuan (US$640 million), surpassing 2009's total of 4.3 trillion yuan, said Yuan, who is also President of the World Association of Valuation Organisations.

The interest rate was as low as 0.36 per cent while there was increased housing demand and plans for new towns, increased FDI and demand for property development and management. "With increasing salaries of urban workers and rise of entrepreneurs, more Chinese people could buy a broader array of consumer goods and property."

China could also offer opportunies for investors to make joint ventures in developing mega malls and retail management, as well as in hospitality services and management.

"As the world's most populous nation, representing 22 per cent of the world population with pent-up demand of 1.3 billion consumers, China is creating a market-based economy," he said.

India was predicted to become the largest country in the world, and though relatively poor by Western standards, the attractiveness of India was based on its infrastructure, well-developed legal system and large numbers of well-educated doctors, engineers and others, Yuan said.

Apart from fairly established real estate markets, such as Bangalore, Mumbai, and New Delhi, Yuan said India also boasted growing ones like Chennai and Kolkata and markets yet to be established like Lucknow, Jiapur and Goa.

Investment opportunities in India's property market came from residential development and construction and new town planning; mall development, and management; hospitality services and management; and office/industrial space development and management, particularly IT parks.

Power plant project receives green light

Deputy Prime Minister Hoang Trung Hai issued an order to begin construction of Thai Binh Thermal Power Station 2 in the northern province of Thai Binh yesterday.

Vu Huy Quang, director of Viet Nam National Oil and Gas Group's (Petrovietnam) Power Company, the station's investor, said the Thai Binh Thermal Power Station 2 was an important project in the company's energy supply development strategy towards 2015 with a vision to 2025.

The 1,200MW station will use cutting-edge super critical pulverising coal technology for the first time in Viet Nam. Experts have said this technology is highly efficient and can help Viet Nam meet national and international emission standards.

The first generator is scheduled to come into operation in 2014, followed by the second one at the beginning of the following year.

When operating at full capacity, the station is expected to contribute 6.7 billion kWh annually to the national grid, which will help ensure national energy security and socio-economic development for the province, the Hong (Red) River region and the country as a whole.

Deputy PM Hai requested Petrovietnam to closely co-operate with the construction company to ensure project progress and quality according to the agreed upon commitment. He asked the Ministry of Industry and Trade and the Ministry of Construction to be ready to deal with any emerging issues during construction.

He also instructed the local authorities and relevant agencies to complete the site clearance and resettlement procedures.

The total project investment is about VND31 trillion (US$1.6 billion). Petro Viet Nam Construction Joint Stock Corporation is the developer.

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