BUSINESS IN BRIEF 7/11 Huge potential for cooperation with Middle East, North Africa Deputy Minister of Planning and Investment Nguyen Van Trung has introduced investment opportunities in Vietnam and highlighted fruitful economic cooperation between the country and Middle East and North African countries. Speaking at the Forum for Economic Cooperation between Vietnam, Middle East and North African Partners in Hanoi on November 4, Deputy Minister Trung revealed that Gulf states are involved in 14 projects in Vietnam, with a total registered investment of US$168 million, mostly in oil and gas, real estate, processing and manufacturing technologies and agro-forestry sectors. Vietnam has poured US$121 million into the Middle East and North Africa, with a focus on oil and gas, and telecommunications projects. The two sides have signed agreements on economics, trade and science-technology cooperation, he said. Deputy Minister Trung emphasised that Vietnam is priotizing developing three key areas, with the first one on completing market economy status, creating healthy business climate, and boosting administrative reform. Second, Vietnam is developing human resources, mobilising social sources and improving professional skills for workers. Third, it is set to build a uniform infrastructure system, particularly in urban areas, and developing renewable energy such as wind and solar energy. As a result, Vietnam is expected to turn itself into an industrial country by 2020 on the way to regain its annual GDP growth of 7-8%. Regarding investment environment, Trung said, Vietnam is speeding up its economic restructuring process aiming to ensuring sustainable development and developing green growth. Economic restructuring process is pivoted on public investment, the financial and banking system, as well as State-owned enterprises (SoEs). In 2003, Vietnam has maintained macroeconomic stability, controlled inflation and recorded a 5.4 percent GDP growth higher than the previous year’s figure. Total export earning has hit US$108 billion since January, or a year-on-year increase of 15.2%, he added. According to Trung, Vietnam is a dynamic developing nation within the world. Vietnam, together with other ASEAN member countries, will offer new investment opportunities with a lucrative market of 600 million people and total GDP of more than US$ 1.85 billion. It has joined many international organisations, such as the Asia-Pacific Economic Cooperation (APEC), the World Trade Organisation (WTO), and the ASEAN Free Trade Area (AFTA), and is now accelerating free trade agreements (FTAs) and the Trans-Pacific Partnership Agreement (TPP) negotiations towards the early signing of the important documents. He called for more investments from the Middle East and North Africa in industrial projects on mining, oil and gas, and infrastructure following the public-private partnership (PPP) model, the environment and agricultural development. Garment and textile exports to reach US$19 billion The garment and textile sector’s export turnover is expected to hit more than US$19 billion this year thanks to an increase in orders and export revenue. The Ministry of Industry and Trade (MoIT) said that it already reached US$14.8 billion by October, up 18.7% from a year earlier. In the 10-month period, Vietnam’s garment and textile exports to China were estimated at over US$270 million and its furnishing fabrics at nearly US$700 million. Meanwhile, its cotton imports from China were worth nearly US$7.5 million.   The country’s garment and textile exports also rose sharply to foreign countries including the US (up 37%), the Republic of Korea (up 68%), and Japan (up 35%). The MoIT said that some garment and textile businesses have built a roadmap and specific plans for production, aimed at improving the quality of weaving, dyeing, and designing in preparation for their Trans-Pacific Partnership (TPP) in the near future. 11 export items surpass US$2 billion Telephones and components earned as much as US$17.7 billion, topping the list of twenty key items exceeding US$1 billion in export turnover by October. The Ministry of Industry and Trade (MoIT) said that in the past ten months, the country’s exports reached US$107.97 billion, up 15.2% against the same period last year. Of the figure, foreign-invested sector’s exports (excluding crude oil) were estimated at more than US$66.14 billion, (up 27.2%).    By far, 11 groups of commodities have boosted US$2 billion in export value. In the industrial processing sector, the largest export earners include telephones and components (US$17.7 billion), garments and textiles (US$14.8 billion), electronics, computers and components (US$8.7 billion), footwear (US$6.7 billion), wood and wooden products (US$4.4 billion), bags, wallets, suitcases, caps and umbrellas (US$1.5 billion). In addition, seafood exports earned US$5.4 billion, means of transport and components (US$4.2 billion) and vegetable and fruits (US$0.8 billion). Vietnam seeks breakthroughs in ASEAN trade exchange Vietnam’s trade exchange with Europe and the US remains relatively stable and strong, despite the recent global economic downturn and sluggish Chinese market growth. The US’s gradual recovery and inter-ASEAN trade development have given a boost to Vietnamese exports. International statistics reveal Vietnam has more than half of its export commodities available in developing economies at a higher level than regional competitors such as Indonesia and Malaysia. Trade exchange is expected to flourish in the remaining months of the year, defying declining consumer demand. The Trade Confidence Index (TCI) registered 108 points after the first half of the year. But half of businesses who responded to the HSBC survey predicted trade transactions will improve in the second half. Vietnam is one of the world’s potential trade partners in the formidable garment, textile and telecommunications sectors. Its clothes and garments industry is expected to make up 20 percent of total export earnings by 2020. Since the Vietnam-US bilateral trade agreement took effect in 2000 and Vietnam entered the World Trade Organisation (WTO) in 2007, the country has become the second largest supplier of clothes and footwear to the US market. The volume of clothes, garments, and textiles exported to the European market is expected to grow at double-digit rates over the 2013­–2015 period. Vietnam is strongly committed to economic modernisation and infrastructure improvement. It is very optimistic about the potential growth as well as its telecommunications and IT industries. HSBC experts believe the increasing FDI inflows will support Vietnam in developing the domestic market and upgrading infrastructure facilities. Local and foreign experts say Vietnam will benefit from the ASEAN-China free trade agreement (ACFTA) as its exports to regional countries are expected to grow at an annual rate of 15 percent in the 2013–2020 period. By 2030, Vietnam’s rate of export market will be China while its largest import markets will be India and Bangladesh. Trade exchanges between Vietnam and Malaysia is very important. Malaysia’s rapid growth in industrial machinery and equipment, IT, and telecommunications services will make it possible for Vietnam to increase its exports to Malaysia by up to 15 percent per year in the 2016–2030 period.   Noel Quinn, head of HSBC Asia Pacific Commercial Banking notes that inter-ASEAN trade has increased from 19 percent in 1993 to 25 percent of total regional trade volume in 2012. One reason for such slow growth is transport deficiencies. In the coming years, major ASEAN infrastructure projects will be getting off the ground to iron out snags in trade exchange within the bloc. Western companies used to consider China as a favourite destination for investment, but they have exchanged their views. In fact, the flow of FDI into ASEAN bloc has increased by 24 percent last year to US$114 billion so far thanks to economic liberalisation and efforts to build the ASEAN Community (AEC) by 2015. There is high hope that trade barriers between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam will soon be removed to turn ASEAN into one of the world’s largest markets.  China-Vietnam conference on trade and tourism promotion Ho Chi Minh City hosted a conference on trade and tourism promotion between Vietnam and China to call for more investment in the key sectors of China’s Qinghai province. According to Yu Xiao, Qinghai Department of Commerce Deputy Head, the event is part of activities to strengthen connectivity between businesses, offering favourable conditions for them to explore each other’s market and seek partners. Located in western China, Qinghai has enjoyed a developed economy targeting key sectors such as information technology, green energy and industry, Yu Xiao said. He said he hopes that more businesses from Vietnam and Ho Chi Minh City, through the conference, will come to the province to study business and investment opportunities. Vietnam Chamber of Commerce and Industry (VCCI)’s HCM City branch Director Vo Tan Thanh said economic and trade ties between Vietnam and China have progressed in recent years while praising relevant agencies’ efforts to broaden bilateral relations and create chances for businesses to seek partners. VCCI has signed nearly 30 memoranda of understanding and agreements with Chinese organisations to support trade exchanges among businesses. By September this year, bilateral trade reached approximately US$ 36.24 billion, up 31.7 percent on last year’s period. China has run 940 projects in Vietnam capitalized at nearly US$5 billion. Saudi Arabia funnels money for health project in Bac Kan The Saudi Fund for Development-funded medical training centre in northern Bac Kan province will start its first enrollment in 2014, aiming to provide sufficient health workers for rural and remote areas in the locality. The centre has a total investment capital of nearly VND349 billion (US$17 million), with almost US$14.5 million financed by the Saudi Fund for Development under a loan agreement on health and education projects between Vietnam and the North African country in November 2011. It will also provide further training for postgraduate and assist health research studies in service of healthcare development in Bac Kan and its neighbouring provinces. The centre is now under construction. It is expected to be completed and ready for its first 200-300 recruits next year. Vietnam wants to learn from UK’s PPP experience Ho Chi Minh City wants further support from the UK in building and applying the public-private partnership (PPP) model, said a city official. At a reception for a UK delegation led by President of the Vietnam-UK Network James Keith Chapman, Vice Chairperson of the municipal People’s Committee Nguyen Thi Hong said with its rich experience in PPPs, the UK has assisted Vietnam and HCM City in particular in this field over the past time. The city has also arranged trips to the UK to explore the country’s PPP model and guided its agencies and departments to apply it, she said. Hong said HCM City has applied such models as the build -operate-transfer (BOT) and build and transfer (BT) to mobilise contributions of different economic sectors to large-scale infrastructure projects, adding that the PPP model has been used in the projects. According to the official, the UK now has 96 projects worth over US$700 million in HCM City, ranking 11th among countries and territories investing in the city. For his part, James Keith Chapman said his visit aims to explore HCM City and Vietnam at large, expressing his hope that the city will provide the UK side with information about its socio-economic situation as well as development policies in the coming time. Host and guest compared notes on the city’s development orientations for the next decade, the implementation of the PPP model in infrastructure and social welfare. Established early this year on the occasion of the General Secretary of the Communist Party Nguyen Phu Trong’s visit to the UK, the Vietnam-UK Network has acted as a bridge to connect the two countries in trade, investment, education, culture and people-to-people exchange, through its links with the UK Foreign Ministry, the Investment-Trade Agency and the British Council. The network is sponsored by the Vietnamese Government, Foreign Ministry and donors from the private sector. Gazprom considers liquefied gas provision to Vietnam Vietnamese Ambassador to Russia Pham Xuan Son and Alexey Miller, Chairman of the Board of the Russian-based Gazprom global energy group discussed the possibility of Gazprom providing liquefied natural gas (LNG) to Vietnam. According to a November 4 announcement released by the group, both sides discussed cooperation mechanisms between Russia and Vietnam in the field of gas and oil, especially issues related to cooperation in hydrocarbon exploitation and the development of Vietnam’s gasoline market serving automobiles. Documents on the aforesaid cooperation and development are expected to be signed in the coming time while Gazprom Neft, a subsidiary of the Russian corporation, planned to sign agreements with Vietnam Oil and Gas Group (PetroVietnam ) to provide petroleum for Vietnam and take part in oil refining activities in the country. Gazprom and its Vietnamese partners have inked cooperation agreements on oil refining projects as well as the expansion and operation of their fuel selling system since 2006. Israel, Vietnam seek high-tech farming cooperation Vietnamese and Israeli businesses gathered at a November 4 forum in Ho Chi Minh City to seek cooperation opportunities, especially in hi-tech farming. Municipal People’s Committee Vice Chairman Le Thanh Liem said HCM City always pioneers in providing breeding animals, seedlings and technological advances as a bridge linking domestic and foreign enterprises. Israeli Minister of Agriculture and Rural Development Yair Shamir held that Israel is keen to become involved in Vietnam’s agricultural modernisation based on scientific and technological applications. Both countries attach importance to agricultural development and Israel’s science-tech innovations prove a success, Shamir noted. Top Israeli farming firms like Agrotop, Afimilk, Haifa Chemical and Netafim introduced their successful projects on waste treatment plants, abattoirs, animal feed, and cattle and poultry farms. A number of Vietnamese businesses showed their keen interest in automatic milking systems and surveillance equipment in farms. The forum was co-hosted by the HCM City chapter of the Vietnam Chamber of Commerce and Industry (VCCI) and the Israeli Embassy in Vietnam. Trade surplus with Japan hit US$1.42 billion Japan is now Vietnam’s third largest trade partner after China and the US with US$1.42 billion in export surplus from Vietnam, according to the Ministry of Trade and Industry (MoIT). Last year’s import-export turnover reached US$27 billion, up nearly 50% compared to 2008’s figure. In the first nine months of this year, two-way trade stood at US$18.31 billion. Meanwhile, exports to Japan reached US$9.87 billion and imports from Japan were US$8.45 billion. Many Vietnamese products exported to Japan have earned US$100 million in export turnover. Three groups of commodities take the lead with export earning of over US$1 billion including garment and textile (US$1.74 billion, up 20.21% against the same period last year), crude oil (US$1.51 billion, down 21.56% ), vehicles and components (US$1.35 billion, up 7.57%). However, some commodities saw a sharp decrease in export turnover including oil and petrol (down 99.85%), telephones and components (down 84.83%), cameras and components (down 54.85%), cassava (42.83%). Japan is also Vietnam’s largest investor with 2,047 valid projects capitalised at US$33.4 billion until September 20, 2013. In addition, Japan is also the biggest ODA provider to Vietnam, making up 30% of total committed ODA funding of the international community for Vietnam. JETRO supports Vietnamese farm exports The Japan External Trade Organisation (JETRO) has pledged to assist Vietnam in boosting agricultural exports to Japan, JETRO Chief Representative, Atsusuke Kawada has said. At a November 4 working session with Ha Nam province’s People’s Committee, Atsusuke Kawada said that Vietnam and Japan are potential markets for importing agricultural products. However, Vietnam’s farm exports to Japan are facing difficulties due to strict requirements for quality control and food  hygiene and safety. The Chief Representative pledged his organization’s support for both sides, especially the Vietnamese side’s agricultural exports to the Japanese market. Ha Nam Provincial People’s Committee Chairman Mai Tien Dung said that the province has implemented some projects on growing agricultural varieties which the Japanese have great demand for. Recently,  Ha Nam has provided farmers with capital, techniques, and breeds to help grow 40 hectares of soya bean vegetables for exports to Japan. The province has identified this is a pilot model which needs multiplying to increase farmer income At the meeting, JETRO representatives hailed incentives Ha Nam have given to Japanese businesses including setting up a hot line between provincial People’s Committee Chairman and Japanese enterprises. Vietnam-Brazil trade achieves high growth Two-way trade between Vietnam and Brazil reached US$1.66 billion after nine months, up 27 per cent on last year’s same period and surpassing 2012’s baseline. According to statistics from Brazil’s Ministry of Development, Industry and Foreign Trade, Vietnam’s exports to the Latin American country raked in almost US$ 849 million, a year-on-year increase of 42 per cent. While its’ imports were estimated at US$809.6 million, up 14.2 percent. Vietnam’s exports in the reviewed period were mainly telephone components, footwear, frozen filleted fish, chipset, printers, synthetic fibre, accumulators, cement, rubber, rice and auto tyres. Meanwhile, the largest economy in Latin America provided Vietnam with soybean, maize, steel, cotton, tobacco materials, powdered meat, timber and leather. Economic experts said this year’s two-way trade is predicted to surpass US$2 billion for the first time. Vietnam Expo 2013 to expand investment opportunities The upcoming 11th Vietnam International Trade Fair (Vietnam Expo 2013) in Ho Chi Minh City is expected to open up new investment opportunities for both domestic and foreign enterprises. More than 300 firms from 15 countries and territories will display their products at the event, scheduled for December 4 – 7. Running concurrently, the Vietnam Two-wheel Vehicle International Exhibition (Inter Cycle 2013) will provide visitors with new models of bicycles and electric bikes as well as their accessories. Over the past years, despites the world economic slowdown, Vietnam’s foreign investment attraction has still seen positive results. According to the ASEAN Business Outlook conducted by the American Chamber of Commerce in Singapore, in the eyes of foreign investors, Vietnam remains an attractive destination in ASEAN. Since 2008, the country’s FDI has always stood at around US$10 – 11 billion. Vietnam pipedreams for UK oil firms Last week saw ten UK major oil and gas sector companies visit Vietnam to explore oil and gas business opportunities and partners. This was the second delegation of its kind within just a month. These ten companies discussed potential co-operation projects with the Ministry of Industry and Trade, PetroVietnam and other state-owned and foreign oil and gas companies. Piers Craven, head of Trade and Investment Division at the British Embassy in Hanoi, told VIR that the first eight-company delegation in late September ‘had productive meetings with Vietnam-based partners,” and “specific positive results from these meetings will be publicised over the next few weeks.” “This second delegation follows the first successful one. Vietnam has great potential for UK oil and gas companies and Vietnam is a priority in the UK’s trade policy,” Craven said. “Many more UK oil and gas sector companies will come to Vietnam in the coming period.” Sue Keeler, secretary of Loadtec Engineered Systems manufacturing tanker loading systems for any liquid including chemicals, fuel, beverages and food, said the firm “is not simply selling products and services”. “More importantly we want to establish long-term partnerships and even representative offices or factories here.” Thomas Ouseph, field sales manager of Bunzl Greenham Export providing solutions for personal safety and protection equipment, cleaning and hygiene materials and building contractor site equipment, said he wanted to meet prospective agents or distributors to sell our range of products to the Vietnamese market. Planning to establish a representative office in Vietnam, Oil Plus’ David Hartley regional sales manager - Asia Pacific stressed that the company wanted “to further develop technical and commercial contacts and service provision within the upstream oil and gas industry in Vietnam.” Oil Plus has developed a good reputation with more than 270 clients operating over 450 oil fields in 51 countries. Leonard Pinheiro, representative of Shipshore, which supplies machinery and spare parts to the marine, oil and gas industries, said Shipshore had representative offices in Hong Kong, Malaysia and Singapore. “Our objective is to partner with marine, oil and gas companies in procurement and to extend our expertise in the Vietnamese market,” he said. One of the main reasons behind the eagerness to operate in Vietnam was that the EU-Vietnam Free Trade Agreement currently under negotiation would see prioritised import tax rates on oil and gas equipment into Vietnam. At present, these tax rates have yet to be finalised. Under the World Trade Organisation commitments, member nations share the same prioritised tariff levels for oil and gas equipment. “With these two agreements, we’re not concerned over tariff issues when exporting products to Vietnam,” said Nigel Mount, director of Mount Laboratories UK Ltd providing high-quality laboratory products and services. Jaks suffers funding shortfall Construction delays and a postponed return of $10 million to provincial authorities have raised concerns over Malaysian investor Jaks Resources’ finances and ability to realise the Hai Duong thermal power plant project. Nguyen Duong Thai, Deputy Chairman of Hai Duong People’s Committee told VIR that Jaks Resources had not yet responded to the province’s request two weeks ago that it repay a $10 million advance from the state budget for site clearance. In 2011 Hai Duong People’s Committee advanced the sum for clearing the land slated for the thermal power plant after receiving permission from the Ministry of Finance which hoped the money would push forward the project’s construction. Jaks’ delay in responding to the committee has made the authority suspicious of the firm’s financial capability. “We are tired of this,” said Thai, adding that the committee has actually requested the advance be repaid several times, to no avail. “I am not certain of the investors’ ability, as this is a build-operate-transfer (BOT) project and therefore falls under the purview of the Ministry of Industry and Trade (MoIT). But in my opinion, they lack the financial muscle,” Thai added. A source from the MoIT who was familiar with the case did reveal that Jaks was facing financial problems in construction of the power project. He declined to reveal additional information. Jaks Resources received its investment certificate for the project in August 2011 under the BOT model from the MoIT. The estimated cost was $2.25 billion with 80 per cent of financing sourced through loans and the other 20 per cent by equity. Two years later, however, the project is in stasis as Jaks is still searching for a partner to raise the needed financing. In 2012 the Malaysian firm entered into an agreement with Malaysian Island Circle Investment Holdings and China’s Meiya Power Limited to sell 50 per cent of its stake in the project. Unfortunately for the company, last December both Island Circle and Meiya pulled out of the agreement, forcing Jaks to sign with two new partners, Malaysia’s Sanjung Merpati Sdn Bhd and China’s Wuhan Kaidi Electric Power Engineering Company. Jaks also gave the engineering, procurement and construction (EPC) contract to Wuhan. The project again faced troubles in April as Sanjung Merpati terminated the agreement leaving Wuhan Kaidi as the only other investor in the Hai Duong power complex. In a document sent to Malaysia’s stock exchange on October 30, Jaks announced that its transaction with the Chinese investor was still in progress, and that they hoped to complete it by March 31, 2014. Jaks Resources, at the same time, informed local authorities that it would start construction in December this year. “A promise is just words and we want action,” said Thai. He added that he doubted the company’s timeline as they have regularly failed to meet their announced schedules. Falling housing prices propel sales Falling real estate prices are actually the reason many developers have survived the downturn, said a report sent to the National Assembly by the Ministry of Construction. According to the Ministry of Construction (MoC), property prices have fallen to levels last seen seven years ago, before the boom. “Apartment prices have greatly reduced compared to 2008-2010. Most projects have seen a decrease of 10 to 30 per cent, some have fallen by half,” read the report, which also pointed out that small, ready-to-use apartments costing less than VND15 million ($715) per square metre were now the most desired by buyers. The MoC also reported that the current total value of unsold apartments throughout the country stands at $4.8 billion thanks to increasing purchases of small and finished apartments. The figure in the first six months of the year was 20 per cent higher. “There are still challenges the market must face, but we are looking at an upswing in the first nine months of this year as confidence slowly improves. Many transactions for social housing and small apartments have been conducted successfully,” the report said. Compared to the previous two years, the number of transactions is still low but for the small apartment segment, liquidity is high and transactions are on the up. The report also indicated that even more and more projects were finished and ready for sale, unsold properties in the two major cities of Hanoi and Ho Chi Minh City were decreasing. In Hanoi, unsold real estates were estimated at VND14,487 billion ($690 million) in July this year, down 15 per cent compared with June. In Ho Chi Minh City unsold properties were valued at just over $1 billion, down 16.1 per cent. These results prompted the MoC to announce that the national housing development strategy has achieved positive initial results. Reducing prices have been the top priority for developers to survive the current slump. Many have also offered incentives to buyers. According to CBRE Vietnam, in the third quarter this year residential projects were more cautious with only 1,900 units released, 6 per cent down against the same period last year. Primary prices also continued to go down, with some developers lowering prices by 10 per cent from previous launches and up to 50 per cent on new launches. The number of units put up for sale in Hanoi in the third quarter of this year totalled 1,900 units. In Ho Chi Minh City unit launches continued to rise this year with 1,726 units in the third quarter, increasing 45.8 per cent on quarter and 11.6 per cent on year. The majority of this supply was in the affordable segment, making up 74.7 per cent of new launches. High-end came in second with 19.3 per cent and mid-end last with 6 per cent. Developers’ faith in the market was rewarded as new launches saw notable buyer activity, according to CBRE, which also confirmed that prices in Ho Chi Minh City continued to fall, but at marginal rates. Can Tho targets 1.3 mln tonnes of rice in 2014 The Mekong Delta city of Can Tho has deployed its paddy rice production plan for 2014, targeting an output of 1.3 million tonnes. Local authorities decided to broaden VietGAP and Global GAP standard large-scale rice fields to 14,000-20,000 hectares in the year in a bid to increase the output of high-quality rice to help farmers earn higher incomes. As a regional granary, Can Tho has set to gradually speed up the ecological rice farming process as well as renovate its processing technology to churn out rice products of high economic value. In 2013, rice productivity in the locality averaged 5.77 tonnes per hectare on the total rice farming area of 236.538 hectares, giving a yield of over 1.36 million tonnes of paddy rice. Can Tho has set a target of exporting 860,000 tonnes of rice in the year, up 40,000 tonnes from 2012. As by October 14, the city shipped 755,000 tonnes of rice, earning 359.7 million USD, showing a year on year rise of 14 percent in volume and 22 percent in value. Apart from main markets in Asia, Africa, Europe, Oceania and the US, there are many new customers registered to buy rice from Can Tho. Challenges awash for enterprises Experts and high-profile entrepreneurs at a forum in HCMC on Wednesday advised local companies to make changes to survive the tough time since numerous challenges are awaiting them in the next two years. Speaking at the CEO Forum 2013, the outspoken expert Le Dang Doanh said the local economy began restructuring two years ago, but none of the restructuring targets in all business spheres have been achieved. In agriculture as a key pillar for the economy, for example, a host of problems have aggravated farmers’ economic difficulties, sending agriculture’s GDP to an estimated 2.81% this year compared to 3.3% last year. Glut of farm produce supplies, falling prices of products due to bumper crops, lack of connection between farmers, scientists and companies, and scattered production are some of the woes hitting farmers. Doanh said the Government should introduce a scheme to restructure agriculture. In other sectors, bad debts in the property industry and low efficiency in public investment show no signs of abating, he said. “Vietnam is facing the lowest economic growth in the past 13 years, and revenues for the State budget are falling. The extremely difficult situation will continue in the next two years but for drastic reforms,” Doanh said. He therefore called on enterprises to have correct evaluation of the situation to map out new strategies to cope with the tough time. Pham Phu Ngoc Trai, board chairman of Global Integration Business Consultants, said that as Vietnam is speeding up its international economic integration, there would be new waves of opportunities. “It’s sure that enterprises should have changes to align themselves to the new business environment,” he said. At the seminar, successful entrepreneurs also shared their experiences to achieve success. Ly Ngoc Minh, general director of Linh Long 1 manufacturing ceramic products, said that the company has since 1996 focused on the domestic market instead of overseas markets only. Domestic sales now account for 70-80% of the company’s total revenue, he said. Minh said that it is the attitude of change that has brought about breakthroughs for the company in recent times. Phan Quoc Cong, CEO of the consumer goods company ICP, noted that the company’s key product line branded C Men has also undergone changes to suite the taste of the local market. Enterprises, therefore, should brace for changes in the macro economy and the industry landscape, he said. The forum was jointly organized by Leading Business Club, the 2030 Businessmen Club under Saigon Times Club, and the Saigon Entrepreneurs Club among others. Steel firms concerned about anti-dumping taxes Over 15 cold-rolled stainless steel producers have sent a petition to the Ministry of Industry and Trade to express concerns over possible huge losses after Posco VST and Hoa Binh Inox proposed anti-dumping duty on steel imports from several countries. Posco VST Company and Hoa Binh Inox Company in May filed a request for an investigation into dumping of cold rolled stainless steel products imported from China, Taiwan, Malaysia and Indonesia. “If the anti-dumping tax is levied at 20-40% as requested by the two enterprises, we will face huge challenges or even close down or go bankrupt,” the steel firms said in the petition signed on Tuesday. Le Tan Quoc, deputy sales director of Minh Huu Lien Joint Stock Company, said that the anti-dumping duty will force enterprises to increase product prices. If the tax ranges from 20-40%, stainless steel appliances and building materials will increase by 15-30% in price. Besides, enterprises will have to buy steel from Posco VST at 20-21% higher than the current prices. Otherwise, they would have to buy steel from Chinese firms with prices also surging 20-40% due to the anti-dumping tariff. In June, the Vietnam Steel Association sent a petition to express concerns over the issue. On July 2, the Ministry of Industry and Trade released Directive No. 4460/QD-BCT to conduct an anti-dumping investigation on imported cold-rolled stainless steel from the above countries. On September 30, the Vietnam Competition Authority decided to extend the investigation result until December 2. Recently, enterprises have again complained about the anti-dumping duty, saying that they will incur losses for buying stainless steel material at high prices. They also said that both Posco VST and Hoa Binh Inox Company do not have enough ground to file the lawsuit given the Anti-Dumping Agreement of the World Trade Organization. The firms insist that the anti-dumping duty will bring about benefits for only Posco Group, not the entire industry. Moreover, this may lead to a monopolistic position of Posco VST and Hoa Binh Inox who account for over 81% of the local steel market. In an interview in July, the Daily asked Kang Koo Yang, general manager of domestic sales at Posco VST, why the enterprise wanted a 20-40% tariff on all cold-rolled stainless steel imports while it produced a small amount of products. Kang said that Posco VST can produce more products if there are demands with reasonable prices. However, insiders said that it is hard to predict reasonable prices offered by Posco VST. Small hotel investment faces stricter management Having seen the fast-growing construction of hotels and resorts recently, many central localities are reviewing their accommodation systems, targeting to restrict small-scale facilities. Several central provinces do not want more low-end hotels and resorts constructed in their localities as they target larger hotel projects enabling them to offer more services to visitors as well as improving the service quality. At the Ham Tien-Mui Ne tourism area in the south-central coastal province of Binh Thuan, no coastal land areas are left for investors despite being known as a resort paradise. Similarly, in Danang City and Quang Nam Province, besides coastal areas suitable for building resorts having no room for investors, numerous small hotels and guest houses have been constructed in the city, prompting these localities to choose investment projects in a much more selective way. Ngo Minh Chinh, director of Binh Thuan Province’s Department of Culture, Sports and Tourism, informed that there were 10,000 guest rooms in the province. The province therefore has enough rooms to serve tourists but it is lacking big hotels that are able to accommodate large customer groups, forcing groups numbering more than 200 visitors to stay at different hotels. Furthermore, Binh Thuan is still short of entertainment and sports services, which is why the province is seeking to change the investment policy in hotels, Chinh noted. Binh Thuan previously approved construction of resort projects covering from one to two hectares each, but now the requirement is at least five hectares. The province offers a slew of incentives to large projects developing leisure and accommodation complexes such as the Delta Valley scheme on 1,000 hectares still under construction. “We suppose that building hotels and resorts should be done based on a clear target on customers and markets to promote their efficiency. At present, we don’t want to develop small-sized facilities any more,” he told the Daily. Binh Thuan now is encouraging small resorts to merge together so as to create larger ones in Ham Thuan Nam District and La Gi Town. Meanwhile, Danang has up to 300 hotels of one and two-star standards while the number of three-to-five-star hotels in the city is roughly 50. In fact, local demand for services of the mid- and high-end facilities has grown steadily year after year while lower-end hotels, especially those of one and two-star criteria, have seen low occupancy. According to Tran Chi Cuong, deputy director of Danang City’s tourism department, the fact that multiple small investors have been racing to build low-end hotels in recent years in spite of low demand has resulted in oversupply. Thereby, investors should be given warnings of the actual situation to have more effective investment calculation, Cuong remarked. Many solutions launched to attract home buyers Developers of housing projects have sought new ways to attract customers such as offering free apartment management services instead of simply reducing selling prices, offering preferential interest rates, providing furniture, or extending payment terms like before. Dat Xanh Group has recently offered for sale apartments of the SunView Town located in HCMC’s Thu Duc District with a free management service in 3-10 years. SunView Town consists of around 1,600 apartments having an area of 46-100 square meters each and sold at a price starting from VND10.9 million per square meter. Offering free management services is a solution which many project investors have lately adopted to attract potential customers besides various promotions on offer. Meanwhile, in the land lot segment, the investor of Osaka Garden residential area in District 8 is selling townhouse land lots with free house foundations built for buyers. Osaka Garden’s 240 land lots of 100-120 square meters each are priced at around VND11.6 million per square meter. Earlier, Vingroup has announced to offer a free management service in ten years to residents living in its new urban areas in Hanoi, namely Royal City, Times City and Vincom Village. According to the director of a real estate company, project investors are applying two solutions to lower the product prices. Some cut investment costs and reduce services to lower the selling price while others increase investment costs to offer more services to customers. Regarding the property market in the third quarter, Cushman & Wakefield Vietnam said that most of the current projects were providing many promotions to attract buyers. With several incentives, the apartment market from now towards the year-end and early next year will continue to be a market of buyers, according to Cushman & Wakefield Vietnam. Firms with bad debt can still seek new loans Those businesses in HCMC struggling with bad debt can still apply for new bank loans if their production and business plans are convincing enough, said Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch. Commercial banks have got a directive to this effect from the central bank and the city has been translating this into reality since October 14. Despite bad debt, banks will consider the feasibility of an applicant’s project and lend to it if proven workable. The goal is to help enterprises ride out the difficulties they are facing and pay old loans while banks can achieve credit growth targets in the final months of the year. The plan will run from now to the end of this year, Minh said. However, banks would be exposed to more risks if their clients failed to pay both old and new loans. However, this is an option needed for enterprises to survive the current tough market conditions. Many enterprises in the city have demands for loans but have found it tough to gain access to credits at banks due to their overdue debts. As a result, banks in the city are projected to achieve credit growth of as low as 5.5% in the Jan-Oct period compared to late 2012, lower than the nation’s figure. Local government also has plans to take other solutions such as cutting the interest on the loans that are falling due to support enterprises and allowing debtors to pay the principle first and the interest later. Pham Linh, deputy general director of Orient Commercial Bank (OCB), said the bank has steadily disbursed loans to enterprises since early this year. As of the end of October, credit growth in the corporate customers segment had reached 23% over late last year. The figure is expected at 30% late this year. Many enterprises have asked for loans to finance their imports in the lead up to the upcoming Lunar New Year buying spree. However, they have not placed huge orders due to financial woes, so financing demand would not rise suddenly from now to the end of this year. OCB is now offering enterprises short-term lending rates in dong from 9.5-10% per annum and 12-12.5% per annum for long-term loans. For dollar credits, the bank charges 3.8% a year and 6-6.5% on long-term loans. Most enterprises now prefer short-term loans. Linh said few enterprises want long-term credits to make investments or expand business operations. Le Thanh Trung, deputy general director of HDBank, said his bank had reported credit growth of 10% this year. However, capital demand from enterprises will increase strongly from now to the end of this year. Cross ownership in banks complicated Local experts on Wednesday said that cross ownership in the banking system remained a high-risk issue although the central bank has launched many monetary policies to curb inflation and improve liquidity of lenders over the past two years. Speaking at a workshop on monetary policies in Hanoi City, Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program, said that the banking system restructuring scheme aims at solving immediate problems and securing healthy operation of the network. Especially, the project aims to fix cross ownership, one of the main causes that have troubled the banking network. Given the ongoing restructuring, liquidity of banks has improved while bankruptcy risks have declined. However, the ownership structures of consolidated banks remain unchanged against that before the restructuring plan, suggesting that some groups of shareholders continue to hold majority stakes in banks, Thanh said. Ailing banks during the restructuring process have to seek investors from outside to save them from difficulties. However, it is very hard to find out investors that can replace existing shareholders, who have controlled the banks and manipulated their operations. Given the current law, an individual foreigner can own a maximum stake of 20% in a credit institution, preventing the investor from holding a majority stake or controlling management over the bank. To evade the law, foreign investors have joined many shareholder groups at various credit institutions but actually, these banks have connections. As a result, an old cross ownership has been replaced by a new one, Thanh said. Taking the merger between Western Bank and PetroVietnam Finance Corporation for example, Thanh said its aim was for State-owned enterprises to divest capital out of the banking network. “But for this case, we have accepted to let the State instead of State-owned enterprises join the banking system,” Thanh said. Besides, he at the workshop also said that although interest rates have declined, the gap between lending and mobilization rates stay high, at around six percentage points a year. He asked whether the gap has been made to help banks obtain earnings to deal with bad debts. His calculations on the interest rate were rejected by other experts at the workshop. Le Xuan Nghia, head of the Business Development Institute, said that the rate margin has been reported at 4.3 to 4.5 percentage points at eight large commercial banks. Some banks have posted up a wider gap but it is still less than five percentage points a year. Truong Van Phuoc, vice chairman of the National Financial Supervisory Commission, did not share Thanh’s ideas and Nghia’s figures. “I just asked some banks 10 minutes ago. The margin really is just around 2.8 to three percentage points. Some banks maintain the margin at 1.1 to 1.8 percentage points. In fact, banks have earned very low profits,” Phuoc said. Commercial banks earn low profits as they have used financial capability to solve bad debts, Phuoc added. Losses reported in auto insurance operations A majority of 29 non-life insurance firms have posted losses in the motor vehicle insurance market, especially physical auto insurance, over the years due to unhealthy competition, said Phung Dac Loc, general secretary of the Vietnam Insurance Association. After insurance firms allocate revenue quotas to branches, those branches use all kinds of means to lure customers to meet their sales targets regardless of risks faced by clients, Loc said. For instance, a taxi firm bought insurance for its 200 cabs but many of these vehicles had accidents, forcing the insurer to pay much compensation. However, the insurer could not raise premiums in the following year as a rival was available to offer the same product to the taxi enterprise at the same rate. The average physical auto insurance premium is around 1.3% of the insured vehicle’s total value while the rates in Laos and Japan are 6% and 4-5% respectively. The rate in Vietnam was 2% seven years ago but has dropped to 1.3% now while repair fees have jumped, Loc added. According to the director of a domestic insurance company, insurers have incurred losses due to aggressive premium reductions. Insurance is based on manufacturing year, car brand and other conditions, instead of compensation history and driving experience of the owner. The company of this director also incurred losses in this segment in 2010 and 2011 but then made some gains in late 2012 after revising compensation rates. According to the association, compensation for motor vehicle insurance, including civil liability and physical assets, of non-life insurance firms has increased steadily since last year. In the first quarter of 2012, the compensation ratio was 42.8% and rose to 49.4% in the second quarter and 52.5% in the third quarter. In the second quarter of 2013, the ratio was 65%. Motor vehicles also take the lead for insurance premium revenue of the non-life insurance market in Vietnam. The total premium was over VND3.8 trillion at the end of the second quarter of 2012, up 10% year-on-year. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR