BUSINESS IN BRIEF 5/1 Holiday season drives prices up The consumer price index (CPI) in the capital in January – during the Lunar New Year (Tet) holiday – will climb roughly 1.1 per cent due to high demands. According to the Ha Noi Department for Industry and Trade, the CPI increase during the nation's largest festival will be driven by price hikes of essential consumer goods, which are likely to increase 10 per cent during the Tet holiday. Also, rice prices are predicted to rise 5 per cent, especially the price of high-quality rice and sticky rice. Currently, the price of rice is on the rise due to growing demands in the capital's market and a 10-20 per cent decrease in rice output from the summer-autumn crop. High demands will also push the price of chicken, pork and beef to surge between 5-10 per cent. Despite good weather and an abundant supply of crops, the price of vegetables is also expected to experience a sharp increase of 10-15 per cent. The department, however, is strictly monitoring the supply and demand of essential goods in the capital city to keep market prices stable during the Tet holiday. It will also operate trade centres and wholesale markets to ensure a balance is maintained between supply and demand. Current economic difficulties, which caused residents to tighten their spending, have led to a dramatic fall of 0.34 per cent in food prices in December 2013 – the lowest level in the last decade. VAMC eats up bad debts from credit institutions The Viet Nam Asset Management Company (VAMC) had bought VND38.9 trillion (US$1.85 billion) worth of bad debts at a cost of VND32.4 trillion ($1.54 billion) in the form of special bonds from 35 credit institutions by December 31, 2013. There is one more bank that VAMC plans to buy bad debts this year. Nguyen Quoc Hung, VAMC's deputy chairman, said the quantity of bad debts they would buy was not high. Banks face a deadline of June to clean up their balance sheets, after which new rules regarding non-performing loans (NPLs) come into force. The new rules are part of the country's banking reforms. Banks are reported to be rushing to offload their NPLs to VAMC and clean their balance sheets before the deadline. Despite the new regulations on NPLs, Viet Nam's banking sector has not seen any regulatory improvement regarding transparency, loan classification and accounting standards. VAMC, a wholly State-owned company with charter capital of VND500 billion ($23.7 million) and managed by the central bank, was established in late July last year to reduce the bad debts of the banking sector. It started business in October last year and set a target of purchasing VND30-35 trillion ($1.42-1.66 billion) of bad debts by the end of 2013. Apart from the debt business, the Ministry of Finance allows VAMC to hold deposits at state-owned banks and make investments (hold stakes) in other companies. Other terms regulating VAMC's business are presented in Circular No 209/2013/TT-BTC, which comes into effect from February 15 this year. HCM City shops stock up on Tet specialties Shops in HCM City have stocked up on a variety of traditional Tet foods from various regions around the country ahead of the year's main festival. Ha Noi Supermarket and shops selling northern specialities on Dien Bien Phu Street in District 1 and Tran Quoc Toan Street in District 3 are popular places. Here, besides confectionery, jam, wine, sticky rice, pork pie, fruits, vegetables, and even incense from the north, customers can find many other Tet specialities like Bac Can vermicelli, Lang Son bamboo shoot, square glutinous rice cake (banh chung) and salted vegetables (dua muoi). Many shops have started to take orders for items like Canh orange, Dien and Doan Hung pomelo, phat thu fruit (digitate citrus fruits), and banh chung. Those looking for foods like Tra River goby, various salted fishes, Da Nang grilled beef patty (Da Nang cha bo), and speciality cakes from the central region can find them at Ba Hoa market in Tan Binh District. Items from the Cuu Long (Mekong) Delta, which can be found at many supermarkets and shops around the city, have seen many new additions this year, including dried snake and frog. According to shop owners, the prices of many kinds of specialities, including meat pie and fruits, are up 10 per cent from last month and are expected to go up by another 10-20 per cent by Tet due to higher transport and raw material costs. Besides, northern provinces experienced a poor fruit crop this year, especially of Dien pomelo, pushing prices up, they added. Tran Thi Kiem Hoa of the Tan Dinh Market management said: "Prices of dried shrimp have increased sharply this year with a kilo of the best quality shrimp costing VND1 million (US$47.3) now." "This represents an increase of VND200,000 from last year," she said. Besides boosting research to come up with new products, speciality food producers have also invested in production technologies to improve quality. Many producers use vacuum packaging to give their products a better look and preserve them longer. Tet items are also widely sold online. But experts warn that customers should be careful while buying since many of them do not have labels or indication of origin. SBV to continue gold auctions The State Bank of Viet Nam (SBV) sold 1.82 million taels (69.9 tonnes) of gold during 76 auctions in 2013. SBV will continue these sales in 2014 in an attempt to further stabilise the domestic market and address imbalances between supply and demand. The gold was largely sold to credit institutions to help close outstanding gold deposits. Other sales were sold to gold firms to meet market demands. The sales reduced local gold prices to VND34.6-34.7 million (US$1,641-1,646) per tael at the end of 2013, down VND12 million ($569.28) per tael, or 24 per cent against the year-end in 2012. The gold auctions have been used by SBV to battle speculative activity in the market, minimise gold imports and increase foreign reserves. Gold auctions are among the tools used by the central bank to regulate the gold market. In the first trading day of the new year on Thursday, local gold prices were up VND160,000 per tael ($7.5), or 0.38 per cent, to VND34.82-34.9 million ($1,651-1,655), driven by the increasing trend of world gold. One tael is equivalent to 1.2 ounces Meanwhile, on the trading floor gold was selling at $1,223.20 per ounce. Reuters said gold futures jumped 2 per cent yesterday as bargain hunters resurfaced. Gold plunged 28 per cent in 2013, ending a 12-year bull run, after the US Federal Reserve announced plans to unwind the ultra-loose monetary policy starting in January 2014, tarnishing the metal's appeal as a hedge against inflation. The gold price was nearly $700 below a record hit in 2011. SBV also said that the implementation of the policy had significantly stablised foreign exchange rates. Commercial banks yesterday quoted the US dollar at VND21,115-21,130, which was almost unchanged against one week ago. The central bank's governor, Nguyen Van Binh, last month announced that he would flexibly manage the exchange rate within a 2 per cent margin this year. In 2013, SBV planed a 1 per cent margin in foreign exchange management, but the actual margin was about 0.6 per cent. Viet Nam-Cambodia trade targets $5 billion by 2015 Trade between Viet Nam and Cambodia has developed significantly and will reach US$5 billion by 2015, said Tran Bac Ha, President of the Association of Vietnamese Investors in Cambodia (AVIC). A report from the Ministry of Industry and Trade's Asia-Pacific Market Department revealed that two-way trade value reached $3.1 billion over the past 11 months. Of this total, $2.7 billion came from Vietnamese exports, a year-on-year rise of 5 per cent, including petroleum, steel and iron, garments and textiles, agricultural machinery, chemicals and fertiliser. New house tax to fund infrastructure The Viet Nam Federation of Civil Engineering Associations proposed imposing two new taxes – property tax and development charge – on personal houses starting next year in order to procure funds for infrastructure investment. Pham Sy Liem, vice chairman of the federation, said that the property tax would take into account the value of both land and housing, replacing the old one, which considers only land value. The tax would be imposed on houses in urban areas as well as those near crowded routes with green trees and public lighting systems. "Houses located in convenient places will be more valuable and expensive, so they must be subject to higher fees," he said, adding that the tax would be used for infrastructure development. According to Liem, the Ministry of Finance once proposed a law on land and housing taxes, but did not get approval from the Government due to the financial crisis. However, it was necessary to collect the tax to have a stable fund for development, he said, adding that many nations in the world collected this kind of tax. In terms of development charge, Liem said the fee would only apply to newly-built or rebuilt houses. For example, a newly-built house would be VND5 million (US$240) more expensive if a new road were built next to it, so the owner would have to pay a fee in accordance with this fact. He added that the Ha Noi People's Committee had collected the same fee of 10 per cent of the value of a newly-built house, but it was stopped after two years of implementation. Dang Hung Vo, former deputy minister of Natural Resources and Environment, agreed with the initiative, saying many ASEAN countries imposed taxes amounting to 1-1.5 per cent of the market price of land and housing. The current land tax in Viet Nam was only 0.03 per cent. However, Vo admitted that because the income of people was rather low, any tax increase should be carefully considered. Le Dang Doanh, an economic expert, said officials should collect feedback from the public before implementing the development charge. He cited Switzerland, where the Government collected public opinion on tax amounts, as a role model. Nguyen Hong Van, a resident of An Duong Street, said she already had to pay more than VND1.2 million ($57) each year in land fees and did not want to pay more. "I'm tired of all kinds of fees. I think the authorities should consider the financial burden people are suffering," she said. The federation will submit the plan to authorised agencies for approval early next year. Exports need quality breakthroughs Exports notched up enormous success in 2013, contributing to macroeconomic stability and a supply-demand balance. In the long-term, however, they require dramatic quality improvements. The Ministry of Industry and Trade reported Vietnamese exports improved 15.4% to total US$132.17 billion in 2013, 10% higher than the annual target set by the National Assembly. The domestic sector accounted for 33% of the total (up 3.5%), while the foreign direct investment (FDI) sector excluding crude oil contributed 61.4% (up 26.8%). Twenty-two export commodities recorded trade values above US$1 billion each. Vegetables and fruits crossed the US$1 billion export threshold for the first time, a positive signal for the agricultural sector. Exports to the Americas enjoyed the highest growth. Exports have undertaken restructuring in response to industrialisation and the 2011–2020 import-export development strategy and with a vision for 2030. Industrial processing products accounted for 71% of exports (up 6%), followed by agro-forestry and fisheries products’ 15% (down 3%) and mineral fuels’ 7% (down 3%). Mobile phone handsets and components finally surpassed garments with 69.2% export growth, US$21.5 billion in earnings, and accounting for 16% of total export value. Domestic businesses showed signs of recovery with export growth of 3.5%—higher than 2012’s level of 1.2%. Vietnam managed to record a trade surplus for the second consecutive year, actually increasing the surplus from US749 million in 2012 to its current US$863 million. Vietnamese products are now available in almost 200 countries and territories. MoIT Minister Vu Huy Hoang says the results are particularly impressive considering present economic difficulties that include price declines and restricted markets. The best performing commodities included garments, footwear, wood and timber products, computers, and electronics and components. Hoang cites these results as demonstrating expanded production capacity and the structural shifts in Vietnam’s exports. Exports were a major influence on sustained macroeconomic stability but the most successful commodities deserve more than their ideal share of the credit. The garment sector’s dependence on imported materials remains a problem. Domestically sourced materials account for just 40–45% of the sector’s demands. It must seek to connect businesses in material supply chains capable of accommodating sustainable development. Agro-forestry and seafood products fell in terms of both prices and volume. Four of the seven key export commodities—cassava, coffee, rice, and tea—decreased in volume alongside a drop in cashew nut, pepper, and rubber export prices. Mobile phone handsets and components, garments, computers, and electronics and components were once again the best performers. The FDI sector’s trade surplus is approaching US$14 billion. Its pleasing export growth was unfortunately inefficient because of its reliance on manufactured and assembled products with low added values. Most exports rely heavily on imported input materials as the Vietnamese support industry is still in its infancy. Manufactured and assembled product imports are expensive. Despite its growth, the industry and trade sector has yet to achieve breakthroughs in sustainable development. Northern ports handle first tonnes of cargo in 2014 Cai Lan Port in the northern province of Quang Ninh received four vessels and handled nearly 145,000 tonnes of cargo on the first day of 2014. The Cai Lan International Container Terminal Company (CICT) hosted the Honest Spring ship from Panama, which docked at the port to unload 20,074 tonnes of soybean. The MTV Quang Ninh Port Ltd Co welcomed three other vessels, the Hai Qinh, Green Bay and Taio Frontier, containing corn and wood chips. The same day, the Singaporean Pacific Express container liner moored at Tien Sa port in the central city of Da Nang to load 200 cargo containers. New shipbuilding firm to begin operations The Shipbuilding Industry Corporation (SBIC) begins operations this month as part of the restructuring of the heavily indebted Viet Nam Shipbuilding Industry Group (Vinashin). With a total registered capital of VND9.52 trillion (US$449.06 million), the new corporation will operate as a parent company and focus on building and repairing ships, as well as recycling and converting old vessels into scrap metal. Trade with Brazil tops $2 billion in 2013 Experts predict that bilateral trade with Brazil would likely top some $5 billion over the next five years, and $8-10 billion by 2020.— VNA/VNS Photo Tran Le Lam Total trade between Viet Nam and Brazil was estimated to reach US$2.3 billion in 2013, including $1.1 billion coming from Vietnamese exports, according to the General Departments of Custom. Among Viet Nam's key export products to Brazil were seafood, footwear, computers and electronics, as well as textiles and garments. Experts predict that bilateral trade with Brazil would likely top some $5 billion over the next five years, and $8-10 billion by 2020. Binh Dinh targets two million visitors in 2014 The south-central province of Binh Dinh has targeted to welcome over 2 millions tourists in 2014, up 22 per cent year-on-year, according to the provincial Culture, Sports and Tourism Department. The province also seeks to earn VND780 billion ($37.14 million) from tourism revenues in 2014, a surge of 32 per cent over 2013, the department said. To reach these goals, Binh Dinh was taking steps to improve the quality of its tourism products, including promoting cultural activities and organising seminars to turn the province into a national tourism centre by attracting travel agencies and strategic investors. Vietnam pushes ahead with life-long learning society Deputy Prime Minister Vu Duc Dam has appealed for the best use of technological advances, making it easier for citizens to learn throughout their lives as Vietnam pushes ahead with building a life-long learning (LLL) society. He made the call at a national conference in Hanoi on December 17 that discussed the vision and action needed to build a society of LLL which encompasses learning at all ages and includes formal, non-formal and informal learning. The event was held as Vietnam is integrating into the world economy, especially the Association of Southeast Asian Nations that will materialise its community by 2015. In 2005, the Government adopted the LLL society strategy until 2010 and has recently passed through its extension to 2020, with clear responsibilities of ministries and agencies involved. He suggested vulnerable groups like women, ethnic minority communities and those living in disaster-prone areas be given priority during the process. Dam asked scientists, education professionals and policymakers to pinpoint major obstacles while calling for input from home and abroad on the strategy. Inter-sectoral approaches were raised during the discussions, visualising how a learning society will come out and develop in light of the best international practices. United Nations Country Director in Vietnam Pratibha Mehta praised Vietnam’s commitment to building a LLL society model, which she said will keep Vietnam off the “middle income” trap and shift its economy to one led by technology and professional skills. Delegates from Japan, the Republic of Korea, Singapore and Thailand also shared relevant perspectives and experiences from their own countries. According to them, the model should be driven by financial means and interactive communities involved. The event was a joint effort by the National Steering Committee on Building a Learning Society, the National Council on Education and Human Resource Development, the UN in Vietnam and the UNESCO Institute of Life-Long Learning.- 121 trillion VND needed for transport in northern region The Transport Ministry has said more than 121 trillion VND (approximately 6 billion USD) will be needed for transport infrastructure in the mid-land and mountainous areas in the northern region between now and 2020. The focus of investment in the next three years will be three highways connecting Hanoi and the northwestern province of Lao Cai , Hanoi and the northeastern province of Thai Nguyen , and Hoa Lac in Hanoi and the northwestern province of Hoa Binh . In addition, important centripetal routes and belt roads will be upgraded, including National Highways 6, 12 and 279, while weak bridges on these roads will be rebuilt. The ministry plans to call for ODA capital to upgrade the Yen Vien-Lao Cai railway route as well as to invest in several inland waterway, aviation and local road projects, including the Viet Tri-Lao Cai and Pha Lai-Da Phuc waterway routes together with major river ports on the routes. For the local road networks, the transport ministry aims to pave all inter-district and inter-provincial and 70 percent of inter-commune roads with cement concrete or asphalt. Transport minister Dinh La Thang said it is important to set priority in line with capital arrangement, adding that the ministry will work to mobilize all capital sources, both domestic and foreign, and in all forms such as BOT (Build-Operate-Transfer), BT (Build-Transfer) and PPP (Public-Private Partnership). Transport infrastructure projects will be developed in the direction of multi-purpose, such as combining building roads with irrigation works and new residential areas to relocate people from natural disaster-vulnerable areas. Art performance raises funds for AO victims More than 450 million VND (21,150 USD) was raised for AO/dioxin victims in the southern province of Vinh Long at a cultural exchange and art performance held in the locality on December 17. The event, organised by the local Association for the Victims of Agent Orange/dioxin (AVAO) in conjunction with the province’s Department of Culture, Sports and Tourism and Union of Friendship Organisations, saw the participation of many Vietnamese artists and those from the Republic of Korea. According to AVAO Chairman Phan Thanh Rang, Vinh Long is home to more than 6,000 AO victims , with half of them are children. Most of them meet difficulties in their lives and need assistance from the community to integrate into the society. The money collected at the event will be used to provide scholarships and health care services as well as build houses and centres for taking care of the victims. Price drives away potential power investors The government not yet setting the power price under market rules and no viable mechanism to source investment for the power sector are the core reasons investors remain uninterested in power projects. Kien Luong 1 thermal power project needs $2 billion and if other parts of the Kien Luong power centre project, assigned to the Tan Tao Group (ITA), are included, total investment amounts to $6.7 billion. Four years after starting the project, ITA still fails to finalise capital arrangements for the project. ITA initially thought the build-operate-own (BOO) investment model with a government guarantee would help it source loans from international credit organisations, but the government has refused to guarantee the model. ITA recently got the thumbs up from the government to convert its investment model into a build-operate-transfer (BOT). Under the model, the government guarantee would follow regulations set forth in a decree from 2009. Without special government guarantee, it is difficult for ITA to source the needed capital to execute the project, particularly as loans are planned to account for 70 per cent of total investment. Not only private investors have found it difficult to source capital for power projects, state giant PetroVietnam has also faced numerous difficulties. Early last week the group inked an agreement to borrow $780 million to implement the $2 billion Thai Binh 2 thermal power project, assigned to PetroVietnam five years ago with a capital structure of 30 per cent investor equity and 70 per cent loans. Head of the customer relations department at Pvcombank Bui Huy Cong said during the capital arrangement process for PetroVietnam’s power projects, many foreign organisations said Vietnam’s current price levels were unappealing. In light of power development master plan for 2011-2020, the power sector would need $48 billion in total investment capital. Electricity of Vietnam, Vietnam’s state-owned power authority, faces mounting hardships in sourcing investment capital. According to deputy general director Duong Quang Thanh, the capital from EVN’s depreciation fund is only enough to pay the principal and interest of current credit contracts with very little remaining to invest. At the same time, efforts to raise capital by equitising member units have been below expectations so EVN is likely to face future difficulties as well. It has been difficult for EVN to source new loans from international organisations such as the World Bank and Asia Development Bank as its modest cumulative capital fails to meet the needed 25 per cent equity investment required for power projects. Deputy head of the Central Economic Committee Bui Van Thach said that as well as capital shortages, there is no viable mechanism to help power projects attract investment. “The average power price in Vietnam is 7 US cents per kWh, against 11-12 US cents in regional countries, making it difficult to lure investors into the power sector,” said Thach, adding that to charm investors, the price of power must be opened to real market prices. Nguyen Minh Due, an expert from the Vietnam Energy Association, said efforts needed to be put toward saving the production cost of power, thus making it easier to source investment. Brand, manager shake ups critical to reforming bad banks Vietnam is seeing an increasing trend of banks changing their brand identity and/or managers to bolster efficiency. In the recent past, Tien Phong Commercial Joint Stock Bank launched a new brand and changed its transaction name to TPBank. After a year and a half of self-restructuring, the bank has seen positive results. According to chairman Do Minh Phu, before restructuring, TPBank reported low liquidity and bad debts exceeding 6.4 per cent and faced insolvency. Until now, the bank has succeeded in raising its chartered capital from VND3 trillion ($142 million) to VND5 trillion ($264 million), double its total asset value and reaping profits of more than VND500 billion ($23.8 million). The bank’s deposits have more than doubled, its bad debts have slid to 2.7 per cent, and its customer base has tripled. In the middle of this year, after getting State Bank approval, private TrustBank changed its name to Vietnam Construction Joint Stock Commercial Bank after a group of new shareholders made a significant capital injection. The new structure aims to focus on providing unique banking services to corporate clients operating in the fields of manufacturing and trading building materials and constructing social housing. Most recently, Navibank asked for shareholder input in changing its name into Dan Quoc Joint Stock Commercial Bank along with a logo change, brand identity shift and moving of the head office from Ho Chi Minh City to Hanoi. The move came after a major shake-up of the Board of Directors. Banking expert Nguyen Tri Hieu said the name and brand changes were vital to the banks’ post-restructuring goals. “Banks rely on the trust of their customers and when a bank develops a bad reputation due to low liquidity and sustained losses, designing a new name and brand shows the bank’s intent to make changes and puts customers’ minds at ease,” Hieu said. TPBank CEO Nguyen Hung said three factors were crucial to ensure successful restructuring. His first point was to achieve real capital flows to help would-be-restructuring banks improve their financial strength. Second was having a real shareholding structure where the principle shareholders do not use the bank’s capital for private affairs. Third was having an experienced and capable Board of Directors. TPP negotiators prioritize quality Vietnam’s Trans-Pacific Partnership (TPP) negotiators agreed to give priority to quality instead of hastily speeding up the agreement negotiations due to time constraints, said leader of the negotiation team. Speaking at the conference on TPP negotiations in HCMC last Friday, Tran Quoc Khanh, head of the Vietnamese TPP negotiation delegation and Deputy Minister of Industry and Trade, said that the team is trying to conclude the agreement as soon as possible. However, negotiators from participating countries agreed that no agreement is still better than a bad agreement. They will not sacrifice quality of the TPP agreement due to time pressure, Khanh said. Related sides will organize mid-term negotiation rounds regularly and a ministerial meeting will be held early next year, maybe in January, he added. There have been 19 official TPP negotiation rounds, many mid-term sessions and three ministerial meetings. However, the agreement cannot be concluded this year as expected earlier. Vietnamese negotiators are divided into 20 groups to look into nearly 30 issues. However, over 20 issues still need further discussion, including tough problems such as merchandise, investment, trading, intellectual property and State-owned enterprises (SOEs). For instance, in the garment and textile sector, Vietnam theoretically will benefit from the TPP and enjoy a 0% tax rate while exporting goods to TPP member countries. However, the nation will face problems with the “yarn forward” Rule of Origin, which requires the TPP nation to use TPP member-produced yarn in textiles in order to receive duty-free access. As Vietnamese enterprises mostly import materials from countries outside the TPP agreement, they will get no benefits from the agreement if the “yarn forward” rule is approved. Local enterprises are considering a solution for the problem, importing cloth and producing garments in Vietnam to enjoy tax incentives. However, this solution in the long term may turn the enterprises into subcontractors while the local textile and dyeing industries may fail to grow up. Vietnam still offers cheap labor costs and the garment industry is developing. But if a neighboring country one day stands out for low labor costs, foreign investors may move all their workshops there immediately, Khanh said. The negotiation team is trying to solve the problem to bring about benefits to enterprises in the short term and sustain development in the long term, he added. According to the Vietnam Textile and Apparel Association, the nation’s apparel export value has surpassed US$20.5 billion this year compared to last year’s figure of US$17.5 billion. SOEs are also a tough problem as TPP members have requested that SOEs must follow market rules and secure transparency in operation. Meanwhile, Vietnam has over 1,000 SOEs, which is a large number compared to other TPP nations. Besides, TPP members have yet to reach agreement in intellectual property rights, Khanh added. Agriculture investors to get State support Enterprises investing in agriculture will be given stronger financial support from the State, according to a decree just issued by the Government effective from next February. The maximum financial support of VND20 billion will be given to those enterprises setting up factories to manufacture particle boards from planted woods. Local and foreign investors in the husbandry sector will be subject to support of VND3 billion each project, while those involved in dairy farming will get VND5 billion that will be used to build infrastructure, treat wastes and acquire equipment. Those investing in near-shore fish rearing will be given VND40 million for every 100 cubic meters of rearing cages, and up to VND100 million if their farms are above six nautical miles from shore. Such incentives are provided for in Decreee 210/2013/ND-CP effective from February 10 and replacing Decree 61 issued in June 2010. In addition, project owners will also enjoy land rent exemption for 15 years, and are subsidized 70% of the cost for new technology research. The stronger incentives are meant to encourage investment into agriculture, an area that has attracted few investors. Risks loom large over fiscal, monetary policies Both officials and experts at a seminar in Hanoi on Thursday expressed grave concerns over the country’s fiscal and monetary policies which may pave the way for high inflation to return and pile pressure on public debt. Deputy Minister of Planning and Investment Cao Viet Sinh said he was wary about high inflation if there is no harmonization of fiscal and monetary policies. Sinh was speaking at the seminar on harmonizing fiscal and monetary policies in macroeconomic management for 2014-2015 organized by his ministry. The deputy minister himself is drafting a resolution on improving the business environment for 2014. Regarding the fiscal picture, Sinh said the budget overspending of 5.3% of GDP equivalent to VND224 trillion coupled with the Government bond issuance of VND100 trillion will account for 7.5% of gross domestic product (GDP) in 2014. The monetary scenario for next year is also gloomy. The greater money supply will steer the cash flow into Government bonds and bad debts, while it should be channeled into business instead, Sinh said. Trinh Quang Anh from the Policy and Development Institute under the Ministry of Planning and Investment observed that credit institutions are holding up to VND450 trillion, or some US$21.5 billion, worth of treasury bills and Government bonds, or up to 90% of the amount of such papers in circulation. But the pressure is mounting, Anh said, as the Government will likely have to issue an additional VND320 trillion worth of bonds in the next two years to cover public investment and to service those bonds that become mature. “The Government bond issuance poses risks. I would warn against the public debt becoming unsafe, causing uncertainties in the banking system,” he said. Le Xuan Nghia, a financial expert, said the bond market accounts for 17% of GDP now, with 90% being Government bonds. Banks are holding 80% of the amount. In Nghia’s calculations, the aggregate maturity date of all Government bonds will come after 3.2 years. “I am very much concerned that the amount of public debt is rising quickly and most of the (bond) maturity dates come in the midst of the 2014-15 period, which will result in huge difficulties for the State budget to pay foreign debts and due bonds,” he said. Such a situation “will cause adverse impacts on the liquidity of commercial banks, and without discretion, there will appear fiscal danger.” The concern about rising public debt is echoed by Pham The Anh, acting director of the Public Policy and Management Institute of the National Economy University. The total amount of public debts, inclusive of those owed by State-owned enterprises and those owed by the State to developers of capital construction projects, may have risen to 98% of GDP instead of 55.7% announced by the Ministry of Finance in October. “The overall fiscal picture shows that Vietnam has been unable to keep the budget revenue/spending balanced. The budget overspending is alarming although Vietnam enjoys a high ratio of budget revenue to GDP compared to regional countries,” he said. Vu Dinh Anh, another economist, agreed to the point. “To service debts, we have to borrow more, without any sources available to pay principal sums. In case we cannot borrow funds, what shell we do to pay the ever-rising public debt?” Anh pondered. When raising budget overspending to 5.3% of GDP and issuing VND170 trillion of bonds for the next two years, the Government must be prudent in combining fiscal and monetary policies for macro stability, said experts at the seminar. Dao Van Hung, director of the Policy and Development Institute, and his colleague Trinh Quang Anh suggested that the Government quickly announce its policy of keeping inflation at around 7% in the next two years and lower in the medium term for macroeconomic stability. Meanwhile, the State Bank of Vietnam must also announce its stance of stabilizing the exchange rate, allowing for a fluctuation of no more than 2-3% in the next two years to reassure local and foreign investors of a stable business environment, they said. Red tape hinders border trade with Laos, Cambodia Delegates at an international seminar in Tay Ninh Province last Friday said complicated procedures at border gates are hindering trade between Vietnam and Laos and Cambodia. Tran Bao Giam, Vietnam’s trade counselor in Laos, said traders as well as travelers were complaining much about import-export and customs procedures. He was speaking at the seminar titled Tay Ninh – Gateway for Vietnam-Laos-Cambodia Border Trade organized by Tay Ninh Province government in collaboration with the trade ministries of the three countries. “Travelers and traders for the most parts do not complain about road conditions, but the procedures that are time consuming and costly,” said Giam, who has worked in Laos for 20 years. Hoang Tho Xuan, an expert with the Trade Research Institute under Vietnam’s Ministry of Industry and Trade, said the three countries were working together to improve road conditions to facilitate goods transport at border gates linking the three. To further facilitate trade, relevant authorities of the tree countries should allow transport means from each country to enter the other, he said. But such a condition is not enough, according to Giam. “In my opinion, even if the three countries improve infrastructure at border gates, that won’t help if procedures are not streamlined,” Giam said. Xuan of the Trade Research Institute noted that the working hours at border gates of the three countries also vary, and commodities have to undergo double inspections, blocking the easy flow of goods. Therefore, the three countries should map out regulations convenient for traders if the exchange of goods between them is to improve, Xuan said. Such a view was echoed by the business community. Tran Thanh Trong, chairman of Binh Duong Province’s Electro-Mechanical Association, said many types of Vietnam-made electric appliances sell well in Cambodia, but traders find customs red tape at border gates very discouraging. Enterprises when selling electric appliances to Cambodia will have to unload cargoes from trucks at the border gate, normally Moc Bai in Tay Ninh, then load such cargoes onto other trucks for transport into Cambodia. That causes great hardship for enterprises, Trong said. Deputy Minister of Industry and Trade Nguyen Cam Tu shared concerns over the red tape problem. Under ASEAN commitments, one-stop customs procedures will apply in the coming time to simplify procedures in the bloc. However, I think that Vietnam, Laos and Cambodia have special relationships so this issue (of simplified customs procedures) should be addressed earlier before the ASEAN Economic Community is established in 2015,” he said. However, the deputy minister also observed that each country has a specific legal system, with different priorities regarding economic development and security, so it is understandable that regulations on customs and import-export are also different. Data from Vietnam’s General Customs Department show that between early 2008 and this November, the trade value between Vietnam and the other two countries via border gates totaled US$19 billion, growing by an average 22% a year. This year, two-way trade between Vietnam and Cambodia is expected at US$3.5 billion, with nearly one-third conducted via border gates, mainly Moc Bai Border Gate in Tay Ninh Province. VND14 tril. for central road upgrade, construction The Ministry of Transport on Sunday started construction of a section of Ho Chi Minh Road running through the central region with a total value of nearly VND12 trillion while work on another project to upgrade a section of Nation Highway 19 worth some VND2 trillion was also commenced in the region on the same day. According to the transport ministry, the section of Ho Chi Minh Road stretching from La Son in Hue to Tuy Loan in Danang has a total length of 80 kilometers. It is set for completion in 2017. Owing to the scheme’s urgency, the project has got nod from the Government to make payment for its investment capital by government bond sales. Besides, the transport ministry is permitted to appoint the project’s investor. When in place, the La Son-Tuy Loan section of Ho Chi Minh Road and Danang-Quang Ngai expressway will make it easier for transport among central key economic regions. Furthermore, it is believed to reduce the heavy reliance on Hai Van Tunnel for traveling and tackle flooding and accidents on Nation Highway 1A in this area. On the same day, a section of Nation Highway 19 going through Binh Dinh and Gia Lai provinces also started upgrade. The project has a total length of more than 55.7 kilometers, with one section stretching through Binh Dinh with over 33 kilometers and the other through Gia Lai with over 22.6 kilometers. The project is deployed in line with the build-operate-transport format at a total cost of over VND2 trillion. Its toll collection will be carried out in more than 22 years after construction is completed in 2015. National Highway 19 is the backbone route connecting Binh Dinh and other central coastal provinces with central highlands provinces, Southern Laos, Northeastern Cambodia and Thailand. The highway however has been in deterioration, causing serious landslides during the past rainy and flood season. Height limit plus for green construction in city downtown Environmentally friendly works in the central area covering 930 hectares in HCMC will be subject to higher land usage coefficient, says a new policy of the city aiming to promote green construction in the city besides creating more greenery and open spaces for the local community. As per the city’s new regulation, open spaces for the community meaning public spaces such as squares and parks which can be accessible to residents at any time will be subject to higher land usage coefficient if the space accounts for at least 30% of the area. Speaking with the Daily, Truong Quang Thuc Trinh, deputy director of the central area planning management division under the city’s Department of Planning and Architecture, informed that projects recognized as green can have one more floor compared to the height limit designated for each area. The central area covers 930 hectares, encompassing District 1 and the nearby precincts of District 3, District 4 and Binh Thanh District. The area is limited by Nguyen Huu Canh-Thi Nghe Canal to the north, Dinh Tien Hoang-Vo Thi Sau-Cach Mang Thang Tam to the west, Nguyen Thi Minh Khai-Cong Quynh-Nguyen Cu Trinh-Nguyen Thai Hoc-Ong Lanh Bridge-Vinh Phuoc-Hoang Dieu-Nguyen Tat Thanh to the south and the Saigon River to the east. “There are more than 20 applications on constructing green schemes at the city’s center under consideration for land usage coefficient adjustment at the planning and architecture department,” said Trinh. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR