BUSINESS IN BRIEF 25/2 Firm accused of tax evasion, titanium smuggling The General Department of Customs has revealed tax evasion and smuggling of titanium ore by the Binh Thuan Trade and Mineral Investment Joint Stock Company (KSBT). The company's tax evasion and smuggling of thousands of tonnes of titanium ore were uncovered by the Lao Dong (Labour) newspaper after its investigation in July and November last year. During the investigation, some 40 customs clearance documents reportedly showed evidence of tax evasion and illegal exports by this company. To Bai Tich, general director of the KSBT, said all his company contracts were signed via fax. However, 37 out of the 39 contracts to sell titanium ore between 2009 and 2012 did not have the specific account numbers of the buyers. They were mostly Chinese companies. According to the Vietnam Immigration Department of the Ministry of Public Security, many contracts were signed and sealed when the director had gone abroad on business. However, the director told the authorities that all the contracts had been signed and sealed in his office in Vietnam . The Anti-smuggling Department of Chinese Customs informed the Vietnamese authorities that 10 Chinese companies, which often bought titanium ore from the KSBT, were registered with the Chinese Customs. But the names of seven out of these 10 companies did not match with the ones registered with the Chinese Customs. They are actually bogus companies, Vietnam Customs reported. The KSTB made illegal trading contracts lawful through commercial banks. Some contracts were signed without invoices. This means that a large volume of titanium ore was out of the Vietnam authority's control. The case files had been transferred to the investigating agency under the Ministry of Public Security. Local bank wins Finance Asia awards for 3 consecutive years The Technological and Commercial Joint-Stock Bank (Techcombank) has been selected by The Corporate Treasurer of Finance Asia magazine as “the best cash management bank” and “the best trade finance bank” in Vietnam in 2013. This is the third consecutive year Techcombank has won the awards by Finance Asia, a leading magazine on finance and banking in Asia. It also marks the 15th international prize the bank has received since the beginning of 2013. Techcombank has been evaluated for its investment in developing technological infrastructure with an average 15 million USD per year. With this investment, the bank has met criteria on bank transactions such as fast growing branch networks, and pre-eminent service quality.- TPP ministerial meeting opens in Singapore The TPP Ministerial Meeting is taking place in Singapore from February 22 to 25 with participation of ministers from 12 TPP countries. Ministers from the 12 Asia-Pacific countries, namely Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam have gathered here for the meeting. As scheduled, Vietnam’s Minister of Commerce and Industry Vu Huy Hoang will attend all sessions of the ministerial meeting. He will also have bilateral working sessions with other negotiation delegations during February 22-25. According to some delegates, this time’s TPP Ministerial Meeting will continue discussing issues still at odds among negotiation delegations, including investment, financial services, State-owned enterprises, E-commerce, customs, intellectual property rights, labour, environment, agriculture and textiles. Before the opening of the meeting, Singapore’s Prime Minister Lee Hsien Loong said in an interview with Chinese media group Caixin that negotiators “are very close to completing it” and that all the countries “are trying very hard” and “ought to be able to close this year”. New Zealand’s Trade Minister Tim Groser said, in a statement on February 19 before leaving for the negotiations, that “the key objective of this upcoming meeting is to focus on resolving all outstanding issues with the aim of substantively completing a comprehensive and balanced, regional agreement”. In February 19 broadcast discussion on New Zealand’s commitment to the regional economic integration and context for the TPP negotiations, Prime Minister John Key said that despite the controversial chapters in the TPP, including intellectual property and agricultural issues, “We remain confident that TPP can be concluded”. He also said “It’s ambitious for the 12 countries. Countries like Japan who has historically set outside of significant free trade agreements so this would be a big step for them. The United States, I think, has a variety of reasons why it’s very interested in seeing a successful outcome for TPP but nevertheless they still have to get it through their Congress and Senate.” Japan and the United States are the biggest economies in the grouping but are seeking agreement on their key bilateral issues – cars for the US and farm produce such as rice, beef, pork and diary for Japan . Many observers said that they expected an in-principle deal to be unveiled during US President Barack Obama’s visit to Asia in April. But even if negotiators reach a draft agreement, passage of the TPP for many countries could drag on for more than a year. However, experts all argued that there are economic benefits for all the participants, which now have a total population of more than 792 million and account for nearly 40 percent of global GDP and about one-third of all world trade.- MoF increases petrol, diesel prices The Ministry of Finance (MoF) yesterday allowed petrol distributors to increase fuel prices to a maximum of VND307 per litre. The hike, which raised the price of the popular gasoline RON92 to VND24,510 per litre and diesel to VND22,770, began at 8pm yesterday. The price adjustment followed the upward trend of global fuel prices, the ministry said in a statement. Since last November, the ministry has repeatedly emphasised that the petrol and gasoline businesses have been suffering losses due to global price fluctuations. It is estimated that 70 per cent of the petrol in the local market is imported, so retail prices depend heavily on global fluctuations. This is the sixth price hike for petrol and gasoline since early 2013. Work starts on $66.6m wood production line Construction of a VND1.4 trillion (US$66.6 million) wood production line was launched at the Quan Ngang Industrial Zone in the central province of Quang Tri. The line, the second of its kind in the MDF VRG Quang Tri wood factory, will have a capacity of 120,000 cubic metres of medium-density fibreboard (MDF) each year. It is slated for completion in the second quarter of 2015. South Africa and Viet Nam seek to boost trade ties South African wine producers and exporters met with Vietnamese wine importers in HCM City this week to discuss new business opportunities. Ambassadors and general consuls from many countries, along with experts from the wine industry in Viet Nam attended the event, which was co-organised by the South African Embassy, the South African Honorary Consul in HCM City, Do Thi Kim Lien, the South African Wine Association, and others, to mark the 20th anniversary of diplomatic ties between the two countries. According to Kgomotso Magau, the South African Ambassador in Viet Nam, being the world's eight largest wine producer, South Africa's wine volume accounted for four per cent of the world wine market last year. Martyn Mill, a wine producer from South Africa, said wine consumption is increasing in Viet Nam, providing a good opportunity for South African wine producers and exporters. A similar event was also organised in Ha Noi. Consumer confidence marks two-year high: market survey Viet Nam's Consumer Confidence Index (CCI) in the fourth quarter touched a two-year high, fueled by the optimism in the job market, Nielsen reported. According to Nielsen, a global provider of market research, insights and data, the CCI in Q4 2013 was 98 points, one percentage point higher than Q3 and 10 percentage points higher than Q4 2012. In a poll examining the ratios of savings, 74 per cent of the Vietnamese consumers said they were saving for the future and re-prioritising their discretionary spending to save on household expenses. This is the highest rate in the region, followed by the Philippines at 68 per cent. According to HSBC Holdings Plc's Emerging Markets Index released earlier this month, Viet Nam is among the most optimistic countries in terms of business expectations. The Asia-Pacific region was the only one to post an increase for the quarter, as consumer confidence surged one index point to touch 105. The indexes were down or flat in the other regions. All the confidence indicators posted marginal gains in the Asia-Pacific region in the fourth quarter, with a two-percentage point rise for job prospects (62 per cent), a one-percentage point increase for personal finances (62 per cent) and a three-percentage point up for spending perceptions over the next 12 months (43 per cent). Consumer confidence increased in six of 14 countries, with a quarterly climb of six percentage points in Japan to reach 80, its highest index since 2005. China went up one index point in the fourth quarter to reach a score of 111. India also reversed its downward confidence trend of the last three quarters by increasing three index points to reach 115 in Q4 2013. The percentage of Indians who said they were in a recession declined 14 percentage points to 62 per cent from 76 per cent in Q3 2013. WB funds estuary upgrade A ground-breaking ceremony was held in Nam Dinh City yesterday for a project that would upgrade major waterway corridors and river ports in the Lach Giang Estuary. The city is the capital of the northern province of Nam Dinh, which neighbours Ha Noi. A project document from the World Bank, which is funding the upgrade, said it is a part of the Northern Delta Transport Development Project, "which aims at enhancing the efficiency, environmental sustainability and safety of transport infrastructure and services through the alleviation of physical and institutional bottlenecks in two major waterway corridors in the Northern Delta Region." Speaking at the ground breaking ceremony, Deputy Prime Minister Hoang Trung Hai said the project was of great significance in ensuring regional socio-economic development. He asked the investor and contractors to use the World Bank loan efficiently and implement the project on time. Hai also asked the Ministry of Transport to co-ordinate closely with relevant agencies in tackling problems that come up during the project's implementation. The Lach Giang Estuary upgrade is also the main part of the US$110 million National Waterway Corridor 3 (Ha Noi – Lach Giang) improvement project. It is expected to facilitate better exploitation of the regional waterway system and improve connectivity of the national waterway network. The World Bank release noted that it would also result in the "ability of target waterways to receive larger vessels, resulting in lower transport costs and emissions of greenhouse gases and local pollutants per ton-kilometer, faster travel times, and safer navigation." Investment deal agreed for petrochemical complex The JGCS Consortium signed an agreement on Saturday with Viet Nam's Construction Corporation No1 to build civil works at the Nghi Son Refinery and Petrochemical Project in Thanh Hoa Province. The US$91 million sub-contract is for the construction of the project's civil works, zone-1 and zone-2. Speaking at the signing ceremony, Deputy Prime Minister Hoang Trung Hai required the project's main contractor, JGCS, and domestic sub-contractors, including Construction Corporation No1, to closely coordinate with the project's investor, consultant and supervisor to assure the project progresses on schedule and at a high quality, while maintaining a safe environment for workers and environmental protection standards. The success of the project will help continuously build ties between domestic and foreign contractors in future projects, Hai added. Hai also highly praised the JGCS's preparation for the project's construction and congratulated Construction Corporation No1 as the Vietnamese firm that could prove its competence and experience to be selected as a sub-contractor for the project. Hai said that the Nghi Son project played an important role in the development of Thanh Hoa Province. The project in the Nghi Son Economic Zone is one of Viet Nam's key projects on national energy security and socio-economic development strategies, and is the largest-ever in Southeast Asia and also the largest FDI project in Viet Nam – with capital topping $9 billion. The project is a joint venture between PetroVietnam, with a 25.1 per cent stake, Kuwait Petroleum International with 35.1 per cent, Japan's Idemitsu Kosan with 35.1 per cent and Mitsui Chemicals with a 4.7 per cent investment. Once commissioned in 2017 as scheduled, the project is expected to refine 200,000 barrels of crude oil per day, which is the equivalent of 10 million tonnes of oil per year. It is estimated it will create thousands of jobs during the construction period and more than 1,000 jobs when operational. This will be the second oil complex in Viet Nam, alongside the Dung Quat oil refinery plant. EU tops list of Viet Nam trade partners The General Department of Customs has reported that the EU is still Viet Nam's largest trading partner. The other five top trading partners are the ASEAN, the US, China, Japan and South Korea. The EU continued to be Viet Nam's largest importer, with a total export turnover of US$24.33 billion, up 19.8 per cent. It accounted for 18 per cent of Viet Nam's total export turnover. Many export goods experienced high growth, including telephones and accessories valued at $8.15 billion, up 43.9 per cent; footwear worth $2.96 billion, an increase of 11.8 per cent; and textiles, which earned $2.73 billion, a climb of 11.1 per cent. Imported goods from EU countries in the past year reached a total value of $9.45 billion, or an increase of 7.5 per cent, compared with 2012. The main imported commodities included machinery, equipment, tools and accessories. China continued to be a large trading partner of Viet Nam, with a total import and export value of $50.21 billion, up 22 per cent in the past year compared with 2012. However, Viet Nam's trade deficit with the northern neighbour remained large as the country imported goods worth $23.69 billion from China. In 2013, imports by both domestic and FDI enterprises from China increased sharply. Particularly, the imports of FDI enterprises rose by 38.7 per cent to reach $20.59 billion, and the imports of domestic enterprises went up to $16.36 billion. As for the US, Viet Nam's exports to that country reached $23.87 billion, a 21.4 per cent growth, which accounted for 18 per cent of the country's total export turnover. The export of garments and textiles reached $8.61 billion, footwear rose to $2.63 billion, wood products increased to $1.98 billion and computer and electronic components climbed to $1.47 billion. Meanwhile, exports of seafood from Viet Nam to the US increased to $1.46 billion. In 2013, imports from the US were valued at $5.23 billion, up 8.3 per cent, against 2012. Thirteen imported commodities with a total value of more than $4 billion accounted for 77 per cent of the value of goods imported from the US. Viet Nam still maintained its trade surplus while trading with the US, with an export value of $18.64 billion in 2013. Last year, Viet Nam's exports to Japan hit $13.65 billion, up 4.5 per cent, compared with 2012. However, this growth rate is quite modest against previous years. It was 23 per cent in 2010, 40 per cent in 2011 and 21 per cent in 2012. The main staples exported to Japan are textiles with a value of $2.38 billion, crude oil worth $2.09 billion, automotive components worth $1.77 billion and machinery and equipment worth $1.21 billion. Viet Nam's imports from Japan increased marginally by 0.1 per cent, while in 2010, it rose 20.7 per cent. In 2011, it jumped by 15.4 per cent, and in 2012, 11.6 per cent. The value of imported goods from Japan was $11.61 billion in 2013. In 2013, the bilateral trade between Viet Nam and South Korea experienced the strongest growth among the major trading partners of Viet Nam. The turnover was $27.33 billion, up 29.4 per cent year-on-year. Also, Viet Nam's exports to Korea reached $6.63 billion, up 18.8 per cent, and it imported goods worth $20.7 billion, an increase of 33.2 per cent. Trade between Viet Nam and other ASEAN countries has slowed down. Last year, Viet Nam's imports and exports to the ASEAN region posted positive growth rates, but they were much lower than the growth rates of previous years. Vietnamese businesses review operation in Russia The Vietnamese business community in Russia has met to review the results of last year’s operations and map out its strategy for 2014. At the February 22 meeting in Moscow, Vietnamese ambassador Pham Xuan Son praised the Vietnamese Business Association in Russia (SBA) for proactively assisting Vietnamese enterprises iron out their snags in recent years and increase profits. “The Association has successfully functioned as a coordinating link between Vietnamese business and Russian partners and elevated Vietnam’s image to potential Russian investors”. “It has also acted in conformity within the legitimate rights of local enterprises in line with Russian regulations”, Son added. On this occasion, the SBA along with Incentra Company and the Overseas Vietnamese Association in Russia organized a gala dinner, which was attended by famous Vietnamese artists. The jubilee saw music and dance performances in praise of the homeland that left deep impressions on international friends and Vietnamese in attendance. FDI enterprises granted too many advantages Foreign direct investment (FDI) enterprises in Vietnam are afforded too much preferential treatment, disadvantaging local businesses, economist Pham Chi Lan has argued in a recent media interview. Lan said the rapidly increasing FDI levels that followed Vietnam’s entry to the World Trade Organisation (WTO)—especially in exports—prove the country’s incentive policies are overgenerous. Lan said Vietnamese real estate prices continue to rise, limiting domestic businesses’ access to land. Conversely, almost all FDI enterprises can claim more land than strictly necessary. Localities offer foreign investors land at artificially reasonable prices. Vietnamese businesses never receive similar treatment FDI enterprises get long-term tax exemptions—as much as ten years with no tax, and a further ten years of 50% discount. They can easily borrow capital from Vietnamese banks. Vietnamese private enterprises are often forced to borrow loans at higher than listed interest rates. Discriminating between FDI and local enterprises will lead to serious repercussions. In the short-term, weakening local businesses create space for FDI expansion and increased market share. Economic development should rely on internal rather than external strength, she noted. FDI enterprises might push Vietnam’s GDP and exports higher but such figures are conditional on perpetually granting those businesses preferential treatment. A mass retreat of foreign investors, like Thailand’s 1997 experience, is always an unstated possibility and implied threat. The State should limit the preferential conditions it offers foreign investors and level the playground with local competitors. Some FDI enterprises, even those investing in Vietnam for dozens of years, still manage to evade paying their due in tax. Lan blames poor management and preferential policies. Foreign businesses must first obey Vietnamese obligations and laws. The State should extend its authority to supervise and control these businesses. Exports to the US increase sharply in January Vietnam’s export earnings from the US market hit US$2.35 billion in January 2014, a year on year increase of 16.2%, according to Vietnam Customs statistics. Textiles topped the list of export items, earning US$954.53 million, up 20.9% compared to the same period last year. They were followed by footwear, raking in US$248.12 million, up 2.6%, and wood products, valued at US$186.67 million, up 1.9%. Notably, mobile phone handsets and accessories ranked fifth, rising 1% to US$126.93 million. Approximately 1.5 million Vietnamese residents in the US support Vietnamese products in penetrating the US market. Besides, Trans-Pacific Partnership (TPP) agreement negotiations are entering the final stage, and once the trade pact is signed, it will offer plenty of opportunity to Vietnamese exporters. However, the Vietnamese Trade Office in the US warns Vietnamese businesses will encounter difficulties breaking into the US market unless they meet its tough requirements.    February trade deficit hits US$1.2 billion Vietnam has run up a deficit of US$1.2 billion in February, or 5.9% of total import-export value, following a large surplus in January. Statistics show Vietnam’s export earnings are estimated at US$9.6 billion and its import value at US$10.8 billion. Experts explained businesses focused on production to meet export orders before the lunar New Year that fell in late January. Businesses resumed production again in February, fuelling material import demands. Products with high import value include clothing, iron and steel, electronics, computers and components, and garment and footwear accessories. Mobile phone handsets and accessories topped the list of export items, bringing back US$1.6 billion, closely followed by garments (US$1.3 billion). These are two of Vietnam’s leading export items. Despite February’s high deficit, the national economy has still maintained a trade surplus of US$244 million in the past two months. Vietnam earned US$21.06 billion from exports, up 12.3%, and purchased US$20.82 billion worth of imports, up 17%, in two months. The foreign direct investment (FDI) sector enjoyed a trade surplus of nearly US$2.1 billion, while the domestic economic sector showed a deficit of nearly US$1.9 billion. Samsung expands operations in Vietnam The Republic of Korea’s Samsung group has drawn up a very ambitious expansion plan to revamp its operations in Vietnam and take full advantage of the country’s sound investment climate and highly-skilled human resources. Vietnam Investment Review (VIR) reported besides Samsung Electronics that has already committed US$5.7 billion in investment, other Samsung companies are eyeing mammoth thermal power, aviation and shipbuilding projects in the country. Although its investment plan is not unveiled yet, the Government Office recently announced Deputy Prime Minister Hoang Trung Hai’s instructions on strengthening investment cooperation with Samsung group. The group plans to invest in the Vung Ang 3 thermal power plant in Ha Tinh, Long Thanh International Airport in Dong Nai, a shipyard in Khanh Hoa, and even in information technology and e-government projects. Last year, Samsung C&T and the Vietnamese Ministry of Planning and Investment (MPI) signed a memorandum of understanding (MoU) on cooperation in infrastructure investment and development for Samsung-funded projects. At a recent working session with MPI Minister Bui Quang Vinh, senior Samsung advisor Ha Chan Ho expressed the group’s desires to expand operations in Vietnam, apart from its traditional area - electronics. He revealed Samsung wants to enlarge its Research and Development Centre in Vietnam, which is located inside the Petro Vietnam Insurance (PVI) building under a lease contract. The centre currently employs 800 engineers and expects to raise the figure to 1,400 in 2014 and 2,000 in 2016. The group aims to turn the Vietnam-based centre into one of its largest in the world in the coming years. Samsung now needs a land fund in the city centre to build its R&D centre instead of a previously suggested location at Hanoi’s Hoa Lac hi-tech park. Deputy PM Hoang Trung Hai recently asked the Hanoi Municipal People’s Committee to work on Samsung’s proposal. At the working session with Ha Chan Ho, MPI Minister Vinh hailed Samsung’s win-win cooperation, saying this principle will benefit both sides and ensure long-term cooperation. Samsung has been applauded for meeting its commitments to the Vietnamese government. After enjoying corporate income tax exemptions under current investment incentives, Samsung Electronics Vietnam (SEV) began paying the tax in 2013 and its 2014 corporate income tax is estimated at between US$60-70 million. Samsung electronics plants in Bac Ninh province alone handed in nearly US$92 million (VND2 trillion) worth of taxes, including VND1 trillion in local taxes. A SEV report shows SEV exports hit US$23.7 billion in 2013, making up nearly one fifth of Vietnam’s total export earnings. The localisation rate in its products also rose to 33% in the same year. A US$2.5 billion SEV-invested electronics plant got off the ground in Thai Nguyen province last year and, when the plant is put into operation in March 2014, Samsung said it expects to raise its 2014 export value to US$35 billion. With such an ambitious investment plan, Samsung aims to turn Vietnam into a premier leading production base in Asia. Construction starts on Thai Binh thermal power plant Deputy Prime Minister Hoang Trung Hai attended a ground-breaking ceremony of a thermal power plant in the northern province of Thai Binh on February 22. The plant is being built in My Loc commune, Thai Thuy district, by the Electricity of Vietnam Group (EVN) and Japanese contractor Marubeni at an estimated cost of VND26.5 trillion (US$1.27 billion). About 85% of the total comes from the Japan International Cooperation Agency (JICA)'s ODA loan and the remaining 15% is sourced from the EVN. The first turbine is scheduled to generate power in the fourth quarter of 2017,and the second in the second quarter of 2018. The two turbine groups will have a combined design capacity of 600MW and generate 3.6 billion kWhs annually. Addressing the ceremony, Deputy PM Hai noted the project helps ensure an adequate supply of electricity not only for the northern region but also southern localities, especially during the dry season. He asked local authorities and relevant agencies to speed up the project and protect the interests of displaced residents. Vietnam joins tourism fair in Belgium Vietnam is participating as a main venue, by special invitation, in the four-day Belgian – 2014 Chaleroi Tourism Fair– which kicked off on February 20. Speaking at the opening ceremony, fair chairman Van Cawenbergher accentuated Vietnam’s tourism potential, noting the nation’s inherent natural beauty and a variety of its attractive tourism products. Visitors to the fair were entertained with Vietnamese music and art performances, including lion dance and folk singing. The Vietnamese pavilion, decorated with displays of the traditional conical hats, peach blossoms, bamboos and flowers, attracted a large number of visitors. Following a success of a similar fair in 2010, the organizing board selected Vietnam as a main venue at the fair, showcasing its culinary art, handicraft products and cultural identity. Vietnamese participants introduced lotus green tea, displayed Ao Dai (long dress) fashion show, and a guide for visitors on how to cook nemcuon (spring rolls) – a traditional Vietnamese dish. HCM City encourages European investment HCM City is committed to creating a favourable investment climate for foreign companies, including those from Europe, to do long-term and efficient business in the locality. Mayor Le Hoang Quan made the commitment at a reception for representatives of the European Chamber of Commerce in Vietnam (Eurocham) on February 21. Quan said the city stands side by side with foreign businesses, addressing their concerns and facilitating their operations in line with Vietnamese law. The city has asked its relevant agencies to simplify its administrative procedures, ensure financial transparency and provide businesses with timely and accurate information on investment policy, he told his guests. Quan emphasised in the coming years HCM City will step up its efforts to increase exchange programmesas part of its bid to attract more investment and international visitors. The city is accelerating its international integration process and implementing cooperation agreements, as it strives to become the leading economic hub of the nation, he concluded. During the meeting, participants also discussed measures to attract investment, boost administrative reforms, and development orientations for HCM City until 2020. Reform efforts to boost economic recovery The Government’s endeavours in renovating institutions and bettering the legal system have been seen by some as decisive factors likely to support economic recovery in 2014 and beyond. Economic experts at a workshop held in Ho Chi Minh City on February 21 shared the view that Vietnam’s economy will regain its growth in the next two years when businesses pin high hope on sustainable development. SandeepMahajan, the World Bank’s Lead Economist for Vietnam, said the world economy still faces risks in 2014, but suggested developing countries will swiftly conduct reform of fiscal and monetary policies. To spur growth and limit risks, Vietnam should heed the restructuring of financial and banking institutions with the involvement of the private sector, he advised. However, according to Dr. Tran Du Lich, Vietnam will face short, mid and long-term challenges this year and further ahead, as the country’s low cost-based industry has lost its competitiveness during the process of regional and international integration.   In the 2012-2013 period, the country’s export revenue mainly depended on foreign direct investment (FDI) enterprises, he said, adding that the support industry – a key factor to raise local production and cut costs - has failed to fulfil its demands. The agriculture sector, which holds a lot of promise due to the huge rural population , has not been fully tapped in the context of globalisation, he noted. Therefore, the maintenance and restructure of the macro-economy is the main focuses of the Government’s policies in 2014 and next year, the workshop heard. Participants at the event were unanimous that a cautious and flexible monetary policy should set a credit growth target of around 15 percent annually. They highlighted the increase of the budget overspending cap to 5.3 percent of the gross domestic product (GDP) and the issuance of additional Government bonds worth VND170 trillion (US$8.1 billion) in the 2014-16 period. Such moves are expected to help Vietnam fulfil its growth targets of 5.8 percent in 2014 and about 6 percent in 2015, while curbing inflation at around 7 percent annually. Dr. Le XuanNghia, Director of the Business Development Institute, said this year’s export growth in 2014 is expected to be the maintained or even increased compared to last year, with significant contributions made by local businesses. More foreign investment will be poured into the country and the amount of disbursed capital will increase, he said. HCM City CPI rises 0.24% in February February's Consumer Price Index (CPI) in Ho Chi Minh City notched up 0.24% from the previous month, official statistics show. Other statistics released by the HCM City Statistics Office reflect that inflation in the first two months of the year increased overall by a modest 0.64%. The food and restaurant basket of goods led the increases at 0.76%, followed by transport and post office (up 0.69%), goods and service (up 0.40%), drinks and cigarettes (up 0.33%), cultural and entertainment services (up 0.28%), household utensils (up 0.10%), garment, hat and footwear (up 0.02%). Prices remained relatively unchanged in the post and telecommunications and education groups. Groups that posted decreases from the previous month including housing-electricity, water, fuel, construction materials, pharmaceutical products and health services. Vietnam’s active participation in sustainable development Vietnam’s sustainable development programmes are always linked with environmental protection, response to climate change, improvement in social welfare and businesses’ role. Deputy Prime Minister Vu Duc Dam made the remark at a business forum on Vietnam’s sustainable development held in Hanoi on February 21. Deputy PM Dam who is also President of the National Council on Sustainable Development and Competitiveness Capacity said that the Vietnamese Government has adopted a national sustainable development strategy and devised an action plan on sustainable development. Vietnam is also a staunch and pro-active member in regional and international activities regarding sustainable development. The Vietnamese Government ardently encourages businesses to pay greater attention to sustainable development by improving competitiveness capacity, boosting administrative reform, creating a proper mechanism for natural resources and human resources allocation. United Nations (UN) Country Director in Vietnam Pratibha Mehta applauded the Vietnamese business community’s efforts to promote sustainable development and green growth. She also highlighted the importance of partnership between the business community and the Government under which the Government can issue policies aimed at encouraging business contributions to the sustainable development process. Doing business along with the poor is also a topic of major concern at the forum. The use of the business model together with the poor will create more market opportunities for low-income earners as private companies are employing more than 50 percent of the world’s low-income earners.  This year’s forum was held by the Vietnam Chamber of Commerce and Industry (VCCI), the Vietnamese Business Council for Sustainable Development and the British Council. The forum discussed sustainable development initiatives like new business models, the effective use of energy, response to climate change and commune business model initiated by the British Council. Contributions to Cambodia’s economic development Vice Mayor of Cambodia’s Kampong Thom province, Huon Manit lauded the contributions of Phuoc Hoa-Kampong Thom Rubber Development Co.Ltd to the locality’s socio-economic development. He made the compliments at the company’s five-year anniversary of commencing operations held on February 20 at the company’s facilities in Kampong Thom. Since inception the company has employed nearly 1,300 local labourers who earn an average monthly income of US$140. Working closely with the Cambodian Government, the company has contributed to the generation of jobs, reducing poverty, and promoted the transfer of technological advances to local residents in Cambodia. The company’s director Dang Don Cu said that after five years of implementation, the company has planted nearly 7,600 hectares of rubber, and the plantation of new rubber trees is expected to be completed this year. Next year, the company is expected to begin exploiting rubber latex from the initial 500 hectares that were first planted in 2009. At the event the Royal Government of Cambodia and local authorities presented certificates of merit to the company representatives and individuals warranting special merit. This year, the company will explore the possibility of expanding its facilities to handle a capacity of over 10,000 tonnes per year, it was announced. It aims to increase the number of workers to 2,500-3,000 by 2015 with increased average monthly incomes ranging between US$200 and US$500. ILDEX Vietnam 2014 attracts businesses As many as 120 local and foreign businesses have registered to attend the fifth Livestock, Dairy, Meat Processing, Aquaculture, and Bio-Energy Exposition in HCM City from March 19-21. ILDEX Vietnam 2014 features advanced technology and innovative solutions from International suppliers for Vietnam’s livestock, dairy, meat-processing, and aquaculture industries. It is considered a rendezvous of international businesses to showcase products and the state-of-the-art farming technology, and share livestock and aquaculture development orientations for Vietnamese businesses. The expo will see the participation of leading global companies in the field such as Big Dutchman, Biomin, Buhler, Muyang, Novus, Behn Meyer, Lohmann, Tierzucht, P&N and Asia Pacific. Workshops will be held to share experience in cattle breeding, dairy farming and processing, disease control, animal health, and aquaculture.    ILDEX Vietnam, which takes place every two years, has attracted more than 170 companies and over 6,500 visitors each time. The professional event is expected to increase business opportunities for companies. Experts encourage firms to take acquisition opportunities Businesses should take advantage of the current good acquisition opportunities as they won't be available in 50 years' time, according to Le Xuan Nghia, head of the Business Development Institute. Nghia told participants at Friday's seminar on Viet Nam's economy in 2014, organised by the Vietnam Economic Times in HCM City, that the industries that weakened first in the economic crisis were the one that would recover the quickest. They included the footwear, garment, and electronics industries amongst others. "Building materials will also be among the industries quick to recover, though it has to cope with strong competition from outside," he said, citing Chinese building materials which have established themselves as being of good quality unlike other Chinese consumer goods. He noted the state was focusing on the equitisation of the telecommunications sector and that sector was proving attractive in the international mergers and acquisitions market. The service sector that was not seriously weakened in the crisis is also likely to recover relatively rapidly, according to the economist. With regards to economic challenges, Nghia revealed that the Prime Minister required drastic measures to be taken in handling bad debt problems, restructuring commercial banks and in the worst cases, accept bankruptcy. Equitisation and restructuring of State-owned enterprises [as a set plan] will help secure confidence from foreign investors, according to Nghia. The PM has approved a list of those to under-go the process [equitising and restructuring] in 2014-15. He however noted, that the process would take time, especially business evaluation, which would require the involvement of major foreign firms if it was for a large corporation. On the restoration of the real estate market, Nghia said the State could only support in terms of policy and could not help financially. He mentioned that the State Bank and Ministry of Construction were required to adjust procedures relating to the VND30 trillion (US$1.43 billion) programme to provide loans to property developers and low-income end-buyers, at soft interest rates. The terms of the loans were expected to lengthen and interest rates to decrease, he said. A new credit package of VND70 trillion ($3.33 billion) had been proposed to the Government. "The amount will support important infrastructure development," said Nghia. He added that even street houses that are too small and in need of upgrading would likely to be included in the new programme. Meanwhile, Marc Townsend, managing director for the real estate services firm CBRE Vietnam, anticipated that the middle level apartment transactions would increase perhaps at higher rate this year, than those for the affordable units, thanks to the rising middle class. The recent entries of Starbucks and McDonald's in Viet Nam as well as the official allowance of 100 per cent foreign owned companies in the restaurant and cafe business in 2015, as set out when joining WTO, would encourage more foreign firms to explore this retail market. Speakers at the seminar agreed that though challenges remained for the country's economy, there were encouraging factors. Economist Tran Du Lich cited these as being the determination of the government not to allow inflation to rise again, the end of high lending interest rates of more than 20 per cent, and stability of the foreign exchange rate, increased export and remittance, and the positive foreign direct investment. On his part, Sandeep Mahajan, Chief Economist for World Bank Vietnam stated that the country had achieved significant progress in the integration into the world's economy but it would need to make more focus on improving its competitiveness. Interest rates hamper credit growth Many commercial banks are struggling with a large amount of idling capital that they are unable to disburse given the ongoing situation of stagnant domestic consumerism and weak production. The situation raises pressing concerns related to high borrowing costs, which surpass the capacity of many enterprises. Experts argue that in order to unlock the trapped capital, banks must work to slash lending interest rates on medium- and long-term loans. Economist Tran Du Lich said that doing so would revive domestic production and boost market demand. The State Bank of Viet Nam gives credit priority to four sectors: agro-forestry-fishery production, small- and medium-sized enterprises, ordinary industry, and end-processing industry. However, it is not easy to slash loan costs further; long-term deposit interest rates would have to be slashed to less than 7 per cent annually to secure the system's liquidity. Currently, banks are offering 7.9-8.4 per cent interest for long-term deposits. Analysis based on a targeted inflation rate of 5.5-6 per cent coupled with a 2 per cent margin for forex management and the competent competition of the Vietnamese dong against the US dollar showed a vague possibility of further cuts in deposit interest rates within 10 months. This simply means that high interest rates for long-term loans will become a thing of the past, creating a paradox: capital is abundant, but enterprises have no money. Hoang Trong Nam, director of Dai Duong JSC, which produces brewery products, said that banks have only reduced short-term borrowing costs for one to three months, while keeping the rate afloat thereafter. Total borrowing costs were not low, and enterprises found it difficult to access capital. According to the Viet Nam SMEs Association, these enterprises, which comprise 90 per cent of the total domestic enterprises, are practically unable to borrow money for production. Construction upgrading Hanoi-Lach Giang waterway corridor begins The second phase of the Hanoi-Lach Giang Waterway Corridor No. 3 upgrade started on February 23. The project costs US $110 million and aims to promote transportation via waterways and boost economic development in the regions. When finished, Hanoi will be able to receive 1,000-ton ships.  The Ninh Co River and Ninh Phuc Port are expected to receive ships up to 3,000 tons. The project is part of the Northern Delta Transport Development Project and is expected to finish by the end of 2015. The Northern Delta Transport Development Project (WB6) stretches across 14 cities and provinces at a total cost of US $201.5 million. The World Bank is providing a loan of US $171.5 million. The first phase of the Viet Tri-Quang Ninh Waterway Corridor No. 1 is expected to complete by the end of 2014.  Bank decrease reward rates in HCMC Commercial banks in Ho Chi Minh City have reduced reward interest rates starting early February. Saigon Thuong Tin Commercial Bank (Sacombank) reduced the rate for short-term deposits by 0.3-0.5 percent on February 12. Interest rates for a one-month term will reduce to 6 percent per year for deposits less than VND 50 million and 6.6 percent for deposits more than VND 50 million. The bank reduced rewards by 0.1 percent on February 20. Asia Commercial Bank (ACB) reduced the rate to 6.5 percent for one or two-month terms and 6.6 percent for three-month terms. Vietnam Technological and Commercial Joint Stock Bank (Techcombank) also decreased rewards to 6.55 percent for one-month terms and 6.64 percent for two or three-month terms. Vietnam Export Import Bank (Eximbank) decreased the rate to 6.5-6.6 percent for one to two-month terms. Housing Development Bank (HDBank) decreased the rate by 0.1-0.2 percent on less than six-month terms. The interest rates are 6.8-6.9 percent for one to two-month terms. Nam A Bank decreased their rates by 0.6 percent, giving 8 percent interest for deposits over six months. The rates temporarily increased during the Tet season as a promotion and are now decreasing to the previous rates, according to Sacombank. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR