BUSINESS IN BRIEF 20/6

Banks move to decrease borrowing costs again

Some commercial banks have cut deposit interest rates by 0.2-0.5 percentage points in the past 10 days to reduce input capital costs and further lower borrowing costs.

Vietcombank, one of the big four by assets in Vietnam's banking system, cut the annual deposit interest rate for three months and shorter terms by up to 0.3 percentage points to 5%. Some branches of Military Bank lowered its highest deposit interest to 7.5% from 8% per year. Other small banks listed deposit interests at 8.5-8.7% annually.

Economist Tran Du Lich, cited by Thoi Bao Tai Chinh (Viet Nam Financial Review), said, "The cut is to test the market validity."

The 5% deposit interest will be good as it was likely to guarantee a positive real interest rate for depositors and to help banks circulate their capital in the economy, Lich said. [A positive real interest rate is a situation when the nominal interest rate is higher than the inflation rate].

This early step on deposit cuts is likely to mark the second wave of adjustments since the beginning of the year. It should be noted that the cut occurs at a time when banks are struggling with high-cost abundant capital sources that are getting harder to lend.

Prior to the cut, industry experts said trimming deposit rates was a must to make capital cheaper for borrowers and make loans more accessible.

Luu Duc Hai at the Development Strategy Institute under the Ministry of Planning and Investment said, "Vietnamese enterprises are bearing too high capital costs that reduce their competitive and productive capacities in exports and domestic markets."

Although Vietnamese exporters have access to special interest rates ranging between 8% and 10% annually, the borrowing costs are estimated to be 1.4 to twice as high as those prevailing in some regional countries. On the other hand, Vietnamese producers in non-priority sectors are paying between 10% and 13%.

At the May Government meeting, the State Bank of Vietnam Nguyen Van Binh said credit demand was weak.

The credit growth of Vietnam's banking system rose to 1.31% between January and May 23; the total supply was an estimated 5.28% higher than in the end of last year; and the total mobilised capital increased by 4.2%. This is sparking doubts about the feasibility of a 12-14% credit growth by the year-end.

Multinationals keep eye on Vetnam potential

Vietnam has emerged as one of the top three frontier-market economies that are attracting the most attention from American and European multinationals, according to the latest Frontier Markets Sentiment Index.

The Index, published last week in the Wall Street Journal, is developed by Washington DC-based advisory firm Frontier Strategy Group (FSG). It tracks the level of interest that major American and European multinational companies show in 70 frontier-market economies.

According to the report, Nigeria topped the list as the most popular pick for multinationals, followed by Argentina and Vietnam.

Of the 20 countries attracting the most interest from multinationals, nine were in sub-Sahara, while Asia accounted for just three markets. Vietnam was the only country in Southeast Asia among the top three economies, with 24.7% of companies including it on their watch lists.

The Index is based on information collected from FSG's roughly 200 multinational clients, which include giant corporations like Coca-Cola, General Electric, Novartis, Dell and Akzo Nobel.

Matt Lasov, FSG's global head of advisory and analytics, said: "We collect data about which countries the companies are watching for potential future investment. Over time, that gives us a clear picture of their market priorities – which countries are they including in their future plans and which they are dropping."

Two major insights provided in the research were the current state of sentiment towards countries in the frontier markets, and the change in sentiment over time (corporate perception of markets in response to the changing business and macroeconomic environment).

Overall, sentiments toward frontier markets among the 200 multinationals in the survey declined. About 80 per cent of the countries covered in the survey have seen the level of corporate interest subside since last year.

FPT strikes first M&A deal in Slovakia

FPT, the leading Vietnamese ICT company, signed a deal with Slovak energy corporation RWE in Berlin on June 18 to purchase its subsidiary RWE IT Slovakia.

Under FPT’s first mergers and acquisitions (M&A) deal, RWE IT Slovakia will be renamed FPT Slovakia and wholly invested by FPT Software in the country.

Established in 2004, RWE IT Slovakia has more than 400 employees, mostly experts in Statutory Accounting Principles (SAP) software. It specialises in supplying IT services, especially SAP and ‘Smart Home’ solutions to its parent company.

RWE Chief Executive Officer Peter Terium and FPT President Truong Gia Binh shaking hands  after signing the M&A deal

RWE will become FPT Software’s biggest client in Europe, with a score of contracts worth tens of millions of US dollars over five years.

FPT Software expects the agreement will help the company expand operations in various areas in Europe and beyond.

“The landmark deal will elevate FPT’s position in Europe and the rest of the world,” said FPT President Truong Gia Binh.

“From now on FPT is capable of supplying overall and long-term IT services to leading partners in the area of infrastructure (power, gas, water supply and others) in Europe and other developed economies like the US and Japan.”

FPT Software General Director Nguyen Thanh Lam said the M&A deal will enhance FPT Software’s production capacity, enabling the company to make use of resources both in Europe and Vietnam to provide the most efficient services to customers.

It will also help FPT Software break into and increase its revenue in this potential market, he said.

FPT is speeding up its development strategy overseas. It earned US$130 million in revenue from overseas markets in 2013 and aims to raise the figure to US$340 million in 2016.

Vietnam firms wary of higher stakes for foreign investors

Firms were eager for the long-awaited proposal to increase foreign stakes in listed companies, but some were cautious over unexpected acquisitions.

The State Securities Commission's proposal to increase foreign stakes in listed companies from the current 49 per cent to 60 per cent is now under scrutiny amid the Law on Enterprise being amended.

Nguyen Mai Thanh, General Director of REE Corporation (REE), among the largest listed companies by capitalisation and liquidity in the market, said on Tuesday at a news conference held by Nhip Cau Dau Tu magazine that the company was willing to let foreign investors hold a larger stake.

However, local enterprises should be empowered with greater decision-making rights to prevent the risk of being acquired by foreign firms she was quoted by Vnexpress online newspaper, as saying.

Chairperson of Traphaco, a pharmaceutical company, Vu Thi Thuan, said that injection of foreign capital was essential.

She noted that some sectors related to social security, including the pharmacy industry, should be given careful consideration when the Government raises foreign stakes.

According to Andy Ho, Managing Director of VinaCapital, firms were ready for an increase in foreign stakes.

He said that regulation might give a boost to the stock market in Viet Nam, which was levelling off. It could improve liquidity with local investors showing interest in gold and dollars, he added.

Still, companies' market capitalisation, management efficiency, turnover and profit growths were of greater concern to foreign investors, he said.

However, Vice Director of HCM City Stock Exchange Tran Thi Anh Dao, urged companies to be careful in selecting strategic investors.

Previously, it had been mentioned that securities firms would be the first to be allowed to increase foreign stakes.

HCM City hopes for Dutch support in hi-tech farming

Ho Chi Minh City hopes to learn from the Netherlands’ experience in hi-tech farming, Chairman of its People’s Committee Le Hoang Quan has said.

Receiving Dutch Minister for Agriculture Sharon Dijksma in Ho Chi Minh City on June 18, Quan informed her of the progress of bilateral coordination between the city and Rotterdam as well as other Dutch partners in climate change adaptation, health care, food hygiene and education, which he said has yielded positive results.

Chairman of HCM City People’s Committee Le Hoang Quan receives Dutch Minister for Agriculture Sharon Dijksma (Photo: VNA)

The city now has 75 Dutch projects topping US$700 million. Two-way trade between the city and the Netherlands hit US$625 million last year and US$235 million in the January – May period of 2014, he said.

Dijksma hailed the recent signing of strategic partnership deal with Vietnam as a driver of their agriculture cooperation, including science and technology.

Dutch companies are keen to work with partners from Vietnam and Ho Chi Minh City in particular, she said, adding that she is hopeful about the chances of tie-ups across cultivation, animal husbandry and dairy processing.

The minister is part of a delegation led by Dutch Prime Minister Mark Rutte during his Vietnam visit from June 16-18 at the invitation of his Vietnamese counterpart Nguyen Tan Dung.

Australian investors to be directed towards Ben Tre

Australian Consul General in Ho Chi Minh City John McAnulty vowed to call for more investment in the Mekong Delta province of Ben Tre at his working session with local authorities on June 18.

The pledge came after McAnulty said he is impressed by Ben Tre’s business competitiveness, which moved up from 26th place in 2012 to sixth last year in the national rankings, placing it third among the 13 cities and provinces in the region.

Director of the provincial Department of Planning and Investment Nguyen Truc Son ascribed the achievement to drastic administrative reform, including one-stop investment licensing and a hotline to the Chairman of the provincial People’s Committee for support.

Ben Tre will not rest on its laurels, and is determined to introduce better and transparent policies, making it easier for investors to access the latest information, he said.

The province currently boasts 47 foreign-invested projects, mostly from Asian enterprises.

On the afternoon of the same day, McAnulty attended a ceremony to inaugurate a bridge in Bao Thach commune, Ba Tri district. It was built using VND240 million (US$11,400) funded by the Australian Consulate General.

VIETBUILD 2014 opens in HCM City

An international exhibition featuring real estate, interior and exterior design and construction materials – VIETBUILD 2014 was held in HCM city on June 18.

The event attracted 800 businesses and economic groups, showcasing their products from 18 nations, including Malaysia, Thailand, Singapore, the Republic of Korea and Canada.

Deputy Construction Minister Phan Thi My Linh said that the national economy is on the right track to recovery in the early months of the year, owing to positive signs in the production of construction materials and the real estate market.

Linh added that the event aims to stimulate demand, promote trade activities and help businesses and investors introduce their new products and advertise real estate projects for sale as well as transferring technologies.

Seminars on the latest advanced technologies were also held during the event which will run through to June 22.

IBM provides cloud computing services for SMEs

IBM group officially launched Softlayer, cloud computing services in the Vietnamese market in HCM City on June 18.

Accordingly, Softlayer will provide services to Vietnamese companies, with priority given to small and medium-sized enterprises (SMEs), even to group of projects.

Tan Jee Toon, IBM Vietnam General Director said that Softlayer will build clouds on a server owned by an enterprise or organisation in order to ensure privacy, security, confidentiality and computing capacity.

In addition, the service will help users control infrastructure and provide them with flexibility of payment to control costs effectively.

Softlayer was established in 2005 and reacquired by IBM group in July 2013. At present, it is the world’s largest cloud computing service provider with 30,000 customers from 140 nations.

Each year, IBM Group invests more than US$6 billion in cloud computing research and development. It is expected to have 40 data centres around the world by late 2014.

Hanoi to host Vietconstech 2014

An international exhibition casting the spotlight on construction technology (Vietconstech) is set to take place at the Vietnam Exhibition and Fair Centre in Hanoi from December 10-13, 2014.

The organising board announced on June 17 that large numbers of domestic businesses are registering to attend the event, alongside companies from Japan, the Republic of Korea, Spain, Italy, Singapore, Taiwan, and Malaysia.

The expo provides an opportune occasion for businesses to get updated on the latest developments and trends in the construction industry. It also provides a juncture to forge new business alliances and networking opportunities.    

Businesses and trade organizations will showcase their potential and strengths in scientific and technological development, equipment and machines in construction and construction material production. This year’s event will also introduce mining achievements in national economic development.

There will be seminars on environmentally friendly building materials, and sustainable development in construction.

The exhibition, held in Hanoi for the first time in 2012, aims to help businesses introduce new technologies and equipment, seek partners, and promote investment and technology transfer.

Binh Phuoc boosts cooperation with Cambodian provinces

The southern province of Binh Phuoc and five Cambodian provinces will strengthen friendship and cooperation for the sake of prosperity, mutual understanding and development.

To this end, a cooperation agreement was signed on June 17 by the Binh Phuoc provincial People’s Committee and the five Cambodian provinces of Kamphongcham, Kratie, Mondulkiri, Stung Treng, and Tabong Khmum.

Under the agreement, the six parties will continue to maintain cooperation ties spanning investment, economy, construction, agriculture, cultural exchanges, and health care.

They will also promote information exchange on policies of the governments to facilitate import-export activities and travel through their border crossings.

Priority is given to accelerating the operations of quarantine stations in accordance with agreements signed by the two governments, raising the effectiveness of bilateral cooperation, ensuring security along border areas, and boosting the fight against smuggling, illegal immigration, and drug-related crimes.

The provinces also agreed to invest in infrastructure construction and upgrade traffic systems connecting border gates, aiming to further promote economic, trade and agricultural exchanges.

At the signing ceremony, Chairman of Binh Phuoc People's Committee Nguyen Van Tram said the agreement offers Vietnamese and Cambodia localities an opportunity to strengthen friendship and cooperation in a number of important fields.

Vinatex set to launch IPO on July 22

Vietnam National Textile and Garment Group, or Vinatex, will launch an initial public offering (IPO) on July 22, one year slower than earlier scheduled.

Vinatex said on June 16 that it plans to hold a pre-flotation briefing on June 23 and organize seminars to introduce investment opportunities in the group in Hanoi and  

HCMC on July 2 and 4 before the IPO on the Hochiminh Stock Exchange.

According to Vinatex’s equitization plan approved by the Government, the group has total chartered capital of VND5 trillion. After the group goes public, the State will retain a 51% stake while 24% will be offered to strategic investors, 24.4% put up for public tenders and 0.6% sold to employees.

Vinatex has completed divestments from financial and credit institutions, recovering over 85% of capital in the sectors so far in line with Decision 320/QD-TTg of the Prime Minister.

Vinatex is expected to obtain VND25.2 trillion in revenue in the first half this year, up 10% year-on-year. Its domestic earnings are put at VND11 trillion, a year-on-year increase of 10%.

Vinatex’s export revenue is estimated to reach US$1.62 billion in the first half of this year, up 15% over the year-ago period. Its major exports include the United States, Europe, Japan and South Korea, with shipments to South Korea gaining the highest growth rate of 30.1% to US$874 million.

Vinatex said outbound sales from the United States had soared 14.5% and accounted for up to 44.5% of the group’s total export revenue in the January-June period.

SBV unveils plan for restructuring ailing finance firms

The State Bank of Vietnam’s governor Nguyen Van Binh has announced a plan to restructure weak finance companies in the coming time as most of such enterprises have suffered heavy losses over the past two years.

According to the central bank, Vietnam now has 16 finance companies, excluding PetroVietnam Finance Corporation (PVFC) that has now been merged with Western Bank to form PVComBank.

Up to 12 out of the 17 enterprises belong to State-owned economic groups. The remaining five, except for Viet-Societe Generale that has been acquired by HDBank and renamed as HDFinance, are foreign-invested firms – Prudential (UK), PPF (the Netherlands), Mirae Asset (Korea), Totoya Vietnam and JACCS (Japan).

Given current laws, finance companies are classified as non-banking credit institutions and are entitled to conduct banking operations other than the taking of deposits or the provision of payment services.

Finance enterprises under State-owned economic groups mainly mobilize capital from units under the groups and borrow from credit institutions. The firms primarily give loans to enterprises belonging to the groups or having relationships with leaders of such groups.

Despite operating as a bank and facing high risks, finance firms have rarely announced data while being subject to little supervision from State agencies. As a result, finance firms usually provide risky credits.

The central bank has plans to force six domestic finance companies to undergo restructuring. The firms may be merged into banks or sold to stronger companies.

Up to now, only Saigon-Hanoi Commercial Bank has announced a plan to take over a finance company but it has yet to disclose the firm’s name.

Some experts said the finance firm model in State-owned groups is not successful and restructuring is inevitable. In addition, State-owned groups and enterprises have to divest capital out of non-core businesses, including finance companies, as ordered by the Government.

However, restructuring and merger will be challenging.

PVFC had not suffered losses before merger but its shares had been traded at just VND4,000 each, far below the nominal value. Most remaining firms have incurred heavy losses with bad debt staying at up to 30% or even 50%.

Therefore, it is risky to merge or acquire the companies.

Another problem is that leaders of weak finance firms are trying to hide their real situation, fearing that they might be dismissed from their posts or even prosecuted for poor operations of the companies. As a result, restructuring and merging plans would be face challenges.

Luxury car market expands

Global automakers have increasingly launched their luxury car brands in Vietnam’s market, where the demand for such products among well-to-do customers has risen lately.

This June, Japanese automaker Nissan Motor Company will open a showroom for its luxury Infiniti cars in HCMC.

Previously, CT-Wearnes Vietnam Co. Ltd., distributor of the Italian luxury car make Lamborghini, said it would open a showroom for this brand in Hanoi within this month.

The rising demand of high-income people for expensive cars has attracted more auto manufacturers to launch their expensive products in the country.

Since late last year to date, renowned car brands in the world such as Lexus, Audi, Porsche, Rolls-Royce, and Bentley have made debut in the market with showrooms and official importers.

The sale of luxury autos grew quickly in the first four months this year for both completely built-up (CBU) cars and cars assembled in Vietnam.

Mercedes-Benz Vietnam (MBV) said it sold 682 cars during the period, rising almost 60% over the same time last year.

The company said its business result in the first quarter this year is the best ever during its 19 years operating in the domestic market. An executive of MBV said the auto market in Vietnam will be more active this year as the country’s economy is on the path to recovery.

Previously, the Vietnam Auto Manufacturers Association (VAMA) predicted the country’s car sales this year at 120,000 units, a rise of 9% over last year.

MBV has plans to introduce seven Mercedes-AMG sport car models, with four of them having been launched in the market, including A45 AMG, G63 AMG, S63 AMG and CLA 45 AMG, priced at around VND2-9 billion each.

Andreas Klingler, general director of Porsche Vietnam, said his company is having good business in Vietnam as it saw a rise of 40% in car orders in the first five months.

He added the country’s luxury car market will continue expanding until the end of this year along with the rising market demand. A Porsche car in Vietnam has its price starting from around VND3 billion.

Audi Vietnam said since late last year, luxury car sales in Vietnam have grown at more than 60%, including both CBU cars and cars assembled in the country. The firm expects at least 40% growth of CBU cars this year.

VAMA revises up auto sales forecast

* The Vietnam Auto Manufacturers Association (VAMA) has adjusted up its auto sales projection for this year to 125,000 units, or 5,000 units higher than its previous prediction.

The revised forecast for 2014 rises by 14% over last year given strong sales growth in the whole market last month.

VAMA recently put May sales on the local auto market at 12,134 units, including 7,225 cars and 4,909 trucks, respective increases of 6% and 8% over April with the number of domestically-assembled vehicles sold by its members reported at over 9,600 units.

The association said 8,952 autos were assembled domestically last month, falling 2% against April, but imports of completely built-up (CBU) autos surged by 42% month-on-month to 3,182 units.

Many members of VAMA reported better business results last month. For instance,Ford Vietnam said its May sales rose by 51% over last year, the highest sales gain over the same period since it started operating in the country.

This was ascribable to strong sales of Transit and Ranger pickup trucks and Fiesta compact cars, with 308 Ranger trucks delivered to customers in the month, a year-on-year rise of 130%.

Toyota Vietnam said it sold 2,802 units last month, taking to 13,230 the number of units sold in the first five months of this year, rising by 10% over last year.

Its Toyota Vios model posted the highest sales revenue last month with 706 units, accounting for 48% of the firm’s sales.

In the January-May period, sales of the whole auto market rose 33% with a whopping rise of 23% in the number of locally-assembled vehicles and an increase of 75% in  

CBU units compared to the same period last year. Of which, sales of cars grew by 38% and trucks expanded by 25% year-on-year.

Taiwan textile project approved in Long An

Taiwan’s Yu Yuang Textile Co., Ltd has received an investment certificate to develop a dyeing and yarn project worth US$58 million at Phuc Long Industrial Park in Long An Province.

The project will be developed on an area of around eight hectares in Ben Luc District. Work on the factory will start next month and it will be up and running early next year.

Yu Yuang Textile said it expects the factory to produce around 16,800 tons of cloth each year for both domestic use and export.

The project is the company’s first investment in Vietnam, which is said to ready itself for opportunities in the market once the country signs the Trans-Pacific Partnership  

(TPP) agreement, which will offer the investor 0% tariff when exporting products to TPP member markets.

The Taiwanese company now provides cloth for renowned brands in the world such as Nike, Adidas and Triumph.

Last month, Hong Kong’s Huafu Vietnam Industrial Co., Ltd also received an investment certificate to develop a dyeing and yarn project covering an area of 20 hectares in Thuan Dao Industrial Park in the province’s Can Duoc District.

Costing some US$136 million, the project is planned to start operation next May and will be able to dye 20,000 tons of cotton and produce 30,000 tons of yarn.

As Vietnam is about to sign the TPP, many investors from China, Hong Kong, South Korea and Taiwan have since mid-2012 developed large-scale textile and dyeing projects in the country to cash in on opportunities to be brought by the TPP agreement.

Polish firms come knocking

Many Polish enterprises are looking for opportunities to do business in the country, said Poland’s Deputy Minister of Foreign Affairs Katarzyna Kacperczyk.

Representatives of nearly 50 enterprises participated in the Vietnam-Poland Business Forum in HCMC last week to explore business opportunities and seek Vietnamese partners. Most of these firms are active in environment, agriculture, food processing and preservation, pharmaceutical, information technology, shipbuilding, mining and construction.

Kacperczyk told this event that companies from her country wanted to invest in this country and partner with share experiences with Vietnamese firms and want to find partners to make investments in the country. These are leading companies of Poland and can supply technological advances.

As of late last year, Polish companies had invested in 10 projects in Vietnam with total registered capital of more than US$100 million. Most of these projects are in the  

fields of real estate, manufacturing, processing and green technology.

New sea route okayed to ease Haiphong Port backlogs

The Ministry of Transport has approved a new sea route linking ports of Quang Ninh, Haiphong and Vung Ang, which will be put into pilot service from June 25, to help cope with huge backlogs at Haiphong Port.

Checks on loads of container trucks at Haiphong port have affected the process of cargo clearance, leading to a buildup of containers there.

The ministry said the Quang Ninh-Haiphong-Vung Ang sea route will be operated on a trial basis for one month before it is officially opened in July this year to transport enterprises.

About 20 ships of 1,000-1,500 DWT will ply the new route from June 25 before July, and will be able to handle goods at any ports along the way from Quang Ninh to Ha Tinh provinces. The ministry estimated a 3,000-DWT vessel can carry 80 containers.

It takes about three days for vessels to complete a trip from the northern province of Quang Ninh to the central province of Ha Tinh if they cruise at 7-8 miles per hour.  

Freight on this new route is just one-fourth of those by road.

Another new route comprising road and rail transport of goods between Haiphong and Lao Cai Province is being mapped out to cut cargo backlogs at Haiphong Port and ease traffic on the roads linking Haiphong and the northern mountainous province.

Surging backlogs have been reported at a number of ports around the country more than two months after inspections and fines were launched to prevent heavier-than-allowed trucks from the country’s roads.

Trinh Chau Khanh, director of Kim Loi Transport Company in HCMC, said accumulations of cargo at ports were unavoidable as trucks were normally two to three times heavier than their designed transport capacity. Inspections force transport enterprises to have more trucks but time is needed to buy new vehicles.

Cargo accumulation has impacted on goods producers, port operators and shipping lines. Ship operators have complained that slow goods clearance forces them to pay more for docking their vessels at ports.

Saigon Port to have all facilities relocated by 2016

The relocation of all facilities of Saigon Port from the center of HCMC will be finished in the first quarter of 2016, according to Saigon Port Company Limited.

As per a report the enterprise has sent to the Ministry of Transport, a firm named Ngoc Vien Dong Urban Investment & Development Company has been established to conduct this scheme. The enterprise is preparing a specific plan for the relocation.

Ngoc Vien Dong will advance capital to construct Saigon-Hiep Phuoc Port, road D3 leading to the new port and other works to serve the relocation plan.

This year and next, the company will spend an additional VND850 billion finishing the first phase of the Saigon-Hiep Phuoc Port project to make room for the relocation of facilities at Nha Rong-Khanh Hoi Port as part of Saigon Port.

The enterprise also has plans to start work on road D3 in August. Construction is expected to take 14 months.

As committed, Saigon Port management has to hand over the site of Nha Rong-Khanh Hoi Port to Ngoc Vien Dong Company so that it could finish the relocation in the first quarter of 2016.

Saigon Port has five branches and three subsidiaries at Nha Rong-Khanh Hoi Port that have to move to Hiep Phuoc Port.

Under Decision No. 46 of the Prime Minister, five ports in HCMC in the inner city must be shut down prior to 2010 but only Tan Cang Port had been replaced by Cat Lai while relocation of the others is still underway.

The Government has agreed to reschedule the relocation of Ba Son shipyard until 2015. Meanwhile, Tan Thuan Dong and Rau Qua ports are waiting for approval to delay relocation to 2020.

Under a zoning plan approved by HCMC authorities, after facilities at the inner-city ports are relocated, the Ba Son shipyard site will be developed into the Saigon-Ba Son financial, office, and hotel complex.

The Saigon Port location near Nha Rong Wharf will be turned into a tourism port. Relocating port facilities to the city’s outlying districts is aimed at easing traffic congestion in the city center.

HCM City supports litchi consumption

The HCMC Department of Industry and Trade has clinched agreements with authorities of Bac Giang and Hai Duong provinces to help speed up consumption of their litchi at markets, supermarkets and convenience stores in the southern city.

The pacts were inked in HCMC on June 16 when the ministries of industry-trade and agriculture-rural development cooperated with HCMC, Bac Giang and Hai Duong provinces to organize a conference on solutions to boost sales of litchi in the eastwest of southern Vietnam.

Nguyen Thi Hong, vice chairwoman of HCMC, said that if agricultural products were sold at supermarkets here in the city, there would be chances for producers to sell their products in other markets outside HCMC and even overseas markets.

Bui Van Hanh, vice chairman of Bac Giang Province, said farmers in the northern province would be able to yield 140,000 tons of litchi from 32,000 hectares under this plant cultivation this year, rising by 10,000 tons over last year. About 60% of the output is for export and the rest for domestic sale, mainly in HCMC and the Mekong Delta region.

The northern province of Hai Duong reported that local farmers could reap 40,000 tons of litchi from their 11,000 hectares this year and they have sold their products well thanks to applying the VietGAP (Good Agriculture Practice) standards to their production. However, only 5% of the output is shipped to Japan, South Korea, China and  

Europe and the remainder is for domestic consumption.

To help northern farmers have their litchi transported to the south, Hanh has called for the Ministry of Transport to give priority to the trucks carrying litchi and other farm produce as this fruit can be kept fresh for a week only.

Stockpiling helps to boost rice farmers' profits

A Government programme to create a temporary stockpile of one million tonnes of rice from the winter-spring crop has ensured that many farmers in the Cuu Long (Mekong) River Delta earned profits, a meeting heard yesterday in Long An Province.

To prevent prices from falling during the peak rice harvest season, the Government tasked food companies with buying one million tonnes starting on March 15, fully subsidising loan interest for more than half of their loans' six-month tenure.

Vo Thanh Do, deputy head of the Agro-Forestry and Fisheries Processing and Salt Industry Department, said by April 30 companies had bought 995,494 tonnes.

He said that in early March, when the winter-spring rice crop reached the peak harvest season, prices had slumped, but thanks to the stockpile programme, paddy prices have gone up by VND100-200 per kilogramme, enabling farmers to enjoy profits of at least 30 per cent.

"Based on the average production cost of the winter- spring crop estimated by the Ministry of Finance, the difference between the cost and purchase price ranged from 35.3 to 40.6 per cent."

However, Do, as well as many other delegates at the meeting, agreed that relevant ministries and agencies, local authorities, and companies need to develop closer co-operation to improve the programme's efficacy.

They also agreed that temporary inventories are merely a short-term measure, and in the long run the country must create incentives for rice export and consumption.

But Deputy Minister of Agriculture and Rural Development Vu Van Tam said that in the short-term there is no better measure to ensure profits for farmers.

The ministry is implementing a series of long-term programmes, including restructuring the agricultural sector with a focus on shifting to other food crops on low-yield rice fields and creating links between rice businesses and farmers, he said.

Replying to a question about whether the Government would adopt the programme also for the summer-autumn crop, Tam said his ministry would keep a close eye on the market, and would urge the Government to do so if prices fall during harvest.

The harvest of the summer-spring crop has jut begun, and prices are stable, he said.

Nevertheless, he urged the Viet Nam Food Association and localities to be prepared so that they can start to buy immediately if the Government decides to go ahead.

Nguyen Phu Hoa, deputy head of the Import-Export Department, called on food companies to strengthen links between rice production and consumption and expand trade promotions in both traditional and new markets, especially difficult markets like the US, South Korea, Iraq, and Japan.

Pham Van Bay, deputy chairman of the Viet Nam Food Association, said the country exported about 2.3 million tonnes of rice in the first five months of the year, down 16 per cent year-on-year.

The Ministry of Industry and Trade, the association, and businesses have organised and would continue to organise business trips to market rice, he said, adding that exports to Mexico and South Korea have shown positive signs recently.

Viet Nam's rice exports hit 585,500 tonnes worth US$248.7 million last month, the highest volume in the past nine months, thanks to a rising demand from Chinese importers.

According to data from the Viet Nam Food Association (VFA), in May, the Asian market - including China - was Viet Nam's largest rice importer, accounting for 398,200 tonnes, or 68 per cent of total volume.

African and American markets followed with imports of 87,300 and 78,200 tonnes, respectively.

With May's results, the country shipped 2.34 million tonnes of rice in the first five months this year worth $1.07 billion.

VFA attributed the hike to a sharp rise in imports from Chinese traders, saying that rice exports via border trade in the first five months this year reached 600,000 tonnes, up more than 50 per cent against the same period last year.

VFA estimated that Vietnamese rice exporters will ship roughly 6.2 million tonnes of rice this year, compared to the forecast of 6.5 to 7 million at the beginning of the year due to loss of some traditional markets in Africa to Thai traders, who have sold rice at cut-rate prices to clean up their stockpiles.

Malaysia has also stocked up on rice from Thailand to meet demands this year, while Indonesia, another important market for Viet Nam, has yet to see demand for imported rice.

Analysts believe that the loss of traditional markets will force Vietnamese exporters to be more active in diversifying their markets, and focus on improving their products' quality.

In recent years Vietnamese aromatic rice and glutinous rice have seen an increase in output and market share. Aromatic rice is now a strong product of Viet Nam.

Over the first five months this year, Viet Nam exported over 400,000 tonnes of aromatic rice, up more than 40 per cent year on year.

Aside from efforts by businesses to boost their exports, the Government needs to provide support for the establishment of areas that specifically produce high-quality rice, experts said.

Singapore rice imports

A number of Singaporean businesses paid due attention to Vietnamese rice, especially Jasmine rice, and affirmed that they will continue to import the Vietnamese rice.

The statement was made during a two-day working visit to Singapore early this week led by Deputy Minister of Industry and Trade Tran Tuan Anh.

During the meeting with Singaporean businesses, Chairman of the Singapore Rice General Importers Association Andrew Tan stated that the volume of rice imported by Singapore from Viet Nam has surged four times during the 2008–13 period. Vietnamese rice currently accounts for 28 per cent of Singapore's import market share.

Tan noted that for the last few years, price of Vietnamese rice has been competitive and its quality has also improved significantly owing to the application of modern technology.

Anh claimed that Singapore has remained a potential market for Vietnamese rice as all varieties of Vietnamese rice meet Singapore's standards.

In addition to importing rice for domestic demands, Singapore is also considered an ASEAN commercial hub and a gateway for Vietnamese rice to enter Indonesia, the Philippines and a number of African markets, Anh added.

Singapore has remained one of Viet Nam's leading trade partners, with a bilateral trade of US$8.4 billion last year, of which $2.7 billion came from Viet Nam's exports to Singapore.

Bilateral trade between the two countries in the first four months this year surged 21.2 per cent to nearly $3.3 billion, with agricultural produce of rice, pepper and seafood being Vietnamese staple key exports.

HCM City firms look to cut import reliance

HCM City-based companies have asked for preferential policies, including credit and tax incentives, to enable them to produce feedstock locally and reduce their imports.

Speaking at a meeting on Monday between city authorities and representatives of companies and business groups, Tran Viet Anh, deputy chairman of the HCM City Rubber – Plastic Manufacturers Association, said 80 per cent of raw materials for the plastic sector is imported from China.

If plastic companies are given tax breaks, they could boost production of raw materials instead of importing them, he said.

Le Van Khoa, director of the city Department of Industry and Trade, said China was the largest exporter to the city the first five months of the year.

The city imported US$2.35 billion worth of cloth and feedstock for the garment, textile, footwear, pesticide, and iron and steel industries from China, up 14.7 per cent over the same period last year.

Around 70 per cent of the city's processing companies depend hugely on imports from that country, according to the department.

The city's exports to China in the period were worth $839.4 million, down 4.4 per cent year-on-year, with the major items being computers, electronic goods and spare parts, vegetables, fruits, and rice.

Khoa said to reduce dependence on China, the Government should strengthen trade promotion activities to diversify markets.

It should continue to provide soft loans under the demand stimulus programme to companies that produce feedstock for the garment and textile sectors, he said.

It should have preferential policies for companies in the supporting industries based in industrial parks, he said.

Le Hoang Quan, chairman of the city People's Committee, called on business and sector groups to help companies access loans.

Quan also urged the tax and customs sectors to offer incentives to companies that import modern machinery for production.

Investors not enthused by port IPOs

A large part of the shares of State-owned sea ports could not find buyers at the ports' initial public offerings (IPOs).

At Da Nang Port's IPO yesterday, only nearly 19.6 per cent of more than 8.3 million shares put on auction were sold to 80 investors at an average price ofVND11.401 (US$0.54) per share. Da Nang Port raised VND18.6 billion ($885,000) through its IPO.

Three other ports of the Viet Nam National Shipping Lines including Hai Phong, Nha Trang and Quang Ninh ports also implemented IPOs last month, and about 65 per cent of shares put on auction of the three ports remained unsold.

The unsold shares were worth around VND356 billion ($16.9 million).

At Nha Trang Port's IPO, only 350,800 shares, accounting for 6 per cent, were sold to 47 individual investors.

Quang Ninh Port also saw more than 92 per cent of its shares unsold at its IPO.

Hai Phong had the most successful rate at IPOs among these ports, with a modest 46.95 per cent of shares on auction, sold, and raised VND238 billion ($11.3 million).

According to Bui Quang Dao, director of Quang Ninh Port, quoted by VnExpress news website, the number of investors having interests in port shares was limited while many ports implemented IPOs at the same time and in a hurry.

Declining profits also made port shares unappealing to investors. Nha Trang Ports saw its after-tax profit falling from VND1.8 billion ($85,000) in 2012 to VND752 million ($35,800) last year. The profit of Quang Ninh Port declined to VND1.5 billion ($71,000) last year from VND6.1 billion ($290,000) in 2012.

Dao said that the high stakes of the State in these companies after the IPO, at 75 per cent, also made investors wary about buying port shares.

Port analyst of Ban Viet Securties Nguyen Hong Quang said that recent port IPOs were not so successful due to their failure to attract attention of foreign investors or strategic partners.

Giants act to cut dairy, beef prices

Three large Vietnamese companies, Hoang Anh Gia Lai JSC (HAGL), Nutrition Food JSC and Vissan Limited Company, will launch a joint venture aimed at reducing domestic prices of dairy products.

According to an agreement signed by the three companies in HCM City on June 9, HAGL will spend VND6.3 trillion (US$300 million) for building a dairy and beef cattle farm. Once completed by 2015, the farm will have 236,000 cows.

Beef cattle will be imported from Thailand and Australia while cows will be from Australia, New Zealand and the US.

The farm network will be located in Viet Nam, Laos and Cambodia.

Nutrition Food JSC will build a milk factory in Tra Da Industrial Park in September this year with total investment capital of VND5 trillion ($238.09 million). The project will be carried out in two phases.

The 2014-15 phase will produce about 290 million litres of fresh milk per year, while the second phase will help raise the total capacity of milk to 500 million litres.

The factory's equipment will be imported from Germany and Sweden. It will process milk supplied by HAGL.

Meanwhile, Vissan Company will carry out its project on Vissan food processing industry complex in southern Long An Province, with an investment capital of VND2 trillion ($95.238 million). The complex will have an annual capacity of 100,000 tonnes and will sell all beef supplied by HAGL.

HAGL chairman Doan Nguyen Duc said the first batch of 60,000 beef cattle from Thailand was imported on June 16.

Ninh Hoa Sugar announces merger plans

Ninh Hoa Sugar Joint Stock Company has planned to seek delisting and merger with Bien Hoa Sugar Joint Stock Company at its annual shareholder meeting to be held tomorrow.

According to Ninh Hoa Sugar's documents prepared for tomorrow's meeting, all of its outstanding shares coded as NHS on HCM City Exchange will be swapped to Bien Hoa Sugar JSC's shares listed as BHS.

This move is aimed at enhancing the competitiveness in the market as well as increasing the financial, management and production capacity.

If the deal is successful, Ninh Hoa Sugar, with an estimated market capitalisation of VND711 billion (US$33.8 million), as of Monday will be under 100 per cent ownership of Bien Hoa Sugar JSC, with VND756 billion ($36 million) market capitalisation.

After the merger, Bien Hoa Sugar will have the largest raw material area in the country, which will cover 23,500 hectares.

With stable raw materials together with a combined capacity exceeding 10,000 tonnes per day, the production costs will be lowered, which was the key factor in competition when local sugar prices were relatively higher than in the neighbouring countries.

Merger and acquisition was among the solutions for sugar companies to restructuring for cost savings and efficiency amidst rising competition and high stockpiles of the sugar industry.

Both companies reported profits in the first quarter of this year, with Bien Hoa earning VND20 billion ($952,000) and Ninh Hoa Sugar earning VND28 billion ($1.3 million).       

PVEP puts more oilfields into operation

Lam Son Joint Operating Company (Lam Son JOC) is bringing ashore 8,000 barrels of crude oil per day from its Thang Long oilfield off the southern continental shelf of Viet Nam.

According to the PetroVietnam Exploration and Production Corporation (PVEP) – Lam Son JOC's parent company – the crude oil is being pumped from TL-P8, TL-1P, 4P, 3P, 7P and 5P wells, which were officially put into operation on June 6.

Lam Son JOC also plans to extract oil from the Dong Do field later this month.

The Thang Long and Dong Do oilfields, both located in Block 01-02/97, were discovered in the Cuu Long sediment basin, about 160 kilometres east off the southern Vung Tau sea.

Local services have been used for the production of the fields, which will contribute to ensuring the national energy security and increasing PVEP's oil and gas production output.

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR