BUSINESS IN BRIEF 4/1 Coffee surplus drives record low prices An overabundance of certified coffee flooding the global marketplace is heading up the longest slump in coffee prices in decades, say leading market analysts. The export price of certified coffee generally has historically hovered about US$300/tonne higher than non-certified coffee says Vu Dinh Noi, deputy general director of Thang Loi Coffee Company. Our company currently has in excess of 1,200 hectares of coffee in cultivation under the UTZ Certified and Rain Forest certifications in the Central Highland province of Dak Lak. However, last season international certified coffee comprised more than 50% of Vietnam's total output, which surpassed the set target by the Ministry of Agriculture and Rural Development (MARD). The oversupply caused the price of export certified coffee to decline and our profits to plummet accordingly, Noi adds. There are four kinds of certified coffee, namely 4C, UTZ, RFA, and Fairtrade. To date, certified coffee has accounted for roughly 1/3 of the nation’s total cultivation area, making up 58% of Dak Lak province’s total coffee production. International certified coffee helps domestic businesses and farmers benefit from higher prices and improves the prestige and competitiveness of Vietnam's coffee sector in the global market says Trinh Duc Minh, Vice Chairman of the Buon Ma Thuot Coffee Association. However, he agrees with Noi and says that overproduction is hurting the coffee industry and businesses are more often than not finding it hard to sell high-quality coffee at a reasonably profitable price in the global market. Minh suggests that coffee producers across the country work more cohesively to set appropriate targets for certified coffee production so that this kind of product can generate a higher source of income for producers and exporters. Dr. Le Ngoc Bau, Head of the Tay Nguyen Agriculture and Forestry Science Institute, in turn, affirms that Vietnamese certified coffee faces a number of difficulties in achieving an equitable price in the global marketplace. Vietnam, he noted, like coffee producers from many other nations, confronts the all too familiar dilemma of too much product on the market. Once, the supply vs. demand threshold is reached the price drops and those in the industry suffer losses due to low export prices. Bau believes more sophisticated forecasting and prediction methods should be implemented, providing local businesses in the industry with more timely and accurate analysis so they can adjust their production accordingly. It is essential to create a closer link between exporters and farmers and have accurate forecasts, with a view to regulating the quantities of coffee to be exported to avoid excessively high inventory levels, Bau concludes.    Wind StarCruiser brings tourists to central destinations Da Nang – The Wind StarCruiser carried 100 tourists from Singapore to Da Nang's Tien Sa Port on Tuesday, beginning an 11-day visit to Da Nang, Hoi An and Hai Phong. This is the cruise ship's first time bringing tourists to coastal destinations in central Viet Nam this year. The local culture, sport and tourism department estimates 15,000 tourists will visit the city and nearby UNESCO-recognised heritage sites around New Year's. In 2014, Da Nang hosted 4 million tourists, including 1 million foreigners. Business community raises expectations for 2015 Along with the recovery of the whole economy in 2014, production and business activities also saw improvements despite a high number of dissolved and suspended enterprises. Concluding a difficult year, the business community is placing new expectations in 2015 amidst the deeper economic integration into the world and tougher competitiveness. According to the General Statistics Office (GSO), nearly 15,500 enterprises resumed business operations in 2014, up 7.1% compared to 2013. More than 74,400 enterprises registered to establish with a total registered capital of over VND432 trillion (US$20.3 billion), down 2.7% in number of enterprises but up 8.4% in registered capital. The average registered capital per new enterprise in 2014 was VND5.8 billion (US$272,600), an increase of 11.5% against the previous year. Newly-established enterprises in 2014 also created jobs for more than one million people, up 2.8% over the last year. The year 2014 also witnessed more than 67,800 dissolved enterprises but GSO Director Nguyen Bich Lam said that this was not a worrisome number as 93.7% of them had capital less than VND10 billion (US$470,000) each and 70% of dissolved enterprises were operating in fields of low technology content such as wholesale, retail sale, repair of automobiles and motorcycles, tourism services, machinery for hire among others. Lam said that Vietnamese enterprises are in the screening process under the market rules which eliminate weak ones. Thus, the bankruptcy of enterprises also helps restructure the economy, clean up the business environment and be the basis for the sustainable development, the GSO Director affirmed. Looking back on 2014, it can be said that it was a year of difficulties for many enterprises. Van Duc Muoi, General Director of Ho Chi Minh City-based food producer Vissan, said that the Government has built trust in the business community through commitments on administrative reform in the field of economy. However, enterprises, particularly small-and medium-sized enterprises with weak distribution networks met lots of difficulties in selling products as consumers continued to be sparing with shopping, coupled with the economic recession and limited public investment in trade infrastructure. 2015 will be a beginning year for changes in policies and institutions with the effect of a number of laws including the revised Law on Investment and revised Law on Enterprises, the two 'backbone' laws for the economic activities. The two laws are expected to reduce administrative procedures and enhance the freedom right of doing business and the role of enterprises. In 2015, Vietnam will also participate in the ASEAN Community and other economic agreements which forces enterprises to change themselves and make the economy more dynamic. Le Phuoc Vu, Chairman of the Board of Directors of Hoa Sen Group said that extensive economic integration will help enterprises to expand trade transaction, attract investment, boost exports, cut cost and improve their competitiveness. Besides advantages, Vietnamese enterprises will have to face fiercer competitiveness even in their home market which requires them to be alert to challenges and put forth appropriate business strategies. Chairman Vu suggested the Government have a mechanism to ensure the harmony of interests between domestic and foreign enterprises operating in Vietnam. It is also crucial to fight against and settle counterfeit and imitation goods to protect enterprises and consumers. The Government should work closely with enterprises to facilitate their export to foreign countries amidst the upward trend of protectionism through trade barriers. Bond sales at record high The Government, provinces and enterprises have raised a total of more than VND288.7 trillion (US$13.5 billion) from bond sales this year, a new record high. The bond sales revenue is equivalent to 7.27% of the country’s gross domestic product (GDP) in 2014, according to the Ministry of Finance. Of the VND288.7 trillion, more than VND234 trillion has been raised from government bonds (G-bond), up 30% against last year and 3-1/2 times over 2010. Sales of the bonds guaranteed by the Government made up over VND17.5 trillion, municipal bonds VND7.4 trillion and corporate bonds more than VND26.7 trillion. The ministry said the bond sales help the State budget collections exceed the 2014 estimate and fuel development projects. The average term of G-bonds and government-guaranteed bonds is 4.95 years, or 1.74 years longer than in 2013. Bonds with terms of five years or longer account for 47% of the total bonds issued this year. The average term of bonds issued by the Vietnam Development Bank is 3.36 years, 0.53 year longer than in 2013, and those by the Vietnam Bank for Social Policies at 3.7 years, 0.71 year longer than last year. Earlier, the National Assembly issued a resolution requiring G-bonds to carry terms of at least five years and a stop to taking out short-term loans to offset State budget deficit and reschedule old debts. Compared to last year, the average bond yield has dropped by 1.3-3.7 percentage points for all terms, according to the Finance Ministry. So far, total outstanding bond loans have surpassed VND864.9 trillion (US$40.6 billion), equivalent to 21.77% of the GDP this year and higher than 19% of the GDP last year. Of the amount, the outstanding G-bond loans make up nearly VND550 trillion, equivalent to 13.84% of the GDP. Economic experts have expressed concerns that many bonds issues will drain capital from the market and make life tougher for private businesses which are in dire need of finances. Veggie and fruit trade surplus hits US$1 billion The fruit and vegetable sector posted export revenue of US$1.5 billion and import spending of more than US$500 million in the January-November period, leaving a trade surplus of nearly US$1 billion. Export revenue in the first 11 months of the year exceeded the year’s target set earlier by the Ministry of Industry and Trade by US$300 million. Asia continued to be one of the major export markets for Vietnam’s fruits and vegetables. In the period, China remained Vietnam’s biggest veggie and fruit importer with turnover climbing 34% to US$359 million and accounting for 26% of the sector’s total export. It was followed by Japan, the United States, South Korea, Taiwan, the Netherlands, Russia, Thailand, Malaysia and Singapore. Nguyen Van Ky, general secretary of the Vietnam Fruits and Vegetables Association (Vinafruit), said Asia was Vietnam’s key export market thanks to convenient road and waterway transport. In the first 11 months, Vietnam spent big on fruit and vegetable imports from Thailand, China, the U.S., New Zealand, South Africa, India, and Chile, according to the Ministry of Agriculture and Rural Development. Thailand overtook China to become the largest fruit and vegetable exporter to Vietnam last year. Vietnam’s fruit and vegetable imports from Thailand neared US$140 million in the period, soaring 52% year-on-year and accounting for 29% of total imports. Meanwhile, fruit and vegetable imports from China had fallen by 5% year-on-year to US$136 million due mainly to local consumers’ concerns about lack of hygiene and safety. State capital divestments fare well Divestments by State-owned enterprises (SOEs) from finance, banking, real estate, insurance and other non-core business sectors fared well last year thanks to an improved performance of the local economy. The Steering Committee for Enterprise Reform and Development said as of December 25, SOEs had posted combined divestments of VND8 trillion (US$374 million) from 233 businesses, or nearly VND2 trillion higher than book value. Of the total amount, VND204 billion was from securities, VND297 billion from insurance, VND185 billion from real estate, nearly VND1.5 trillion from finance and around VND1.3 trillion from banks. In addition, share sales at companies where the State does not need to hold a stake had brought about VND4.5 trillion, accounting for 56% of the total divested capital. Almost all the divestments were made at prices higher than book value, with 20% for finance, 11% for banking, 15% for property and 9% for insurance, and the stake selling price was 50% higher than book value. However, divestments from securities were 2% lower than book value. State Capital Investment Corporation (SCIC) obtained more than VND2 trillion from offloading state shares at 66 enterprises. Vietnam National Coal Mineral Industries Holding Corporation Limited (Vinacomin) got over VND1.7 trillion and Vietnam Rubber Group posted VND523 billion. The figures were VND318 billion for HCMC, more than VND1.3 trillion for the Ministry of Construction, and approximately VND600 billion for the Ministry of Transport. However, many SOEs and localities have yet to complete withdrawing state capital from non-core businesses as ordered by the Government. Last year, the number of restructured and equitized SOEs was 167 and 143 respectively, up 1.65 times and nearly two folds compared to the previous year. The amount of divested state capital is six times higher than 2013. Experts calculated at least one SOE must go public every day if ministries and localities want to realize the target for SOE equitization next year.    International arrivals lower than expected The number of international visitors to Vietnam last year increased by a mere 4% year-on-year to 7.87 million, which is lower than the target of some 8.3 million set earlier by the Vietnam National Administration of Vietnam (VNAT). The growth last year was much lower than the 10.6% recorded last year due to a fall in arrivals from Vietnam’s major visitor-generating markets. Figures of the General Statistics Office (GSO) showed Vietnam attracted more than 1.9 million Chinese tourists last year, a slight rise of 2.1% compared to last year, while the growth of this market last year was 33.5%. The sluggish increase in Chinese-speaking visitors to Vietnam last year mainly resulted from the tensions on the East Sea in mid-May when China illegally placed a giant oil rig well inside Vietnam’s waters. According to the GSO, travelers from other major markets such as Japan and the United States have grown slower than in previous years, while other markets like Russia, Malaysia, Singapore and Indonesia have yet to bring in breakthroughs or lost growth momentum. For example, more than 360,000 Russians visited Vietnam last year, up 22% compared to a year ago but much lower than the growth rates of 50-70% in the years before. Nguyen Van Tuan, head of VNAT, told a media briefing in Hanoi on December 30 that tourism was a vulnerable sector and the incident in the East Sea, the impact of Ebola outbreak in some African countries and aircraft crashes have caused direct and indirect impacts on the local tourism sector. Tuan was quoted by Vietnam News Agency as saying that local tourism sector was unable to beat the target of 8.3 million international visitors last year due to unpredictable events. So, the country lost some 1.5 million foreign travelers last year. The targets for next year are 8.3-8.5 million international visitors, 41 million domestic travelers and total tourism revenues of VND270 trillion. Last year, the number of domestic tourists rose by 10% to 38.5 million and tourism revenue has increased by 15% to VND230 trillion. Commenting on the situation in 2015, local travel firms said it would be tough to attract more international travelers due to dismal prospects. “There have been no clear signs of strong growth for the tourism industry. Less women and middle-aged travelers who are traditionally key customers of Vietnam, have booked tours to the country,” said Nguyen Van Tran, general director of APEX Vietnam Travel Corporation. Vietnam will have to cope with fierce competition as its major visitor-generating markets are also important markets of other countries. Vietnam could be in a disadvantageous position when competing with other countries given fewer flight options, and limited tourism products and services. Vietnam’s tourism sector often focuses on the United States, Europe or Japan which many competitors also eye, said Phan Dinh Hue, director of Vietcircle Travel and Service Company. “We should explore new markets where there are fewer competitors as a measure to cope with current difficulties,” Hue suggested. After strong increases in the first five months of last year, the number of international visitors to Vietnam declined month-on-month in the last seven months. To obtain the targets, the local tourism sector plans to launch a range of programs to diversify and promote products and services, expand markets, and ensure safety for travelers. EVN’s 2013 profit put at nearly VND5 trillion Vietnam Electricity Group (EVN) earned profit of nearly VND5 trillion in 2013 when power production cost was VND1,473.8 per kWh and the selling price was VND1,499.8 per kWh, according to the Ministry of Industry and Trade. The ministry said in a report released on December 30 that the production cost of VND1,473.8 per kWh included generation cost of VND1,135.5 per kWh, distribution cost of VND251.97 per kWh, and management cost of VND6.47 per kWh. Therefore, the total production cost of approximately VND170 trillion last year incorporated power generation cost of over VND130 trillion, distribution cost of nearly VND29 trillion, transmission cost of VND9.2 trillion, and management cost of VND746.2 billion. With this production cost, EVN obtained revenue of around VND173 trillion. The difference between the production cost and revenue was nearly VND2.9 trillion. EVN also earned about VND1.94 trillion from related operations. Overall, EVN’s profit last year neared VND5 trillion, the ministry said. According to the Electricity Regulatory Authority of Vietnam under the ministry, all the profit and revenue calculations were based on documents provided by EVN and its member companies, as well as the group’s sales contracts. Nguyen Anh Tuan, director of the Electricity Regulatory Authority of Vietnam, said the production cost last year did not include the group’s spending on swimming pools and tennis courts which caused public criticism. Asked whether power tariffs will go up or not in the coming time, Tuan did not give a direct answer but said the ministry and the Government will make decisions regarding this matter. Fuel prices are one of the factors to influence power prices, and affect the cost of electricity produced by oil- and gas-fueled plants such as Thu Duc, Can Tho, O Mon, Phu My and Nhon Trach rather than coal-fueled and hydropower plants. Therefore, power tariffs will likely increase in the coming time. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR