BUSINESS IN BRIEF 9/7 Vietjet and Phu Long Real Estate launch joint promotion Vietjet and Phu Long Real Estate Company have agreed to cooperate in a special promotion named: “Settle down on Dragon land and get VIP priority.” Accordingly, house hunters purchasing a unit at Dragon Parc or Dragon Hill Residence and Suites will earn one year of unlimited free SkyBoss Class flights for two persons with Vietjet. The promotion period is now open and will run until September 25, 2015. With every payment of at least 20% of a Dragon Parc’s total value, or at least 50% of a Dragon Hill Residence and Suites’ total value (for 104sqm, 117sqm and 122sqm units), buyers will be able to fly in style with Vietjet’s SkyBoss on any one of the airline’s domestic flights or international routes linking Vietnam to cities in Thailand, Singapore, Taiwan and South Korea. Besides Dragon Parc buyers will also be rewarded with two ounces of gold from Saigon Jewelry Co. plus a holiday for two in a five-star resort. Flying on Vietjet SkyBoss, passengers can enjoy an array of special benefits, such as: priority check-in; 20kg free checked baggage (or a set of golf clubs); priority seat selection; access to the luxury lounge; private SkyBoss car; free meal and drink on the flight; and free flight schedule change. Whenever you fly with SkyBoss, you will also contribute to “Spread the Love” charity fund which will go towards the purchase of 10,000 health insurance cards for the poor and needy in Vietnam. “The only way to travel for leaders, pioneers, movers and shakers, Vietjet’s SkyBoss class is getting more and more support from passengers who demand high-quality and flexible priority services,” said Mr. Desmond Lin, Vietjet’s Director of Business Development. “With SkyBoss class, passengers will experience the full suite of Vietjet’s premium services with access to a luxury lounge, comfortable seating on modern aircraft, a refreshing drink and delicious hot meals served by our friendly flight attendants, and plenty of special surprises onboard.” Vietnam's largest brewer manipulated taxes The state audit office has ordered the country's largest brewer, Sabeco, to pay VND408 billion (US$18.68 million) in luxury tax it allegedly owes from 2013, Tuoi Tre newspaper reported on July 6. It has accused Saigon Beer Alcohol Beverage JSC, producer of the popular Saigon Beer, of rigging prices within its system of 11 distributors to pay less tax. Luxury tax is calculated on the price at which a producer sells products to distributors, and this must be at least 90% of the price at which the distributors then sell. The tax was 50% for beer in 2013. Sabeco paid the tax based on the price it set for Sabeco Trading Co. Ltd, which it fully owns, the audit office said in its report to the Ministry of Finance. The distributor then sold beer to 10 "regional" distributors in each of which Sabeco owns a 90-94% stake, it said. This allowed Sabeco to set low prices and pay less taxes, an unnamed finance ministry official was quoted as saying by the newspaper. In its report, the audit office recommended that the ministry should order Sabeco to pay taxes on the price at which its regional distributors sell to retailers. If this is accepted, the brewer would have to pay a total of VND4 trillion (US$183.23) for 2008-14, Tuoi Tre reported. But the audit office asked the company to pay its 2013 debts first, saying since the total amount is huge, Sabeco would need time to pay up. In response to the state audit office's charges, Sabeco has "continuously" filed complaints with relevant ministries, claiming it did not violate any rules, the newspaper reported. The proposal to change the method of calculating tax, if approved, would change the company's financial indexes like profits, affecting employees' salaries, it warned. Moreover, the company's profits since 2008 have already paid out as dividends to shareholders, and so it would be difficult to pay the so-called debts, it said. It offered instead to pay VND58 billion (US$2.65 million) in back personal and corporate taxes. Sabeco made an initial public offering (IPO) in January 2008, after which the state holds an 89% stake. Earlier this year the Ministry of Industry and Trade called for allowing the company to sell more shares and bring down state ownership to 36%. In May the company said its net profit this year would rise 8% to VND3.29 trillion (US$151 million) due to higher output and lower production costs. Sabeco pointed out that many other large companies like Hanoi Beer Alcohol and Beverage Joint Stock Corp. and Vietnam National Tobacco Corporation have similar distribution systems. This was confirmed by Pham Dinh Thi, chief of the ministry's Department of Tax Policies. The ministry is drafting a new decree that is expected to help stop pricing manipulation following recent proposals by state inspectors and the state audit, he told Tuoi Tre. Over 1,100 new businesses established in Dong Nai Over 1,100 new businesses have been set up so far this year with a total capital of 4.1 trillion VND (187.9 million USD) in the southern province of Dong Nai. Another 220 enterprise increased their registered capital to a combined 2.2 trillion VND, according to the provincial Department of Planning and Investment. The total new registered capital of 6.3 trillion VND represents 70 percent of the yearly target, the department said, adding that the businesses generated more jobs for people, contributing to socio-economic development. In the period, 60 businesses submitted documents to dissolve, a 66-percent increase from a year ago while 240 branches and offices submitted documents to stop or suspend operations. Tra fish output increases, exports down Tra fish output in the Mekong Delta increased in the first six months of 2015 but export value of tra fish products experienced a downfall, according to Deputy Chairman and General Secretary of the Vietnam Pangasius Association Vo Hung Dung. Speaking at a press conference in the Mekong Delta city of Can Tho on July 7, the deputy chairman said as of June 30, total tra fish output stood at 516,140 tonnes, up 1.22 percent compared to the same period last year. However, earnings from the export of tra fish products dropped 9.6 percent year on year to 616.6 million USD. Nevertheless, he added that the monthly export turnover was on a rising trend, and forecast that exports turnover for three quarters is expected to be equivalent to the same period last year. He underlined significantly changes in markets for the country’s tra fish exports since late 2014, with strong decreases in exports to the EU, slight reduction in the US market while shipments to China and Hong Kong surged by over 42.8 percent. Exports to the ASEAN market have also posted a positive growth. Dung attributed the drop in shipments to the EU and the US to a cheaper Euro and stricter technical barriers. The price of tra fish exports also reduced by 5 cent per pound in the US, and anti-dumping measures taken by US organisations caused difficulties to Vietnamese exporters, he said. US aims to become Vietnam’s top investor Since the normalisation of relations 20 years ago, the US has built its share in Vietnamese market towards becoming the country’s top investor, considering the huge potential of the impending Trans-Pacific Partnership agreement and the birth of the ASEAN Economic Community later this year. Just two decades ago, the US foreign direct investment (FDI) flow to Vietnam was non-existent. Several US multi-national conglomerates, though they considered Vietnam a promising market, had to do business indirectly through a third country. After US President Bill Clinton declared a full lift of the embargo on Vietnam on July 12, 1995 and the bilateral trade agreement was signed in 2000, US inflows into Vietnam have come in droves. Giants operating in beverages, information technology, software, automobiles and energy such as Coca-Cola, PepsiCo, P&G, IBM, Cargill, Microsoft, Ford, Chevron and UPS, one after another, injected huge amounts of capital into Vietnam and reaped successes. Globally popular brands Coca-Cola and PepsiCo have been taking the beverage market by storm over the past 20 years. P&G has increased their investment three-fold in Vietnam since 1995 and recently broke ground a factory last March, which will churn out Gillette razors for export across Asia. Microsoft owns a mobile phone manufacturing plant worth over 300 million USD in the northern province of Bac Ninh. Chipmaker Intel, after relocating its Costa Rica manufacturing operations to Vietnam, is also considering moving its Malaysian main-board and microprocessor factories to Vietnam and other countries. US investments are catapulting Vietnam into a technology investment destination. As of this May, the US had 742 projects valued at over 11 billion USD in Vietnam, ranking seventh of 101 investors in the country. Sitting down with a reporter from Cong Thuong (Industry & Trade) newspaper, Chairman of the American Chamber of Commerce Gaurav Gupta said the Vietnamese government should continue regulatory reform and improving business climate and workforce quality. US firms valued the Vietnamese Government’s efforts to control exchange rates, increase gross domestic product and improve policies, saying continued progress in these fields will fuel further US FDI inflows to Vietnam. Irradiation to boost Vietnam’s fruit exports Vietnam expects to increase fresh fruit exports to the US and Australia next year following the US government's approval of irradiation as an effective quarantine system. Minister of Agriculture and Rural Development Cao Duc Phat said on July 5 the ministry would work with the Ministry of Science and Technology (MST) to fund upgrades to an irradiation centre in Hanoi, aiming to meet the north's demand for exporting agricultural products. Previously the centre irradiated some agricultural products such as onions, garlic and dried medicinal herbs, but it operated on a small scale and not professionally, said Cao Dinh Thanh, Deputy Head of Vietnam Atomic Energy Institute. 2015 is the first year Vietnam has sent lychee to the US and Australia, where there are strict quarantine regulations on fruits. The north must transfer its lychee crops to the south for irradiation treatment until the new centre for irradiation becomes operational next year. Phat assigned the Plant Protection Department and relevant agencies working with the Hanoi Irradiation Centre under the Vietnam Atomic Energy Institute to set up a plan to upgrade the centre. Vietnam has two irradiation centres in the south approved by the US Department of Agriculture. Irradiating produce in Hanoi instead of shipping projects south will help ensure product quality, reduce export costs and increase buying prices for farmers' products. It would also move the north toward its long-term goal of exporting more regional products, Phat said. Nguyen Xuan Hong, Head of the Plant Protection Department, said it worked with US partners to make sure longan production in northern Hung Yen and Hanoi satisfied safety standards for export. "If the irradiation centre is not upgraded in time, the next longan crop will be transferred to the south for irradiation treatment before export," Hong said. Dang Quang Thieu, Director of the Hanoi Irradiation Centre said, the upgrade was expected to cost 30 billion VND (1.38 million USD). "We imported the necessary equipment from Italy and the Republic of Korea," Thieu said. "However, to meet the demand for fruit irradiation, we need 9 billion VND (416,000 USD) more to build and upgrade storehouses," Thieu said. The system will irradiate for 40 to 50 tonnes of lychee and longan per day, Thanh said. Irradiation is an alternative phytosanitary pest treatment that replaces toxic, outdated methods like toxic chemical fumigation. Vinh Long hones industrial prowess The Mekong Delta province of Vinh Long targets a 26 trillion VND (1.21 billion USD) revenue from industrial production this year, up 11.4 percent annually, on hope of wooing more inflows into industrial zones. The province recently granted licenses to Cong Thanh and Phu Yen industrial zones in Binh Tan and Vung Liem districts, respectively, said Director of the provincial Department of Industry and Trade Nguyen Minh Tho. During the second phase of construction, Hoa Phu industrial park registered two new investors with a combined capital of 645 billion VND (30.1 million USD) and 11 million USD. In the meantime, Binh Minh industrial zone reeled in 12 projects worth nearly 1.14 trillion VND (53.1 million USD), seven of them are in the works. During the third quarter of this year, Dong Nai province will recheck licensed projects and address difficulties facing them to speed up implementation. Publicity campaigns will introduce and extend commercial reaches of major products both in and outside the country. Under an industry and trade restructuring scheme, Vinh Long will focus on ramping up processing and light industries this year. On a six-month calculation, the province generated above 13.2 trillion VND (616.8 million USD) worth of industrial manufacturing, up 15.5 percent year-on-year. A number of manufacturing sectors achieved growths, including animal feed, poultry and seafood (28 percent), handicrafts (24.7 percent), and concrete production (44 percent). Mekong Delta region reviews green tourism Provinces and cities in the Mekong Delta region are mulling over resources and cooperation mechanisms to make the most of natural conditions for green tourism development. At the Green Tourism Week held last week in Can Tho city, Deputy Prime Minister and Head of the Southwest Steering Committee Vu Van Ninh asked regional provinces to seek suitable solutions to tap their natural potential. The provinces were urged to boost links and create a chain of tourist destinations to meet growing demand and increasingly diverse tastes. The Deputy PM hinted that localities could develop high quality and highly competitive tourist products with particular brand identities such as ecological tourism, island tourism, garden and river tourism and conference and meeting tourism. Deputy Minister of Culture, Sports and Tourism Vuong Duy Bien said the Mekong Delta’s tourism sector has developed strongly in recent years with a two-digit annual growth. In 2014, the region welcomed 22.4 million tourists, 1.83 million of which were international visitors, generating 6.36 trillion VND (289.8 million USD) in revenue and 2.2 million jobs for local people. The region, however, is facing issues related to sustainable development, environmental pollution, depleting resources and impacts from climate change, according to the Deputy Minister. He called for a more sustainable approach to tourism development and links among localities. Nguyen Van Tuan, Head of the Vietnam National Administration of Tourism, said the coordination among localities in the region to develop green tourism should focus on developing products and brands unique to the region. Tuan urged localities to focus on training a quality tourism workforce with a focus on professional skills. A project on developing green tourism products unique to the region will be launched soon with an emphasis on formulating mechanisms and policies for coordination and links, seeking financial resources for investment and developing human resources. A steering committee and an office for coordinating tourism development in the region will be formed as will a fund for Mekong Delta tourism development. Nation needs wholesale markets The Vietnamese Government was considering a project to build a wholesale agricultural market worth billions of US dollars, said an official of the Korea Chamber of Commerce and Industry (Korcham Vietnam) According to Hong Sun, Secretary-General of Kor-cham in Vietnam, farm products were the key exports of Vietnam, but their distribution faced many difficulties, including the lack of wholesale markets to have auctions and distribute products everywhere, Bizlive newspaper online reported. The disadvantage would create a barrier for Vietnamese enterprises to gain from the Vietnam-RoK free trade agreement and increase Vietnam's exports of farm products, he said. Therefore, Korcham had proposed to build a wholesale market for farm products on an area of 300ha in Ha Noi, six times larger than the similar market in Seoul, he noted. Vietnam needed a modern distribution system to improve the competitive ability of its local farm products because the cost of distribution of Vietnamese farm products at present accounted for 20% of the cost of trading, 10% higher than other countries, he pointed out. The key structure of the market would be constructed in 2-3 years, on a total investment of US$300-400 million, he said, adding that the construction of the entire market needed US$1-2 billion. Hong Sun noted that the investment will come from foreign investors, including major capital from the Republic of Korea. The market would have wholesale and retail sections and its operation would be supported by modern information technology system to ensure fair auctions, he added. Korcham is currently looking for space for the market in Ha Noi as it needs a large area. The market would gather farm products to be exported to the RoK and, may be, to some other neighbouring markets such as Hong Kong, Singapore, and Japan, he said. During the initial period, Korcham might employ experts with experience from the RoK or other countries to support Vietnam in developing the market because the management of the market would be based on a modern software system, he added. ‘Promotions should be used to push key products' Trade promotional activities should focus on enhancing the export of key Vietnamese products and the consumption of local products in home markets, according to the Deputy Prime Minister Hoang Trung Hai. He noted that the activities should be undertaken under the programme, "Vietnamese people give priority to using Vietnamese goods." At a ceremony to celebrate the 15th anniversary of Viet Nam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade (MOIT) in Ha Noi on Monday, Hai highly appreciated Vietrade for accomplishing tasks assigned by the government and MOIT in the past 15 years and contributing to the national economic development and international integration. Hai expressed his hope that in the coming time, the agency would continue to complete its tasks and help the Government and ministry to build efficient policies on enhancing trade promotional activities at home and abroad. Trade promotional activities should provide market information, including forecast on market demand, for enterprises and improve the quality of its staff to meet the demands of the domestic economy, he remarked. The agency should closely cooperate with foreign organisations to increase the efficiency of its promotional activities in the future. Between 2010 and 2014, the National Trade Promotion Programme launched by Vietrade attracted the participation of more than 21,000 enterprises that earned over US$46 million and $5.3 billion in export contracts and sales, respectively. Thanks to Vietrade, many Vietnamese products are now present in large markets, including the US, the EU, China, Japan, South Korea, and the Middle East, among others. Vietrade's trade promotional activities in Viet Nam and abroad have received wide support from the people and enterprises, especially at events such as trade fairs, workshops, exhibitions, exchanges, as well as training courses for enterprises and others. Bui Huy Son, head of Vietrade, said sources for the national trade promotion programme had been limited, but programmes had partly managed to improve the competitive ability and development of local enterprises and their brand names. Lee Kyu Seon, Director-General of the Korea Trade and Investment Promotion Agency in Ha Noi, said over the past 15 years, Vietrade had efficiently held trade promotional activities, including international trade exhibitions such as Expo and Foodexpo, attracting many South Korean organisations and enterprises. Through these international exhibitions, enterprises and organisations had promoted the commercial relations between enterprises in both countries. Meanwhile, Atsusuke Kawada, Chief Representative of Japan External Trade Organisation (JETRO), said since the establishment of Vietrade, the agency and Jetro had been regularly exchanging views on trade and investment, apart from organising meetings between enterprises in Viet Nam and Japan. The two agencies have also organised annual exhibitions to encourage Viet Nam's support industry. He expected the two agencies to have more intensive cooperation in the future and contribute to the development of the economic cooperation between Viet Nam and Japan. Sai Gon Trading Corporation and Kinh Do Limited Company said local enterprises had promoted their brand name and products at Vietrade's trade promotional activities, especially trade fairs. At the ceremony, the Deputy PM presented the Labour Order first class to Vietrade in recognition of its achievements and contributions to the nation over the past 15 years. Vietrade was established on July 6, 2000, in accordance with government decision No.78/2000/QD-TTG, which is directly under the MOIT. MTA Vietnam 2015 improves enterprise production capacity The 14th International Precision Engineering, Machine Tools and Metalworking Exhibition and Conference opened at the Saigon Exhibition &   Convention Centre on July 7, attracting nearly 350 businesses from 20 countries. The exhibition showcases advanced technologies of businesses from Germany, Singapore, Japan, the Republic of Korea and India. Highlights of the event include precise technologies and machines of Japanese businesses like Aizaki, Asada, Kira, PMT, Mishima and Towa.   They want to introduce special design solutions for exclusively Vietnam, with the aim of supporting local businesses in improving production capacity and the quality of products. Yasuzumi Hirotaka, JETRO Office Director in HCM City, said Japanese businesses want to directly meet partners from Vietnam and other countries at the event to establish long-term, cooperative relations in light of the country’s rapid development of the production industry. During the event running until July 10, there will be specialized seminars on solutions to enterprise resource planning (ERP) for the production industry. Transport ministry to put 59 transport projects into use The Ministry of Transport will accelerate progress towards inaugurating 59 projects later this year, stated Deputy Minister of Transport Nguyen Ngoc Dong. They include upgrades to and expansions of National Highway 1 from Thanh Hoa to Can Tho, the Hanoi – Hai Phong highway and Pleiku airport facilities, among others. The ministry will also launch key projects such as the Hung Ha Bridge, National Highway 18 linking Noi Bai and Bac Ninh, the Bac Giang – Lang Son expressway and Chau Doc Bridge. In coordination with municipal and provincial authorities, it will also step up site clearance, resettlement and capital disbursement. In the first half of this year, a 663-kilometre stretch of the Ho Chi Minh trail running from the Central Highlands province of Kon Tum to the southern province of Binh Phuoc was completed 18 months ahead of schedule, saving around VND2 trillion (US$95.2 million). Tender planned for sugar imports The Government has agreed with the Ministry of Industry and Trade to put sugar import within quota out for tender in 2016 instead of allocating it in order to ensure transparency. Deputy Prime Minister Hoang Trung Hai has asked relevant ministries and organisations, including the Ministry of Industry and Trade, Finance, Agriculture and Rural Development, as well as Viet Nam Sugarcane and Sugar Association to raise a tender mechanism for sugar import in line with commitments to the World Trade Organisation. Sugar import management policies for the coming years will be laid based on the results of the pilot tendering of sugar import. For the import quota of 81,000 tonnes of sugar this year, the allocation method will still be applied, but the amount of crude sugar to be imported for processing at domestic plants will be increased. Viet Nam Sugarcane and Sugar Association had, for many years, proposed to remove the allocation of sugar import quota as, according to the association, it causes unhealthy competition in the sector. According to Nguyen Hai, the association's general secretary, the tender mechanism for sugar imports will create transparency and harmonise benefits for farmers, sugar plants, and companies using sugar as a raw material. Hai proposed that only crude sugar should be allowed to be imported. He added that bidders should not just be sugar plants and companies using sugar for production but trade companies as well. According to Agro-Forestry, Seafood Processing and Salt Industry Department under the Ministry of Agriculture and Rural Development, the total sugar output of the 2014-15 crop was 1.4 million tonnes, 13 per cent less than the previous crop. As of mid-June, sugar inventories reached 389,440 tonnes, 159,500 tonnes lower than a year ago. Hanoi’s economic growth fastest in four years Hanoi’s total output of goods and services grew by 7.8% in the first half of 2015, the fastest pace in the past four years. The figure was announced at a meeting of the municipal People’s Council on July 6, which targeted growth of 10-11% in the remaining months of the year by continuing to improve the business environment. Industrial production recovered strongly in the six months ending in June, rising 6.7% compared with a 0.3% rise during the same period a year earlier. The property market was warming and services also posted strong results in the first half of 2014. However, exports were struggling, down by 1.2% as the majority of Hanoi’s goods were shipped to the European Union when the euro was falling sharply against the US dollar. The number of tourists to Hanoi in the January-June period rose 6.4% with international arrivals up 8.8% over the same period of last year. Trade promotion should focus on key Vietnamese exports Trade promotion activities should be renewed with a focus on boosting the export of key Vietnamese products and expanding both domestic and foreign markets. Deputy Prime Minister Hoang Trung Hai made the request at the ceremony held in Hanoi on July 6 to celebrate the 15th anniversary of the Vietnam Trade Promotion Agency (Vietrade) under the Ministry of Industry and Trade (MOIT). The Deputy PM appreciated Vietrade for accomplishing its tasks assigned by the government and the MOIT in the past 15 years, contributing to national economic development and international integration. Between 2010 and 2014, the National Trade Promotion Programme, launched by Vietrade, attracted the participation of more than 21,000 enterprises who earned over VND1 trillion (US$46 million) and US$5.3 billion in export contracts and sales. Thanks to Vietrade, many Vietnamese products are now present in large markets including the US, EU, China, Japan, the Republic of Korea, and the Middle East among others. Vietrade has also organised a string of activities to promote trade in Vietnam and abroad, receiving widespread support from people and enterprises at events such as trade fairs, workshops, exhibitions, exchanges, training courses for enterprises and others. At the ceremony, Deputy PM Hai presented the Labour Order, first class to Vietrade in recognition of its achievements and contributions to the nation over the past 15 years. Vietrade was established on July 6, 2000 according to the government decision No.78/2000/QĐ-TTG which is directly under the MOIT. Controlled inflation should ensure economic growth The year's target of a 5% increase in the consumer price index (CPI) is feasible amid encouraging results for inflation and price controls in the first six months of 2015. The CPI and inflation control should create momentum for the growth of the gross domestic product (GDP). The CPI, an indicator of inflation, increased by 0.55% in June compared to December 2014, and 1% over the same period in 2014, according to the General Statistics Office (GSO). But the figures marked the lowest June CPI since 2001, said Deputy Director of the Academy of Finance’s Institute of Economics and Finance Nguyen Duc Do. He noted that the rate of inflation in the past year has slowed noticeably and the economy is now relatively close to an inflation rate of 0% - far from the target of 5%. Do said concerns about a low rate of inflation were raised in 2014 when inflation in December 2014 decreased by 1.84% over the same period in 2013, attributed to the sharp decline of petrol prices. However, in the past six months, inflation has been mainly driven by the higher prices of electricity, the exchange rate and health services, but not petrol prices. According to the GSO, a 2% VND/USD exchange rate adjustment led to a CPI increase of 0.6%, and a 8.47% rise in electricity prices led to a 0.22% increase in the CPI. Do added that the six-month inflation rise was mainly fuelled by costs, but the low inflation pace in the past year was due to lower aggregate demand than aggregate supply. He noted that since 2008, economic growth has always been lower than the potential of 6.5%, which means the increase in aggregate demand was lower than that of aggregate supply, pulling down inflation. The downward trend of inflation will stop when the economic growth rate increases to 6.5% or above. Economist Ngo Tri Long said inflation over the past six months posted a 0.55% increase compared to December 2014, equivalent to nearly a tenth of the year's target - the lowest figure in the past 14 years. Thus, the year's target of less than a 5% increase in the CPI is achievable. Long emphasised that low inflation will create positive impacts on socio-economic development, making investors and enterprises feel secure, creating favourable conditions for policy makers and managers to put forth and implement measures to remove barriers to production and business activities. But effective control of inflation must create a driving force for GDP growth, he added. Long said GDP increased by 6.28% in the first six months of this year - a relatively high level for recent years - indicated economic recovery. It is expected that the GDP growth rate for the entire year will reach 6.2%. Despite the high growth rate, a number of economic factors have yet to be improved, requiring greater efforts from the government including a high trade deficit, and a large number of bankrupt enterprises among others. The government set a target of reaching an annual GDP growth rate of 6.5%-7% in the 2016-2020 period to avoid deflation - but attaining this growth is a significant challenge. Do said the reduction of interest rates, particularly the lending rate, is one of the prerequisites for achieving this target. In the 2012-2014 period, the State Bank was successful in lowering interest rates, reducing inflation and stabilising the exchange rate and the gold market, which was attributed to the flow of cash into the bonds market. Do noted that when the money flows into bonds, the pressure on the exchange rate will decrease, creating good opportunities for lowering interest rates and issuing government bonds, as well as increasing credit growth and allowing the easier settlement of non-performing loans. Thus, it is advisable to put money in bonds in the current context, Do said. Meanwhile, Head of the State Bank of Vietnam's Banking Strategy Institute, Nguyen Thi Kim Thanh said monetary control should be at the top of the list, along with a balance between the supply and demand for goods, to maintain stable inflation. The facts show that the prices of commodities in the past six months were mainly driven by supply and demand. In the remaining months of this year, credit growth will continue to increase along with expanded ownership limits and voting rights for foreign investors in listed enterprises, posing a challenge to the State Bank in controlling cash inflow and the exchange rate to curb inflation. Thanh also suggested strengthening the fight against goods smuggling and improving distribution channels of goods which otherwise may create negative impacts on price management policies. Vietnam’s economy predicted to grow by 6.3% in first three quarters The National Financial Supervisory Commission (NFSC) has projected that the Vietnamese economy will expand by 6.3% in the first nine months of the year. The regulator said economic growth for the whole of 2015 could reach 6.5% thanks to recovery in the manufacturing sector. Vietnam’s economy grew 6.03% in the January-March period, accelerating to 6.15% in the three months following, bringing growth in the first half of the year to 6.1%. According to the NFSC, the index of industrial production rose 9.1% in the first six months of the year, much higher than the 5.8% increase during the same period of last year, with the manufacturing sector up 9.9% compared with 5.5% in 2013 and 7.5% in 2014. In addition, a 10.9% rise in power generation and distribution indicated a strong recovery in manufacturing, which was further supported by the purchasing managers index of 54.8 in May, the highest level since the survey began in April 2011. The first half of 2015 saw the number of newly established enterprises up nearly 22% while those forced to close dropped 5.8% against the same period of 2014. In June, consumer price inflation and core inflation, which were 1% and 2.37% respectively, had remained largely unchanged over the four months prior, said the NFSC, predicting that core inflation for the whole of 2015 would be about 3%, while headline inflation would be less than 3%. Despite the upbeat tone, the NFSC warned that the Vietnamese economy was still facing serious challenges such as the return of a trade deficit, a struggling agricultural sector and difficulty in tax revenue collection. The trade gap during the January-June period was estimated at US$3.75 billion, due to growing imports and slowing export growth. According to the NFSC, the export growth rate in the first five months of the year was less than half the rate during the same period of 2014, 7.3% compared with 15.4%, while the import growth rate nearly doubled over the first five months of last year. At the same time, the farming sector saw a slowdown from the previous year, rising by 2.16% compared with 2.96% a year earlier. Shorter G-bond tenors sought to boost fund-raising The Ministry of Finance plans to ask the National Assembly (NA) for approval to issue Government bonds with tenors of less than five years to reverse a decline in demand for G-bonds. The NA’s Resolution 78/2014/QH13 allows the Government to issue debt with tenors of five years or above with an aim to curtail soaring public debt. Deputy Minister of Finance Vu Thi Mai told a recent review meeting in Hanoi that that the ministry would petition the NA to approve bond tenors of less than five years to help improve fund-raising for the State budget. In addition, the ministry will diversify borrowing forms to mobilize long-term capital from domestic and overseas sources at affordable interest rates to cope with State budget constraints. As of June 24, the ministry issued nearly VND100 trillion worth of G-bonds to raise money to finance the budget deficit and development projects. This amount is equivalent to only 36.8% of the year’s target. Meanwhile, Vu Viet Ngoan, head of the National Financial Supervisory Commission, said G-bond coupons had been on the rise since March. According to the commission, there are three primary reasons for the decline in bond sales. First, the issuance of bonds of over five years from this year has made it difficult for investors to predict rate volatility and arrange capital for investments of longer terms when the year’s inflation is forecast to stay at the lowest rate in the past decade. Secondly, the banking sector has reduced purchases of bonds issued by the State Treasury due to higher credit growth and longer bond tenors. Finally, investors expect higher bond yields while the demand for ten-year bonds is low. According to the NA’s Budget and Finance Committee, this year’s debt payments are set to rise and make up 31% of State budget collections, higher than the 25% target in the public debt strategy. The reason is that more money is needed to pay debts of one- to three-year G-bonds issued in the past few years. This is why the NA issued Resolution 78 restricting the issuance of bonds with tenors shorter than five years. H1 auto imports surge 186% y-o-y Vietnam spent more than US$1.55 billion importing completely built-up (CBU) autos in the first half of 2015, soaring 186% against the same period last year. An updated report of the General Statistics Office (GSO) indicated the January-June CBU auto imports almost reached the US$1.57 billion level recorded in all of 2014 and were more than double the figure in 2013. The first six months saw car imports surging 121.6% to 57,000 units, including 11,000 worth US$345 million in June alone. Notably, the volume of imported cars was less than the 72,000 units registered for all of 2014. This meant auto companies, particularly joint ventures, spent more on expensive cars. Almost all local auto joint ventures have imported cars for sale in Vietnam, especially luxury units. More than 10 luxury car brands are available on the domestic market. This year, car importing firms will join what will be the first exhibition of imported car brands in Vietnam in October. These car importers have invested heavily in their sales and maintenance systems across the country. Such exhibitions were organized by auto assembly joint ventures and car importers in collaboration with the Vietnam Automobile Manufacturers Association (VAMA) in previous years. Auto industry watchers also attributed the strong CBU auto imports in the first six months of this year to soaring demand for trucks since the middle of last year as transport enterprises have had to buy new vehicles after the Ministry of Transport decided to apply stricter controls on overloaded trucks. As the demand far outpaces the supply of locally-assembled trucks, enterprises have increased imports with a majority of them from China. The strong rise in January-June car imports contributed to Vietnam’s trade deficit of US$3.7 billion, equivalent to 4.8% of total exports in the period. Meanwhile, the country enjoyed a trade surplus of US$1.9 billion in the first half of 2014. Vietnam ran a trade deficit of US$16.7 billion in the first six months of the year, according to the Ministry of Industry and Trade. Jan-Jun electricity output, consumption up strongly Vietnam Electricity Group (EVN) said electricity output and consumption in the first half of this year surged over the same period last year. EVN reported at a meeting of the Ministry of Industry and Trade in Hanoi on Wednesday that the power sector generated 78.74 billion kWh in the first six months of this year, rising by 12.35% against the January-June period of 2014. Nguyen Tai Anh, deputy general director of EVN, was quoted by VietnamPlus as saying at the meeting that household electricity consumption soared in May and June compared to the same period of last year due to hot weather. The highest daily electricity consumption in May-June was more than 531 million kWh, up over 13% against the peak electricity consumption day of the same period of last year. To meet rising demand, EVN commissioned five power generators with a combined electricity capacity of 2,654 MW last month. This helped reduce the number of power cut hours from January to June by 38% year-on-year. “This (less power cuts) is one of the targets EVN is striving to achieve to better serve customers,” Anh said. EVN projected the volume of electricity generated in Vietnam and imported in the second half of this year would be 80.32 billion kWh. The group pledged sufficient electricity supply for production and commercial activities toward the year-end. It plans to put into operation Lai Chau Hydropower Plant with a designed generation capacity of 1,200 MW and Huoi Quang Hydropower Plant with 520 MW. Minister of Industry and Trade Vu Huy Hoang said EVN should secure stable electricity supply to meet the demands for not only production but also daily use consumption of households as assigned. Hoang told EVN to find measures to drastically solve the environmental pollution caused by coal ash from Vinh Tan 2 Thermal Power Plant in the central province of Binh Thuan and not to let this pollution happen at other thermal power plants in the country. In April this year, a large number of people in residential areas near Vinh Tan 2 Thermal Power Plant gathered on the National Highway 1A section at the project in protest against the dust pollution triggered by the plant. The gathering caused severe traffic congestion on the 50-kilometer-long road section in the province. Mobile phones likely to be imposed safeguard duties in Turkey The Turkish Ministry of Economy is conducting investigations on mobile phones imported into the country in order to impose safeguard duties. More than one-fourth of the imported mobile phones last year came from Vietnam, equalling around US$791 million. The Vietnam Ministry of Industry and Trade on July 6 said that investigations were underway after five Turkish smart phone producers lodged a complaint. If Vietnam mobile phones are levied safeguard duties, their import tax may increase by 10-15% in the first year of being imposed such kind of tax. Transport enterprises to divest from non-core businesses Companies in the realm of ransport will continue to withdraw capital from non-core businesses, according to Deputy Minister of Transport Nguyen Ngoc Dong. Addressing a meeting reviewing the accomplishments of the first six months of 2015 and outlining tasks for the next sixth months, Dong said from the beginning of 2015, the ministry completed capital divestment from 19 companies, collecting a total amount of almost 1.49 trillion VND (68 million USD). Corporations were also given the green light to withdraw capital from 27 of their affiliates and associated companies besides removing State capital from two local inland waterway management and maintenance companies, he said. The ministry recommended the Prime Minister approve capital divestment via tenders and at a larger amount than stipulated in Decision No 37/2014/QD-TTg for 23 enterprises, totalling 5.5 trillion VND (252 million USD). Regarding the rearrangement, reform and equitisation, Dong confirmed the ministry would step up the restructuring of nine corporations, including the Shipping-Building Industrial Corporation; Vietnam National Shipping Lines; Vietnam Expressway Corporation; Cuu Long Corporation for Investment, Development and Project Management of Infrastructure; the Aviation Corporation of Vietnam; and the Central Transport Hospital, among others. In the next six months, Minister of Transport Dinh La Thang said the ministry would strive to complete the equitisation of all enterprises where the State does not need to hold 100 percent of capital in 2015. After 2015, the ministry should only have control of four corporations and two companies: the Vietnam Railways, Vietnam Air Traffic Management Corporation, Northern Vietnam Maritime Safety Corporation, Southern Vietnam Maritime Safety Corporation, Vietnam Maritime Communication and Electronics LLC and the Transport Publishing House. Source : VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR