BUSINESS IN BRIEF 21/9 Villas stand out in Da Nang residential market With the presence of Premier Village Da Nang Resort and Naman Residences, the residential market, especially the villa segment, in Da Nang in the second quarter continued to be vibrant with a large supply outlook for the second half of the year, according to the latest report from Savills released on September 15. The report stated that two villa projects - Premier Village Da Nang Resort and Naman Residences - supplied 150 dwellings in total. The villa stock in the city was 890 units from 16 projects. The primary market comprised 450 dwellings from ten projects, accounting for 50 per cent of total supply. One new apartment project launched also provided 100 dwellings. There were 711 units from 13 projects in the primary market, up 5 per cent against the first quarter. The absorption rate for villas and apartments also increased remarkably in the second quarter. A 12 per cent rise was recorded in villas due to the good sales performance of the Premier Village Da Nang Resort, seeing an average villa price of VND27.5 million ($1,210) per square meter, up 9 per cent quarter-on-quarter. Meanwhile, the apartment market continued to show positive signs with an absorption rate of 18 per cent. The average price fell 5 per cent quarter-on-quarter due to lower prices in a new project in Son Tra district. Projects whose developer had a strong reputation and were in close proximity to the beach and the city center generated good sales in the quarter. Most transactions in Da Nang were not for residing but for investment and leasing, according to the report. With sound operations, Savills predicted that from the second quarter onwards 1,350 dwellings from 13 villa projects and 17,600 units from 21 apartment projects will enter the market. While Son Tra district continues to have the largest future villa supply, Hai Chau district remains the top apartment supplier, with a 75 per cent market share. Wyndham invests in Ha Long Bay hotel Wyndham Hotels and Resorts, the largest hotel group in the US, signed a cooperative agreement with the Ha Long Star Tourist Service JSC on September 15 to build the Wyndham Legend Ha Long. The hotel will be its first five-star hotel of international standard in Vietnam, with 217 rooms and a range of services such as meeting rooms, a café, a gym and fitness center, and spa and massage facilities. The hotel is expected to open its doors in 2016. Speaking at the signing ceremony, Ms. Vu Thi Thu Thuy, Deputy Chairman of the Quang Ninh Provincial People’s Committee, said she appreciated the cooperation between the two enterprises and hoped they would cooperate closely to meet the needs of tourists from Vietnam and overseas. The signing of the cooperative agreement marks another coming together of Vietnamese and foreign enterprises and will attract tourists to Ha Long Bay, one of the wonders of the world. Wyndham is one of the largest hotel groups in the world, owning and operating more than 7,500 hotels worldwide. The Wyndham Legend Ha Long is its first investment in Vietnam. Foreign house buyer number far behind expectations The number of foreigners and oversea Vietnamese buying houses in Vietnam has been far behind forecasts since the Housing Law 2014 took effect in July, said economic expert Dinh The Hien at a seminar in Ho Chi Minh City on Monday. The seminar was hosted to solve problems for foreigners and oversea Vietnamese to buy houses in Vietnam. The Housing Law 2014 permitting foreigners to buy houses in Vietnam has been expected to heat up the real estate market with an increase of foreign house buyers. However it has not been as expected because of many reasons. Among them is that decrees and circulars guiding implementation of the Housing and Real Estate Laws have not been issued. Deputy chairman of the Committee for Oversea Vietnamese Affairs (COVA) in HCMC Tran Hoai Phuong proposed authorized agencies to simplify procedures and provide transparent database to improve the condition. The Ministry of Construction and the State Bank of Vietnam should ensure the rights of foreign house buyers, facilitating money transfer into their accounts when they resell properties, he suggested. According to statistics by lawyer Nguyen Van Hau from the HCMC Lawyer Delegation, about 400 oversea Vietnamese and foreigners bought houses in Vietnam in the period of 2009-2014. Mango gets access to Japanese market The Japan Ministry of Agriculture, Forestry and Fisheries has announced that it officially opens door to Vietnamese mango enter to the market as of September 17. The Plantation Protection Department (PPD) under the Ministry of Agriculture and Rural Development said this is the second Vietnamese fruit to be shipped to Japan after dragon fruit in 2009. To meet requirements for mango exports to Japan, Vietnamese relevant agencies have spent five years making files and building a disease control process. Before entering Japan, Vietnamese mangoes must undergo a hot steam treatment process (like dragon fruit). Vietnam has five factories providing hot steam treatment, including four using codes regulated by Japan. A director of a fruit export company in HCM City said his firm has received the foresaid information and is prepared to ship the first batch of mangoes to Japan soon. Vietnamese, foreign travel businesses find fresh opportunities Vietnamese and foreign tour operators have found many new opportunities after showcasing their photos, searching  for partners as well as building strategic cooperation for the future at a three-day international tourism fair, which concluded recently in Ho Chi Minh City. The Hoi An Tourism Company from the central province of Quang Nam, which has joined the International Travel Expo Ho Chi Minh City (ITE HCMC 2015) for four times, designed its booth with images of Hoi An ancient town, situated peacefully along the Hoai River. The firm, which mainly organizes tours to the old town, received great attention from international buyers, as Hoi An has become an attractive destination for foreign tourists in the past decade. Le Thi Anh Tuyet, head of marketing at the company, said it had planned to engage in 60 appointments with international buyers during the first two days. But the firm joined 150 appointments in total, which means the ancient town remains a magnet for international visitors, she said. The Hoi An Tourism Company offers foreign buyers the idea of an old town, combined with the rural setting, by the sea so that they can integrate it into their tour packages for customers, Tuyet said. The TNK travel company, which has partaken in the ITE for two times, told a group of reporters that the fair was a chance to learn about the needs of customers so that the firm would be able to create suitable products. TNK specializes in organizing tours to the Mekong Delta and Ha Long Bay for tourists from developed countries, and it attended 20 meetings with potential foreign buyers at the fair, three of which could be considered successful. Simone Denvang, who is in charge of public relations at the firm, said the most promising deal came from the meeting with a U.S. firm. Meanwhile, foreign tourism companies also considered the ITE an opportunity to promote their images to Vietnamese tourists. Yourng Hark, head of marketing with Sokha Hotels & Resorts from Cambodia, said the ITE was an effective channel to tell clients what the company is doing well, and it is the main reason why it has come to the event for four times in a row. Isabel Von Jordan, representing a large travel company coming from Germany, said each year he goes to Vietnam once or twice, and he wants to find new tourism products for his clients at home. According to the organizers’ statistics, there were 5,000 appointments between local sellers and international buyers during the first two days of the fair. Domestic and foreign enterprises booked 6,000 appointments online to seek business opportunities during the three-day tourism promotion event, the organizers said. The ITE HCMC 2015 attracted around 320 travel agencies at home and abroad, as well as Vietnamese and foreign tourism promotion companies with 250 booths of 350 exhibitors from 21 countries and regions, visited by over 25,000 people, the organizers added. Vietnamese brand to contest in highly competitive powdered milk market Vietnam’s domestic private ese Nova Group, which has been operating for 23 years in the agriculture and real estate sectors, now targets a growing share in the highly competitive market of children’s powdered milk. Late last month, Nova has set foot in the powdered milk market with the launch of the Anka Milk brand in cooperation with Ireland’s Kerry Group. The milk, produced at Kerry Group’s Anka farm in Ireland, is imported then distributed at supermarkets and Nova’s 36 agents. The company has promised to keep the price of their products unchanged for two years. According to Nguyen Huu Liem, deputy chairman of Nova Group and chairman of Anova Milk, the group’s subsidiary in charge of its milk operations, their primary target is to raise the market share to 5 per cent within the first three years. Powdered milk is only the first step and will be followed by liquid milk and milk-based dietary supplements. Liem is confident that Anova will be able to expand its distribution network as Novaland, the real estate arm of Nova Group, is an investor in many large real estate projects with tens of millions of residents in the future. Nova Group started the powdered milk project three years ago. In Vietnam, the price of powdered milk is rather volatile but has shown an upward trend over the years. The market is abundant with foreign brands. “We picked the children’s powdered milk segment because it is sensitive and prices tend to fluctuate the most here. We want to create the most suitable product to Vietnamese children,” Liem said. Anova Milk chose not to build a production and packaging plant in Vietnam because the investment and production costs are high, which would have resulted in a high price for the product. Moreover, Vietnamese people have a preference for foreign brands. Therefore, Nova has invested over $50 million in the production line of the Anka Ireland farm, to produce the Anka-branded milk formula in Europe. The cans that the milk comes in have traceability codes that enable consumers to look up all information on each Anka product, from the origin of fresh milk material to the quality verification process, manufacturing, the nutrition formula, the manufacturing packaging date, as well as nutrition verification and transport. A recent survey by Ipsos Vietnam on customers with children more than two years of age in Ho Chi Minh City and Hanoi showed that 80 per cent of them are at a loss the first time they buy milk for their children, 66 per cent do not know what the criteria for good powdered milk are, 74 per cent say the information on the label is not enough to determine the quality of the milk, 78 per cent say they will be more confident if the product has a traceability code. Competition is tough on the powdered milk market with foreign brands making up 75 per cent of the more than 300 brands. Abbott has 120 products in Vietnam, holding a 30 per cent market share. Vinamilk ranks second with a 24.6 per cent market share. In the children’s powdered milk segment, Vinamilk ranks first with a 25.8 per cent share. Nova Group, formerly Thanh Nhon Ltd, was established in 1992 and has been producing and trading veterinary medicine, aquaculture chemicals, and pharmaceutical materials as well as building villas for rent. In 2007, the company changed its name to Nova Group with two major fields of operation, namely agriculture, with Anova Corporation, and real estate, with Novaland. State-run conglomerates eye power price hike to offset losses caused by VND devaluation Three state-run conglomerates, which are involved directly or indirectly in power generation, are seeking for permission from state management agencies to raise power price, saying that the devaluation of the local currency earlier this year has worsened their balance sheets. The Vietnam Electricity (EVN), Vietnam National Coal Mineral Industries Group (Vinacomin), and PetroVietnam (PVN) claimed that the depreciation of the Vietnamese dong has raised their debt burden, which will only be partially offset by a hike in power prices. The State Bank of Vietnam (SBV), the country’s central bank, on August 19 depreciated the dong by one percent against the U.S. dollar after doing so for two times previously, bringing the total devaluation of the local currency to three percent. The latest SBV move, which is the third it has made in 2015, will help strengthen the national economy so that it can stand firm amid any international financial turbulence, deputy governor Nguyen Thi Hong said. Earlier this year the central bank announced that it would not devalue the dong by over two percent in 2015. The dong depreciation has caused a VND1.2 trillion (US$52.8 million) loss for those thermal power plants built and managed by Vinacomin, Vu Anh Tuan, the firm’s deputy general director, said in a meeting between the three state-run behemoths and the Ministry of Industry and Trade earlier this month. Meanwhile, Ngo Son Hai, deputy general director of EVN, said the combined losses incurred from the dong devaluation by the power utility and PVN may be ten times those at Vinacomin. But Deputy Minister of Industry and Trade Do Thang Hai said at the meeting that though the devaluation may result in losses for the three state-owned firms, their proposal on raising power prices must be submitted to the central government for a green light. Ho Cong Ky, chairman of the board of directors of PetroVietnam Power Corporation, told Tuoi Tre (Youth) newspaper that almost 70 percent of the investment in local thermal plants, often costing over $1 billion each, is financed by bank loans. Some are funded by loans worth billions of U.S. dollars, Ky said. As a result, a $1 billion loan, which was valued around VND21 trillion, has become VND22 trillion since the dong depreciation. Increased debt repayment obligations mean more costs, so without any price hike, the investors will run into losses, the chairman added. Representatives of the Ministry of Finance and the Ministry of Industry and Trade and many experts told Tuoi Tre the losses brought about by the dong depreciation, if any, cannot be all included in the proposed price increase, as a power price hike will have a knock-on effect on the pricing level of the economy. Dang Quyet Tien, deputy head of the Corporate Finance Department under the Ministry of Finance, said existent regulations stipulate that losses due to exchange rate differences will be included in the cost of production and they are amortized over five years. The Ministry of Industry and Trade and the Ministry of Finance are advised to determine at which rate the losses will be offset and included in electricity price, Tien added. Dr. Nguyen Duc Thanh, director of the Vietnam Economics and Policy Research Institute (VEPR), said the Vietnamese dong has been actually devalued by around five percent so far, referring to the SBV’s widening the trading band of dong-dollar transactions by two percent last month. According to the VEPR’s preliminary calculations, all this is able to make electricity cost increase by less than two percent. Meanwhile, for operational power plants, even with very large investments, they are often financed by long-term loans, approximately 20-30 years, Dr. Thanh said. He added that losses resulting from exchange rate fluctuation should be offset during the entire term of the loans, instead of only one year with just a price rise. Binh Thuan seeks money for projects The People's Committee of south-central Binh Thuan Province is calling on local and foreign investment for four tourism projects with total capital of US$384 million. Le Tien Phuong, the committee's chairman, spoke about the projects at an investment promotion conference held in the province last Saturday, attracting more than 300 enterprises and representatives of associations. The projects include Ham Tien-Mui Ne Luxury Tourism, Commerce, and Service Complex covering nearly 200 ha with estimated capital of $200 million and the 86-ha Hon Rom-Mui Ne Luxury Area with estimated capital of $92 million. The other two projects are the 330-ha Ham Thuan Da Mi Tourism Area with estimated capital of $42 million and the 310-ha Bung Thi Hot Spring Tourism Area worth $50 million. The Hoang Quan Group plans to invest the first project of Ham Tien-Mui Ne. Truong Anh Tuan, the group's chairman and CEO, said that more resorts might be built in the project. The province has had 1,156 local and foreign investment projects with total capital of $7 billion including 104 foreign ones worth $1.7 billion from 24 countries and territories. The province is seeking investment in its industries, especially export processing companies using local materials. It has 100 mineral mines including coal, gold, tin and titanium. The latter has a total of 500 million of tonnes in reserves. Nguyen Duc Hoa, head of the provincial Department of Planning and Investment, said the province had offered preferential income tariffs and land hiring fees for investors in localities such as Phu Quy Island, several districts and industrial parks. The province will also provide loans to enterprises to train human resources, transfer technology and develop markets, he added. At the conference, the committee signed an investment agreement for projects including the Viet Nam-Cambodia United Friends Tourism Area, Hoa Thang Wind Power Plant No 1 and Solar Power Plant. One enterprise said it wanted to build a plant to produce adobe bricks by using coal residue from Vinh Tan Thermoelectricity Plan No 2. Another 12 investors also plan to build similar plants. Phuong told the enterprises to consult Viet Nam Electricity (EVN), which is in control of coal residues. If EVN agrees, the province will create favourable conditions for these plants as they can reduce pollution caused by coal mining. He said the province would continue to improve the investment environment, especially inter-regional roads. Phan Thiet Airport is expected to open soon, he added. Way-out proposed to propel major expressway firm restructuring Vietnam’s largest state-owned expressway developer has proposed a funneling capital between projects to address its recent funding deficiency problems. The Vietnam Expressway Corporation (VEC) has recently requested that the Ministry of Transport approve the use of capital sources from financially solvent highway projects to fill the capital shortfall in low efficiency projects, thus ensuring a steady cash flow overall, and specifically, for the duration of struggling projects. If they receive the green-light, the VEC will be capable of finding a financial equilibrium through the use of VND20.36 trillion ($934 million). This capital injection would be drawn from three major expressway projects to ease financial distress at two other crucial projects: the Danang-Quang Ngai and Noi Bai-Lao Cai expressways. VEC chairman Tran Quoc Viet said, “The traffic volume and toll revenue at our three operating expressways – Cau Gie-Ninh Binh, Noi Bai-Lao Cai, and Ho Chi Minh City-Long Thanh-Dau Giay – have surpassed our projections, helping to significantly improve VEC’s cash flow.” The latest financial data from the two major expressway projects facing capital distress show a shortfall of VND22.05 trillion ($1 billion) in the money flow, down VND8.83 trillion ($405 million) compared to an estimate from 2014. If the VEC proposal is approved, the remaining shortage of VND1.69 trillion ($77.5 million) at these two principal highways will be offset by using proceeds from construction bond issuances or bank loans. “The VEC proposal may be the best possible way-out to advance the shake-up plan of Vietnam’s expressway chief engine, which is responsible for managing more than $5 billion in investment capital,” a senior transport expert commented. Previously, in a document commenting on VEC’s organisational restructuring and the increased chartered capital proposal sent to the Government Office in June, Deputy Minister of Finance Tran Van Hieu said such a shortfall ($1 billion at VEC’s two major expressway projects) was huge, surpassing the state budget’s affordability limits. As part of its proposal, the VEC is also seeking permission not to establish joint stock companies for these five expressway projects at this point in time, as well as asking for extended exploitation timeframes for these projects. According to VEC’s initial estimates, the time needed to recoup capital (for the capital portion raised by VEC) is 23 years for the Cau Gie-Ninh Binh route, 31 years for Noi Bai-Lao Cai, 19 years for Ho Chi Minh City-Long Thanh-Dau Giay, 23 years for Ben Luc-Long Thanh, and 22 years for Danang-Quang Ngai expressway. These timelines are in place to ensure that VEC can fully repay loans to their two major donors – the World Bank and Asian Development Bank (ADB). At present, government agencies and sector management have reached a consensus on raising VEC’s chartered capital to more than VND22 trillion ($1 billion) from the current VND1 trillion ($46.7 million). Using this renewed fund of capital, VEC has proposed to extend the exploitation timeframe at these five expressway projects to 42.5 years. “VEC’s current debt over equity ratio comes to about 53 to 1. Therefore, allowing VEC to increase its chartered capital is necessary to ensure financial security and facilitate capital mobilisation for other highway projects in the future,” said Deputy Minister of Planning and Investment Dang Huy Dong. Becamex builds residential-industrial complex in Binh Phuoc The Investment and Industrial Development Corporation (Becamex IDC) started the construction of a residential-industrial complex in the southern Binh Phuoc Province on September 14. The project, covering 4,700ha in Chon Thanh District, has a total investment capital of VND20 trillion (US$888 million). The industrial zone, covering 2,500ha of the project area, focuses on such industries as electrical items, household products, computing and information technology and telecommunications, besides food processing. The complex will also house healthcare, education, commercial and shopping facilities to serve more than 200,000 residents and investors who will work and live there. Becamex IDC has invested in a series of industrial zones and residential areas such as Viet Nam-Singapore industrial zones in Bac Ninh, Nghe An, Quang Ngai and Hai Phong. Becamex IDC was established in 1976. It is now a prestigious brand in the field of investment and development of industrial, residential, urban and transport infrastructure. Currently, Becamex IDC has 28 subsidiaries and is involved in joint co-operation covering several areas such as finance, insurance, banking and construction, as well as trading, real estate, services and telecommunication - information technology, besides pharmaceuticals, healthcare and education, with a charter capital of approximately VND5.5 trillion ($244 million). Unknown quantity With a few million dollars at his disposal, Mr. Matsuda, a Japanese entrepreneur in the field of information technology, is considering starting something in Vietnam, just as many of his business acquaintances have done successfully over the last few years, especially as Japan’s economy is growing at quite a slow pace. However, with the devaluation of Japanese Yen (JPY) and the government spending more and more on public investment, he has reasons to hesitate as there are perhaps more opportunities at home and domestic costs are more affordable than previously. Giant Japan-headquartered multinational corporations may have a lot more financial power and may want to diversify their business portfolio with some production bases in Vietnam, but their general mindset may not be too far from Mr. Matsuda’s. Foreign direct investment (FDI) from Japan flowed swiftly into Vietnam in the period from 2011 to 2014. According to figures from the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MPI), Japan remained the top investor in Vietnam until mid-2014, with accumulated registered capital of $35.57 billion. In the last 12 months, however, the country has been surpassed by South Korea, with nearly $40 billion, while Japan’s was just a touch over $37 billion. Looking at FDI flows into Vietnam as a whole, there have only been 1,068 new projects with registered capital of $6.92 billion in the first seven months of 2015, up just 1 per cent compared to the same period of 2014. The figure is quite modest compared to previous years and raises concerns over whether it is indicative of a deceleration of FDI flows into Vietnam, especially from Japan. Losing its footing Fifty-three countries and territories had investment projects registered in Vietnam in the first seven months of this year. South Korea took the lead, with new and additional registered capital totaling $1.91 billion, accounting for 21.7 per cent of the total. The UK followed, with $1.24 billion, representing 14.2 per cent, then the British Virgin Islands and the US, both of whom had around $800 million in investment, or 10 per cent of the total. Hong Kong rounded out the Top 5, with $790 million and 9 per cent. Japan found itself outside of the Top 5, ranking sixth with only 176 new projects and 82 expanded projects, with combined capital of $716 million. Back in the golden days Japan was either champion or runner-up in the Vietnam investment game, with billion-dollar projects such as the $9 billion Nghi Son Oil Refinery in north-central Thanh Hoa province, the $1.22 billion Bridgestone Tire Manufacturing Factory in northern Hai Phong city, and the $1.2-billion Tokyu Garden City project in southern Binh Duong province, among others. But over the last year Japanese FDI to Vietnam has been marked by an absence of mega projects, falling 65 per cent to $2.05 billion in 2014, according to figures from the Japan External Trade Organization (JETRO). Japan’s macro-economic situation (with economic growth of just 0.004 per cent in 2014 and a “not very optimistic” forecast for 2015) and the public investment mentioned above may well lie behind Mr. Matsuda’s hesitation and the overall decline in Japanese FDI coming to Vietnam. However, Mr. Nguyen Van Toan, Deputy Chairman of the Vietnam Association of Foreign Investment Enterprises (VAFIE), believes that this is only a short-term trend and that Japanese enterprises will continue to invest in Vietnam over the longer term. Getting up Japan has provided the highest level of ODA to Vietnam, exceeding $23 billion and accounting for more than 30 per cent of the total committed by the international community. Twelve per cent was grant aid and the remainder preferential loans. Japanese ODA projects have made significant contributions to Vietnam’s rapid socio-economic development, which is a necessary requirement of investors when looking into a new investment destination. More importantly, though, the financial source plays a key role in attracting Japanese enterprises to come and bid for contracts, and consequently creates a spillover effect on the Japanese business community to focus more on Vietnam. Tariff barriers are being reduced and eliminated gradually and Japanese companies operating in Vietnam receive substantial benefits when importing raw materials for processing and manufacturing. The Ministry of Finance (MoF) announced new preferential tariffs for the period of 2015-2019 on April 1, with 3,200 tariff lines being eliminated on machinery, equipment, electronic devices, spare parts and accessories, and others being imported from Japan. This is expected by authorities to encourage more Japanese enterprises to come to the country. With a rising number of Japanese enterprises contacting JETRO for information on Vietnam’s investment environment and consultation, the Japanese Business Association of Ho Chi Minh City (JBAH) recently told Mr. Toan that falling Japanese FDI flows to Vietnam are unlikely to become a trend. According to JETRO, 62.3 per cent of Japanese enterprises in Vietnam were profitable last year, up from 59.2 per cent in 2013 and, as a result, 70 per cent have expressed a desire to continue to invest in the country. A delegation of 30 businesses from the Japan Business Federation (Keidanren) attended the 2015 Vietnam-Japan Trade and Investment Promotion Forum in Ho Chi Minh City on July 31 to explore the country’s investment and business environment. According to Keidanren’s Senior Managing Director, Mr. Mukuta Satochi, Vietnam is considered a gateway for Japan to enter the ASEAN market. “As the ASEAN Economic Community will be formed at the end of the year Vietnam’s role as a business venue in global supply chain strategies will increase,” he said. Meanwhile, Mr. Hirotaka Yasuzumi, Managing Director of the JETRO office in Ho Chi Minh City, said a study by JETRO revealed that Vietnam is chosen by a majority of Japanese businesses operating in Thailand and China as a place to locate their manufacturing facilities within their “Thailand+1” and “China+1” strategies. “The trend of shifting to a third country from China is increasing, mostly targeting ASEAN countries, especially Vietnam,” he said. Abundant human resources and low costs are among Vietnam’s attractive characteristics, Mr. Yasuzumi said, noting that salaries for well-trained workers with good foreign language skills in Ho Chi Minh City are about $440 per person per month; half the cost in China’s Guangzhou province. Moreover, the electricity price is about $0.09 per kilowatt hour and water is about $0.43 per cubic meter, which are two or three times cheaper than those in the Philippines’ capital of Manila or in Guangzhou. A large number of giant Japanese enterprises in Vietnam are following this investment trend. Mr. Tadahito Yamamoto, President and Chairman of the Board of Fuji Xerox, recently revealed his plans to turn Vietnam into Fuji Xerox’s global production base. In 2018 the import tax rate from ASEAN to Vietnam will be eliminated and so Fuji Xerox is investing in production in Vietnam and opening more branches in Myanmar, Cambodia and Laos to take advantage of the upcoming opportunities, he said. Many experts in the field of foreign investment have expressed faith that Vietnam is likely to see a new wave of investment from Japan as its investors have shown continued interest in the Southeast Asian market. PM signs off on ADB highway loan Prime Minister Nguyen Tan Dung has approved a second loan from the Asian Development Bank (ADB) for the Ben Luc - Long Thanh Highway project. $286 million in loans are to come from ordinary capital resources (OCR). The Vietnam Expressway Corporation (VEC) is the owner of the project.   The Prime Minister asked the Ministry of Transport to direct the investor to accelerate project progress so its timetable will be met. The Ben Luc - Long Thanh Highway stretches 57.1 km in length, passing through Long An province, Ho Chi Minh City, and Dong Nai province. It is a key national project in the North - South Highway, expected to be open to traffic in the second quarter of 2019. The project will significantly bolster socio-economic development in the southern region, facilitating investment attraction and tourism in Ho Chi Minh City, Long An, and Dong Nai. Upon completion the highway will connect traffic in the Mekong Delta and southern provinces, largely bypassing Ho Chi Minh City. It will connect to the Cai Mep - Thi Vai road network and the Sao Mai - Ben Dinh seaport network, simplifying the transport of goods. Exchange rate felt in public debt The adjustment made by the State Bank of Vietnam (SBV) to the VND/USD exchange rate will make Vietnam’s principal debt increase by between VND15 trillion ($660 million) and VND20 trillion ($880 million) calculated in the domestic currency, according to a strategic report from Viet Dragon Securities Corporation (VDSC). It wrote that the exchange rate adjustment in the short term will not affect inflation but will have some impact on public debt. According to the World Bank, as at the end of 2014 Vietnam’s total debt was estimated at $110 billion, or 59.6 per cent of GDP. The government’s foreign debt was stable at 27 to 28 per cent of GDP and accounts for half of all public debt. Based on movements in the exchange rate since early this year, repayment obligations in domestic the currency have increased by VND15 trillion ($660 million) and VND20 trillion ($880 million). The SBV said that the exchange rate level should be considered in the context of the economy as a whole, not only as regards export or imports. SBV Deputy Governor Nguyen Thi Hong said that some businesses will benefit from exports while imports and foreign debt will increase. New CEO for Vocarimex The Vietnam Vegetable Oils Industry Corporation (Vocarimex) announced the appointment of Ms. Nguyen Thi Xuan Lieu, a member of its Board of Management, to the position of CEO on September 14. The company is seeking to change to a stronger business strategy and improve its management capacity to take advantage of its potential for development. The appointment takes effect immediately. Ms. Lieu was elected to the Board of Management at Vocarimex’s annual general meeting in November 2014. She has more than 30 years experience in banking and finance, holding key positions at the Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) from 1996 to 2013. Since 2014 she has held the position of Deputy Director General in charge of the vegetable oil business at the KIDO Corporation. With experience and ability in strategic implementation, Ms. Lieu will be able to effectively implement business strategies and contribute positively to the development of Vocarimex. Vocarimex plays an important role in Vietnam’s oil market. It previously sold 24 per cent of its share to KIDO Corporation. According to its financial statements, after-tax profit for the last three years has been from VND18 billion ($729,000) to VND50 billion ($2.2 million) and return on equity (ROE) around 2 to 5 per cent. Nhon Trach Newport gets green light The Ministry of Transport (MoT) has approved an investment proposal from the Saigon Newport Corporation (SNP) to build the Nhon Trach Newport dry port in Nhon Trach district, southern Dong Nai province. The dry port has an area of 11.1 ha, divided into four sectors: a container park on 3.54 ha, an empty container yard on 1.32 ha, a warehouse on 1.38 ha, and offices on 0.2 ha. Capacity at the port is expected to reach 150,000 TEUs per year and customs clearance procedures for inland ports can be completed on site. SNP is responsible for constructing and putting the port into operation on schedule at the prescribed quality. MoT has assigned the Vietnam Maritime Administration to guide, inspect, and supervise construction. In May, SNP also signed an infrastructure leasing contract at the Phu Huu Port in Ho Chi Minh City’s District 9 to reduce overload at Cat Lai Port in District 2. It plans to repair and upgrade infrastructure and equipment so it can berth ships of large tonnage by the end of this year. It will also invest in a 280-meter wharf at Phu Huu Port, to come into operation in 2016. Rising appetite Japan’s Sumitomo Corp. is planning to develop a large industrial park in northern Vinh Phuc province, complete with factories for lease for smaller Japanese businesses wanting an easy entrance into manufacturing in Vietnam. The corporation expects to spend a total of $120 million to construct the 200 ha site, which may be opened in 2018. About 10 per cent of the site will be dedicated to small-scale factories for lease. This will be Sumitomo’s seventh overseas industrial park and its third in Vietnam, following one each in Hanoi and northern Hung Yen province, which have a combined area of 620 ha and house 150 companies. Sumitomo is not alone in the business of industrial parks. Sojitz, another Japanese conglomerate, also plans to develop at least three more in Vietnam, following the Loteco and Long Duc Industrial Parks in southern Dong Nai province. The upward trend of Japanese investment in Vietnam is the reason behind the expansion plans of both Sumitomo and Sojitz. Although Japan’s FDI fell in 2014 as the weakening Yen and other factors encouraged some Japanese firms to focus on domestic production, the industrial park investments by Sojitz and Sumitomo herald a new wave of Japanese investment into Vietnam. In April the Japan External Trade Organization (JETRO) released a survey on the international operations of Japanese firms, underscoring the increasing number of Japanese companies moving away from China. ASEAN countries were the most popular transfer destinations, accepting 47.9 per cent of all relocations. Japanese companies blame increasing production costs and personnel costs for their relocations. “Among respondents selecting transferring from China to ASEAN countries, almost half of them (57 in 129 cases) selected Vietnam as the destination,” JETRO stated in the survey report. Nearly half of Japanese companies operating in China cited rising labor costs as one of the biggest barriers to them expanding their investment in the country. Meanwhile, the number of Japanese enterprises saying Vietnam’s labor costs are too high is just 12 per cent. This reflects the difference in labor costs between the two countries and explains why more and more Japanese companies want to transfer their operations to Vietnam. In addition, nearly two-thirds of Japanese companies operating in Vietnam want to further expand their investment in the year to come. Kyocera, for instance, will build a new plant in Vietnam this year to significantly increase its output of multifunction printers. The investment aims to improve its price competitiveness by relocating some production from China. The new plant, capitalized at around $57.8 million, can manufacturer metal molds and form plastic parts. By 2018 it will turn out 2 million units a year, or four times as many as now. Accompanying the expansion, its workforce will be tripled to around 5,000 employees. Japanese stationery supplier the King Jim Co. has also announced it will build a third plastic paper file factory in Vietnam by late 2016, to reduce its production in Vietnam’s northern neighbor. “Vietnam’s labor costs are one-third of China’s and new factories in Vietnam will help improve Japanese companies’ competitiveness,” said Mr. Hideo Okubo, Chairman and CEO of investment consultants the Forval Corporation. He added that the good relationship between Vietnam and Japan is a key factor in attracting investment from Japanese companies. Vietnam and Japan have signed a free trade agreement, both are involved in negotiations over the TPP, and Japan is Vietnam’s biggest bilateral donor. As an investment advisor, Mr. Okubo sees a growing appetite among Japanese companies for service sectors and consumer products in Vietnam. “Ten years ago most Japanese companies eyed Vietnam as a manufacturing base for export, but now I see a lot of companies coming here to exploit growing demand in the local market,” he said. “This is because of Vietnam’s young population and an emerging affluent class.” He pointed out that service sectors, including financial services, IT, and retail, are especially attractive. Recent investment activities by Japanese companies also reflect this trend. Japanese credit card company Credit Saison this year entered Vietnam’s consumer finance market by buying into a subsidiary of the Ho Chi Minh City Development Bank (HDBank), spending around $41.4 million on acquiring a 49 per cent stake in HDFinance, Vietnam’s third-largest consumer finance business. “As Vietnam’s economy has grown, rising incomes have boosted demand for appliances and motorcycles,” Credit Saison said in its announcement. “But loans are used for only 20 per cent of such purchases. Credit Saison saw considerable room for growth compared with such markets as Indonesia, where the figure is 80 per cent.” While Credit Saison sees opportunities for consumer finance products in Vietnam, Japanese retailers have also found their own opportunities. Just last month, Japanese convenience store chain Ministop teamed up with Sojitz in an effort to reinvigorate its stalled operations in Vietnam. Ministop at one time planned to open 500 stores in Vietnam, in cooperation with local coffee giant Trung Nguyen. The arrangement came to an end this year, but its deal with Sojitz, a sister company of FamilyMart, indicates that Ministop’s plans to enter the market haven’t come to an end. The AEON Group, the biggest retailer in Japan, has set Vietnam as its hub in the Southeast Asian region. The retailer is now running two stores in Binh Duong and Ho Chi Minh City and a new store is about to open in Hanoi. But this is not enough. To enhance its foothold in the market, AEON in January entered into a capital and business tie-up with Vietnam’s Fivimart and Citimart. The partnership is part of the Japanese retailer’s strategy of “Shift to Asia” under its Medium-term Management Plan during the 2014-2016 period. “In order to achieve rapid growth in the Vietnamese market, we believe the partnerships with Fivimart and Citimart, companies with strong business foundations in two of the largest cities in the north and the south of the country as well as knowledge about varying regionally-oriented customer needs, are of great significance,” AEON noted in its announcement. Vietnam’s property sector, which Japanese companies used to largely ignore, is also attracting more attention from Japanese investors. Following the investment by the Tokyu Group, which joined hands with Becamex IDC to develop a $1.2 billion township in southern Binh Duong province, many other Japanese real estate developers have jumped into Vietnam. Mitsubishi and Toshiba will partner with South Korea’s Lotte Group to develop a $2 billion complex with a luxury trade center, hotels, office blocks, and apartment blocks on a 10 ha site in Ho Chi Minh City. Haseko, meanwhile, will develop an apartment block in Hanoi in cooperation with local giant the Him Lam Group. The two have set up a joint venture, with Haseko holding a 95 per cent stake. This marks the first overseas expansion by the Japanese company since 1988. And the Tokyo-headquartered investment fund the Creed Group last month inked a deal to invest $200 million in An Gia Investment, securing a 20 per cent stake in the Vietnamese real estate company. This is the second investment by the Creed Group in Vietnam this year, after its investment in 577 Investment Corp. to jointly develop 1,100 apartments in Ho Chi Minh City. “Although Vietnam experienced a severe bubble in its real estate market from 2006 to 2007, it is the only country with continuously falling property prices among all Southeast Asia countries,” the Group said. “Vietnam’s property value could be underestimated given its condensed population and industrial segment’s prosperity.” Decree on Real Estate Business Law released Prime Minister Nguyen Tan Dung has signed a decree detailing the implementation of certain articles of the Law on Real Estate Business. The decree has provisions on the conditions of organizations and businesses in the industry, contract types, transfer of house leases and purchases, and procedures to transfer all or part of a real estate project. Regarding operating conditions, real estate organizations and individuals must establish enterprises in accordance with the law and with capital of more than VND20 billion ($939,000), excluding households or individuals of small scale and infrequency, as defined in Chapter 4 of the Law, selling, transferring, or leasing. In the transfer of leases and purchasing agreements, available and newly-built houses and constructions under the provisions of the Law can be transferred when documents granting the land use right certificate have not been submitted to related authorities. With a lease-purchase agreement, construction includes all types of leases and purchase contracts signed with the lessor. For housing, the transfer will be done for each house and apartment while the assignment of many individual houses or apartments must contain all houses or apartments in such contracts. Rice exports continue to decline Vietnam exported over 3.8 million tonnes of rice, raking in 1.6 billion USD in the period from January 1 to August 31, showing considerable drops in both volume and value over the same period last year. In the same period of 2014, the country shipped more than 4.2 million tonnes of rice and grossed over 1.8 billion USD, according to the Vietnam Food Association (VFA). Vietnam is the only one among the five biggest rice exporters in the world to record a decrease in the period. On September 9, the Philippines’ National Food Authority (NFA) invited Vietnam, Thailand, and Cambodia to join a tender to supply 750,000 tonnes of rice, in addition to the planned import of 1.8 million tonnes of rice this year due to El Nino impacts. This can be a good opportunity for Vietnam to boost rice exports in the remaining months of this year. The prices of rice in the Mekong Delta, Vietnam’s largest granary, have dropped slightly from last month. As of September 11, Mekong Delta provinces and cities have harvested summer-autumn rice on nearly 1.3 million hectares of land with a total output of 7.34 tonnes of brown rice. The localities have also planted summer-winter rice on 640,000 hectares out of the planned 886,000 ha. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR