BUSINESS IN BRIEF 19/3
Vietnam’s pharmaceutical market attractive to Indian enterprises
Vietnam’s pharmaceutical market which is worth 3.5 billion USD is attractive to Indian enterprises, according to Operational Director of the Pharmaceuticals Export Promotion Council of India (Pharmexcil) Ravi Uduy Bhaskar.
Addressing a Vietnam-India trading exchange programme for the pharmaceutical sector in Ho Chi Minh City on March 17, the director said significant changes in laws and mechanisms regulating the sector in Vietnam have encouraged Indian enterprises to consider greater presence in the Southeast Asian country’s market.
The Deputy Director of Ho Chi Minh City branch of the Vietnam Chamber of Commerce and Industry (VCCI), Vu Thu Hang, revealed Vietnam’s pharmaceutical sector is expected to growth at an annual growth of 16 percent from now to 2020.
Meanwhile, India has an advantage in science, technology, the pharmaceutical industry and chemistry, hence cooperation in the field would help bilateral trade and investment in the area, she added.
Hoang Thanh Mai from the Vietnam Pharmaceutical Management Department stressed Vietnam’s authorities have always created the best possible conditions for enterprises, including those from India.
The department has cooperated with many local and international entities to boost the application of information technology in managing activities such as medicine registration, price declaration and information registration, she noted.
The department is working to refine the regulation system in the area towards meeting both the domestic requirements and international best practice, she concluded.
According to the department, among 7,630 valid registered foreign medicines in Vietnam, 2,814 are of Indian companies. Indian companies number 200 among 718 foreign companies operating in medicine and medicine material in the country. They not only supply regular generic medicines but also highly specialized drugs which Vietnam is not able to produce at present.
HCM City augments measures to attract FDI
Ho Chi Minh City is employing a host of measures to press on with attracting foreign direct investment (FDI), especially in high-tech and hi-tech support industries.
Right in the first week of 2016, the management board of the Saigon Hi-tech Park presented investment certificates to three new projects, including one FDI project with registered capital of 21 million USD by Malaysia’s United More Sdn Bhd. The project is set to manufacture 12 million plastic products for smart TVs every year.
In the first two months of this year, the city granted investment registration certificates for 90 projects with combined capital of 155.9 million USD. Another 78.8 million USD was added to 25 existing projects, helping HCM City stay among the top five FDI destinations in Vietnam, according to the municipal People’s Committee.
Twenty-three countries and territories poured money into projects there, including Japan (three projects worth 50.6 million USD), Singapore (18 projects worth 39.5 million USD), and Malaysia (three projects valued at 22.6 million USD). They were followed by Indonesia (one project – 8.3 million USD), the Republic of Korea (17 projects – 7.5 million USD) and Thailand (four projects – 6.4 million USD).
Le Thi Huynh Mai, Deputy Director of the municipal Department of Planning and Investment, said the city is conducting a series of reforms to facilitate investments such as helping foreign investors compile business registration dossiers free of charge, providing an online investment registration service and granting investment registration certificates by post.
Vice Chairman of the HCM City People’s Committee Le Van Khoa said his city will focus investment attraction efforts on key industrial and service sectors and hi-tech agriculture.
It is also eyeing at inviting investments from the US, Canada, New Zealand, Australia, the Republic of Korea and especially Japan in 2016. To do so, 108 promotion activities are planned to be organised this year.
Additionally, HCM City will solidify cooperation with foreign provinces and cities, he noted, adding that it plans to set up a Japan desk to offer the best possible assistance to Japanese investors.
He took the recent cooperation between Japan’s Creed Group with two Vietnamese companies as an example of effective investment promotion. The Creed Group agreed to work with the Phat Dat Real Estate Development Corporation and the An Gia Investment company in a housing project in District 7. The 8,000-flat project has capital of up to 500 million USD.-
HCM City, US-based conglomerate eye partnership
Ho Chi Minh City hopes to cooperate with Honeywell in its development projects, Chairman of the municipal People’s Committee Nguyen Thanh Phong said on March 17.
He made the statement at a meeting with representatives from the US-based multinational conglomerate who visited the city to seek potential partnership.
Ho Chi Minh City targets to become a hub of economy, trade, science and technology of Southeast Asia, he said.
The city has been developing its infrastructure with priorities given to the construction of urban railway network alongside environmentally friendly projects and those to prevent floods, the chairman added.
It is expecting a new wave of investment from the US, including from Honeywell in the near future, Phong said, noting that the city would support and facilitate foreign businesses’ investments in Vietnam.
For his part, , stated that Vietnam has been one of the most dynamic markets of the conglomerate with fast growth rate. The group mainly provides power-sufficient as well as safety and security solutions in the country.
He confirmed the firm’s wish to collaborate with the city in the long term, particularly in the energy sector.
Honeywell is an American company that produces a variety of commercial and consumer goods, engineering services and aerospace systems. The firm opened its office in Vietnam in 1994 and has established relations with local partners in energy and aerospace.
Trade connectivity enhanced among Japan, Vietnam, ASEAN enterprises
A programme to connect enterprises operating in the supporting industry from Japan, Vietnam and ASEAN countries took place in Ho Chi Minh City on March 16-17.
The event, jointly held by the Japan External Trade Organisation (JETRO), the HCM City Export Processing and Industrial Zones Authority and the municipal Supporting Industry Development Centre, attracted the participation of more than 200 businesses.
Okubo Fumihiro, JETRO project director in HCM City, said that JETRO has so far organised numerous activities to facilitate trade exchanges and connectivity between small and medium-sized enterprises, in order to increase the proportion of domestic supply by local businesses.
However, this programme also aims at export promotion, Fumihiro stated, adding that businesses can sell their products to foreign markets in foreign currency.
He expressed his hope that the programme offers a new option and facilitates trade exchange among enterprises to increase the proportion of domestic supply, while boosting the exports of Japanese companies in Vietnam, and for Vietnamese businesses as well.
Currently, the proportion of domestic supply remains low in Vietnam. According to JETRO data, the supply of materials and spare parts by Vietnamese businesses reduced from 14.4 percent in 2014, to 13.2 percent in 2015, lower than that of Indonesia (20.3 percent) and Thailand (24.1 percent).
Meanwhile, the localisation rate of Japan’s manufacturing enterprises in Vietnam also dropped slightly, from 33.2 percent in 2014, to 32.1 percent in 2015.
Ho Chi Minh City, the country’s largest economic hub, is calling on foreign enterprises, especially those from Japan, to continue investment in the four spearhead fields of electricity-electronics, chemicals, mechanics and food processing.
The city is focused on building infrastructure facilities in accordance with supporting industrial businesses’ requirements and carrying out capital assistance policies suitable for them.
TPP impacts on stock market reviewed
The Trans-Pacific Partnership Agreement (TPP) is expected to have a positive influence on the Vietnamese stock market, said Tran Dac Sinh, Chairman of the Ho Chi Minh Stock Exchange (HOSE)’s Board of Directors.
He made the remark during a seminar on opportunities created by the TPP for Vietnamese businesses, which was held on March 17 in Ho Chi Minh City.
Relying on the common development basis, the quality of goods in the stock market will be improved significantly, not only for the sectors that will benefit from the TPP, such as garment, footwear, and aquatic products, but also for supporting industries, said the chairman.
The foreign indirect investment flowing to Vietnam will increased sharply, creating a new driving force for the market, he added.
However, the TPP will also bring difficulties and challenges due to the fact that the stock market is not large enough to absorb enormous quantities of foreign capital and local enterprises will face competitive pressure, according to experts at the seminar.
In order to turn opportunities into benefits, not only enterprises but also management branches should undergo a vigorous change, the experts added.
TheTPP, a free trade agreement between 12 countries - Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, was officially signed on February 4 after five years of negotiations.
With a market of more than 800 million people, the 12 TPP participating countries account for nearly 40 percent of the global economy and one third of the world’s trade.
Expected to come into effect in 2018, the deal will open up big opportunities for enterprises operating in trade, production, and export-import activities.
Thua Thien-Hue seminar looks to develop tourism workforce
A seminar discussing the adoption of the 2013 Vietnam Tourism Occupational Standards (VTOS) was held in the central province of Thua Thien-Hue on March 17.
VTOS was approved by the Vietnam National Administration of Tourism (VNAT) as part of the Environmentally and Socially Responsible Tourism Capacity Development Programme, known as the EU Project.
It consists of a range of units of competence that specify particular skills, knowledge and attitudes necessary to fulfill job requirements satisfactorily.
Participants also debated tourism training cooperation between educational establishments and firms, and the demand for tourism workforce training in the central coastal region.
Phan Tien Dung, Director of the provincial Department of Culture, Sports and Tourism, said tourist arrivals have surged nearly 15 percent annually, pushing revenue by 30 percent recently.
Currently, the total number of people working in local tourism is nearly 35,000, he added
Moreover, a survey indicated that half of hospitality employers offer new training to their staff, especially those working in marketing and housekeeping practices.
Co-hosted by the EU Project and the provincial People’s Committee, the event attracted over 100 stakeholders coming from Thua Thien-Hue, Da Nang and Quang Nam.
New juice firms stir up market
Fresh players are eagerly stepping into the local peachy fruit juice market. Nafoods Group JSC, one of several major domestic juice companies in Vietnam, is increasing investment capital to expand its market share.
The firm, currently holding over 10% of the world’s condensed passion fruit products, will invest VND2.05 trillion (US$93.2 million) into a project to construct more processing facilities and rent more land.
Nafoods’ Juice Smile brand of fruit concentrates entered the market in late 2015, with five different types of fruit juice including passion fruit, pineapple, pomegranate, orange, and grape at its FTN factory in Spain, which meets European standards.
Last year, Nafoods posted US$25 million in export value of products including fruit purees, fresh and frozen vegetables and fruit, and nutritious drinks.
International FOOD JSC has also joined the market by rolling out its new Wonderfarm brand of natural orange juice, which was made on an aseptic packaging line at the state-of-the-art Kirin Vietnam plant to complete heads-on with similar products in the market.
Vietnam’s beverage market has witnessed robust growth in recent years, with consumers showing a rising preference for natural juices.
The Ministry of Industry and Trade predicts that production of local vegetable and fruit juice could hit six billion litres by 2017 as consumers display an increasing appetite for fresh fruit juices.
According to the Vietnam Beer, Alcohol, and Beverage Association (VBA), local consumers serve as the main output market for non-alcoholic beverages, making up about 85% of the sector’s total revenue.
A recent VBA survey revealed that because there was room for further growth in the domestic juice market, most of the companies in the sector intend to boost their capacity by at least 20% compared to last year, specifically by making juice products from fresh fruit. “Fresh juices and purees could grow at an average 17.5% annually in the next five years. The market share of top firms, however, may be reduced by fresh new players”, the survey stated.
According to experts, it is likely that Vinamilk, the leading dairy company in Vietnam. And privately held beverage group Tan Hiep Phat will no longer retain their dominance in the domestic juice market after many new players have started squeezing this lucrative field.
StanChart PE, Goldman invest mega-bucks in Vietnam start-up
A private-equity arm of Standard Chartered Plc and Goldman Sachs have invested a combined US$28 million in Vietnamese start-up M_Service, the operator of mobile e-wallet MoMo, the companies have unveiled in a joint statement.
Standard Chartered Private Equity (SCPE) invested US$25 million, while Goldman Sachs, an existing shareholder and strategic investor, put in an additional US$3 million on top of its initial US$5.75 million investment in 2013, the statement said.
Smartphone app MoMo provides e-wallet services and over-the-counter remittance and payment platforms for a customer base of 2.5 million people, the statement added. It claimed to have more than 1 million mobile e-wallet customers.
More than half of Vietnam's 90 million population are Internet users as of last year, while the number of mobile phone subscribers in Vietnam grew 26% to 124 million during 2009-2013, data from the government show.
It is extremely exciting to see financial support and the customer base for MoMo growing, said Pham Thanh Duc, general director of M Service JSC.
MOF eases regulations for VAT tax refunds
The Ministry of Finance has asked local tax authorities to refund value-added tax (VAT) to enterprises if the amount of tax they default on is less than the amount of tax refund that they will receive.
The ministry's decision is in response to complaints about tax refund delays caused by tax agencies, which is blamed for the shortage in businesses capital sources.
Deputy Minister Do Hoang Anh Tuan said that 287 businesses across the country were waiting for tax refunds but there are both objective and subjective reasons for the delay.
One of the reasons is that some enterprises owe the State budget but the State budget must also refund tax to these enterprises. However, under regulations previously issued, the two debts are not allowed to be offset, so enterprises are required to settle debts with the State budget before receiving tax refund.
According to Tuan, there are 20 enterprises facing this situation.
The ministry officially abolished the regulation via a document sent to local tax offices on Monday.
The ministry's leader also asked the General Department of Taxation (GDT) to check and inform local tax agencies within 6 working hours upon receiving their proposals for tax refund approval.
If they receive approval, the agencies would then issue a decision to refund tax to enterprises and update the tax payers database.
Local tax offices must take full responsibilities if they are slow in refunding tax to enterprises, Tuan said.
However, the ministry still requests localities to delay the tax refund if they detect any breaches of tax or customs regulations committed by companies or if tax payers are unable to prove the eligibility of the tax amount declared in their applications.
Tuan added that some businesses which were under scrutiny also have to be put in the waiting list.
Another reason for the tax refund delay is that some localities do not have enough funds to return to enterprises.
Nguyen Thi Tuyet, general director of the Nhat Tri Thanh Company which specialises in supply materials for the metallurgy industry, said the firm should have received VND38 billion (US$1.7 million) of tax refunds by the end of January, but due to a shortage of money, the local tax office delayed the refund until the beginning of February.
Nguyen Huu Quang, an official from the National Assembly's Finance and Budget Committee, said a delay like this was not rare.
Deputy head of central Da Nang City's tax authority Nguyen Dinh An said that there are five to six pending applications at his office because of capital shortages. Normally, due to the limited quota set for each locality, the GDT would approve the refund in accordance with the order of priority such as type of business, export and big investments.
Deputy Minister Tuan said that the ministry had enough resources for tax refunds nationwide. Currently, funds reserved for tax refund total VND3.8 trillion ($173 million). However, he did not deny the possibility that "This man has much to eat but that man finds no small piece."
He said HCM City now had only VND92 billion ($4.2 million) in the reserve while it needed VND800-900 billion ($36-41 million) for tax refunds. In contrast, the central Ha Tinh Province has VND1.1 trillion ($50 million).
To fix the problem, the ministry would remove quotas set for each locality and be more flexible in allocating funds for tax refunds.
Dinh Nho Hau, head of the Ha Tinh Province's tax office, said that the changes in tax refund regulations would help tackle difficulties for both local tax offices and businesses.
He also suggested that there should not be any discrimination among enterprises. Tax offices should repay tax to enterprises right after they complete procedures applying for the refund, regardless if they are big exporters or investors.
Over the past two months, 3,100 applications were sent to local tax agencies and all of the enterprises successfully reclaimed tax with total amount of funds worth VND13 trillion ($591 million). This year, the Government set aside VND98 trillion ($4.5 billion) for tax refunds.
DPM stresses crucial role of digital technology
The Vietnamese Government actively adopts guidelines and policies to encourage the development of digital technology, asserted Deputy PM Vu Duc Dam at World Development Report 2016: “Digital Dividends” on March 14 in Ha Noi.
The Deputy PM highlighted the benefits of digital technology in improving labor capacity, exploiting natural and human resources, enhancing the management of production and service as well as making crucial contribution to the national socio-economic development.
He suggested creating a favorable legal environment to encourage the development of digital technology and limit its negative aspects.
Deputy PM Dam expected that large information technology groups and multi-national corporations will not only operate for their own benefits but also show their responsibilities for society, especially assisting local people in remote and disadvantaged areas to improve the lives.
In addition, he said everyone should be aware of information technology to create opportunities for their own lives and works as well as have the habits of using digital technology appropriately to protect the benefits and prevent negative sides of information technology.
The report, released by the World Bank, underscored the need to roll out development strategies for digital technologies with broader visions than those of information and communications.
TPP good news for stock market
The TPP will have a positive impact on Vietnam’s stock market, Mr. Tran Dac Sinh, Chairman of the Board of Directors at the Ho Chi Minh City Stock Exchange (HoSE) told the “TPP Dialogue - Envisioned Growth Opportunities for Businesses in Vietnam” conference held by KPMG Vietnam with the Vietnam Chamber of Commerce and Industry, Ho Chi Minh City Branch (VCCI HCMC), and HoSE.
As the economy develops the quality of listings will significantly improve, not only stocks of sectors certain to benefit from the agreement such as textiles, footwear, and fisheries but also support industries. “Indirect foreign investment to Vietnam will increase substantially, driving the stock market,” he added.
Mr. Warrick Cleine, Chairman and CEO of KPMG in Vietnam and Cambodia, said that 2016 will be a milestone for Vietnam’s economic landscape. “The TPP and other agreements such as the EU - Vietnam Free Trade Agreement and integration into the ASEAN Economic Community will create numerous benefits for businesses in Vietnam as they will have the opportunity to expand into other markets, including important markets like the US, Japan, and Australia,” he said.
“However, it also increases competition across all areas, from labor, capital, and funds to real estate and other resources,” he added. “Only those that are truly well-prepared are likely to be successful.”
The conference was attended by representatives from more than 30 local and international business associations, 200 foreign-invested enterprises, local businesses, and local authorities. Among the special guests was Deputy Minister of Industry and Trade and Head of Vietnam’s TPP Delegation, Mr. Tran Quoc Khanh, who was the keynote speaker.
Participants received a comprehensive overview of the TPP, the potential impacts it will have on the business environment, and the opportunities and challenges it presents for enterprises in Vietnam.
Beer brewers call for SCT changes
Mr. Pham Tuan Khai, former Director of the Legal Department at the Office of the Government, told a conference held by the Ministry of Industry and Trade on March 16 discussing the implementation of Decree No. 108/2015 and Circular No. 195 that he identified certain problems in the Decree after it was introduced on October 10, 2015.
The Ministry of Finance’s Decree No. 108/2015 and Circular No. 195, which guide the implementation of the 2008 and 2014 Laws on Special Consumption Tax, stipulate a 5 per cent increase in tax rates on beer and brandy annually until 2019, on wine every two years, and on cigarettes every three years.
The two legal documents were introduced in late 2015 and came into effect quite quickly, on January 1, 2016, creating difficulties in tax calculations.
Mr. Nguyen Van Viet, Chairman of the Vietnam Beer, Alcohol and Beverage Association (VBA), said that the two legal documents caused tax hikes and also problems in implementation.
Mr. Le Van Cuong, a senior financial expert, said that the problems stem from the decree and the circular ordering production companies to control the retail price of sales agents that are scattered throughout the country and independent from production companies. “This is unreasonable,” he emphasized.
Mr. Viet added that beer production in Vietnam is declining and tax rates in Vietnam are higher than those in neighboring countries like Laos and China.
Other participants at the conference also asked the State to ensure tax collections and the continued implementation of the Decree and the Circular so that enterprises will be unable to find any loopholes to conduct transfer pricing.
Single window for all ports
The Ministry of Transport (MoT) and related agencies have set a target of applying National Single Windows (NSWs) at all 25 ports in Vietnam by June.
NSWs have been deployed at nine trading ports, including Dong Nai Port, which has had one since March 15.
According to Mr. Le Thanh Tung, Deputy Director of the Information and Technology Center at MoT, enterprises using NSWs have faced difficulties due to the need to submit original documents to port authorities while also performing online applications.
To resolve the problem the General Department of Vietnam Customs has consulted with other departments and agencies on a draft document to be submitted to the Prime Minister for approval.
For example, a foreign vessel clearing customs procedures at any Vietnamese port should use an NSW while submitting original documents to port authorities only at the first time of entry.
$1 million from UNIDO to support industrial strategy
The Prime Minister has approved the contents of a project funded by the United Nations Industrial Development Organization (UNIDO) to assist the building of development policies and the strategy for the industrial sector through institutional capacity building. The project is to have total investment of $1.08 million and be carried out over 36 months.
It aims to raise institutional capacity of both the government and the private sector, improve the strategy for the sector as a whole and develop suitable policies for each specific industry, and ultimately enhance the competitiveness of Vietnam’s industrial sector.
According to the Industrial Development Strategy to 2025 and Vision to 2035, Vietnam’s industrial sector will develop with a sound structure in terms of industry and region. It should be sufficiently competitive to develop during integration, possess modern technologies, participate in global value chains in a number of specialized sub-sectors and fields, and fundamentally meet the requirements of the economy and exports.
By 2035, Vietnam’s industrial sector is to have a majority of specialized industries meeting international standards in terms of technologies and product quality, fully participate in global value chains, use energy efficiently, and compete fairly in international integration.
ICAEW: Vietnam to see best growth in ASEAN
The Institute of Chartered Accountants in England and Wales (ICAEW) has recently released its Economic Insight South East Asia Quarterly briefing for the first quarter of 2016, containing a prediction that Vietnam's economy will grow the most among ASEAN-6 countries in 2016.
ASEAN-6 includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Vietnam ranked first in expected growth this year, with 6.3 per cent, followed by the Philippines and Indonesia with 6.1 per cent and 5.1 per cent, respectively.
The report noted that growth in Vietnam was 6.7 per cent in 2015 as foreign direct investment (FDI) reached record levels and export growth remained strong despite depressed commodity prices. Its forecast is for growth to stay in the 6-7 per cent range in 2016-18 as improvements in trade access compensate for slowdowns in some key trade partners and non-textile industrial growth promotes export diversification.
Regarding rising debt burdens increasing risk, Vietnam is already running an expansionary fiscal stance, according to the report’s authors, with higher current expenditure having contributed to a debt-to-GDP ratio approaching 60 per cent this year. A gradual fiscal consolidation is being planned by authorities over the next few years to avoid breaching the debt ceiling of 65 per cent of GDP.
The best performers among ASEAN-6 will be economies where growth is underpinned by strong domestic fundamentals and there is room for policy support. In this respect, the authors believe that Vietnam, the Philippines, and Indonesia have the best growth prospects among the ASEAN-6 countries, reflecting healthy domestic factors such as low debt, macro-stability, and wage competitiveness, which will help them continue gaining market share in low-cost industries.
PM directs contractor selection for Quang Tri EZ planning
Prime Minister Nguyen Tan Dung has assigned the Chairman of the Quang Tri Provincial People’s Committee to select contractors to conduct project planning for the development of the Southeast Quang Tri Economic Zone in the central province.
The Southeast Quang Tri Economic Zone has an area of 23,729 ha and spans 17 towns and communes: Hai An, Hai Ba, Hai Vinh, Hai Que, Hai Khe, and Hai Duong in Hai Lang district, Trieu An, Trieu Phuoc, Trieu Van, Trieu Trach, and Trieu Son in Trieu Phong district, and Gio Quang, Gio Mai, Gio Hai, Gio Viet, and Cua Viet in Gio Linh district.
The economic zone includes industrial zones, administrative zones, residential zones, tourism zones, services zones, and a harbor, and is to be a key development area in the province and central Vietnam as a whole.
Moreover, it is to become an international trade center for agriculture, forestry, and fishery, a building materials production center, and an electricity production center, and will also provide tourism and trade services.
The Southeast Quang Tri Economic Zone will maximize the natural local conditions and its geographic location to not only connect transport from and to the north and the south but also play an important role in national security and economic development.
Future and Bond Indexes to be used for derivatives market
On March 16 the Hanoi Stock Exchange (HNX) and the Vietnam Securities Depository (VSD) announced the blueprint and system for Vietnam’s derivatives market, with Future and Bond Indexes being introduced as the first new derivatives indexes.
According to Ms. Nguyen Thi Hoang Lan, Deputy Chairman and General Director of HNX, the Future Index will be built up to cover stocks on both the HNX and HSX markets. The Index will include the VN30 and HNX30 baskets as stipulated in the original plan for developing the derivatives market.
The HNX and VSD will introduce the transaction connection and clearing of derivative products in April so that they can be put into trial operation in September and October, with checks to be completed in November and the derivatives market to open in December.
The HNX and VSD selected the FPT Information System Corporation to be the provider of systematic solutions for the Central Counterparty Clearing House (CCP) of the Global Markets Exchange Group Limited (GMEX).
VSD General Director Duong Van Than said the systematic platform can fully serve the first two derivative products and other derivative products in the future.
Da Nang villa market sees strong Q4 performance
In the fourth quarter of 2015 the villa absorption rate in central Da Nang city increased 14 percentage points (ppts) quarter-on-quarter, to 66 per cent, due to the impressive sales performance of Vinpearl Da Nang 2, according to the latest report from real estate consultants Savills Vietnam.
Most active projects have entered into the final phase of sales with gradually slowing sales velocity, according to the report.
There were no new villa or apartment projects in the quarter. The primary market had eleven projects providing 572 villas (down 21 per cent quarter-on-quarter), accounting for 48 per cent of total stock. Ngu Hanh Son district remained the top supplier, accounting for 69 per cent of total stock.
The primary market in apartments also had eleven projects providing 412 units (down 32 per cent quarter-on-quarter), accounting for 13 per cent of total stock. Hai Chau and Son Tra districts dominated, with a 96 per cent market share.
Reputable developers, attractive sales policies, and proximity to the beach were key contributors to good villa sales in the quarter, according to Savills. Projects with guaranteed minimum annual return also had better sales performance relative to others.
Ngu Hanh Son district tops future villa supply while Hai Chau district tops future apartment supply. Following positive market sentiment it is expected that projects along the coast will launch in the first half of 2016.
Mining Vietnam 2016 to open in Hanoi
The Mining and Mineral Recovery Exhibition (Mining Vietnam 2016) will be taken place in Hanoi from March 29 to 31, said the organizers.
The exhibition aims to help local mining enterprises to integrate into the world's technologies, modern machineries and equipment in the field of exploring and recovering mining.
The organization board said the 2016 Mining Vietnam attracted 161 businesses from 22 countries and territories worldwide.
There would be six country groups from the United Kingdom, Germany, Czech Republic, Singapore, China and Australia.
USD deposits increase despite zero interest rate
Despite the government's efforts to minimise the dollarisation of the economy, the public have continued making deposits in US dollars because of fear over inflation and unstable policies.
According to Truong Van Phuoc, deputy chairman of the National Financial Supervisory Commission, VND deposits grew at 16.3 percent in 2015, lower than previous year's 19.3 percent. Meanwhile 2015's USD deposit growth rate of 14.3 percent was higher than previous year's 4.7 percent.
Last December, the State Bank of Vietnam lowered deposit rates on USD to zero to provide an incentive to turn to dong savings. The move followed the US Federal Reserve increasing short-term interest rates to 0.25-0.50 percent. Despite the lack of value, many people have continued to maintain their savings in dollars and US dollar deposits have actually increased.
A bank employee said "With zero interest, people are now depositing their savings for indefinite terms so they can withdraw the money at any time. It's inconvenient for the bank and affects liquidity and our ability to extend credit," she said.
Hoang Minh Phu, a depositor in Hanoi said he felt safer with US dollars. "I know I won't have any interest but I won't be affected by the government's policies."
Nguyen Tri Hieu, an independent director on the board of Ocean Bank, said US dollar hoarding showed people's concerns about world economy and local policies. Vietnam saw record low inflation of 0.63 percent in 2015. However, it is forecast that the rate may rise to 5 percent this year due to increases in electricity, education and healthcare prices.
"The Vietnam dong falling against the US dollar has worried the public, at least until the end of the second quarter. That's why many people are hoarding US dollars in case exchange rates are adjusted for the worse," he said.
Hieu went on to say that the concern was particularly true to who have savings of more than USD10,000.
Customers suffer from many fuel taxes and fees
Customers are being charged for a wide range of incentive taxes and fees given to enterprises.
Taxes are main cause for Vietnam's high fuel costs. Import tax, special consumption tax, VAT and environment tax account for half of the price of fuel. Without all the taxes, the fuel price would drop to just VND7,000 per litre.
Everyone understands that the government needs a strong state budget to upgrade infrastructure and pay wages for officials and enterprises need profits for further development. But the fuel prices in Vietnam are much higher than many countries. Except for the recent decrease on March 4, most of the time, even when the world fuel dropped, local retail prices have stayed the same.
Diesel import taxes for products imported from ASEAN countries were cut to 5% in 2015 and to 0% from 2016 in accordance with ASEAN Trade in Goods Agreement. But Circular 78 issued by the Ministry of Finance and the Ministry of Industry and Trade in last May stated that the import tax for diesel and mazut is 10%. That means wholesalers import their products with low tax rates but the customers have to pay for high tax rates.
Vietnam imports an average of 400 million litres of diesel from ASEAN countries each month and the wholesalers can earn a monthly profit of VND200bn (USD9.5m). In 2014, Petrolimex reported a loss of VND8bn but in next year, it enjoyed nearly VND2trn.
The Vietnam-Korea Free Trade Agreement, which took effect in December 2015, reduced the import taxes for products from South Korea to 10%, instead of the 20% for products imported from Singapore or Malaysia. Yet the fuel, when it is sold to the customers, is not much cheaper. Customers always get the short end. For some unknown reason, the Ministry of Finance and the Ministry of Industry and Trade ignored various incentives and tax differences last year for enterprises.
On behalf of the government, Vietnam National Oil and Gas Group (PVN) promised to give USD3.5bn in incentives to the investors in the Nghi Son Refinery. PVN then proposed to add this into the prices of products that would be sold directly in front of the refinery gate. This is an unreasonable deal for customers.
It is repeatedly said that fuel prices must provide profits for the government, enterprises and benefit customers alike. The state budget has strong income, enterprises earn huge profits while customers still have to suffer from high prices.
The local retail prices only fell recently because the world fuel prices had dropped to record low. One question is left hanging is that whether enterprises will try to prevent retail prices from hiking up too fast once the world prices pick up again, as they are earning so much now thanks to many taxes and fees.
List of 500 enterprises with best prospect announced
A list of the 500 Vietnamese enterprises with the best prospects (Best Prospect 500) has been released by the Viet Nam Report and VietNamNet newspaper under the Ministry of Information and Communication.
The top 10 leading enterprises were Thanh An 96 Construction and Installation Joint Stock Company, Da Nang Seaproducts Import – Export Corporation, Foodtech Joint Stock Company, Vietnam Education Publishing House One Member Limited Company, PV Oil Thanh Hoa, Material and Complete Equipment Export – Import Corporation, Hanoi Clean Water One Member Limited Company, Song Thu Corporation, Tranphu Electric Mechanical Joint Stock Company and Red River Coal Joint Stock Company.
According to Vietnam Report, the companies have strong potential to become top enterprises in Vietnam. The list of 500 Best Prospect was selected from the top 2,000 biggest enterprises in the country.
The Vietnam Report survey showed that the three top priorities in business strategy for the Best Prospect Enterprises in 2016 are increasing revenue and profit, cutting costs, and promoting new products and services at the selected rates of 89.8%, 64.4% and 59.3% respectively.
Meanwhile, only around 50% of surveyed companies plan to expand business to new industries. In addition, nearly 80% of surveyed enterprises said that improving the quality of managers is a priority for achieving growth targets.
Inclusion on the list of Enterprises with the Best Prospect is an opportunity for enterprises to affirm their role and position in both domestic and international markets. In addition, the ranking also proves the efforts and aspirations of enterprises in becoming motivating economic forces in the context of deeper integration.
The Best Prospect 500 ranking was based on objective principles, in compliance with international standards, as well as enterprises’ data in order to ensure objectivity and accuracy.
Saigon Co.op lowers prices of power-saving products
The Saigon Union of Trading Cooperatives (Saigon Co.op), the owner of the Co.opmart store chain, will slash prices of power-saving products by half in response to the Earth Hour 2016 campaign.
Co.opmart stores, together with Co.opXtra – a hypermarket venture between Saigon Co.op and Singapore’s NTUC FairPrice, will join hands with energy brands such as Rang Dong, Dien Quang, Comet, Sunhouse and Honey in a campaign to cut prices of thousands of energy-efficient products such as LED torch, rechargeable light, electric cooker, electric fan, kettle and hairdryer.
On March 18, 19 and 20, shoppers at Co.opmart supermarkets can enjoy a 50% discount on products such as Comet electric hotpot cooker, Goldsun electric cooker, stainless steel pot and Tithafac electromagnetic stove.
In this year’s Earth Hour campaign, Co.opmart is also cooperating with Unilever, P&G, Unicharm, Kimberly-Clark, and LG to lower prices of consumer goods such as laundry detergent, shampoo, dishwashing liquid and fabric softener.
On March 19, 20, 26 and 27, customers can bring their used mini gas stoves to Co.opmart and Co.opXtra stores and exchange them for new ones at reduced prices while loyal customers will have the opportunity to get vouchers for bills worth over VND500,000 (US$22.3). On March 19 alone, Co.opmart stores will give each shopper an eco-bag to encourage customers to kick the habit of using plastic shopping bags.
HAG borrows from multiple banks
Hoang Anh Gia Lai Joint Stock Co (HAG), which is active in a range of sectors including agriculture, has borrowed from many banks.
The lenders include BIDV, VPBank, Sacombank, Eximbank, LaoVietBank, HDBank, Bac A Bank and Viet Capital Bank.
According to the firm’s financial report for the fourth quarter of 2015, HAG’s total outstanding loans had amounted to VND32.6 trillion (US$1.4 billion) by end-2015, rising by 56% from a year earlier and accounting for 67.16% of its capital. Of the amount, short-term debt reached over VND12.79 trillion and long-term debt around VND19.85 trillion.
Details about HAG’s loans were not shown in the quarterly report but its loans were mentioned in the consolidated financial report for the first half of 2015.
According to the consolidated report, HAG had borrowed over VND1.5 trillion from BIDV by end-June 2015, over VND451 billion from LaoVietBank and VND119 billion from HDBank.
These loans were used to supplement working capital of HAG. Collateral included land use right certificates, factories, offices, machinery, equipment, rubber tree farms and cows.
Regarding long-term debt, HAG has issued some VND7.3 trillion worth of corporate bonds for Sacombank, Eximbank, VP Bank, VietinBank Securities Company and ACB Securities Company. Some of the bonds were owned by Bac A Bank and HDBank.
The company has spent the proceeds from bond sales implementing a number of projects in Laos and Vietnam, and restructuring debt. The projects include planting rubber trees on 10,000 hectares in Rattanakiri Province, Laos; and developing an industrial cluster in Attapeu Province, Laos to produce sugar, electricity, ethanol and fertilizer; Dak Srong 3A hydropower station in Krong Pa District, Gia Lai Province; and Nam Koong 2 hydropower project in Phou Vong District, Attapeu Province, Laos.
HAG bonds were issued via BIDV, BSC, ACB Securities, Phu Gia Securities and VPBank Securities.
Some sources told the Daily that HAG had also taken out loans from Bac A, Viet Capital Bank and Orient Commercial Bank (OCB). A representative of OCB said HAG has settled all its debt for the bank.
BIDV is seen as the biggest creditor of HAG with loans totaling some VND8 trillion while other banks provided VND100-3,000 billion to HAG.
According to a HAG document recently sent to the State Securities Commission of Vietnam and the Hochiminh Stock Exchange to explain the fourth-quarter earnings report, HAG’s financial expenses rose by VND155 billion year-on-year to VND374 billion in the final quarter of last year. Other expenditures edged up by VND413-440 billion as the firm closed mines, so it eliminated investments in the mining industry.
Slow site clearance affects Metro Line No. 2 progress
Metro Line No. 2 connecting the central station near Ben Thanh Market and Tham Luong in District 12 has fallen far behind schedule due to slow site clearance.
The groundbreaking date for the project has remained undecided. The project could not be completed until 2023 or 2024, according to the Management Authority for Urban Railways (MAUR).
MAUR said on Tuesday that of the two metro lines with financing already arranged, Metro Line No. 1 from the central station to Suoi Tien Park in District 9 is under construction and scheduled to be put into operation in 2020. The second metro line has not got off the ground as its design has been changed, which requires National Assembly (NA) approval.
In late January the Government approved the project adjustment and told relevant agencies to present it to the NA Standing Committee’s last session of the year. The Government permitted HCMC to approve the adjustment based on the evaluation of the Ministry of Transport.
MAUR plans to complete the design adjustment in quarter two and submit the project to the ministry for evaluation in quarter three.
Hoang Nhu Cuong, deputy head of MAUR, said the groundbreaking schedule of Metro Line No. 2 has remained unknown due to the lack of land for construction as district authorities are uncertain when site clearance in the areas under their management is finished.
Cuong said if site clearance is complete in 2017, it would take five more years to complete construction of the second metro line. This means the line might come online in 2023 or 2024, compared with the initial schedule of 2018.
HCMC is envisioned having eight metro lines. Except for the first two lines, the remaining lines are in the process of finding investors.