BUSINESS IN BRIEF 6/6 Da Nang, UK forge partnerships The Da Nang People’s Committee together with the British Consulate in Ho Chi Minh City and the British Business Group Vietnam (BBGV) held a conference to discuss trade opportunities between Da Nang and the UK, in the central city on June 3. Bilateral trade revenue between the sides hit 30.3 million USD in 2015. Da Nang mostly exported seafood, apparel, rubber products and handicrafts to the UK. British companies have so far invested 1.6 million USD in nine projects in Da Nang on information-technology, consultancy and import-export. Six local firms secured import-export affiliations with British partners. Vice Chairman of the municipal People’s Committee Phung Tan Viet said room for the development of bilateral partnerships remains extensive, adding that Da Nang is committed to creating favorable conditions for British investors. Ian Gibbons, British Consul General in Ho Chi Minh City, said that the sides have made good progress and that he believes in the future growth of their trade ties. At the conference, the management board of Da Nang high-tech park and the BBGV signed a memorandum of understanding on cooperation. Vietnam’s textile sector attractive to Indian investors Opportunities to invest in Vietnam’s garment and textile industry were introduced to representatives from nearly 70 Indian textile and garment companies at a conference held in Coimbatore, India on June 2. Jointly organised by the Export-Import Bank of India (Eximbank) , the Vietnamese Embassy in India and the South India Textile Research Association, the event aimed to promote India’s investment in Cambodia, Laos, Myanmar and Vietnam (CLMV). Ambassador Ton Sinh Thanh briefed participants on the strong development of Vietnam’s garment and textile sector, saying that this contributed to boosting the country’s exports. He also highlighted great opportunities for Indian garment and textile groups to invest in production and supply chains of materials for the sector. EximBank General Director Mukal Sarkar pointed out advantages for Indian firms if they invest in Vietnam, citing fairly developed infrastructure conditions, abundant and cheap workforce, and stable security. Representatives from some Vietnamese enterprises also introduced specific textile projects that are calling for investment in central Vietnam, as well as advantages related to location, procedures and services supporting investment in industrial parks. Indian firms expressed their concern about credit loans for investment in Vietnam and the possibility to form bonded warehousing in the country. According to a plan, the Indian Government will provide their enterprises with an assistance package worth 100 million USD, helping them increase investment in CLMV nations, focusing on the textile sector in Vietnam. "Pull out the nails for businesses," says expert "Nails lie under the carpet." This was what a speaker said during a seminar on the development of small- and medium-sized enterprises (SMEs) on Friday, as he described Viet Nam's business environment. Le Hong Son, a former director of the Ministry of Justice's legal document testing department, said although the country has rolled out the red carpet for enterprises and investors, conflicting legal documents remain the "nails" hindering businesses. Such conflict is seen in circulars from ministries, documents from localities, and Government regulations. Authorities also cause difficulties for companies with certain deeds, he said. Here are two of 21 examples Son presented on Friday, showing how inappropriate policies might cause business inequality: Late last year, the People's Committee of the northern province of Quang Ninh issued Decision No 4088/2015/QD-UBND and Decision No 3625/QD-UBND, setting various conditions for tourist cruise operators on Ha Long Bay. One rule is that cruisers must have firefighting equipment using water built in, meaning more cisterns and pipelines are to be installed on the vessels. This can't be done for existing ones. While the issue remains controversial, more than 1,000 local workers face losing their jobs if the businesses are shut. Remarkably, the decisions of the provincial authority violated enterprise, investment, tourism and fire prevention laws, as well as the law on domestic waterway traffic, and the Civil Code. The decisions would reportedly facilitate bigger firms to jump into the area. In 2013, the Ministry of Industry and Trade issued Circular No 05/2013/TT-BCT and Circular No 59/2013/TT-BCT, stipulating that goods temporarily imported for re-export could be stored no more than 15 days, and this period could be extended by 25 days. This conflicted with the Customs Law, which enabled a period of 12 months and an extension time of six months, for the same circumstance. "The nails must be pulled out," Sơn said, adding that future legal documents are to be compiled with multi-sector polls and careful assessment to ensure that they do not serve "privileged groups". Le Van Khuong from the Ministry of Planning and Investment's Enterprise Development Department said construction works were underway for a draft law to support SMEs. He said the law will provide policies related to bank loans, corporate income taxes and technology, as well as production sites, public procurements and market expansion. It will also deal with programmes to assist starts-up, form chains of companies, and help firm improve capability. Le Duy Binh from consultancy firm Economica said thinking has been changed about approaches to help SMEs, citing a source of the Organisation for Economic Co-operation and Development. In the past, SMEs were considered firms that needed protection, then as those needed promotion. Now they should be the ones that need facilitation, with enhancement of their competitiveness the focus. Prime Minister Nguyen Xuan Phuc has insisted recently that private enterprises would be a driving force for economic growth. Special support policies were needed to foster the development of starts-up and SMEs, and to boost investor confidence. However, participants at Friday's meeting agreed that support programmes should not be massive, because too much assistance may work contrary to market rules and international integration commitments. "Any policies there may be, we need a pure, healthy and equal playground for all businesses. We also need good civil servants for the sake of enterprises," said Son. "It's not how enterprises will be assisted. It's whether a legal framework can remove business barriers that we are interested in as we wait for an SME supporting law to be available," said independent journalist Huy Duc. Official data said Viet Nam has around 500,000 enterprises. Khuong said nearly 98 per cent of them are SMEs, which contribute about 48 per cent to the country's gross domestic product (GDP) and generate 50 per cent of domestic jobs. They account for only 6 per cent of the country's foreign trade values, however. SMEs represent 95-99 per cent of all businesses in other ASEAN countries. Nationally, they contribute 23-58 per cent to GDP, create 43-97 per cent of jobs and account for 10-30 per cent of import-export values. Time for private businesses to have “greater voices” Now that Việt Nam emphasises the importance of the private business sector, there is a chance for small- and medium-sized enterprises, especially female entrepreneurs, to have “greater voices”. Layton Pike, Deputy Head of the Australian Embassy Mission to Việt Nam, made these remarks at an economic forum in Hà Nội yesterday, as Government officials, international economists and businesspeople discussed private sector development. Deputy Prime Minister Vương Đình Huệ said the private business sector, accounting for 95 per cent of the entire business community in Việt Nam, was the most important thing for the local economy. The Government would work hard to create the best conditions for them to grow in a fair and competitive environment, he said. Trương Gia Bình, chairman of technology corporation FPT, said the whole world was involved in the digital revolution, especially in the context of the Trans-Pacific Partnership and other free trade agreements signed recently with developed countries. Bình said the Government needed to support local businesses with shorter administrative procedures, especially in registering a business and tax policies. The Government should help connect Vietnamese businesses with overseas Vietnamese people so that local businesses can tap their experience and investment capital, he said. Better and faster money transfers overseas were also urged at the forum, as many local enterprises worked with overseas partners but struggled to transfer money, which delayed investment and lowered competitiveness. Sandeep Mahajan, lead economist from the World Bank, said Việt Nam was striving to enter the higher reaches of the upper middle income status (US$22,000 GDP per capita purchasing power parity). The economist said that in order to achieve the target, the country needs to boost productivity in the local private sector by enhancing micro institutions of the market economy, strengthening participation in global value chains, and commercialising and modernising agriculture. Chairman of the Việt Nam Young Entrepreneurs Association (VYEA) Bùi Văn Quân said private enterprises created about 1.2 million jobs and contributed more than 40 per cent of Việt Nam’s total gross domestic product. He said the private sector could adapt to challenges, had strong creativity and competitiveness. But it showed limited capacity related to capital, market knowledge and conjunction with international partners. Yesterday morning, Deputy PM Huệ met with successful local start-ups, where young entrepreneurs asked the Government to create a healthy playing field for private enterprises, State-owned enterprises and foreign-invested enterprises. Most of the young entrepreneurs wanted Government support mechanisms and policies on capital, science and technology, human training and administrative procedures reform for fair competition and transparency. Huệ said the Party and the State encouraged all economic sectors to play on a level playing field, which was clearly stated in the Government’s resolutions No 19 and No 35 on the support and development of enterprises by 2020. He said the Government would develop policies to boost the growth of the private business sector by setting up national start-up funds. However, he stressed, these policies could only benefit active and creative enterprises. Businesses have to take the right path, instead of only relying on Government support. Huệ said Việt Nam was expected to have a million active businesses by 2020. There are now about 900,000 registered businesses, but only about 500,000 are active. Yesterday’s forum, the first forum of its kind for the private business sector in Việt Nam, was held by VYEA with support from the Mekong Business Initiative and Australian Government. More than 500 participants focused their discussions on areas such as the digital economy, agriculture, education and vocational training, logistics and distribution, capital and fund raising, and industrial and auxiliary industries. VYEA Chairman Quân said the event established a mechanism for regular dialogue between the Government, private sector, and partners inside and outside the country. “It is a good chance to hear from the private community,” Huệ said. Vietnam gov't has no plan to divest from Vinamilk this year After tantalizing investors since last year with supposed plans to sell out its stakes in 10 major companies, including diary giant Vinamilk and information technology leader FPT, the government has decided to go slow. The State Capital Investment Corporation (SCIC), Vietnam’s sovereign fund, recently announced a list of 120 companies in which it would sell the government’s stakes worth more than VND6.3 trillion (US$278.06 million) this year. But of the major companies, it includes only FPT and Sa Giang Import and Export Corporation, in which SCIC holds 6 and 50% stakes. SCIC's latest plan came less than two weeks after it and other shareholders of Vinamilk voted to remove the 49% limit for foreign ownership. The fund owns 45% of the diary company, while foreign investors have already hit their limit with Singapore's F&N Dairy Investment holding 11 percent. Besides Vinamilk, other major companies that are off the list include insurer Bao Minh Group, Binh Minh Plastic Joint-stock Company, and Vietnam Reinsurance Corporation. SCIC's stakes in them range from 37.1 to 50.7 percent. "SCIC will sell its stakes only when it has new investments that are more profitable," news website VnExpress quoted SCIC chairman Nguyen Duc Chi as saying at a recent press conference. The fund reportedly earned around VND5.06 trillion (US$223.42 million) in dividends last year, more than 53% of it from Vinamilk. That was equivalent to nearly half of its revenue which included the sale of shares. SCIC now has stakes in 197 companies which have a combined market value of nearly VND95.7 trillion (US$4.22 billion), according to VnExpress. Its holdings are equivalent to 23% of the companies' combined charter capital. Unresponsive Chinese company piling violations A Chinese investor’s recycled tire manufacturing plant named Vietnam Hello International Limited Company, located in Phu Bai industrial park (IP) in the central province of Thua Thien-Hue, has been delaying dealing with its air pollution violations, in spite of the authority’s continuous prodding, according to newswire Laodong.vn. According to workers in the IP, recycling rubber tire has caused serious air pollution since the plant came into operation. The stench is worse whenever the plant discharges wastewater. The pollution does not only make workers discontent but also affects their health. An inspector from the Thua Thien-Hue Department of Natural Resources and Environment stated that the plant is equipped with used machinery and outdated technology, thus leading to the foul smell during the manufacturing process, which might be avoided otherwise. A representative of the Division of Natural Resources and Environment of Huong Thuy commune said that the authority requested the company to take appropriate measures to deal with the pollution numerous times, which the company promptly ignored. In January 2015, the Thua Thien-Hue People’s Committee imposed a fine of VND180 million ($8,025) on the company for violating environmental regulations. In addition, the company lacked a temporary storage area for dangerous waste at the time. Previously, at the end of 2014, the Thua Thien-Hue IP Management Board requested the company to relocate the plant to La Son IP or Tu Ha IP. However, as of now, the company has yet to pay the fine or relocate the plant. Licensed in February 2010, the company specialises in manufacturing recycled tires, as well as trading tires and other rubber products. Binh Dinh power centre to call on new investors The Binh Dinh People’s Committee has proposed an investment revocation for the $7.5 billion Binh Dinh power centre invested by Saigon-Binh Dinh Energy Joint Stock Co., a subsidiary of Saigon Invest Group. After the revocation, Binh Dinh will call for investors to develop the project. Previously, in December 2014, the province requested the Department of Planning and Investment and the Department of Industry and Trade in Binh Dinh to propose plans to seamlessly conduct the investment revocation. Licensed in 2009, the project was to be developed on a 250 hectare area in Phu Cat district and have a total designed capacity of 5,200MW. The construction of the project is divided into three phases for three power plants, including a 600MW and two 1,000MW plants, which were expected to come into commercial operation in the 2016-2021 period. The centre is part of the national power development plan towards 2020, and is intended to use the latest environmentally friendly technologies and coal imported from Australia or Indonesia. The plants will be fuelled by 12-14 million tonnes of coal annually and about 33,800 tonnes of diesel and fuel oil each year. In 2009, the government requested the Ministry of Industry and Trade to approve the location of Binh Dinh power centre and support the investor in implementing each phase on schedule. In 2012, the province agreed the investor’s proposal to use a 340 hectare water surface area and a 218 hectare ground area to develop the project. The province requested the investor to submit the project’s progress report as well as commit to the agreed time to start and fish the construction of each phase. However, as of now, the construction has yet to be implemented on schedule. Footwear investors stepping up game in Vietnam The Nam Dinh Department of Planning and Investment has recently granted an investment certificate for Hong Kong-based Bunda Footwear Company Limited to develop a $47.5 million footwear production factory in Nam Truc district, according to local media. The 30-hectare project’s construction is expected to start in September. The factory is expected to begin its test run sometime between August and September 2018 and officially come into operation in October 2018. Upon entering full operation, the factory will have an output of 15 million products per year and create between 10,000 and 12,000 jobs. According to Trieu Duc Hanh, Secretary of the Nam Truc District Party Committee, the project plays an important role in the district’s socio-economic development, making it imperative for the authority to support the investor in site clearance as well as deal with problems arising during the implementation process. The district will try to complete the site clearance and hand over the ground for the investor before June 30. Bunda’s project is not the sole large-scale footwear production projects invested in Vietnam in the first five months of this year. On March 7, the Can Tho City Export Processing and Industrial Zone Management Authority licensed South Korean Taekwang Industrial to implement a $171 million shoe-manufacturing factory in 2B Hung Phu Industrial Park in Cai Rang district of Can Tho. The factory covers an area of 62 hectares, 52 of which is reserved for the production area, while the remaining 10 is set aside as a service and commercial area and warehouses for lease. The factory’s construction is divided into three phases. The first phase’s construction is expected to be kicked off in 2016 and last until 2019, with the second and third phases to be finished by 2022 and 2025, respectively. The factory constructed during the first phase will start operation in the first quarter of 2017, while the second phase will be inaugurated in 2020, and the third phase in 2023. Once the factory comes into operation, it will have a total capacity of 100 million products per year and create 30,000 jobs. Government says no to higher electricity prices The government has rejected any increase to electricity prices or fees for build-operate-transfer (BOT) projects in electricity this year. It will establish an electricity price stabilization fund, similar to the existing oil and gas price stabilization fund, to better monitor electricity prices, the government’s monthly meeting heard. Prime Minister Nguyen Xuan Phuc, after hearing reports from Minister of Finance Dinh Tien Dung, spoke of the principles of following market mechanisms, ensuring supply, monitoring the price adjustment roadmap, controlling expenditure, and preventing the use of administrative orders in price control. “It is vital to closely follow the situation, evaluate the effects of price adjustments and monitor the prices of essential commodities to curb inflation within the level set by the National Assembly,” the PM said. Regarding oil and gas prices, he asked ministries and agencies to follow global oil prices, monitor expenditure and put the price stabilization fund to effective use. The government’s decisions come at a time when Vietnam recorded the highest inflation rate for five years in May. The consumer price index (CPI) rose 0.54 per cent against April and 2.28 per cent against May last year, according to the General Statistics Office (GSO). The government is committed to keeping the annual inflation rate at below 5 per cent, Deputy Prime Minister Vuong Dinh Hue told a May meeting with banking and finance agencies. To keep inflation at between 4 and 5 per cent, Deputy PM Hue asked relevant authorities to work closely to control fiscal and monetary policies in line with economic development. “We will not let inflation escalate in 2016,” he insisted. “Rising inflation in the first few months of the year does not mean we should expect high annual inflation.” As the economy has shown signs of faltering, the government is trying to spur public investment in a bid to push up GDP growth, which only increased 5.6 per cent in the first quarter; lower than the 6.7 per cent recorded in the same period last year. Low disbursement of public investment, according to the government’s monthly meeting in May, is considered a factor leading to slowing growth. PM Phuc therefore asked ministries, agencies, and cities and provinces to report by June 6 on the disbursement of planned public investments for the year. Reports must identify the reasons behind obstacles, if any, during the disbursement process, such as those in investment procedures or project implementation. The Ministries of Finance and Planning & Investment, together with the Office of the Government, will receive the reports and make proposals to the Prime Minister before June 20 on practical methods to accelerate the disbursement of public investment. Vietnam remains determined to reach the macro-economic goals set for 2016, with GDP of 6.7 per cent. 2.9 million motorcycles sold in FY2016 Nearly 2.9 million motorcycles were sold in fiscal year 2016, from April 2015 to March 2016, by members of the Vietnam Association of Motorcycle Manufacturers (VAMM), up 7 per cent compared to the previous fiscal year. VAMM is yet to release specific sales figures for its five members but Honda Vietnam (HVN) reported holding 70 per cent of the market in fiscal year 2016. According to Mr. Minoru Kato, General Director of the HVN, fiscal year 2016’s sales reached 2.03 million, 120,000 more than in fiscal year 2015. Figures show that Vietnam’s motorcycle market in fiscal year 2016 did not fluctuate a great deal so the market share among manufacturers is therefore expected to see no significant change compared to 2015, when Honda led the market and was followed by Yamaha, Piaggio, SYM, and Suzuki. The 7 per cent growth in fiscal year 2016 is considered a successful result for the five members of VAMM. The association has predicted it will be difficult to reach sales of 3 million in fiscal year 2017, even though Honda, Yamaha, and Piaggio plan to retain their current production capacity and boost their marketing campaigns. New definitions for investment and bidding violations The government has issued a new decree on sanctions for violations in investment and bidding procedures. The new decree will come into effect on July 15 and replace Decree No. 155/2013. It stipulates administrative violations and their punishment, remedial solutions for the consequences of violations, and the rights of related local authorities in punishing violations in planning and investment. Behavior considered administrative violations in planning and investment include those relating to public capital use and management, those in investment in Vietnam and investment from Vietnam to other countries, those in bidding management, and those in business registration. Other administrative violations in planning and investment not stipulated in the decree will be subject to a decree on administrative violations in State management. Organizations will be warned or fined a maximum of VND80 million ($3,560), while the maximum for individuals is VND40 million ($1,780), which are unchanged from the previous decree. Depending on the seriousness of the offence, individuals and organizations will be subject to one or more remedial solutions. Vietnam leads ASEAN in Canada trade Total bilateral trade between Vietnam and Canada in the first quarter stood at $928.97 million, up 11.8 per cent year-on-year, according to Statistics Canada. Vietnam remains the leader in ASEAN in trade with Canada, with imports from the country of $92.9 million, down 38.7 per cent year-on-year, while exports to Canada were $836.1 per cent, a rise of 23 per cent. Vietnam therefore recorded a trade surplus of $743.2 million in the quarter. Main exports from Vietnam were machinery, electronic equipment, wood, textiles, footwear, fax machines, and printers. The export value of machinery and electronic equipment was almost $273 million, an increase of 123 per cent year-on-year. The export value of footwear was $103 million, up 35.5 per cent, crocheted and knitted products $81 million, down 1.2 per cent, textiles $76 million, down 7.3 per cent, wood $60 million, down 2.2 per cent down, and fax machines $49 million, down 20 per cent. Machinery and electronic equipment saw the highest growth in the period, of 123 per cent. Seafood saw the sharpest decline, of 22.4 per cent. Main imports from Canada to Vietnam were fertilizers, soybeans, oilseeds, seafood, machinery, equipment, and fur. Fertilizers had highest import value, of $23.5 million, while machinery recorded the highest growth, of 176.5 per cent. Vietnam was the fifth largest importer in ASEAN and top in exports. Cambodia had the highest import growth, of 226 per cent, while Laos had the highest export growth, of 254 per cent. CEO Group makes a mark on Phu Quoc Island The CEO Group is now focusing on developments along Truong Beach in the west of the Phu Quoc island, targeting to turn it into a highlight of Vietnam’s tourism and hospitality market. With three projects on a total area of 300 ha,the local property developer is one of the largest developers on the Island of southern Kien Giang province. Located near Phu Quoc International Airport and Duong Dong Town, Truong Beach is one of the most beautiful on the island with sand stretching 20 km. Among the 200 projects invested on Phu Quoc around 50 are located on Truong Beach, with a total area of over 1,800 ha. The CEO Group has invested up to VND3 trillion ($133.7 million) on developing Sonasea Villas & Resort in the center of Truong Beach. Construction has involved dozens of contractors and 1,800 construction workers. Novotel Phu Quoc Resort, with 400 rooms, was completed after one year of construction and meets all standards and requirements of the Accor Group. The resort was officially opened in January. The resort is the largest under the Novotel brand on Phu Quoc and within the Accor network in Vietnam. Occupancy has been over 90 per cent since the opening. During holidays such as Lunar New Year or April 30 and May 1 the resort is usually filled to capacity, proving the attractiveness of an international-class resort on Phu Quoc Island. The first large-scale resort on Truong Beach, Novotel Phu Quoc Resort is part of the Sonasea Villas & Resort real estate complex developed by the CEO Group. With a total area of 80 ha on a 1 km stretch of beach, Sonasea Villas & Resort is one of the two largest hospitality projects with the longest beaches on Truong Beach. To meet increasing demand for investment in hospitality real estate, the CEO Group will launch 1,000 resort shophouses and villas in the time to come. It also revealed that most shophouses have been purchased. Villas in Sonasea Villas will be handed over to buyers this year. All are on 270-713 sq m with a private garden and swimming pool. With competitive sales prices offered by the CEO Group, more than half of those launched on the market at the end of 2015 have been purchased. In the center of the villa cluster it is also developing facilities such as a large swimming pool, a promenade, landscaping, a clubhouse, and restaurants, among others. The CEO Group plans to begin construction of the high-end Sonasea Resodences villas on 62 ha at Truong Beach this year. It will expand its land area, especially in hospitality, by conducting M&A deals in the time to come and has agreed to become the largest shareholder of a company who owns two projects with a total area of 150 ha on Phu Quoc, Mr. Doan Van Binh, Chairman of CEO Group, told its 2016 annual shareholders meeting. The CEO Group is also negotiating with a partner to secure an 8 ha project in Nha Trang. With experience of 15 years in developing real estate projects and strengths in term of land, capacity and brand, the CEO Group is gradually developing a chain of hospitality products under its own brand, contributing to the development of Phu Quoc Island’s tourism and hospitality sector. Six Senses appoints new Director of Marketing Communications Mr. Norman Zweyer has been appointed Director of Marketing Communications for the three Six Senses properties in Vietnam. In his new role Mr. Zweyer will be responsible for media relations and marketing communication strategies for Evason Ana Mandara in Nha Trang, Six Senses Ninh Van Bay, and Six Senses Con Dao. “We are delighted that Norman is joining us at the Vietnam office, bringing with him a wealth of knowledge,” said Ms. Do Thi Thu, Director of Sales & Marketing Vietnam. “His appointment further adds to our commitment to position Six Senses properties in Vietnam as leading destination resorts in Southeast Asia.” Mr. Zweyer brings more than 12 years of extensive sales and marketing experience in hospitality to his new role, having previously worked at several distinguished international luxury brands. He has been part of the Six Senses family since April 2007, when he began his career as a Senior Sales Manager supporting the opening of Six Senses Zighy Bay in Oman. This was followed by seven years in Thailand, where he served as Director of Sales for Evason Phuket & Bon Island and as Director of Public Relations for the award-winning Six Senses Yao Noi. Prior to this he worked in the sales department at the One&Only Maldives at Reethi Rah and for a high-end destination management company in Dubai. He earned a Bachelor’s degree in Fairs, Conventions, and Event Management from the University of Cooperative Education in Ravenburg, Germany in 2003. He then earned a Masters Degree in Hospitality Management through an intensive online studies program through Cornell University in New York. Budget deficit continues to escalate Vietnam’s budget deficit for the first five months of 2016 was VND66.4 trillion ($2.96 billion), the General Statistics Office has announced. Revenue from January to May of VND346.2 trillion ($15.7 billion) was exceeded by spending of VND412.6 trillion ($18.7 billion). The government has previously projected budget revenue for 2016 of VND1,019.2 trillion ($45.86 billion) with total spending of VND1,273.2 trillion ($57.3 billion), resulting in a deficit of VND254 trillion ($11.5 billion), or 4.95 per cent of GDP. So far this year Vietnam has spent VND55 trillion ($2.5 billion) on foreign debt settlement. It also put VND64.2 trillion ($2.91 billion) into development projects and VND293.4 trillion ($13.3 billion) into national defense and administrative governance. Tumbling crude oil prices have cut budget revenue considerably, with revenue from oil in the first five months of 2016 falling sharply to VND13.9 trillion ($631 million), accounting for only 4 per cent of total budget revenue. According to Mr. Nguyen Duc Thanh, Director of the Vietnam Institute for Economic and Policy Research, taxes and tariffs will be reduced considerably as many free trade agreements Vietnam has signed will come into effect shortly. Lower tax revenues from import-export duties will have a significant impact on budget revenue collection. Authorities are under intense pressure given that the budget deficit for the first five months of the year was $2.96 billion. Attention therefore should be paid to intensifying the supervision and transparency of budget use. Prime Minister Nguyen Xuan Phuc has asked the Ministry of Finance (MoF) to step up measures to bolster State budget revenue. Among the measures, accelerating the equitization of State-owned enterprises, keeping public debt under control, and creating a favorable business environment to attract foreign investment have high priority. The PM also encouraged the socialization of State-run education, healthcare and other public services so that the number of people on the State payroll can be cut, easing the pressure on the State budget. There is also an urgent need, the PM stressed, to decentralize State funds from the central government to local governments. This comes from the fact that Vietnam will find it more challenging to gain preferential loans and official development assistance (ODA) following the World Bank’s announcement that it will cut its ODA to Vietnam before July 2017. Almost 30,000 enterprises suspend operations in first 5 months In the first five months of this year there were 44,740 newly-established enterprises while 28,582 enterprises suspended operations, according to the General Statistics Office (GSO). The number of newly-established enterprises increased 24.1 per cent and their registered capital of VND349 trillion ($15.58 billion) was 59.3 per cent higher than in the first five months of last year. Registered capital per enterprise averaged VND7.8 billion ($347,800), a 28.5 per cent increase year-on-year. Of the 28,582 enterprises that suspended operations (which was 25.9 per cent higher year-on-year), 10,794 nominated an intended day of returning to operations while 17,788 could not determine when they would re-open.   Additional capital to existing enterprises totaled VND655.9 trillion ($29.2 billion) in the period and 531,900 new jobs were created. There were 12,999 enterprises returning to operations, a 75.6 per cent increase compared to the same period last year. Meanwhile, the number of dissolved enterprises stood at 4,634, 19.5 per cent higher year-on-year. In May there were 10,191 newly-established enterprises, an increase of 28.1 per cent year-on-year with registered capital of VND101.2 trillion ($4.5 billion), up 78.1 per cent. The number of newly-established enterprises in May totaled 104,700. The government recently issued Resolution No. 35 providing support for enterprises to 2020, by which time Vietnam is expected to have 1 million enterprises. HCMC looks to challenge foreign retailers The Ho Chi Minh City People’s Committee has met with local retailers in the city to identify solutions to countering the rising number of foreign retailers. The meeting was held on May 30, but no solutions or detailed plans have been made available to the public. Mr. Nguyen Thanh Phong, Chairman of the People’s Committee, was quoted as telling the meeting that without control and direction Vietnam’s retail market will be strongly affected by foreign retailers. “Retailers from South Korea see Vietnam’s retail market in general and Ho Chi Minh City’s retail market in particular is an ideal destination,” Mr. Phong said. “Foreign investors want to turn Vietnam’s retail market into the second-largest retail market in the region after Malaysia.” The meeting gathered a number of major enterprises in the retail and distribution sectors in the context of Thailand’s Central Group recently completing the acquisition of Big C, worth $1.14 billion. After the acquisition local retailers have said that the domestic retail market is being redrawn, towards the expansion of foreign retailers. Figures from the Ministry of Industry and Trade (MoIT) show that foreign retailers now account for over 50 per cent of Vietnam’s retail market share. Ms. Dinh Thi My Loan, Chairman of the Vietnam Retailers Association, said that mergers & acquisitions (M&As) have become common in Vietnam’s retail market, via which foreign players are penetrating into the country. Central Group is the second Thai giant to purchase a retail chain in Vietnam. The Berli Jucker Corporation (BJC) previously acquired Metro Cash & Carry Vietnam for $706.2 million. While many foreign retailers promote M&As in Vietnam, Parkson, one of Malaysia’s leading retailers, had to close Parkson Paragon in Ho Chi Minh City’s District 7. It also closed its Parkson Keangnam Landmark center in Hanoi last year. According to figures from MoIT, Vietnam’s retail market in 2015 was estimated at $102 billion. There are now over 700 supermarkets and 132 trade centers, of which 22 are 100 per cent foreign-owned. It is expected that retail growth will reach 11.9 per cent by 2020 with a retail market size of $179 billion, of which modern retail will account for 45 per cent. German investors confident about Vietnam German investors are upbeat on Vietnam as fine destination for their future investments thanks to recently-signed trade agreement between Vietnam and the European Union (EU). “German enterprises are now seeking investment opportunities and expanding existing investments in Vietnam as they see the country as an attractive destination given the EU - Vietnam Free Trade Agreement (EU-VN FTA) and the TPP, together with advantages in location,” Mr. Marko Walde, Chief Representative of German Industry and Commerce in Vietnam (AHK Vietnam), said in a press release issued on May 31. The Vietnam section of the AHK World Business Outlook Survey 2016 released on May 31 in Ho Chi Minh City and conducted by AHK’s network worldwide on 3,400 German companies, showed that more than half were positive about the future of Vietnam’s economy and 47 per cent expect even greater economic development in the country. Fifty-four per cent of German investors said they were considering increasing their investment in Vietnam next year and 58 per cent will engage more employees under their investment plans. Almost 70 per cent said they believe their business situation at this time is good, when asked about their perceptions. When asked about challenges for future investments in Vietnam, factors cited included the economic conditions, shortages of skilled workers, and increasing labor costs. Infrastructure and energy and commodity prices, meanwhile, are considered positives. In Vietnam, German companies are more confident about the economy and business development than in other ASEAN countries or China and India, according to the report, and there are very positive signs in business confidence, outlook and expectations among German companies in Vietnam. The Delegation of German Industry and Commerce in Vietnam (GIC/AHK Vietnam) has been providing support and enhancing the business relationship between Germany and Vietnam since 1993. Every year it supports hundreds of German companies in doing business and searching for partners and suitable investment locations in Vietnam and also helps Vietnamese firms in developing markets in Germany. Vietnam tops ASEAN in trade with Canada Bilateral trade value between Vietnam and Canada in the first quarter of 2016 reached US$928.97 million, up 11.8% over the same period last year and recording the largest figure among ASEAN countries. The figures were released by the Statistics Canada, the country’s national statistical agency. Data showed Vietnam’s exports to Canada during the first three months of the year hit US$836.1 million, up 23%, while Vietnam imported Canadian goods worth US$92.9 million, down 38.7%. Vietnam’s key shipments to the North American country included machines, electronic devices, garments, footwear and timber products. Combined revenues from machinery, electronic products posted the largest growth rate at 123% reaching US$273 million, followed by footwear with revenue of US$103 million. However, seafood exports fell sharply by 22.4%. Vietnam’s main imports from Canada included fertilisers, soybeans, machinery and accessories. Compared with ASEAN countries, Vietnam was the fifth largest importer of Canadian goods but the largest exporter to Canada. As a single economy, ASEAN’s exports to Canada reached US$2.879 billion while imports were estimated at more than US$1 billion. Jan-May FDI approvals down in HCMC HCMC saw fresh foreign direct investment (FDI) approvals in January-May dipping year-on-year despite the higher FDI commitments in the country. According to a report of the HCMC Statistics Office, FDI capital pledged for new and existing projects in the city had reached US$647.3 million in the year to mid-May, dropping by US$407.7 million year-on-year. The city approved 276 new projects worth US$481.2 million and 48 operational projects to add an extra US$166.1 million. Meanwhile, the country’s FDI approvals in the first five months of the year rose by 136.4% to US$10.16 billion over the same period last year. The period saw 36 nations and territories investing in HCMC, with Cayman Islands taking the lead with total registered capital of US$230.5 million, accounting for 47.9% of the total fresh FDI approvals, followed by Japan with US$75.7 million (15.7%), Singapore with US$64.1 million (13.3%), South Korea with US$29.8 million (6.2%), and Malaysia with US$23.5 million (4.9%). FDI flows into many sectors fell in line with the city’s orientations. FDI pledges in the processing-manufacturing sector accounted for 12.9% of the total with 16 projects worth US$62.1 million while the trading sector attracted 106 projects worth US$117 million and the real estate sector lured seven projects worth US$236 million. The city also approved 38 projects capitalized at US$29.1 million in the information and communications sector, 11 projects (US$10.5 million) in the accommodation and food sector, and 52 projects (US$12.7 million) in the sci-tech sector. In contrast, registered capital of domestic startups in HCMC went up in January-May. The number of newly-established domestic enterprises rose by 19.7% to 13,267 with total registered capital of VND99.95 trillion (US$4.46 billion), up 37.9% compared to the same period last year. The agro-forestry-fishery sector attracted VND893 billion (US$39.82 million) in fresh capital in the first five months, 2.7 times higher than in the year-ago period. The commercial and service sectors lured VND79.86 trillion (US$3.43 billion), a year-on-year rise of 89%, while the construction sector saw new capital down by 29.4% to VND22.2 trillion (US$989.9 million). U.S. dollar rises to four-month high The U.S. dollar on May 30 morning soared to a four-month high against the Vietnamese dong currency, VND22,450-22,455 per dollar, up around VND100 compared to the start of last week. Vietcombank bought the dollar at VND22,380 and sold it at VND22,450, up VND30 against last Friday and VND105 against last Monday. VietinBank quoted the dollar buying price at VND22,375 and selling price at VND22,455. The respective prices at Eximbank were VND22,360 and VND22,440. The greenback has risen steadily since the beginning of last week and reached the highest level in more than four months on May 30 morning. Late on May 30 afternoon, Vietcombank’s dollar buying and selling prices stayed unchanged. At VietinBank, the buying price fell to VND22,370 per dollar and the selling price to VND22,450. Meanwhile, Eximbank bought the dollar at VND22,360 and sold it at VND22,450. The dollar got firmer on the informal market as well. A money changer in downtown HCMC on May 30 bought the dollar at VND22,450 and sold it at VND22,490, an increase of VND70 compared to last Friday. A shop told the Daily on the same day that it had no dollars left for sale. According to a deputy general director of a bank, the dollar had been firmer against the dong as banks had acquired dollar funds to balance their foreign currency positions while firms’ dollar demand has remained normal. Dollar buying and selling prices have edged up since the State Bank of Vietnam (SBV) last Friday announced details of Circular No. 07/2016/TT-NHNN that allows businesses to take out short-term loans in foreign currency with low interest rates and convert them into the dong to fund production of goods for export. The circular is effective from June 1 to December 31 this year. Interest rates for those loans stand at 2.8-5.2% per annum while rates for dong loans range from 6.8% to 9% per year. Companies getting short-term foreign currency loans cannot use them to make payments but convert them into the local currency to finance their production plans.   Speaking to the Daily, a SBV leader attributed the sharp dollar rise on May 30 morning to a knee-jerk reaction on the market, saying that corporate demand for dollars has remained normal and that the central bank would intervene if necessary.     From April 1, the SBV began strictly supervising short-term foreign currency loans for firms to prevent dollar hoarding, and encouraging dollar buy and sell transactions to ease pressure on dollar demand. However, the central bank permitted those firms making offshore payments and investing in foreign markets, and petroleum importers to continue taking out loans in foreign currency. Do Thien Anh Tuan, a lecturer at the Fulbright Economics Teaching Program, told the Daily last month that the central bank discourages dollar borrowing and lending but this policy must be adjusted to make it appropriate to different groups of businesses. Tuan said firms having foreign currency revenues should be allowed to get foreign currency loans. A ban should be imposed on businesses that do not generate foreign currency revenues and individuals who borrow foreign currency for speculation. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR