BUSINESS IN BRIEF 8/11 Housing market slows but expected to pick up Though the real estate market is said to be in a rather strong growth phase, it is still showing signs of slowing down and some unstable aspects, which could badly affect it if they are not addressed in time.  This judgment is based on the decrease in the number of successful transactions in the country’s two biggest markets, Hanoi and HCM City.  In September, for instance, the number of transactions was respectively 1,100 and 1,050, down from 1,200 and 1,160 in August.  One severe limitation in the market is an oversupply of high- and medium-end apartments and a shortage of products that most people can afford.  Some analysts attributed the market slowdown to certain changes in policies by the State Bank of Vietnam (SBV), especially its hike in the risk index for lending for property and securities from 150 per cent to 200 percent.  It also lays out a roadmap for reducing the cap on medium- and long-term lending using short-term funds from 60 per cent to 40 percent.  The 30 trillion VND housing stimulus package launched in June 2013, which offered loans at a maximum interest rate of 5 percent to individual borrowers for a 15-year tenor, ended in June this year. This has made many low-income earners who had hoped to buy houses rethink their plans.  Prospective buyers thus worry about the availability of money and have become more hesitant to enter the market.  The recent increase in the prices of many real estate products and the strong return of investors in secondary properties have also contributed to volatility in the market, affecting affordability and thus liquidity year.  Yet, despite the slowdown, analysts predicted the market to become more competitive in the final months of the year since supply of high-end apartments exceeds demand.  In the third quarter, the supply of apartments in the Hanoi and HCM City markets increased sharply, with nearly 15,000 offered for sale, of which high- and medium-end apartments accounted for 50-60 percent, according to Vietnam Real Estate Association.  The association also said thousands of new luxury apartments would come into the market by year-end but housing for low-income earners would be limited. Meanwhile, demand is predominantly for social housing.  All this is likely to cause an oversupply of luxury apartments, thus sparking fierce competition.  The main reason for this skewed situation is unplanned development, which was the main cause of the bubble that formed some years ago before bursting and leaving the market in tatters, according to experts. Dong Thap leads Mekong Delta in tra fish output The Mekong Delta province of Dong Thap has produced 400,000 tonnes of tra fish a year, marking the highest output in the region.  Phan Kim Sa, Deputy Director of the provincial Department of Industry and Trade, said materials zones account for more than 63 percent of the province’s tra fish cultivation area of 2,120 ha, leading to the high output.  After a local chain value model was built, processing firms have restructured their operations by acquiring weak ones and building a chain of supply-processing-consumption and export.  More than 1,000ha of tra fish are being bred under VietGAP, GlobalGAP, ASC, BAP standards. With 122 fries producing facilities, 48 trading and over 1,200 breeding units, the province expects to produce more than 1 billion fries this year.  According to Sa, Dong Thap tra fish has been present in nearly 100 markets worldwide.  In January-October, the province exported more than 207,000 tonnes of farmed fish, earning over 521 million USD, up 3.43 percent annually.  Dong Thap is currently home to 24 for-export seafood processors with a total annual capacity of over 429,000 tonnes. A majority of plants meet HACCP and ISO standards and could self-provide 60-70 percent of needed materials.  In the coming years, the province strives to raise over 500,000 tonnes of tra fish in an area of more than 2,200ha, and export upward 645 million USD worth of tra fish. S Koreans to invest in gas facilities   South Korean company Hyosung Corporation has proposed to build polypropylene (PP) factories and a liquid petroleum gas (LPG) storage facility in Ba Ria-Vung Tau Province. The company recently submitted the proposal to the Ba Ria-Vung Tau industrial zones authority. A source from the Ministry of Industry and Trade (MoIT) said Hyosung Corp wanted to set up the factories and storage facility in Cai Mep Industrial Zone, in Tan Thanh District. The firm would make a capital investment of US$1.2 billion, and the two units would occupy a proposed area of 608,910sq.m. The project will be divided into two phases. The first phase would include the construction of an $133 million underground storage facility for LPG and the first PP factory with an annual capacity of 300 million tonnes, at a cost of $336 million. The second phase will include the construction of a second PP factory with an annual capacity of 300,000 tonnes at a cost of $226 million as well as a PDH factory worth $496 million. In its proposal, Hyosung Corp has shown its commitment to environmental conservation and guaranteed the quality of its technology and machinery. Hyosung Corp is one of South Korea's top 15 companies in the field of textiles, manufacturing spandex and nylon, among other things. In Viet Nam, Hyosung Corp operates factories in Nhon Trach 5 Industrial Zone in Dong Nai Province, producing spandex, nylon and polyester threads, and steel wires, steel tire cords, bead wires, saw wires, used in auto manufacturing. Most of their products are exported.  Experts warn of sloppy food chain Improving the regional link and developing the supply chain are necessary for the Cuu Long (Mekong) Delta to boost efficiency in agricultural production and national food security. Experts of CEL Consulting specialising in supply chains in South East Asia said the region contributed more than 50 per cent of the country's food output, but farmers' income remained low and food processing and export firms continued to struggle, Hai Quan (Customs) newspaper reported. According to CEL Consulting, this was due to the shortcomings of a sloppy supply chain. Currently, the agricultural sector's supply chain still has to go through many intermediaries. More than 90 per cent of farmers rely on intermediaries as the only source of market information and the only purchasers. In addition, firms did not have direct interaction with farmers, so they failed to manage the supply, experts said. Julien Brun, director of CEL Consulting, was quoted by the newspaper as saying that the future of the region's agricultural production would be centralised production, which would require improvements in both the scale of production and the regional link. Under this model, firms would help direct farming production following the market demand, develop brand for agricultural products and apply technologies in production. Intermediaries should simply play the role of logistics service providers, according to Julien. The development of a distribution network was also essential, he said. The region must increase rice output from 21 million tonnes per year to 22.1 million tonnes and fishery output by 28 per cent by 2020 to meet national food security. Footwear firms gear up for FTAs Vietnamese leather and footwear firms are implementing new production and business strategies to make the most of the opportunities provided by free trade agreements (FTAs), especially with Eurasia. The agreement between the Eurasian Economic Union (EAEU) and Viet Nam came into effect last month. A representative of Ladoda JSC said the company had imported leather, equipment and machinery from India at zero per cent duty and was seeking foreign partners, including from Mexico. Ladoda had been exporting handbags and backpacks to the EAEU member countries, and it had now created 20 new designs for other markets in 2017, the representative said. Phan Thi Thanh Xuan, general secretary of the Viet Nam Leather, Footwear and Handbag Association (LEFASO), said the localisation rate of the leather and footwear sector was about 40-45 per cent, while materials accounted for 68 to 75 per cent of footwear prices. Once all the FTAs come into force, foreign investors will focus on material production so as to enjoy tax benefits offered on the basis of product origin. Meanwhile, Vietnamese firms are expected to raise their localisation rate and reduce their dependence on imports. Domestic leather and footwear companies have revamped their production operations to increase productivity and improve quality, even as they expanding business. At the same time, investors from countries and territories such as mainland China, Japan and Taiwan have also built plants in Viet Nam to make the most of opportunities afforded by the FTAs. Foreign direct investment (FDI) businesses, which now make up more than 70 per cent of the sector's export turnover, are said to benefit the most from the deals. Like garments and textiles, Vietnamese footwear will enjoy zero per cent tax in the EU and EAEU markets for seven years once the FTA is in effect. However, Xuan said, once the markets opened up, any business that met market requirements could benefit from the pacts. Apart from the opportunities, the deals are also creating new challenges for the Vietnamese leather and handbag sector. The high labour rate for leather products and handbags of 70 per cent, has lowered profits and made the businesses less dynamic. Besides, technical barriers imposed by the EU and EAEU, together with commitments of social responsibility, environmental protection and procedures to enjoy tax preferences, will increase business costs. Against this backdrop, the LEFASO has suggested that local enterprises roll out their own strategies and solutions in order to churn out high-quality products that can gain them a firm foothold in the home market and compete with their rivals in foreign markets. The association has also called for more tax and land incentives to encourage more investments in the sector.  Seafood import restriction removed Enterprises importing seafood for processing and export can once again get customs clearance certificates before quarantine inspections. A Phap Luat Thanh Pho HCM (HCM City Law) report yesterday quoted the Viet Nam Association of Seafood Exporters and Producers (VASEP) as saying permission to obtain the certificates earlier was granted after the firms complained of undue delays, higher costs and losses. Many firms had complained to the association that over the past four years, they'd typically received customs clearance before inspections, but a new rule issued in August had hurt production and profits. The Ba Ria Vung Tau Seafood Processing, Import and Export Joint Stock Company (Baseafood) has been importing salted cod for export processing for the last two years. The company kept the imported cod in its own freezers and waited to get the inspection certificate before processing it. However, on August 8, 2016, the Region VI Animal Health Agency issued Official Letter 1094/TYV6-TH guiding quarantine declaration for imported seafood material for export processing. As per this document, the customs certificate could be granted only after the imported seafood had passed quarantine inspections. The company petitioned the association for help because it had to spend more money now to store the imported seafood at the port. This could affect the quality of stored seafood because the company could not regularly check if the refrigeration was working properly, it argued. Tran Van Linh, chairman of Thuan Phuoc Seafood and Trade Joint Stock Company, noted that local enterprises had to import seafood that was either not available locally or were available in insufficient quantities. Sometimes, the locally available seafood was priced too high, making the company's products less competitive in the international market. For instance, Viet Nam's seafood enterprises were importing shrimp from India and Ecuador for export processing because of low import prices of US$1-2 per kilo. But under the new regulation, the enterprises were losing out because they had to spend hundreds of millions of dong more on storing the shrimp at the ports until the inspections were done. The association said that four years ago, the Ministry of Agriculture and Rural Development (MARD) had allowed the granting of customs clearance certificates to enterprises storing imported seafood on their own while awaiting inspections. After receiving several complaints from its members, VASEP requested the ministry's Animal Health Department to reverse its decision. MARD responded positively to the request late in October. It said that the enterprises would be responsible for ensuring that the imported seafood they stored in their own facilities met required quality standards. They should also ensure that the stored seafood was not processed before it passed inspection, the ministry said. Pham Hai Long, general director of Agrex Sai Gon, welcomed the decision saying a large number of enterprises doing honest business should not suffer because of a few that violated existing regulations.  VN bank profits surge on services, not lending Some commercial banks have reported high profits in the first nine months of the year thanks to a restructuring effort which focuses on services instead of lending as previously done. According to financial reports released recently, the Commercial Joint Stock Bank for Foreign Trade of Viet Nam (Vietcombank) posted profit of nearly VND4.5 trillion (US$200.36 million) in the first nine months, up 13.6 per cent year-on-year. Of the total, services made up $521 billion, up more than 18 per cent. Securities business also represented VND203 billion. Vietcombank's profit was nearly equal to that of the Commercial Joint Stock Bank for Industry and Trade of Viet Nam (Vietinbank) and the Commercial Joint Stock Bank for Investment and Development of Viet Nam (BIDV), although its total outstanding loans in the period were less than VND440 trillion, equal to only two-thirds of Vietinbank and BIDV's. Last year, services also accounted for 30 per cent of Vietcombank's profit. The same trend was seen in Techcombank, which reported profit of VND279 billion from services in Q3 and VND911 billion in nine months. With the contribution from services, Techcombank posted net profit of more than VND2 trillion in Q3 and more than VND6.2 trillion in nine months, up 29 per cent and 21 per cent year-on-year, respectively. The financial report from the Asia Commercial Bank (ACB) also showed that the bank posted profit of VND236 billion from services in Q3, helping the bank make total profit of VND415 billion in the period, up 15.5 per cent year-on-year. ACB general director Do Minh Toan said his bank is boosting services with a focus on financial services and individual customers. According to independent expert Dinh The Hien, while lending has shown signs of risk due to a rise in non-performing loans, increasing revenue from boosting services would help banks achieve healthy and sustained development in the future.  PVcomBank cuts deposit interest rates PVcomBank last week announced it was lowering deposit interest rates in an effort to be able to cut lending rates early to support production and business. Accordingly, the bank's rate for three to five month deposits has been cut from 5.5 per cent to 5.3 per cent per year. The rate for 13 month deposits has also been reduced from 7.5 per cent to 7.2 per cent per year. The bank's highest rate of 7.6 per cent per year, applicable for 18, 24 and 36 month deposits, has also been cut to 7.5 per cent.  Besides aiming to restructure capital sources, PVcomBank expected that the cut would help it cut lending rates soon to support production and business according to guidance from the Government and the State Bank of Viet Nam. Violations detected in expressway project Violations valued at over VND300bn (USD13.63m) have been uncovered in the construction of the Ha Long-Van Don Expressway, Quang Ninh Province.  Three packages to relocate the electric lines of 35kV, 6kV and 0.4kV and the water mains of the Ha Long-Mong Duong section worth VND300bn have the most serious violations. According to the inspectors of Quang Ninh Province, authorities of Cam Pha City had committed wrongdoings when allocating VND180bn (USD8.18m) package to Thanh Cong Equipment and Engineer JSC, VND78bn package to Tham Gia JSC and VND16bn package to Nam Thang Construction Company. Contractor Thanh Cong Equipment and Engineer JSC is two months behind schedule in completing the VND87bn package. The company even changed the measurements and foundations. Contractors Tham Gia JSC, Nam Thang Construction Company, Quang Ninh Clean Water JSC have violated regulations through corner-cutting, using wrong designs and low-quality materials. Those companies are not specialised in electricity and clean water systems. The inspectors asked Cam Pha City authorities to review the case and punish related individuals. Supervisors and consultants must take responsibilities. Bui Dang Trieu, Deputy Office manager of Cam Pha City said they were considering punishments for Hoang Thi Ngoc Hoa, head of the Finance and Planning Office, Hoang Cong Bon, head of the Natural Resources Office and Nguyen Cong Tho, head of the Centre for Land Fund Development. PM launches establishment for Vietnamese business culture PM Nguyen Xuan Phuc on November 7 attended and launched the campaign to establish Vietnamese business culture, which is meaningful to both Vietnamese business community and the whole people and society. The PM stressed the importance of preventing tax evasion, bribery, corruption and waste as well as responsibility for the living environment and laborers in business culture. A good trade mark is not only the asset of businesses but also the national treasure, that is the reason why a creative Government is caring about business culture and entrepreneurs' ethics, he said, adding that the strong and advanced culture business is regarded as an effective connection for deeper integration into the international and regional economies. Business culture is also the mutual assistance and strong competitiveness, he highlighted. The campaign on establishment of culture for Vietnamese businesses focuses on increasing awareness on business culture, upholding production and business activities, promoting business environment, and enhancing spiritual culture and physical strength of staff and laborers. At the ceremony, Decision No. 1846/QĐ-TTg on taking November 10 as Viet Nam Business Culture Day was announced. Mekong Delta regional connectivity scheme still on paper The regional connectivity scheme for the Mekong Delta, which was mapped out by the Southwestern Steering Committee and got the green light from the Government to be conducted on a trial basis, has not been implemented.  Speaking at a conference on connectivity among Mekong Delta localities in Ben Tre Province last Saturday, Vo Thanh Hao, chairman of Ben Tre Province and secretary of the provincial Party Committee, stressed that regional linkage is pivotal in the area but measures needed to promote connectivity have yet to be employed. Hao said the issues have been raised at many conferences and seminars but local authorities have yet to discuss them thoroughly. He said apart from agriculture and seafood, the delta has great potential in sectors like tourism, seafood processing and renewable energy. However, the region still lags behind other parts of the country in terms of healthcare, education, infrastructure, manpower and investment attraction. Hao emphasized the delta is facing a slew of challenges given climate change, rising sea levels and salinity intrusion while all provinces and cities, except for Can Tho, are financially weak and reliant on State budget appropriations. He said the regional linkage scheme, considered as a driver of social-economic development in the region, is still on paper. There are no mechanisms and policies to stimulate growth in the delta. Besides, while connectivity among localities is poor, some of them even embraced unhealthy competition that weakens regional linkage. The region, with support from central State agencies, has adopted bilateral and multilateral connectivity models such as the Mekong Delta Economic Cooperation, but their efficiency remains unclear. Hao said the abovementioned difficulties and poor awareness have hindered the development of each locality as well as the whole region. Ngo Dong Hai, deputy head of the Party Central Committee’s Economic Commission, told the conference that apart from the lack of good policies, weak regional linkage in the delta is attributable to localities pursuing their own interests. He explained that as long as each locality still searches for opportunities and resources for itself to fuel growth, regional linkage will remain impossible. HCM City sees ample goods supply for upcoming Tet Goods supply for the upcoming Lunar New Year holiday (Tet) in HCMC is forecast to abound as enterprises joining the city’s market stabilization program are investing more to meet soaring demand during the special occasion. The firms are preparing goods worth more than VND17 trillion (US$755 million) in total for Vietnam’s biggest holiday, up VND860 billion against the same period last year, according to Nguyen Huynh Trang, deputy director of the municipal Department of Industry and Trade, at a meeting last Friday. The total value of products with stabilized prices is over VND6.8 trillion, up 15-20% against the city’s target and 25-45% versus last Tet. They include many items with high demand such as meat, poultry, egg, sugar, cooking oil, rice and processed food. Local companies have stockpiled VND9.7 trillion worth of commodities for the buying spree from December 29 to January 27, including items worth more than VND3.76 trillion for the price stabilization program.    According to the department, companies that have registered for participation in the program account for 30-40% of total goods supply for Tet, wholesale markets for 30-40% and other companies for 10-20%. In particular, the HCMC Union of Trading Co-operatives (Saigon Co.op) has stocked up on 105,000 tons of goods worth over VND3.08 trillion, including VND938 billion for the price stabilization program, Saigon Trading Group (Satra) with nearly VND1.4 trillion and VND527 billion, and three wholesale markets, Thu Duc, Hoc Mon and Binh Dien, with around 15,000-16,000 tons per day. Trang said the participating companies are committed to make prices stable during Tet. They also offer discounts on essential items such as pork, poultry and egg. Apart from price stabilization, businesses will launch over 1,500 Tet promotion programs. Large distribution systems will offer discounts of 15-49% on thousands of items. In addition, many mobile stores will offer goods at stable prices during Tet for students and low-income people like factory workers. Minister urges concerted efforts to rev up restructuring The Minister of Planning and Investment on November 3 rallied support from all ministries and localities for concerted efforts to step up economic restructuring, saying the structural reform needs to earn the top priority. Addressing the National Assembly, Minister Nguyen Chi Dung expressed concern that the process of economic restructuring could be hindered by ministries and localities for fear of their interests being affected. “Drastic measures (of the structural reform) may have certain negative impact on the interests of ministries and localities. Therefore, there remains the danger of the economic restructuring process being delayed or implemented half-heartedly,” Minister Dung said. The minister stressed that leaders of localities and ministries should have a vision beyond the interests of their own organizations and benefits of their office terms to move towards close coordination among sectors, regions and localities for higher mutual efficiency. In addition, Minister Dung said there needs to be a suitable legal corridor to help realize focal goals of restructuring. That requires certain laws and regulations to be amended and supplemented, which is a hard job as it demands consensus and swift action. The minister noted that economic restructuring is a painstaking process. As mapped out in the drastic restructuring plan, Minister Dung said, budgetary principles must be tightly adhered to. Key goals are to enhance public investment efficiency, reduce regular public expenditures, curb budget overspending to less than 4% of gross domestic product, and speed up divestment of State stakes in State-owned enterprises (SOE). Regarding financial resources for economic restructuring in 2016-2020, the minister gave further explanations on the amount of VND10,500 trillion that was mentioned in the Government’s report at the National Assembly last week. Accordingly, to achieve an average GDP growth rate of 6-5-7% and an incremental capital output ratio (ICOR) of 5 to 5.5 in the five-year period, then the total investment in the economy should amount to 32%-34% of GDP, equivalent to VND9,000-10,000 trillion. In this process, the ratio of State capital will be reduced while more funds from the society, especially the local private sector, will be mobilized. Specifically, the share of State capital will be reduced from 39.1% in 2011-2015 to between 31% and 34% in 2016-2020, while the corresponding share of local private funds will rise from 38.3% to 45-48%, Minister Dung said. He also mentioned prioritized targets in the upcoming economic restructuring to include quick settlement of bad debt and weak banks; equitization of SOEs and divestment of State stakes; strictly abiding by the Law on State Budget; and improving the business environment and supporting the private sector development among others. Worries over housing tax Suggestions let fly by the Ministry of Finance to collect the housing tax have stirred up objections from many experts who challenge the foundation for such a plan. They argue that the reasons behind the ministry’s intention are not convincible. As covered in local media, the Taxation Policy Department under the ministry has been assigned to flesh out the plan to collect the housing tax, especially those people with two or more houses. Those people with only one house will likely be exempted from this tax, but the tax rate will increase progressively from the second home. Deputy Minister of Finance Huynh Quang Hai says in Tuoi Tre that “the housing tax will surely be collected, not only to increase revenues for the State budget but also because the housing tax has been collected in many countries for long.” Such an approach immediately draws fire. In many countries worldwide, as reasoned by experts, the housing tax is often meant by the State to regulate the market so as to curb excessive speculation, thus ensuring healthy development of the property sector, beside the goal of generating more income for the State budget. In Vietnam, they say, the Ministry of Finance needs to spell out its key goal - whether it is to earn more revenue or to intervene in the market - and needs to take a prudent approach in both cases. If the primary goal is to create a new source of income for the State budget, a rethink is needed, since the burden of taxes and fees in the country is deemed to be already rather heavy for businesses and the people. Creating a new tax will make life harder for many people. Meanwhile, if the goal is to introduce State intervention to ensure justice among all market players, the goal can hardly be realized if the tax is simply based on the number of houses one owns, and speculators will still have ways to ensure their profit margin by factoring the tax sum into their prices. That is to say the rich can still defend their wealth, while poorer people will suffer if housing prices climb due to the new tax. In addition, a certain homeowner can have two or three houses, but the total value of their properties is far lower than one with only a big house in a prime location. In major cities, a big house in a good commercial quarter may cost hundreds of billions of dong, while a house on the outskirts is priced at hundreds of millions or less, and if the tax is imposed on multiple-home owners, then justice cannot be ensured. That is not to mention the vast difference between a home in a major city and another in the countryside. As such, the housing tax – if it is to come into life – must be conceived in another way, and should be based on the value of properties as the core rather than merely the number of properties, besides a set of criteria scientifically mapped out to ensure that State intervention in the market will work to make life easier for the general public. It should stabilize the market rather than stirring up public worries. Plastic material firms face tough competition from foreign rivals Experts attending a conference in HCMC last week said local producers of plastic materials for the construction industry are facing tough competition from foreign rivals in terms of both imports – largely from China – and the increasing presence of foreign companies on the market. According to the conference organizer, VietinBank Securities Company (VietinBankSC), domestic plastic materials for construction hold a market share of 60% and imports for the rest, of which 90% come from China and the remainder from Malaysia and Europe. Currently, many domestic producers use Chinese technology and equipment, Pham Van Bac, deputy head of the Building Material Department under the Ministry of Construction, told the conference on competition on the domestic plastic market. As predicted by industry experts, the demand for plastic materials for use in the construction industry, such as plastic doors, windows and others, will increase rapidly in the coming years. The Ministry of Construction said the housing market is forecast to grow 10-15% per year in the coming time, so 1-1.2 million square meters of housing would be needed a year. This demand will boost the demand for construction plastics, the ministry explained. From 80% to 90% of housing projects in Vietnam use plastic doors and the rest utilize wooden products. The competition in the plastic material industry is strong. Construction plastic materials account for only 18.2% of the entire plastic industry’s sales but their annual growth rate is 15-20%, reflecting great potential. The country is home to 180 producers of plastic products for construction projects, including plastic pipes, doors, windows, ceiling panels and even furniture. Plastic pipe producers alone register over VND12 trillion (US$533.2 million) in revenue a year with two major enterprises – Tien Phong Plastic Joint Stock Company and Binh Minh Plastics Joint Stock Company. For construction plastic materials, Dong A Plastic currently hold a dominant market share, but foreign players are increasing their presence on the market. Foreign enterprises usually step into the domestic plastic industry through merger & acquisition (M&A) deals. For example, Nawaplastic Industries, a subsidiary of Thai giant SCG, is holding a stake of more than 20% in Binh Minh Plastics and 23.8% in Tien Phong Plastic. South Korean and Chinese firms have also prepared themselves to enter the Vietnamese market, piling pressure on local plastic companies. Five loss-making megaprojects under investigation Minister of Industry of Trade Tran Tuan Anh, telling lawmakers at the National Assembly (NA) session in Hanoi last week, said his ministry is inspecting five loss-making megaprojects. The five projects – Phuong Nam paper mill, Ninh Binh fertilizer plant, Thai Nguyen iron and steel mill, Dinh Vu yarn factory and an ethanol and bio-fuel undertaking – have been executed by corporations where the State holds a controlling stake. They have been dogged by long delays, which have resulted in colossal cost overruns. The Government has acted to pull them out of difficulties but to no avail. Minister Anh warned, “Not just the five projects but a number of others are also running the risk of making huge losses.” All those individuals and units involved in these poor-performing projects should be held accountable, he noted. Anh said lessons should be learned from reckless injections of trillions of dong into the above projects. The management of investment activity of the Government and State-owned enterprises should be strengthened. Four investors interested in highway upgrade project Four consortiums have expressed interest in a major project to upgrade and widen National Highway 22, which connects HCMC and Tay Ninh Province’s Moc Bai border gate. A source from the HCMC People’s Committee office said four consortiums had submitted their formal requests to get involved in the project by early this month. These four consortiums have proposed widening the HCMC section of the highway to 60 meters and upgrading the surface and drainage system of the highway section in Tay Ninh. However, they have different proposals regarding some intersections and bridges along the road, resulting in different funding needs which range from VND6.5 trillion (US$292 million) to VND9.5 trillion (US$427 million). The HCMC government wants to widen the highway section in the city to 60 meters, upgrade the existing road surface and drainage system of the Tay Ninh section, build an intersection, widen An Ha Bridge by 30 meters, and keep the other bridges along the highway unchanged. The city government last week sent a report to the Ministry of Transport and Tay Ninh Province asking for their feedback before a feasibility study is done. The city has secured the Prime Minister’s approval for a plan to call for investors to upgrade National Highway 22 under the build-operate-transfer (BOT) format. Investors can install a toll station to recover investment capital. Some narrow stretches of the 58.2-kilometer National Highway 22 have become overloaded due to rising traffic. In a related development, the Ministry of Transport is seeking investors for an expressway linking HCMC and Moc Bai and running in parallel with National Highway 22. Along with National Highway 22, Ho Chi Minh Road, and belt roads No.3 and No.4 in HCMC, this expressway will form a complete road network connecting southern Vietnam and neighboring countries including Thailand and Cambodia. New rural development model causes widespread indebtedness The achievements of the national target program for rural development – often dubbed New Rural Development – in the past five years are undeniable but resources spent on this program are considerable. Many deputies of the National Assembly (NA) deem it necessary to review the indebtedness of rural communes and districts, and the impact of the spending of this program on the State budget. The NA last Friday spent the whole day deliberating the implementation of the national target program on rural development associated with agricultural restructuring in 2010-2015. So far, 2,061 communes (23%) have met the New Rural Area criteria, and 27 district-level units have been granted certification, says the report of the NA Standing Committee delivered by Chairman Vu Hong Thanh of the NA Economic Committee. Certain criteria are amply fulfilled, such as planning (98.74%), social security (93.7%), electricity (82.38%), education (77.86%), irrigation (61.37 %) and income (56.48%). The poverty rate in rural areas thus declined from 17.4% in 2011 to 8.2% in 2015, or an average of 1.84% per year. In the same period, the per capita income also rose from VND16 million to VND28.4 million in the communes meeting the New Rural Area criteria, while their poverty rate fell sharply from 11.6% to 3.6 %. However, to finance the program, more than VND850 trillion was mobilized nationwide. The NA has used VND15 trillion from government bond sales to finance this program in the period from 2014 to 2016. To carry out the program, 53 of the country’s 63 cities and provinces (over 84%) have racked up total debts of more than VND15.2 trillion. Some grassroots governments have even become insolvent, receiving negative feedback from the public. Debt is mainly owed by capital construction projects in the north (the Red River Delta and the north central region), the front-runner in the movement of rural development. The debt of these two regions combined accounts for 75.3% of the country’s total. Meanwhile, the total debt owed by the communes acknowledged as new rural areas makes up 46.9%. It represents 1.8% of the total resources mobilized for the program and 5.7% of the total funding. Deputy Nguyen Ngoc Phuong of Quang Binh Province said: “Many communes are achievement-driven, mobilizing excessively from the public, with even the poor, the elderly and those families under the preferential treatment policy getting involved…” Delegate Nguyen Tuan Anh from Binh Phuoc stressed the need to assess the results achieved with the money spent. The serious long-term consequences which many rural communes and households, especially the poverty-stricken ones, will suffer could not be ignored. It is a must to investigate and publish full reports on the debt owed by rural communes, and the number of farmers falling victim to heavy mobilization, said Anh. One may wonder if it is appropriate for rural development in many areas to put too much emphasis on achievements or to simply go with the flow as it is right now. U&I and FPT to invest in Danang Hi-tech Park Two domestic enterprises inked investment commitment agreements within the framework of a seminar organized in HCMC last Friday to promote investment into Danang Hi-tech Park. In particular, U&I Investment Corporation is committed to investing in the logistics sector while FPT University is to conduct research and training projects in the information technology field at this high-tech park. The 1,500 hectare Danang Hi-tech Park is considered an investment hotspot in the central and Central Highlands regions, and a convergent point for industrial and economic zones in the central region, according to the Danang Hi-tech Park Management Authority. Completed with more 300 hectares of site clearance, the park offers technical infrastructure ready for investment projects. High-tech investment projects in the priority list are exempt from infrastructure fees for the entire rental period. In addition to investment incentives, tenants enjoy a preferential corporate income tax of 10% for 15 years, and a corporate income tax exemption in the first four years plus a reduction of 50% in the following nine years. There are currently four investment projects licensed into the park, including two wholly Japanese-invested projects and two domestic-invested ones with combined registered capital of US$140 million. The park, 15 kilometers from the city center, is one of the three national hi-tech zones of Vietnam established under a decision of the Government. The park management has listed many priority areas to call for investment, such as precision engineering, information technology, software, new energy and new materials. PVcomBank cuts deposit interest rates PVcomBank last week announced it was lowering deposit interest rates in an effort to be able to cut lending rates early to support production and business. Accordingly, the bank's rate for three to five month deposits has been cut from 5.5 per cent to 5.3 per cent per year. The rate for 13 month deposits has also been reduced from 7.5 per cent to 7.2 per cent per year. The bank's highest rate of 7.6 per cent per year, applicable for 18, 24 and 36 month deposits, has also been cut to 7.5 per cent.  Besides aiming to restructure capital sources, PVcomBank expected that the cut would help it cut lending rates soon to support production and business according to guidance from the Government and the State Bank of Viet Nam.  Work starts on $45m pig farm in Nghe An Work on a high-tech pig-breeding farm worth VND1 trillion (US$45 million) began in central Nghe An province's Quy Hop District on Saturday. Financed by Masan Group, the Masan Nutri-Farm will occupy 223hecatres, making it the largest pig farm in the province. Once operational, it is expected to create 350 local jobs and contribute about VND1 trillion to the local GDP. The farm is slated to start operations in the first quarter of 2017 and start supplying pork one year later, Massan Group chairman Nguyen Dang Quang said. It is designed to raise 240,000 pigs a year, in line with the Vietnamese Good Agriculture Practices (VietGap), he said. In his speech at the ground-breaking ceremony, Nguyen Xuan Duong, chairman of the provincial People's Committee, expressed hope that the farm would contribute to accelerating the province's socio-economic development. He also promised that local authorities would create favourable conditions for the Massan Group to implement its projects. On the occasion, Masan Group presented VND150 million to Ha Son preschool and gifts to 10 farming households in Quy Hop Commune.  Seafood exports benefit most from Vietnam-EAEU FTA Nearly 90 percent of tariff lines have been cut and reduced, with 59 percent abolished immediately as the Free Trade Agreement (FTA) between Vietnam and the Eurasian Economic Union (EAEU) has taken effect since October 2016. It is an advantage for Vietnam when exporting goods to EAEU countries compared to other countries in the world.  The aquatic sector will get the most from the agreement since the EAEU will reduce its import tax, from 10 percent to zero, for aquatic products from Vietnam, including processed ones.  Some of processed and canned products, such as tunas and shrimps, will enjoy preferential tax, but they are groups that Vietnam lacks of materials. Another five percent of tax lines will be applied on other seafood products that are not strength of Vietnam.  Agro-forestry products will get the least benefit. For rice, the EAEU has a set an initial quota of importing 10,000 tonnes of rice per year from Vietnam with zero tax. The above-quota amount will be levied the most-favoured nations (MFN) tax. In addition, Vietnam’s annual rice export volume is dependent on demand of EAEU countries.  The agreement will not reduce taxes for green tea packages weighed under 3 kg. Zero taxes are applied only for raw Vietnamese coffees and peppers while there will be no tax exemption or reduction for the processed products. Leather, footwear firms move to seize opportunities from FTAs Many Vietnamese leather and footwear firms have been implementing new production and business strategies to seize opportunities offered by free trade agreements (FTAs), especially a deal between the country and the Eurasia Economic Union (EAEU) which took effect last month. A representative of Ladoda JSC said the company has imported leather, equipment and machinery from India with a zero percent duty, and is seeking foreign partners, including those from Mexico. Ladoda has exported its handbags and backpacks to EAEU member countries, the representative said, adding that the company has also designed about 20 new models for other markets in 2017. Phan Thi Thanh Xuan, General Secretary of the Vietnam Leather, Footwear and Handbag Association (LEFASO), said the locally-made rate of the leather and footwear sector is about 40-45 percent while materials account for 68-75 percent of footwear prices. Once the Vietnam-EAEU Free Trade Agreement and other free trade pacts come into force, foreign investors will focus on material production in order to enjoy tax preferences offered on the basis of product origins. Meanwhile, Vietnamese firms are expected to raise their locally-made rate and reduce their dependence on imports. Domestic leather and footwear companies have revamped their production, gearing towards higher productivity and quality, while expanding markets. At the same time, investors from such countries and territories like China, Japan and Taiwan (China) have also built plants in Vietnam in a bid to make the best use of opportunities afforded by the FTAs. Foreign direct investment (FDI) businesses, which now make up more than 70 percent of the sector’s export turnover, are said to benefit the most from the deals. Like garments-textiles, Vietnamese footwear will enjoy zero percent tax in the EU or EAEU markets within seven years since the Vietnam-EAEU FTA took effect. However, Xuan said, the trend will no longer exist following the market’s opening, any business which satisfies market requirements can benefit from the pacts. Apart from opportunities, the deals will also generate a range of challenges for the Vietnamese leather and handbag sector. The high manual rate of leather products and handbags at 70 percent has lowered profits and weakened the dynamism of the enterprises. Besides, technical barriers imposed by the EU or EAEU, together with requirements regarding social responsibility, environmental protection and procedures to enjoy tax preferences, have forced the businesses to cover more costs. Against the backdrop, LEFASO suggested local enterprises roll out their own strategies and solutions in order to churn out high-quality products that can gain a firm foothold in the home market and compete with their rivals in foreign markets. The association also called for more tax and land incentives to encourage more investors in the sector. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR