BUSINESS IN BRIEF 29/5
Tra fish export to EU increasingly difficult
Exports of Vietnamese tra fish to Spain and the European Union (EU) as a whole have dipped sharply this year.
Meanwhile, the European Commission is preparing to inspect the system for food safety control of Vietnamese seafood from this June, which could make the export of tra fish to this market more difficult.
In early 2017, Spanish TV channel Cuatro aired an inaccurate news program about Vietnamese tra fish.
Back then, Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP), told the Daily that a group of people had made use of this news to tarnish the reputation of the tra fish industry of Vietnam. “There is a group over there trying to take advantage of the environment issue to exaggerate the story in order to gather support for their products instead of importing tra fish from Vietnam for sale.”
The reflections in the clip do not correctly mirror the tra fish industry of Vietnam, not a standard procedure of Vietnam’s tra fish export but just a particular case “exaggerated to slander the tra fish sector of Vietnam, like the smear campaign taking place in the German market earlier,” he said.
While confirming the quality and food safety of Vietnamese tra fish, Hoe said the above incident had made it hard for this product to make its way into the EU and Spain in particular.
In the first three months of 2017, tra fish exports to the EU totaled a mere US$49.9 million, down 21.5% over the same period last year. In particular, exports to Spain tumbled 42.8% year-on-year, while those bound for the Netherlands, the UK and Germany slid 2.8%, 15% and 27.2% respectively against the year-earlier period, according to VASEP.
Such a strong decline in tra fish exports to Spain goes against the previous forecast of businesses and VASEP that the smear campaign would have certain impact on the sale of Vietnamese tra fish.
To recover Vietnamese tra fish exports to Europe after the incident, Deputy Minister of Industry and Trade Cao Quoc Hung on Wednesday this week presided over a press conference at the Embassy of Vietnam in Spain for disseminating information about the production, trading and export of Vietnamese tra fish, according to the Vietnam News Agency.
Hung emphasized that there had been some reports and articles which did not fully reflect and gave inaccurate information about the farming, production, trading and export of Vietnamese tra fish. This has partly affected the confidence of Spanish consumers and the prestige of Vietnamese tra fish suppliers.
At the press conference, representatives of VASEP and some Vietnamese tra fish exporters to the EU provided further information on Vietnam’s tra fish industry and affirmed that Vietnamese tra fish products are safe.
In a related development, the European Commission this June will examine Vietnam’s food safety control system for export to the EU, according to VASEP. All stages related to food safety in aquaculture are subject to inspection, from licensing for the circulation of aquatic feed, veterinary drugs and products serving aquaculture, and the use of animal drugs to food safety assurances during processing.
To export seafood to some EU member states, besides complying with the general EU rules, domestic enterprises must meet the specific requirements of each market, which are often more stringent than general ones, according to VASEP.
Some seafood exporters to the EU said that with this inspection, seafood exports to this market would be more difficult in the coming time.
Regarding this issue, the National Agro-Forestry-Fisheries Quality Assurance Department (Nafiqad) has proposed the Ministry of Agriculture and Rural Development issue a decision suspending the granting of certificates for all seafood products made by those enterprises with shipments that have been warned by the EU authorities.
Bibica targets 1.4 trillion VND in revenues
The Bibica Corporation, a leading confectionery firm in Vietnam, has set targets of 1.4 trillion VND (61.5 million USD) in revenues and 86.6 billion VND (3.8 million USD) in after-tax profits in 2017.
The targets were announced at the Bibica Corporation’s shareholders meeting held in HCM City on May 26.
Truong Phu Chien, vice chairman of the board of directors, said that in 2016, the corporation’s sales exceeded 1.26 trillion VND (52.8 million USD). Its after-tax profits stood at 81.2 billion VND (3.6 million USD).
Currently, Bibica has more than 200 products and 1,200 exclusive distributors, 115,500 retail shops and 500 supermarkets and convenient stores across the country. Its products have been shipped to 15 countries and territories worldwide.
Can Tho hosts e-commerce forum
Mekong Delta enterprises were updated on the latest trends of e-commerce at a forum held in Can Tho on May 26, and engaged in networking to seek sales opportunities and partnerships.
At the event, Nguyen Minh Ky, head of the Vietnam E-commerce and Information Technology Agency under the Ministry of Industry and Trade, introduced trends of online trade related to new business models, online search, and clients from social network, among others.
He said digital marketing is challenging traditional methods, while posing legal issues to businesses in terms of patent dispute, tax and cybercrimes.
At the forum, experts said many enterprises have yet to realise the importance of e-trade applications to their sales.
According to the Ministry of Industry and Trade’s statistics, Vietnam has 52 million internet users and 35 million users of smart phones. Of both groups, 48 percent look for product information on line, while 27 percent use their phones to place purchase orders.
In 2015, e-commerce generated 4.08 billion USD in turnover with an average annual growth of between 25 and 30 percent.
Participating firms said they hope e-commerce will help them expand the market, cut time and cost, and improve their reputation perceived by customers.
International forum highlights FDI trend, impacts in Asia
Researchers, scientists and students from Vietnam, Japan, the Republic of Korea (RoK) and China shared experience, new ideas and research outcomes about widespread impacts of foreign direct investment (FDI) in developed and developing countries at a forum in the central city of Da Nang on May 26.
The 7th Academic Alliance Exchange Forum was jointly held by Dong A University (Da Nang), Nagasaki University (Japan), Dong-A University (the RoK) and Huaquiao University (China).
The participants also touched upon the trend of FDI in the market, and proposed solutions to attract more FDI flows into Vietnam, thus fostering the country’s socio-economic development through job generation, technology transfer and experience exchange.
According to economists, Vietnam’s per capital income increased from 1,120 USD in 2009 to 1,990 USD in 2015. The figure is forecast to reach 12,745 USD in the future.
Member countries of the Association of Southeast Asian Nations (ASEAN), especially Vietnam, are expected to become an attractive destination for foreign investors thanks to their good performance in international integration as well as improvements in the business environment, they said.
The experts revealed that an increase of 1 percent in the FDI flow will help Vietnam expand its GDP growth by 0.243 percent. Therefore, they suggested the country address such macroeconomic difficulties as inflation, bad debt and high inventory level.
Vietnam also needs to roll out solutions to synchronously develop socio-economic and educational infrastructure, in parallel with improving investment polices and creating a more competitive investment climate to attract investors.
RoK firm inaugurates semiconductor plant in Ha Nam
The Seoul Semiconductor Co., Ltd from the Republic of Korea (RoK) on May 27 inaugurated a plant in the northern province of Ha Nam.
Covering an area of 7.5 ha in the Dong Van I Industrial Park (IP) in Duy Tien district, the 300-million-USD plant specialises in manufacturing semiconductor products, hi-tech LED systems and spare parts serving sectors of lighting, electronics, telecommunication, and those requiring energy saving.
The factory applies modern technologies such as nPola, WICOP, DRT ad UV LED, enabling it produce LED lighting systems without power adapters. The plant generates jobs for over 3,000 workers.
Chairman of the provincial People’s Committee Nguyen Xuan Dong said at the inauguration ceremony that this is the largest ever foreign direct investment project in Ha Nam.
He stressed the project is in line with the hi-tech and supporting industry development strategy, as well as the socio-economic development plan of the province.
The project not only meets the market demand, but also open a opportunity for suppliers of auxiliary products, which serves the production of the plant, Dong said.
He asked the Management Board of IPs, and relevant department and sectors of Ha Nam to coordinate closely in addressing difficulties facing Seoul Semiconductor in particular, and other investors in general, thus making it easy for their operations in the locality.
2017 shrimp exports to Japan likely to reach $3.4b
Viet Nam is expected to export shrimps worth some US$3.4 billion to Japan this year, up 9 per cent year-on-year, the Viet Nam Association of Seafood Exporters and Producers (VASEP) said.
Of the total, exports of white-leg shrimp will contribute some $2 billion, surging 8 per cent against the same period last year, VASEP said.
Viet Nam’s shrimp exports to Japan reached $135.4 million over the past three months, a year-on-year increase of 29.6 per cent, making Japan the largest market for Vietnamese shrimps.
The association attributed the significant growth to the rise of the yen, which encouraged Japanese enterprises to move to imported shrimp.
In addition, Japanese consumers tend to switch to cheaper seafood, which increased the demand for shrimp as it is more affordable than other seafood such as tuna, salmon and squid.
Ba Ria-Vung Tau to get fisheries centre
The Party Committee of the southern province of Ba Ria - Vung Tau has approved a plan to build a major fisheries centre in Vung Tau City’s Long Son Commune.
The centre, which will cover a 147-ha area on the east side of Go Gang Island, will include a fishing port, frozen storehouses and a seafood processing area.
It will also have a fishing boat maintenance centre and a sea rescue centre.
The VND2 trillion (US$88 million) centre will be funded by State and local budgets. Private resources will also be sought.
Construction will be divided into three stages from now through 2030.
Tracodi lists in HCM City
Transport and Industry Development Investment Joint Stock Company (Tracodi) on Friday listed 32.48 million shares on the HCM Stock Exchange at a reference price of VND16,000 (US$0.70) a share.
The company will focus on three key sectors: infrastructure construction and real estate; stone, construction materials and mining; and farm produce trading and export.
Nguyen Ho Nam, its deputy chairman and general director, said the listing indicates the company’s new strategy of transparency and would help it enhance its prestige, access long-term resources and develop sustainably.
This year, the company plans to speed up work on BOT 830 and 824 projects, wrap up procedures to begin a social housing project in Long An and increase its stone mining capacity among others.
In trading, it would expand exports of cassava starch, coffee and micro-organic fertilisers, he said.
The company targets after-tax profit of VND63.7 billion, revenues of VND879.47 billion (US$38.7 million) this year, or 6 per cent and 5.5 per cent higher than last year, respectively.
In the first quarter of this year, it reported revenues of VND167 billion ($7.35 million), a more than 90 per cent rise over the same period last year.
Its profit after tax was VND15.1 billion.
TCD plans to pay a dividend of at least 10 per cent for this year.
CGV introduces first ScreenX cinema technology in Vietnam
CJ CGV Vietnam (CGV) officially launched the new ScreenX cinema technology, the first of its kind in Vietnam, in both Hanoi and Ho Chi Minh City on May 26, kicking-off its technology investment strategy for the 2017-2020 period.
The birth of ScreenX technology, which is developed exclusively by CJ CGV, is a milestone in the South Korean movie industry in particular and the world in general, giving movie-goers a strong sense of immersion while watching a movie.
The launch ceremony welcomed a host of celebrities and film directors. The first two ScreenX screens are at CGV Hung Vuong Plaza in Ho Chi Minh City and CGV Aeon Long Bien in Hanoi. One auditorium at both cinemas has been renovated to use the new technology, with seating expected at 200-250.
“Pirates of the Caribbean: Salazar’s Revenge”, the fifth film in the now iconic franchise from Walt Disney Pictures, which was also released locally on May 26, is to be the first film screened with the technology in Vietnam. CGV plans to invest around $200 million from 2017 to 2020 in bringing state-of-the-art cinema technologies to its cinema network nationwide. The investment strategy is among CGV’s mission of contributing to the integration of Vietnam’s cinema industry into the world.
The 270-degree technology projects footage onto the front main screen and the two walls, providing those in the audience with an immersive cinema experience.
In addition to launching ScreenX, CGV will also install more large screens in Hanoi and Ho Chi Minh City from 2017 to 2020. It has already secured three or four locations.
By the end of this year, it will be operating 54 or 55 cinemas nationwide, including in remote areas. It will invest in building 12-15 new cinemas each year, four or five of which will in remote areas. With total investment of $4-7 million per cinema, total investment will reach $70 million.
“The continuous expansion of cinemas around the country as well as the strategic cinema technology investment plan has once again reaffirmed our long-term commitment to the development of quality cinema infrastructure in Vietnam,” said Mr. Dong Won Kwak, CEO of CGV Vietnam.
“During the last ten years in Vietnam, our investment in infrastructure and technology is more than four to five-times our operating profit,” he added. “More importantly, the investment goes towards the development of Vietnam’s film industry. We believe that with the potential market growth, together with the right direction and investment by all stakeholders in the industry, Vietnam will be positioned among the Top 5 developed film markets in the world within the next five to seven years.”
5M agri exports at $13.7bn
Export turnover of agriculture, forestry, and fishery products in May was estimated at $2.8 billion, bringing the total export value in the first five months of the year to $13.7 billion, an increase of 9.5 per cent year-on-year, according to the latest figures from the Ministry of Agriculture and Rural Development (MARD).
The export value of major agricultural commodities was estimated at $7.3 billion, up 12.6 per cent year-on-year. Exports of aquatic products were valued at $2.8 billion, up 10.4 per cent, while key forestry products brought in $3.1 billion, up 9.4 per cent.
Exports of rice grew in volume and value after a long period of continuous decline, rising 1.6 per cent in volume and 1.2 per cent in value year-on-year.
Total export volume reached 538,000 tons in May, worth $245 million, for five-month figures of 2.3 million tons and $1 billion.
Exports of fruit and vegetables remained stable with high growth of 38 per cent year-on-year. Export value was $344 million, bringing the total in in the first five months to $1.38 billion.
China, the US, Japan, and South Korea were Vietnam’s largest markets, accounting for 83.8 per cent of the total.
Indonesia will become an important market for Vietnamese fruit, especially oranges, as it oranges have fallen out of favor in the domestic market, according to the Vietnam Trade Office in Indonesia. Vietnamese orange exporters were recommended to research exporting to the country.
Vietnamese fruit and vegetables are exported to 60 countries and territories worldwide, with Indonesia among the major importers.
Total fruit and vegetables export value reached $2.4 billion in 2016 and is expected to increase to $3 billion this year.
VinaCapital fully divests Time Square Hanoi
VinaLand Limited, the real estate investment arm of Ho Chi Minh City-based private equity firm VinaCapital, has found a partner to transfer the right to develop the $50-million Times Square Hanoi, which has been on offer since 2015.
In a recently released statement, VinaLand announced that it has divested its entire stake in the Times Square project, for net cash proceeds of approximately $41 million, resulting in an IRR of 5.3 per cent.
The project consists of a total land area of approximately 4.0 hectares and was acquired by VinaLand in 2007, at which time the land was designated as a future development site.
The buyer of the project is Elite Capital Resources Limited.
In conjunction with the announcement of the divestment, VinaLand said it will conduct a distribution of $40 million to shareholders through a tender offer to purchase ordinary shares of the company.
“This tender offer follows today’s announcement of the Times Square disposal which, in conjunction with several other exits, will enable shareholder distribution to continue in various forms, including share buybacks and tenders, and is a good outcome for shareholders as we continue to maximise shareholder value,” said VinaLand managing director David Blackhall.
VinaLand also stated that its total valuation is 20.4 per cent above the March 31, 2016 un-audited net asset value, and 48.1 per cent above the unaudited net asset value at the time of VinaLand’s extraordinary meeting in November 2016. Both figures include adjustments for additional investments up to the date of exit.
At the time of this announcement, $17 million, or 41.5 per cent of the net proceeds, have been received by VinaLand with the remainder subject to precedent conditions expected to be satisfied by no later than July 2017.
Located in the emerging business district of the capital, Times Square Hanoi is a 65-35 joint venture between VinaCapital and Thang Long GTC, a unit under state-owned hospitality group Hanoi Tourist.
The planned mixed-use project has a committed investment capital of $50 million and broke ground in 2008. However, the development has been abandoned since then.
The project expected to provide a complex of 20,000 square metres of high-end office space for lease, a 300-room five-star hotel, and a trading centre.
Recently, VinaLand and Vietnam Opportunity Fund Limited (VOF), both under VinaCapital, have been exiting from a range of real estate projects.
Right last month, VinaLand divested its entire stakes at Dai Phuoc Lotus, a residential complex in Dong Nai province, to China Fortune Land Development and earned about $65.3 million. Dai Phuoc Lotus consists of 332 high-end semi-detached and detached villas. Around 200 villas of the first phase have been handed over to buyers.
Kido forges ahead in vegetable oil segment
Kido Group JSC, a major player in the domestic food scene, has just finalised increasing its holding in Vietnam Vegetable Oil Industry Corporation (Vocarimex), one of the largest local vegetable oil firms, moving closer to the target of controlling the cooking oil market segment.
In late May 2017, the company wrapped up the purchase of more than 32.8 million shares of Vocarimex (ticker code VOC), increasing its total stake to more than 62.1 million, equal to 51 per cent.
Currently, the vibrant vegetable oil market is home to nearly 40 businesses, several of whom have grown into big players, such as Cai Lan, Tuong An, and Nha Be Golden Hope.
Before acquiring a controlling stake in Vocarimex, in November 2016, Kido spent more than VND1 trillion ($45.4 million) on buying a 65 per cent stake in Tuong An JSC.
Besides, by late 2016, Vocarimex also held 49 per cent stake in Golden Hope, 24 per cent stake in Cai Lan, and 17.8 per cent in Tan Binh Vegetable Oil JSC.
According to Kido CEO Tran Le Nguyen, in the upcoming time the company will continue buying businesses in the food industry, and striking cooperative deals with units possessing strong product line-ups to maximise their advantage in the extensive distribution channel.
Kido’s accelerated investment into the vegetable oil segment has helped the company boost its revenue growth significantly.
Accordingly, in the first quarter of this year the company raked in VND1.25 trillion ($56.8 million) in net revenue, more than triple than last year, and accrued a profit of VND245 billion ($11.1 million), a 50 per cent jump on-year.
After acquiring a controlling stake in Vocarimex, Kido’s financial indices are forecast to undergo big changes, particularly from the third quarter this year. With its current size, Kido’s influence is expected to extend far beyond the reach it had when it was running in the confectionery business.
Particularly, before transferring its confectionery business to US-based Mondelez International in late 2014, the company’s revenue was VND4.95 trillion ($225 million) that year.
Kido has yet to convene its 2017 general shareholders’ meeting to deliver its official business targets for this year.
Market observers, however, assume that the company’s revenue might even hit VND7.6 trillion ($345 million) this year.
Vietnam Airlines adds summer service to thousands of destinations
Vietnam Airlines is revitalizing its route network with more destinations, more flights and more convenient connections for travellers in both domestic and international markets, reports the Vietnam News Agency.
The National Flag Carrier will add an estimated 4,700 seasonal routes through August 20 on flights from Hanoi to the cities of Danang, Chu Lai, Pleiku, and Nha Trang as well as from Ho Chi Minh City to Phu Quoc, Danang, Nha Trang and Phu Quoc to name just a few.
Starting this summer, we're offering more flights, to more destinations at more convenient times than in recent memory, said a Vietnam Airline representative. And with bigger and more modern aircraft for many of our flights, we'll be getting travellers to the moments that matter most - relaxed and ready to go.
These flights are available for purchase with domestic service beginning as early as today at highly discounted special air fare prices that travellers won’t want to miss out on, said the representative.
For more information, visit Vietnam Airlines https://www.vietnamairlines.com/en/plan-book/book-flight-now/ or contact your local travel agent today.
Cần Thơ looks to boost e-commerce
Vietnam E-commerce Association (VECOM), in collaboration with Can Tho City authorities, hosted an e-commerce forum on Friday, aimed at boosting online sales and business transactions in Cuu Long Mekong Delta.
The forum was attended by representatives of relevant ministries, sectors and businesses from Can Tho City and Cuu Long Delta.
At the forum, Nguyen Minh Ky, head of the Ministry of Industry and Trade’s E-commerce and Information Technology Department, introduced participants to six key trends in e-commerce, including new internet-based business models, online checks while purchasing goods, ways to lead customers from social networks to websites and indirect selling methods.
Of the above-mentioned e-commerce trends, Ky said online marketing was challenging traditional marketing, resulting in businesses facing legal problems such as copyright and content disputes, taxes and internet crimes.
According to MoIT’s statistics, Viet Nam has some 52 million internet users and more than 35 million people using smartphones. Of these figures, some 48 per cent seek information to purchase goods through the websites and 27 per cent order goods on smartphones.
The ministry also reported the revenue of e-commerce transactions between businesses and consumers reached US$4.08 billion in 2015, marking a growth rate of 25-30 per cent.
To be successful in e-commerce, Ky said businesses needed to provide customers with good and necessary apps.
However, during the forum, many experts said most Vietnamese businesses, including those from Can Tho City, were not fully aware of the importance of e-commerce in boosting sales.
Deputy chairman of Can Tho People’s Committee Truong Quang Hoai Nam urged businesses to upgrade e-commerce apps in production and trade, develop their brand names with internet domains and build corporate websites linked with cloud technology.
At the forum, representatives of businesses said they would boost the application of e-commerce to expand the market, cut costs and reduce payment time.
Vietnamese natural rubber exports hit lowest level in 4 years
Vietnamese natural rubber exports fell 21.7% in volume and 29.5% in value month-on-month in April, according to the latest statistics from the General Department of Vietnam Customs.
The decrease is part of the continuing steady decline in overseas consignments the rubber segment has experienced in recent years, said Tran Ngoc Thuan, chair of the Association.
Mr Thuan noted that in the first four months of 2017 combined foreign sales declined 2.1% in total value compared to the same period in 2016, which represents a continuation of the steady decline in sales over the past four years.
The World Factbook reports that for the four-year period 2012-2016 Vietnamese exports of natural rubber plummeted 63.8%, tallying in at just US$904.1 million in 2016.
This compares to worldwide sales of US$4.4 billion for Thailand and US$3.4 billion for Indonesia in 2016, the two top global exporters of natural rubber and essentially places Vietnamese exporters as a group in a virtual tie with their counterparts from Malaysia and Côte d’Ivoire for third place.
Mr Thuan was quick to point out that the slowdown of the global automotive industry and declines in the cost of oil had contributed significantly to a drop in the selling price of rubber during the first four months of 2017.
He said the price on the global market had been hovering in the US$1,600-US$1,700 per metric ton range in March and April down from an averageUS$2,400 in January and February.
Mr Thuan added that a surplus of rubber in Thailand had also been a contributing factor putting downward pressure on the sales price.
The Association recently approached the Prime Minister with a list of proposals aimed at throwing a lifeline to the segment, said Mr. Thuan. Chief among them was a pitch for the government to declare the segment exempt from the value-added tax.
Since 2014, the government has exempted many agricultural products including farm raised fish and seafood from the value added tax but has not yet extended the preferential policy to natural rubber.
Mr Thuan said the list of recommendations to the Prime Minister also included a request to exempt the segment from the requirement to pay income taxes on their earnings.
Additionally, the Association somewhat inexplicably wants the government to develop national standards for rubber latex and regulate the quality of rubber latex raw materials.
This point is not entirely clear, as one would suppose that one of the chief purposes of the Association is to promulgate national standards for the natural rubber industry, which presumably they could implement themselves.
The Association recommended that the government issue legal documents directing rubber businesses to manage rubber wood sustainably in accordance with Vietnam environmental laws and regulations.
Lastly, the list included several recommendations relating to clarifying the issuance of certificates of origin for the segment.
Meanwhile, Deputy Minister Tran Tuan Anh of the Ministry of Industry and Trade noted the fundamental problem the segment is experiencing is that their products are considered inferior to those of competitors.
He suggested that the Association focus on reforming their technologies to improve product quality and less on issues related to value added and income taxes. The lack of competitiveness is the root of the problem, not taxes.
Drivers experiencing the dark side of ride-shares
Vietnamese drivers who once eagerly jumped behind the wheel to work with Grab or Uber might have won the battle against traditional taxis, but the fight amongst themselves is just heating up.
While ride-hailing services were initially meant to help drivers with private cars earn extra cash, citizens in Vietnam’s big cities are turning to these apps as new investment paradigm, using them as an excuse to invest in buying new cars for the sole purpose of joining the ride-share networks.
Some have even turned to bank loans to purchase vehicles in the hope of reaping profits from the seemingly lucrative market.
But with the number of ride-sharing drivers soaring over such a short time, some big investors are swallowing a bitter pill.
In 2015, Bui Tan Cao, a Ho Chi Minh City resident, quit his office job to become a ride-share driver using a four-seater Kia Morning he purchased for more than VND500 million (US$22,000).
Covering nearly 60% of the car’s cost with bank loans, Cao is currently paying more than VND20 million (US$880) in monthly interest.
An investment seemed lucrative at first, with Cao raking in up to VND15 million (US$660) a month, is now turning into a burden. The mushrooming of ride-share drivers has lowered Cao’s daily revenue to VND700,000 (U$30) – VND800,000 (US$35) per day, not counting fuel costs, compared to the VND1 million (US$44) he was making per day when he started.
“I suffer losses for short rides through traffic,” he said.
He now drives for both Uber and Grab to “make ends meet.”
Nguyen Phuong, who runs a transportation company in District 2, put two trailer trucks up for sale, borrowed more than VND2 billion (US$88,100) from banks, and called on friends to invest in a fleet of 12 cars he planned to use in order to tap into the Uber market.
Phuong’s initial monthly profit was up to VND40 million (US$1,760) but earnings began to drop by 40% only a few months later, he admitted.
Phuong now offers to lease his car for a mere VND400,000 – VND800,000 a day, but few drivers are interested. Eight of the heavily invested vehicles now lie dormant, while Phuong sadly acknowledges that “the Uber game is not as easy as I thought.”
Nguyen Minh Phong, a Grab driver in Tan Binh District, said tough competition between drivers of the same service is main cause of slumping earnings.
“You can find hundreds of Uber and Grab cars and taxis on just about any street,” he said.
“They also have to compete with traditional xe om [motorbike taxi], Grab Bike, and UberMoto.”
Phong said even when he sticks with his car 16 hours a day, it is still impossible to hit his previous VND1.5 million (US$66) mark.
“After subtracting my costs, I only earn VND200,000 [US$8] – VND300,000 [US$13],” he said.
“This income is barely enough to cover daily necessities, let alone pay for the bank loan for my car.”
Grab has cut its fare for four-seater cars to only VND9,000 a km, and VND11,000 for seven-seater cars since mid-March. Though it’s great news to passengers, Phong said, “it’s a nightmare for drivers.”
Jabil expands facility footprint in Saigon Hi-tech Park
Jabil Circuit, Inc. (NYSE: JBL), held a groundbreaking ceremony on May 26 for its new facility at the Saigon Hi-Tech Park (SHTP) in Ho Chi Minh City.
The event marked the expansion of Jabil Vietnam’s operations to a total of 413,000 square feet of building space at the park.
Scheduled to be completed by the end of 2017, the new facility will provide additional storage space and accommodate future high-volume production of computing, storage, networking, telecommunications, automotive, digital home, mobility, point of sale, printing, industrial and energy sectors.
This expansion comes as Jabil marks its decade milestone in Vietnam and prepares for future growth.
“Since we began operations in Vietnam ten years ago, we have been on a consistent growth trajectory. We are currently operating at maximum capacity and this expansion is central to our growth strategy. Besides positioning us well for future growth, this expansion also reflects our continued commitment to develop and invest in Vietnam,” said Vijay Chinnasami, senior vice president of electronic manufacturing services (EMS) operations at Jabil.
In 2015, Jabil Vietnam signed a memorandum of understanding (MOU) with the SHTP Management Board to expand its operations. It currently employs about 4,500 employees and aims to create more than 3,000 new jobs in the local area over the next five years.
Jabil also plans to develop the local talent pool for future leadership roles with training and development opportunities.
“With its location in the heart of Vietnam’s growing tech industry, proximity to major air and sea ports and availability of skilled workforce, the Saigon Hi-Tech Park offers competitive advantages for companies to establish operations in Vietnam. We are pleased that Jabil has decided to expand its facility at SHTP and are confident that this will bring about both direct and indirect benefits to the local community,” said Le Hoai Quoc, president of SHTP.
Jabil Vietnam specialises in high volume product solutions and serves the industrial and energy, networking and telecommunications, point of sale and printing sectors. The site has also received several “Best-In-Class” awards from respected companies in the telecommunications, point of sale, smart meter and set-top box industries.
Vietnam real property oversupply dampens growth outlook
Growth in sales in the second or holiday home segment of the property market in Vietnam has garnered a lot of attention of late but its outlook remains cloudy at best—with many experts throwing up the yellow caution flag to investors.
There are approximately 36 second home property developments currently operating in Vietnam with over 7,000 units on the market spanning the gambit of everything from the very affordable to high end luxury.
More importantly, however, according to experts at a recent forum in Hanoi,an estimated 17,000 units are expected to be constructed over the next three years inthe country’s key resort markets.
The prime markets in the country for the second home segment were identified as the provinces of Khanh Hoa and Quang Nam, the island of Phu Quoc, the beach town of Ho Tram, along with the cities of Ha Long and Danang.
The experts at the forum said the 17,000 units include villas, second home condominiums and condo hotels, which latter are legally a condominium but double as a hotel offering short term rentals and are operated in similar fashion to hotels.
This data shows clearly that a nation-wide oversupply problem exists, which will continue putting downward pressure on future growth in the Vietnam second home market, David Jackson,CEO of Colliers International told the audience.
Mr Jackson noted that any upward trend in investment and sales over the recent past is proving to be unsustainable in the face of projects in the pipeline that most surely will saturate the market in the foreseeable future.
With property investment growth losing momentum and private investment growth remaining stubbornly sluggish, the economic growth outlook for the segment over the next few years looks increasingly gloomy.
In Danang alone, Mr Jackson said that the Intercontinental Sun Peninsula Resort, Ba Na Hills Resort, Bai But Resort and the Song-Danang Beach Villas all have long term construction projects scheduled to get underway later this year that will flood the holiday home segment with units for years to come.
The standout mainly is the profusion of condo hotel developments. The pace at which developers are planning to build these units is sure to result in a future over supply unless the government steps in and brings some sensibility to the market.
If not, additional projects will be planned. We are seeing more and more projects announced, all seemingly trying to outdo one other in terms of scale, appeal and often outlandish promised rates of return.
Salesmen for these developments are touting rental returns in Vietnam that can be as high as 12% guaranteed for eight years— but investors should be forewarned not to fall for these extraordinary claims and representations.
To have any chance of meeting these exceptionally high internal rates of return the projects would need top rate management managing these projects more as hotels than as holiday homes.
Yet in most cases this hotel management component seems to be lacking, if it exists at all. Investors should take heed of the age-old adage, that if it something sounds too good to be true, it probably is.
In addition, Mr Jackson noted that investors should be cautious because investments in the segment become higher risk when less experienced developers enter large scale projects,such as is happening in Vietnam in cities such as Danang,with insufficient equity and are not fully supported by banks.
What really happens in many of these cases where guaranteed rates of return exceed the projected future cash flows of a real property development is that the investor ends up paying more for the property than it is worth in the first place.
This is common in real estate and in many markets around the globe the cost of financing can account for as much as 20% of the initial purchase price of a unit.
This structure might prove beneficial under some limited circumstances but it needs to be very well planned and carefully analysed before being implemented or it can result in financial disaster for the real property project and investor.
Rudolf Hever, director of Hotels, Savills Asia-Pacific in turn also warned of saturation in the second home and holiday home segment noting that in the city of Danang the growth in supply of units could hit 27% over the next three years, not a good thing for investors.
Novaland Group obtains $30mn syndicated loan
Novaland, one of Vietnam’s leading property developers, has received a syndicated loan from two foreign banks - Maybank in Malaysia and VietinBank Filiale Deutschland (VietinBank’s branch in Frankfurt, Germany) - in which Maybank is the main lender.
The $30 million loan has a 30-month term.
Disbursed in April, the loan immediately went to the group’s ongoing projects in order to ensure the progress and quality committed to with customers and to continue strengthening shareholder and investor trust in the group.
Similar to foreign loans previously raised from Credit Suisse and GW Super Nova, to receive approval for this loan the Novaland Group had to demonstrate strong financial strength, clear planning, and the development potential of its projects.
The first loan with Maybank has a competitive interest rate, helping Novaland diversify its capital resources, especially in international capital markets, and at the same time shows the interest among international financial institutions in the group.
In the past 25 years of cooperation with local and international financial and banking institutions, Novaland has always followed the principles of cooperation, repaying loans on time and sometimes before maturity.
In order to maintain the group’s credibility among financial and credit institutions, Novaland adheres strictly to financial and operational controls through a system of commitments, especially an index on repayment capacity or a leverage ratio in business operations.
This effort contributes to strengthening confidence among foreign investors and maintaining the image of a transparent company in international capital markets. This is also a key reason why Novaland received rapid loan approval from Maybank and VietinBank Filiale Deutschland and a previous convertible loan deal with Credit Suisse, one of Switzerland’s largest banks.
Maybank is the largest financial and banking group in Malaysia, with a history of nearly 60 years, and has expanded its business to many countries around the world, such as the Philippines, Singapore, Indonesia, Thailand, Vietnam, the UK and the US.
VietinBank Filiale Deutschland is the German branch of the Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank). It is also the only Vietnamese bank operating in Europe and a member of the Association of Banks in Germany and the Deposit Insurance Fund of Commercial Banks.
State Audit: NPLs at 8.85% at end-2015
In a report sent to the National Assembly, State Audit of Vietnam revealed that non-performing loans (NPLs) at banks in Vietnam accounted for 8.85 per cent of all outstanding loans at end-2015, three and a half times higher than the 2.55 per cent rate for end-2015 the State Bank of Vietnam (SBV) announced in March.
The bad debt rate in the entire banking system as at December 31, 2015, including outstanding debts at the Vietnam Asset Management Company (VAMC), restructured loans, and loans not classified as non-performing, totaled VND476.86 trillion ($21 billion), equal to 8.85 per cent of total outstanding loans, according to State Audit.
Agribank’s bad debts, including loans sold to VAMC, totaled VND73.5 trillion ($3.24 billion) at end-2015, equal to 10.7 per cent of its outstanding loans. Post-audit, most Agribank branches were found to have a range of flaws in lending procedures, with some loans not carefully assessed and lacking collateral.
State Audit pointed out in its report that the debt bank VAMC has not actively handled bad debts, with NPLs mainly being handled by the credit institutions themselves, resulting in low efficiency.
The balance of capital at the Vietnam Bank for Social Policies, meanwhile, was extremely tough. Many loans from the State Treasury and SBV have either been extended or declared irrecoverable.
Audits at some banks revealed inadequacies. For instance, Agribank’s risk provision for credit losses was short by VND2.85 trillion ($125.6 million), while Vietcombank hasn’t counted all compound interest on current deposits smaller than VND1,000 ($0.04) since 2001.
State Audit also named banks that remain under special supervision or with extremely poor financial capacity, including the three ailing banks the SBV took over in 2015, VNCB, GP Bank and Ocean Bank, together with Dong A Bank and other finance companies.
Many credit institutions have been recording unstable and uncertain profit. For instance, the accrued income of restructured loans and income earned but not yet received in the entire banking system was VND50.5 trillion ($2.2 billion) at end-2015, including VND21.5 trillion ($947.7 million) at Saigon Commercial Bank, VND6.7 trillion ($295.3 million) at Sacombank, and VND5 trillion ($220.4 million) at PVcomBank.
Many commercial banks accumulated public debts and loans that were hard to recover due to violations by bank officials, which resulted in a difficult handling process and a fairly low recovery rate, such as ACB, Eximbank, Sacombank, VNCB, GP Bank, and Ocean Bank.
Via open market operations, the central bank has ensured stable liquidity for credit institutions and stabilized the exchange rate, with credit growth in 2015 reaching 17.26 per cent year-on-year, higher than the 13-15 per cent target.
While the mid and long-term interest rate in 2015 fell 0.2-0.5 per cent from a year earlier, it did not meet the targeted 1-1.5 per cent.
Only pigs with clear origin can be sold in HCMC
Only pigs bearing an ID tag can be sold in HCMC from September 15 to protect consumer health and benefits, said HCMC People’s Committee vice chairman Tran Vinh Tuyen on May 24.
The program will not be implemented in June as planned, but will be delayed due to the recent sharp fall of pig prices causing heavy losses for farmers. Vice chairman Tuyen emphasized that the ID tag must include full information to help track the origin of pigs.
Tuyen also expressed his concern about food safety and hygiene violations in the city. He expected that violations by individuals and organizations will face strict sanctions including administrative and criminal ones.
Hoang Thi Diem Tuyet, director of Hung Vuong Hospital and a member of the HCMC People's Council, said food safety control has remained lax, and proposed more severe sanctions against violators.
Moreover, Tuyet proposed there should be more tools for food testing and more modern laboratories should be built to produce accurate and fast test results.
Huynh Thi Kim Cuc, deputy head of the HCMC Food Safety Management Board, said they have been handed over a new center for testing medicine and food. The board is also coordinating with relevant agencies to improve the food testing process and develop safe food chains.
In addition to sanctions against processing and trading units found with violations, officials and management agencies that fail to fulfill their duties will also be held accountable.
Pham Duc Hai, vice chairman of the HCMC People's Council, said the city needs to educate consumers about safe food chains and clarify responsibilities of heads of food management, production, trading and distribution agencies.
HCM City looks for financing privileges to fund infrastructure projects
The HCMC government is seeking approval from the Government for a special financing mechanism which will allow the city to make comprehensive infrastructure investments.
In a report sent to the Prime Minister and relevant ministries on Tuesday, city leaders proposed the Government continue allocating funds from the central budget for key projects, and giving HCMC more power and responsibility to use capital sources for urban infrastructure development.
Besides, HCMC is looking to apply land rent exemptions at locations used for public traffic projects approved by the Government such as parking lots, vehicle maintenance stations, ticketing booths, public restrooms, green parks and internal roads.
The city also wants to prioritize the budget and official development assistance (ODA) loans for important projects of key economic areas. It will also focus on planning, construction and development of the logistics system which will be connected to the national network and other regions, including completed technical infrastructure and management information systems.
The Government should reconsider a local budget retention ratio in tandem with contribution of each province and city, thus making resources for localities to develop technical and social infrastructure. The ratio should be fixed until the end of 2020, city leaders said in the petition.
The city wants to retain part of import-export tax revenues in 10 years, at 8%, 10% or 12% of total collections, to fund infrastructure development.
Local government also seeks permission to impose surcharges on a number of business sectors suitable to the city’s situation. Surcharge revenues will not go to the central budget.
In addition, the city wants to take half the land use fee revenue from organizations managed by central agencies.
In recent times, HCMC has concentrated resources on many road projects to reduce traffic congestion and waterway projects to improve shipping. Notably, it will develop eight metro lines and three tramways or monorails in the coming years.
The city is waiting for approval to use around 21 hectares to expand Tan Son Nhat International Airport, raising its handling capacity to 40 or 50 million passengers a year from now to 2025. It is also spending on other sectors such as public transport, electricity supply, flood control, housing, clean water supply, and commerce and service infrastructure.
Between 2011 and 2015, HCMC’s total investments amounted to nearly VND1,200 trillion, representing an average annual growth rate of 9% and accounting for 30% the city’s gross domestic product (GDP).
Total funding demand for infrastructure development in the city is estimated at over VND203 trillion from 2016 to 2020.
Danang gets nod to build Lien Chieu Port
The Ministry of Transport and Danang City have reached an agreement on construction of the new Lien Chieu Port to reduce overload at Tien Sa and Son Tra wharfs.
The local government said Danang Port, comprising two major wharfs – Tien Sa and Son Tra – is regarded as a shipping hub of central provinces. Therefore, a majority of cargo is shipped through the port.
Statistics of Danang show cargo throughput at the port was 5.7 million tons last year. The figure is expected to rise to about 10 million tons by 2020, and some 30 million tons by 2030.
Throughput is projected to surpass the combined capacity of Tien Sa and Son Tra from 2020 onwards. This will increase traffic congestion, cause environmental pollution, and have damaging effects on the local tourism sector.
Therefore, the construction of Lien Chieu Port is badly needed to expand Danang Port and boost the economy of Danang, and the key central economic region in general, said municipal authorities.
Meanwhile, the ministry has approved in principle the Lien Chieu Port project.
The ministry asked the project’s consulting firm, Japan Port Consultant, to finalize the investment statement on the project, giving a thorough analysis of cargo volume and traffic through the port, and suggest the location of the new logistics center aligned with the city’s long-term and stable development.
The first phase of the project is estimated to cost around VND5.58 trillion, with VND2.63 trillion sourced from the State budget. It is scheduled to be operational in 2022. The investment format is public-private partnership (PPP).
The Government agreed to develop Lien Chieu Port into a logistics hub of Danang Port under the PPP format, or the use of official development assistance loans, or other viable investment forms.
The development of Lien Chieu Port will enjoy multiple advantages, as some major infrastructure facilities have been already underway like the Hai Van Tunnel and the Danang-Quang Ngai Expressway.
Vegetables and seafood hold high potential for development
Vegetables and seafood are forecast to bring a lot of added value to agriculture this year if the processing of these products gets due investment, although prices of farm produce tend to fall in the coming time, heard a seminar on market prospects for Vietnamese agriculture.
At the seminar organized by the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) and Economics Department under the National Assembly Office on May 24, Sergio Araujo from the Trade and Market Division of FAO Rome said the demand for agricultural products on the world market is showing signs of saturation.