BUSINESS IN BRIEF 7/8 Vietnam accelerates TPP negotiations in US Vietnamese ambassador to the US Nguyen Quoc Cuong has taken part in in-depth discussions with the governors of a number of US States to speed up Trans-Pacific Partnership (TPP) agreement negotiations. Ambassadors of Japan, Singapore, and Peru also joined the meetings, with the participation of the governors of Wisconsin, Iowa, Delaware, Mississippi, Colorado, Utah, and the management board of the US National Governors Association. The August 2-3 discussions took place on the sidelines of the US National Governors Association’s Summer Meeting held in Milwaukee city, Wisconsin.   Cuong briefed the US governors on the outcome of President Truong Tan Sang’s recent visit to the US, during which President Sang and President Barack Obama reaffirmed their commitment to completing TPP negotiations this year. He also informed them about the impressive growth of economic and trade ties between Vietnam and the US in recent times, saying two-way trade has increased by 140% over the past five years.   He expressed his belief that such growth will be stimulated as soon as TPP negotiations are concluded. Cuong called on the governors to support ongoing negotiations when the TPP is debated at federal and State parliament sessions, aiming to strengthen regional economic integration, promote development goals, and generate jobs in Vietnam, the US and other TPP members. The US governors voiced their support for trade liberalisation and its important role in the global economic growth.  They acknowledged efforts by Vietnam and other TPP members in formulating a standard free trade agreement, and vowed to help conclude the negotiations in 2013. Cuong and other diplomats met business representatives of the Metropolitan Milwaukee Chamber of Commerce, many of whom are operating in Vietnam. Vietnam Airlines’ chief receives French honour French Foreign Minister Laurent Fabius conferred France’s National Order of the Legion of Honour on General Director of Vietnam Airlines Pham Ngoc Minh in Hanoi on August 5. The Order is in recognition of Mr Minh’s active contribution to boosting the relations between Vietnam and France, especially in turning the national flag carrier into a dynamic aviation airline with a cooperation strategy aimed at building its prestigious trademark in the world aviation market. Vietnam Airlines has fully exploited a direct air route between Vietnam and France since 1994 and a non-stop air route since 2003. Minh is also one of the architects of many cooperative projects with French aviation industry in the development of maintenance, production and assembly establishments. The Legion of Honour is France’s highest distinction initiated by Napoleon Bonaparte on May 19, 2002 to honour outstanding citizens who have greatly contributed to France, especially to its development of friendly relations with other nations in the world. Rang Dong wants to construct airport in Phan Thiet Rang Dong Group is seeking approval from authorities to develop Phan Thiet airport on 500 hectares in Binh Thuan Province at a total cost of VND1 trillion, said Nguyen Van Dong, chairman of the company. If approval is forthcoming, the clearance of the 500-hectare area for the airport project will be completed at the end of this year to have the scheme getting off the ground early next year and commissioned in 2016 as scheduled, Dong told the Daily on Wednesday. “Binh Thuan Province’s government and the Ministry of Transport have thrown support behind Rang Dong’s application as the project owner. The local authorities have also reported this petition to the Government,” Dong informed. If selected as the civil aviation scheme’s developer, Rang Dong will also consider a plan to buy airplanes to serve local and international flights in the future, Dong revealed. Established in 1991, Rang Dong Group has been running 11 subsidiaries in the industries of tourism, traffic infrastructure, golf courses, mining, forest plantation and real estate trading among others. The company now is seeking to expand operation to the civil aviation industry. Located in Thien Nghiep Commune in Phan Thiet City, the Phan Thiet airport project has been planned for both civil aviation and military services. Under the planning, the transport ministry and the local government are seeking ways to lure private capital. As per the zoning plan by 2020, Phan Thiet airport should be able to serve 500,000 passengers annually, which will be raised to up to one million by 2030. With the plan, total investment needed for the national defense military component and the civil aviation facility is projected at a combined VND5.6 trillion. The Civil Aviation Authority of Vietnam (CAAV) in November, 2012 forwarded to the transport ministry a zoning plan for a number of airports including Phan Thiet. CAAV said it would continue to study deploying investment formats of public-private-partnership, build-operate-transfer or build-operate this year for aviation infrastructure structure projects. Ministry suggests sugar import quota auction The Ministry of Agriculture and Rural Development has suggested the Ministry of Industry and Trade considering sugar import quota auctions to eliminate the ‘ask-give’ mechanism. According to a document sent to the Ministry of Industry and Trade, local sugar plants produced over 1.5 million tons of sugar as of June 15. Sugar stockpile was 492,500 tons, a strong rise compared to last year’s figure of 179,000 tons. Local factories will begin the 2013-2014 production crop late this month, with their output expected to give enough or excess supply from November. Last year, some 270,000 tons of sugar was consumed in the July-October period. If the consumption level remains unchanged this year, the nation will see around 220,000 tons in surplus, not to mention the minimum sugar import volume as committed to the World Trade Organization (WTO). Therefore, the agriculture ministry in the document has suggested the Ministry of Industry and Trade to create conditions for companies and factories to export surplus sugar, helping them recover capital for the next production crop. Concerning sugar imports given commitments to WTO, the ministry suggests considering suitable time and import quota allocation methods. The Ministry of Industry and Trade has been proposed to study the quota auction method to eliminate ‘ask-give’ mechanism and secure equality for enterprises using sugar as material. FIEs occupy two-thirds of nation’s exports Whereas domestic firms recorded a modest increase in exports in the first seven months, foreign-invested enterprises (FIEs) gained high export growth and occupied an increasingly large proportion in the country’s total exports. The January-July export turnover of Vietnam is put at US$72.7 billion, up 14.3% year-on-year, with US$24.5 billion contributed by domestic firms, a slight rise of 1.6%, and US$48.2 billion by FIEs, up 22%, said the Ministry of Planning and Investment. Thus, though accounting for only 20% of GDP, FIEs represented about two-thirds of the country’s total exports in the first seven months. The items with strong export growth in the first seven months were the major products of FIEs, such as mobile phones and components with an export turnover of US$11.6 billion, a sharp increase of 87% year-on-year. Textile-garment fell to second place, with an export turnover of US$9.6 billion, up 16.3% over the same period last year. FIEs occupied 60% of Vietnam’s total textile exports. Exports of electronic products, computers and components brought in US$5.7 billion, up 40.4%. This sector requires high technology and foreign players are greatly contributing to exports of this group of items. Meanwhile, imports in the first seven months of the year reached US$73.5 billion, a rise of 15% compared to the same period last year. Analysts said that due to the lack of raw materials, most Vietnamese goods were exported in their crude form or just simply assembled with limited added values. This is the case at both domestic companies and FIEs. July manufacturing PMI reflects shrinking demand The latest Purchasing Managers’ Index (PMI) of the Vietnam manufacturing sector pointed to further decline in purchasing power and increase in inventories. PMI registered 48.5 in July, a slight rise from 46.4 in June. However, by remaining below the 50.0 no-change mark, the reading signaled a third successive monthly contraction of the manufacturing sector. “Vietnam’s manufacturing sector continued to contract during July, albeit at a slower pace as output and new orders fell at weaker rates and employment was unmoved,” says a report published by HSBC Vietnam on Thursday. Both output and new orders continued to fall during the latest survey period, albeit at slower rates. Modest falls in these key variables were said to reflect soft underlying market conditions, with clients’ purchasing power reported to have weakened. The net decline in new orders was partly driven by a decline in new business from abroad. New export orders fell for a second successive month and at the fastest rate since the start of the year. With new orders falling further, work outstanding reduced at the second fastest pace in the survey history as companies were able to take advantage of slow demand and clear existing contracts. Excess production was also used to build inventories during July, with stocks of finished goods rising to the sharpest degree since June 2012. Inventories have now grown for two months in a row. On the employment front, Vietnamese manufacturers left staffing levels unchanged during July following two months of contraction. Output charges were cut further in July, the fourth month in succession that a net reduction in average tariffs has been observed. Discounts were reported to reflect intensifying market competition and efforts to stimulate sales. There was some evidence that output prices were being reduced to help clear excess inventory at plants. In contrast, input prices continued to rise. Inflation has now been registered for seven months in a row, with a limited supply of inputs reported to have pushed up prices. There was also evidence that a stronger U.S. dollar had raised import costs. “The further deterioration of Vietnam manufacturing activity reflects both weak domestic and external conditions... External conditions will likely improve in the fourth quarter with the U.S., Japan, Eurozone, and China demand likely picking up,” said Trinh Nguyen, Asia Economist at HSBC. However, “much of Vietnam’s malaise is domestic born and requires a faster pace of reform. The State Bank of Vietnam recently reduced the open market operation (OMO) rate by 50 basis points to ease liquidity conditions. But that is likely a stop-gap solution as fundamental reforms are required to resolve Vietnam’s credit challenges,” she stressed. SBV sells more 26,000 taels of gold The State Bank of Vietnam continued to sell more 26,000 taels of gold that were put up for auction in the 49th gold auction on August 1, sending the total amount of gold injected into the market to 1,323,400 taels of gold, or nearly 51 tons. After the deadline for credit institutions to finalize gold mobilization by July 30, the demand for the precious metal did not decline. In the past month, the Central Bank had pumped 14 tons of gold into the market. Most of the gold put up in recent auctions was sold out. Although global gold price slightly slid, domestic gold price plummeted below VND38 million per tael on August 1. In particular, SJC-brand gold closed at VND37.4 million for buying, and VND37.8 million for selling. On the same day, commercial banks also continued to lower their US dollar exchange rates by VND10-40 per dollar. Eximbank bought dollars at VND21,110 per dollar and sold at VND21,190 per dollar. Vietcombank fixed the rate at VND21,110 for buying and VND21,170 for selling. ACB purchased dollars at VND21,080 per dollar, and sold at VND21,170 per dollar. State Bank calls for loan extension for paddy stockpiling As per instructions of Prime Minister Nguyen Tan Dung, the Governor of State Bank of Vietnam has sent a document to 14 commercial banks to extend term of loans for purchase of summer-autumn paddy for stockpiling this year. Earlier, the Prime Minister had agreed to extend time period to buy summer-autumn paddy for stockpiling until August 15 this year. Accordingly, the Governor of State Bank of Vietnam has asked banks to prolong the term for loans to buy summer-autumn paddy for stockpiling. Lending interest rate will remain unchanged. The 14 commercial banks include Agribank, VietinBank, Vietcombank, BIDV, MHB, Techcombank, SHB, OceanBank, OCB, EximBank, MB, LienVietPostBank, SeaBank and HDBank. Tuna exports to Portugal enjoy impressive growth Vietnam earned over US$4 million from tuna exports to Portugal in the first five months of this year, representing an impressive year-on-year increase of 419 percent. This result made Portugal one of Vietnam’s ten largest tuna importers, according to the Vietnam Association of Seafood Exporters and Producers (VASEP). In the period, Portugal imported over US$2.5 million worth of tuna fillet from Vietnam, up over 941 percent over the same period last year and 1.4 times higher than the 2012 figure. As a result, Vietnam becomes the second largest tuna exporter to Portugal after Spain. Vietnam also recorded a strong surge in exporting fresh and frozen tuna products to the European country in the period, raking in more than US$924,000, up 67 percent year-on-year. The Southeast Asian nation ranked fourth among exporters of processed tuna products to Portugal with an export value of almost US$809,000. It is forecast that the exports of Vietnam’s steamed tuna fillet to the European country will continue to increase in the coming time. However, with recent requirements of the Earth Island organisation regarding the “Dolphin safe” label on tuna products, Vietnamese exporters will be likely to meet difficulties in maintaining its growth as present. EU helps tra fish supply chain sustainability The European Union (EU) has contributed nearly EUR1.9 million to a EUR2.4 million Sustainable Pangasius Supply Chain (SUPA) project in Vietnam, launched in Ho Chi Minh City on August 2. The project was established by the Vietnam Cleaner Production Centre (VNCPC), the Vietnam Association of Seafood Exporters and Producers (VASEP), and the Vietnamese and Austrian branches of the World Wildlife Fund (WWF). It is one of a number of projects designed to help Vietnam’s tra fish industry expand its global market reach and improve the sustainability of its production. The EU will directly support the creation of a complete supply chain bringing Vietnam’s tra fish products to foreign importers and end-users. The EU is Vietnam’s largest tra fish customer. VASEP Secretary General Nguyen Hoai Nam said the project will be implemented in four years (2013–2017). Its benefits will include increased production capacity, enhanced product quality, environmental footprint minimisation, cost reductions, and resource use efficiency boons. The project also includes information exchanges and technical expertise for small and medium-sized businesses to deepen their understanding of sustainable production principles. VASEP said Vietnam’s total tra fish production volume stands at 1.19 million tonnes, accounting for 20.3 percent of the country’s total seafood. Vietnamese tra fish are exported to 142 foreign markets. The industry earned US$1.744 billion in revenue last year. Around 2,900ha of Vietnam’s 5,600ha of tra fish breeding grounds have sustainable production certification. Mekong Delta fruit exports reach 76 nations Associate Professor Dr Nguyen Minh Chau, Head of the Southern Fruit Research Institute, has reported fruit grown in the Mekong Delta region is now exported to as many as 76 countries around the world. Green dragon fruit is the region’s most lucrative produce export, contributing 40 percent of its total fruit export revenue and securing a firm foothold in the markets of the US, Japan, Republic of Korea, Taiwan, Chile, and the Middle East. Chau said local farmers and authorities have enjoyed a successful year , with fruit exports to the Middle East increasing thirteen-fold, to Romania six-fold, and to Greece three-fold compared to 2012’s figures. The Mekong Delta is expected to earn around US$360 million from fruit exports in 2013 as rambutan, longan and mango cultivators take advantage of new US, Australian, New Zealand, and South Korean import licenses. Boosting EU fruit and vegetable exports Hanoi has hosted a seminar, organised by the European Trade Policy and Investment Support Project (EU-MUTRAP) and the Business Promotion and Service Centre. The seminar   reiterated the importance of food hygiene and safety standards to Vietnam’s European produce export success. Participants recommended Vietnam implement Good Agriculture Practice (GAP) across the fruit and vegetable sector to meet the demanding requirements of both European consumers and importers. The event offered an opportunity for associations, businesses, collectives, and processing establishments to learn about useful strategies for protecting the reputation of Vietnam’s fruit and vegetables on international markets. The sector’s export turnover has  increased  at an annual average of US$300 million from 2005–2011. The US$630 million turnover in 2011 was a record high, 35.5 percent more than in 2010, and pushing Vietnam into one of the world’s five leading fruit and vegetable exporters. In 2012 it rose an additional 33.4 percent to US$829 million. But its exports to the European Union markets have not enjoyed similarly spectacular success, mainly due to violations of the bloc’s strict import quality criteria. EU-MUTRAP has planned another seminar for August 6 in the southern province of Dong Nai, this time focused onprinciples of origin within free trade areas and the EU’s new Generalised Scheme of Preferences (GSP). Vietnam Airlines inaugurates fifth hangar The national flag carrier Vietnam Airlines on August 3 inaugurated its fifth hangar to maintain wide-body aircraft at the Tan Son Nhat International Airport in Ho Chi Minh City. This is the second largest of the five hangars Vietnam Airlines is operating at the Noi Bai and Tan Son Nhat Airports , and the first of its kind with a dome shape and equipped with a comprehensive technical system. Covering 13,800 square metres, the 29.5m-high hangar is able to maintain all kinds of wide-body aircraft. The hangar will help Vietnam Airlines ensure technical services for its fleet and planes of other airlines operating at the Tan Son Nhat Airport . It will also enable the national flag carrier to improve its maintenance quality and capacity. In the coming time, Vietnam Airlines will continue investing in building necessary hangars along with support workshops at the two airports. Indian businesses research Vietnamese investment Vietnam’s India trade office has coordinated with the Federation of Indian Export Organisations (FIEO) on a New Delhi seminar discussing bilateral trade and investment opportunities. Nguyen Son Ha, the Vietnamese Embassy in India’s trade councillor, delivered a briefing on the Vietnamese economy, recent developments in bilateral trade relations, the implications of the ASEAN-India FTA Agreement since June 1 2010, and a proposed tariff reduction roadmap facilitating Indian business investment in the Vietnamese market. Indian businesses  inquired about Vietnam’s foreign direct investment (FDI) incentives, such as the regulations governing wholly foreign owned businesses, corporate income tax, electricity prices, the Law on Foreign Investment’s land rental stipulations, and Vietnam’s industry exhibitions and fairs. Ha answered the representatives’ queries, provided contact details for a variety of relevant agencies in India, and invited Indian businesses to participate in some of the major trade fairs scheduled for the remainder of 2013. Both countries are striving to achieve an annual bilateral trade turnover of US$7 billion by 2015. Plastics industry aims for US$7 billion in exports by 2020 The Vietnamese plastics industry hopes to grow to US$7 billion in export turnover by 2020, with corresponding improvements in quality and environmental friendliness. The Viet Nam Plastics Association (VPA) expects 2013’s plastics exports will increase by 11–13.5 per cent, hitting US$2.2 billion in total turnover. The industry is redoubling its efforts to compete internationally with diverse designs incorporating advanced green technologies. Vietnam earned more than US$1 billion from plastics exports over the first half of the year, up 9.3 per cent from the same period in 2012. Japan, the US, Cambodia, and the EU are the industry’s four major foreign markets. Japan, the largest, accounts for more than 22 per cent of the country's total exports, followed by the US, Cambodia and the EU. India is an emerging market boasting enticing potential thanks to Indian industries burgeoning demand. The association also forecasts the perpetuation of positive plastics export trends to Japan, the US, China, India, Thailand, and Malaysia. Experts note the higher quality of the latest locally made products has attracted additional interest on world markets. The Vietnamese plastics industry is still hampered by raw material deficiencies and outdated processing equipment. VPA General Secretary Huynh Thi My says the industry requires an annual 2.2 million tonnes of raw materials, only 450,000 tonnes of which is sourced domestically. It spent US$2.7 billion on imported raw materials in the first half of 2013, a year-on-year rise of 19.2 percent in volume and 20.3 percent in value. Sufficiently qualified human resources are another problem facing the industry, the VPA has warned. The industry is looking to shift its current packaging and household product plastics manufacturing to a new emphasis on technical and construction plastics products. The VPA will strengthen links with foreign trade offices and selected international equipment suppliers to access additional raw material resources and upgrade its technology. Vietnam’s position as the world’s largest rubber exporter could be exploited if the VPA and the Vietnam Rubber Association are willing to collaborate on developing technology that processes rubber into plastics. Vietad 2013 opens in HCM City More than 80 local and foreign businesses are showcasing the advertising sector’s latest technologies at the 4th Vietnam International Advertising Equipment and Technology Exhibition (Vietad 2013), opened in HCM City on August 3. The exhibition’s 200 pavilions displaying nanotechnology, printers, and lasers are this year focused on new environmentally friendly advances. Several seminars and forums will also be held during the event examining Vietnamese advertising trends and Japanese LED billboards. It is expected to attract 6,000 visitors and will run through to August 6. The exhibition’s organisers Dong Nam Advertising and Commercial Promotion JSC are planning a similar event in Hanoi over November 11–14. TPP Agreement to help boost Vietnam’s exports Being a party to a successfully negotiated Trans-Pacific Partnership Agreement (TPP) will offer the Vietnamese trade sector, including its garment and textile industries, an excellent opportunity to promote exports and bypass tariff barriers. This positive assessment was delegate consensus at an August 2 seminar on the TPP’s implications for garment and textile businesses, hosted by southern Dong Nai province. Business representatives said the TPP agreement is particularly vital for the garment and textile sector because of its dependence on input material imports and foreign consumer markets. Current US and European tariffs are as high as 17.5 percent and 9.6 percent respectively (with EU tariffs rising to 17.5 percent above a specified turnover threshold). The Vietnam Textile and Garment Association (Vinatas) said the sector has surveyed markets, materials, labour, equipment, management, and financial problems and is expected to sign the TPP agreement at an October 2013 ceremony in Bali, Indonesia. Vinatas Deputy Secretary General Nguyen Van Tuan noted the sector contributes the second largest amount to Vietnam’s total export revenue. The Vietnamese garment and textile industry’s US$17.1 billion in 2012 turnover also makes it the world’s fifth largest exporter of the products. Tuan believes that in addition to tariff repeals, the TPP agreement will open the door for Vietnam to negotiate greater access to the US’s and other member nations’ markets on behalf of all its export industries. It will also facilitate increasing those partners’ investment in Vietnam. Food technology industry urged to hone competitive edge Hanoi hosted an August 2 seminar discussing the Vietnamese technology industry’s future orientations including long-term perspectives looking towards 2030. Vu Quoc Hung, deputy head of the Ministry of Industry and Trade’s (MoIT) Industrial Policy and Strategy Institute, reported the industry’s 2006–2010 growth rate stood at roughly 16 percent, Its best performing divisions included confectionery (nearly 30 percent), glutamate (over 10 percent), and instant noodles (10 percent annually). Confectionery is expected to expand a further 8–10 percent annually from 2011 to 2014 and begin exporting by 2020. Hung said the food technology industry is targeting an initial 14 percent export growth rate in 2020, rising to revenues of around US$1 billion by 2030. Achieving this will require a clear strategy for maximising local businesses’ global competitiveness, upgrading assembly technology, and promoting the reputation of its brands. Deputy Industry and Trade Minister Ho Thi Kim Thoa said the industry’s sustainable domestic and international development can be assisted by incentive policies from relevant agencies, trademark registration, trade promotion, and accurate and timely market data collection and analysis. Thoa added global economic fluctuations make ensuring food quality, safety, and hygiene standards are reliably met all the more important. Quang Ninh marks founding with border checkpoint inauguration A new border checkpoint at the Bac Phong Sinh border gate was inaugurated on August 2 to mark the 50th anniversary of Quang Ninh province’s establishment. The VND42 billion infrastructure is intended to streamline goods transport, and immigration procedures from across the Vietnamese-Chinese border. The checkpoint’s opening will deliver practical benefits to authorities, local residents, businesses, and investors. It also helps boost the province’s economic development and creates additional employment opportunities at Hai Ha district’s Bac Phong Sinh border gate. According to the district’s management board, Hai Ha should work with authorised agencies on further infrastructure upgrade investments—including parking capacity expansion— if it wants to capitalise on border trade opportunities and import-export activity. The area’s advantageous location grants it access to potentially lucrative commerce between Vietnam and China as well as the promise of the “two corridors, one economic belt” cooperative framework. Local businesses to benefit from SAP technology solution SAP – a world leading software application provider, has introduced its latest technology solution in support of core business operations in Vietnam. The “SAP Business Suite” solution was launched at SAP Forum     in HCM City on August 1. It allows local businesses master huge data sources, social webpages and cloud computing to increase the effectiveness of their operations. As one of numerous solutions which have been launched in 70 cities of 40 countries and territories around the world, the latest technology application aims to bring transactions and analytics together to create a real-time business.  François Lançon, President and Managing Director of SAP in Southeast Asia, highly valued Vietnam’s young workforce in the information technology (IT) sector. With the newly-launched solution, Vietnamese businesses will be able to explore latest applications on cloud computing and data source in a smarter, faster and simpler manner, he said. Pham The Truong, General Director of SAP Vietnam, said about 200 big Vietnamese businesses are using SAP technologies successfully and effectively. At present, SAP is connecting more than 1 million companies worldwide through its Ariba – the world’s largest business-to-business (B2B) network. National Highway 1A in Mekong Delta to be expanded The work of expanding National Highway 1A in the Mekong Delta city of Can Tho was kicked off on August 2 by Deputy Prime Minister Hoang Trung Hai. The expansion section covers a length of 22km from Cai Rang District in Can Tho City to Phung Hiep District in Hau Giang Province. The investment for the expansion work of more than VND1, 800 billion has come from Can Tho-Phung Hiep BOT ((Build-Operate-Transfer) Company and VietinBank. The six-lane highway is expected to complete by end of 2015 and will ease traffic flow and also open opportunities for tourism and other socio-economic benefits in the Mekong Delta region. Viettel continues taking the lead The curtain is dropped on why there was a gap in revenue levels of telecom sector’s leading players VNPT and Viettel. In the first six months of 2013, state-owned Vietnam Posts and Telecommunications Group (VNPT) posted VND54.238 trillion ($2.3billion) in revenue whereas military-run Viettel Group earned VND72,638 trillion ($3.45 billion) in revenue. ight in early 2013, while VNPT set forth its 2013 revenue target of more than VND131 trillion ($6.2 billion), Viettel placed out a much higher revenue figure in the range of VND160-170 trillion ($7.6-$8.1 billion). These revenue levels were set based on these groups’ 2012 performance and development perspectives. Accordingly, in 2012 Viettel reported VND140 trillion ($6.6 billion) in revenue and VND27 trillion ($1.28 billion) in profit whereas for VNPT the revenue and profit figures were VND130 trillion ($6.2 billion) and VND8.5 trillion ($405 million), respectively. Last year was the first time Viettel surpassed VNPT in revenue level while its profit tripled that of VNPT. VNPT’s chairman Pham Long Tran had attributed the group’s decreasing revenue to the hardships firms, particularly state-owned ones, were facing. “Scores of firms counted losses or went bankrupt which cast a big dent on VNPT’s revenue. Besides, the fixed telephone network which was once the main income raising channel of the group, now takes a plunge in both subscriber number and revenue,” Tran noted. State inspectors’ conclusions about execution of state regulations on capital and asset usage and management at VNPT in the recent past had demonstrated a number of shortcomings and wrongdoings at the state group in this regard. VNPT investments proved less effective, causing waste and losses whereas a number of financially dependent units under the state group exposed limitations in management, lacking self-reliance in doing business while having improver assessments about their business efficiency as well as capital and asset usage and management, the report said. Senior economist Dr. Nguyen Minh Phong from Hanoi Institute for Socioeconomic Development Study pointed our two core reasons for Viettel Group’s success: its dynamic leaders and the group’s pursing world-class management models. About VNPT performance, Phong said: “VPNT needs to make more effective use of its core advantages, for instance its strong network infrastructure. Services diversification would help the state group recapture market slices from rivals.” Inflation and economic growth projected at 5% this year Both inflation and economic growth are forecast to be around 5% this year, much lower than the Government’s targets, according to the National Financial Supervisory Commission. This year’s inflation, according to the commission’s forecasts, would stay at 5% if the Government’s price adjustments and policy changes are not taken into account. This inflation rate is based on a pickup of July’s consumer price index (CPI) over June (0.27%), which is still lower than the percentage permissible in each remaining month of the year (around 0.76%). Further room for inflation in the rest of the year is four percentage points, or 0.76 of a percentage point a month, so that the full-year figure is lower than last year’s 6.81%. According to the commission, with such a CPI rise, plus the global price factor which is forecast to be little volatile towards the year-end and the weak domestic consumption, inflation can be under control. Regarding economic growth, the commission said the year’s target of 5.5% was still a tall order as gross domestic product (GDP) in the year’s first half inched up a mere 4.9% year-on-year, a low level compared to previous years. A primary reason for this low growth is poor domestic consumption. Revenues from goods and services in January-July reached VND213 trillion, which rose 5.2% if price hikes were excluded, far less than the 6.7% last year. “The falling domestic demand has impacted greatly on growth. The economy, therefore, is heavily reliant on external demand,” said the commission’s report. This is clearly seen in the Purchasing Managers’ Index (PMI) of June. When the number of export orders dropped in June, the index declined below 50 points for two months in a row. “It’s unlikely the economy can recover and stabilize if domestic demand remains weak,” the report stated. According to the commission, the main reason for sliding demand is the small investment volume, which accounted for 29.6% of GDP in the first six months of the year, well below the 34.5% in last year’s same period. For the exchange rate, the commission said there had been some fluctuations due to anxiety on the market. Other factors that have influenced the exchange rate include balanced demand, changes in foreign exchange holdings by banks and enterprises, and capital adjustments or profit taking by foreign investors. From June to mid-July, foreign investors withdrew around US$450 million from the bond market and nearly US$100 million from the stock market. However, according to the commission, the fluctuations are short-lived, foreign currency supply and demand in the final months of the year would be stable and foreign reserves would keep rising. 10 river management units to be equitized Ten inland waterway management stations under the Vietnam Inland Waterway Administration will be equitized before the end of the year, said Deputy Minister of Transport Nguyen Hong Truong. After nearly eight years of pilot equitization of five inland waterway management stations, the Ministry of Transport recently held a review meeting and informed that although there were still many shortcomings, ten other inland waterway management stations would be equitized this year. Since 2006, the inland waterway management stations 2, 3, 5, 6 and 8 have gone through pilot equitization and become inland waterway management joint stock companies, with a state stake of 54-80%, said Truong. Tran Van Cuu, head of the Vietnam Inland Waterway Administration, said the stability of these companies depended on the orders for regular and occasional maintenance from his agency, which is the same as when they were still inland waterway management stations. These joint stock companies are holding infrastructure and facilities for search and rescue and other assets, but are not allowed to use these facilities because they belong to State Capital Investment Corporation. In addition, organization, personnel management, contract signing and maintenance of these companies are governed by the Vietnam Inland Waterway Administration. Still, the transport ministry stated equalization of public service units was an inevitable trend. Without equitization, public service units cannot even decide on their own staff, resulting in many cases of cumbersome apparatus, affecting their operational efficiency. However, the ministry said it needed to recalculate how to equitize the remaining inland waterway stations. The Vietnam Inland Waterway Administration is considering separating the functions of State management and infrastructure management from production and maintenance of inland waterways. The administration suggested ports should be in charge of State management, leaving inland waterway joint stock companies responsible for maintenance. Credit package yet to touch on apartment inventory The VND30-trillion housing package has stirred up the frozen property market somewhat, but such a push is not strong enough and has not helped in reducing the property inventory, according to market observers.   A market analysis report of Maybank Kim Eng Co. states that policies which aim to support the property market, especially the VND30-trillion home loan package, have initially sent out positive signs. However, the package has failed to reduce a high volume of apartment inventory, as it focuses on projects that are currently under construction. Although the number of property transactions is seen increasing, the inventory volume remains huge with over 16,000 apartments. With the current volume, according to Maybank Kim Eng, it will take four or five years to sell all apartments in stock. Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, said at a seminar held in HCMC last week that it is urgent to sell off the apartment inventory so as to address bad debts at banks. He also stressed the need to increase the supply of budget houses for low-income earners. Nevertheless, the disbursement of the VND30-trillion home loan package for low-income earners is moving at a snail’s pace and has not provided much help for cutting down the apartment inventory. In fact, only 56 homebuyers have been able to take out soft loans from the package. According to Vo, commercial-turned-budget housing projects are still on paper or have just begun, and such projects are not counted in the inventory list now. Jewelry firms yet to get gold import license Many enterprises are seeking approval from the central bank to import raw gold for jewelry production but none of them have obtained licenses so far. Nguyen Ngoc Trong, sales director of Phu Nhuan Jewelry Company (PNJ), said that right after the central bank promised to give licenses to raw gold imports for jewelry production, PNJ has sent a petition to the central bank and related agencies. However, the enterprise has received no feedback. Raw gold imports are very important as the move can help PNJ reduce production costs and jewelry prices. The enterprise has obtained many export orders over the past time but failed to compete with some other countries due to high product prices, Trong said. Nguyen Thanh Truc, general director of Agribank Jewelry Company, said that the central bank’s Hanoi branch has come to inspect its workshops and equipments after the company has sent the suggestion to the agency. However, it has yet to get the import license. At present, the enterprise has to purchase material from the domestic market for jewelry production, at prices higher than the international price by VND800,000 to VND1.5 million for a tael. If enterprises obtain raw gold import permission, they will be able to save much production cost given the current import tax rate of 0%, Truc said. Saigon Jewelry Company (SJC), one of leading jewelry producers in the country, has also sought approval for raw gold imports. HSBC: Vietnam not yet ready to let go HSBC Bank in a report released on Thursday expressed its anxiety over lateness of the Government’s plans on banking system restructuring, saying that Vietnam will find it hard to gain back its potential economic growth rate of 7% if the situation goes on. The bank urged the Government and the central bank to be fast and determined in implementing projects set up in the past. It has been more than two years since Vietnam passed the Resolution 11 in February, 2011 and close to two years since the passage of the Decision 254 in December, 2011, intended as a roadmap to restructure the banking system. The opening of the asset management company (AMC) on July 26 should be considered a milestone as it is intended to resolve Vietnam’s liquidity issues through purchasing half of the bad debts from the financial system. But similar to other reforms that have been profiled since the Resolution 11, the AMC is symbolic as the two pillars - knowing the level of bad debts and having enough funds - for success are not yet adequate, HSBC said in the report. Chartered capital for the AMC is only VND500 billion, which is less than 1% of half of the total bad debts it is required to purchase. But more fundamentally, the delay of the Circular 02 from the original effective date of June 1, 2013 to June 1, 2014 means that the AMC will not have enough information to fulfill its job. The circular is intended to have stricter guidance on the classification of assets as well as levels and methods of provisions. Explaining the delay, the central bank in June said that the move aimed to help enterprises access bank loans, speed up credit growth and help enterprises overcome difficulties. The decision also provided more time for lenders to build up roadmaps and prepare conditions to implement the circular. However, HSBC said that fostering productive enterprises requires a disciplined financial system. Economist Trinh Nguyen said that the delay of the Circular 02 until June 2014 as well as limited chartered capital for the AMC shows that the economy will continue to be plagued by a financial system that is saddled with bad debts. “Fundamentally, the pace of reform comes down to the question of whether the Government is willing to let poor-functioning firms fail, a necessary decision to ensure that the economy is one that rewards efficient investment. While this would allow Vietnam to fulfill its potential and have high rapid growth rates in coming decades, we believe short-term pain is inevitable, especially for low-hanging fruits,” the bank said. To return to its 7% growth rate, more reforms will be needed to capitalize on its favourable demographics, natural resources, and geography. “Therefore, we believe it is pertinent that the Government pushes through reforms to create a financial system that efficiently allocates resources to foster the growth of productive enterprise,” it added. HCM City lenders record 16.5% profit decline Credit institutions in HCMC earned a total profit of some VND4.76 trillion in the first six months, down 16.5% year-on-year, with bad debt a major reason for this decline, said the HCMC branch of the State Bank of Vietnam (SBV). A rising bad debt ratio forced banks to increase their risk provisions, leading to a fall in their profits. Risk provisions made by 14 HCMC-based banks totaled over VND8 trillion in the first five months of the year. In addition, banks had to cut lending rates to support their clients during the tough times, resulting in a smaller gap between deposit and lending rates. Profits from credit operations made up 88.3% of their total profits in the first half of the year, versus 90.2% in the same period last year. Due to economic uncertainties, businesses are performing poorly, struggling with surging inventories and dwindling purchasing power. Therefore, their ability to repay bank loans is limited, affecting revenue of banks, said SBV’s HCMC branch. As of end-June, bad debts at credit institutions in HCMC had totaled more than VND52.3 trillion, accounting for 5.85% of total outstanding loans, up 11% against end-2012. Debts classified into group five, or potentially irrecoverable debts, had amounted to over VND35 trillion, standing at 67.1% of total bad debts. In June, lenders reduced the value of debts in group five by VND892 billion. Assets mortgaged for the debts that had turned bad were valued at VND81.64 trillion at the end of this June. Bad debts at joint stock banks had reached VND24.2 trillion by end-June, the highest value in comparison with other groups of credit institutions. However, the highest bad debt ratio had been recorded at finance leasing companies, where bad debts made up 45.3% of total credits. Foreign banks had the lowest bad debt ratio of only 2.88%. Lenders are adopting three measures for bad debt settlement: using risk provisions, collecting cash and handling mortgaged assets. * Nam Viet Commercial Bank (Navibank) on Thursday published its financial statement for the second quarter. The bank reported a loss of VND11.3 billion in the second quarter, versus a pre-tax profit of VND58.3 billion in the same period last year. Still, in the first six months, the bank achieved a pre-tax profit of VND10.5 billion, equal to only 8.6% of the figure recorded in the year-ago period. Earlier, two other banks announced positive profits for the first half of 2013 although they have not released their second-quarter financial statements yet. An Binh Commercial Bank (ABBank) reported a pre-tax profit of VND214.4 billion, while Sacombank said they had earned nearly VND1.45 trillion in the first six months. Rates of foreign currency loans on wane Short-term foreign currency lending rates at many banks have fallen to less than 5% annually, dipping by some one percentage point from the end of June, while rates of long-term loans have ranged between 5% and 6% annually. Lending rates of foreign currency have fallen considerably since early May and the rates plunged even further after foreign currency deposit rates were lowered to 1.25% annually on June 28, Nguyen Hoang Minh, deputy director of the HCMC branch of the State Bank of Vietnam (SBV), reported. The falling trend of foreign currency lending rates is deemed inevitable by Minh given a restriction in the target corporate borrowers when only exporters with foreign currency incomes are subject to the credit. As it is hard for local banks to lend foreign currency, they have no other choice but to slash lending rates to earn profits from the deposits, he explained. Trinh Van Tuan, chairman of the Orient Commercial Bank (OCB), meanwhile, informed rates of short-term foreign currency loans at his bank hover around 5% per annum and those of long-term loans at some 5-6% annually. The rate cuts are about 0.5-1 percentage points against June 30, he said. Tuan ascribed the rate falls to declining foreign currency deposit rates and rising demand for dong loans among local firms who are seeking to make the most of sharp cuts in dong lending rates and to avoid foreign exchange rate volatility risks. Lenders therefore have had to pull down foreign currency lending rates proportionately, he reasoned. Similarly, an executive of a lender with big loan balances in foreign currency said local banks now are facing tough competition in lending. He noticed a few banks with ample foreign currency supply are offering an annual lending rate of only 2.5% to woo customers from others. That’s why his bank has sought ways to maintain short-term foreign currency lending rates at only roughly 3% per year at certain times to retain customers. Normally, rates of foreign currency loans fluctuate from 3% to 5% per annum depending on borrowing terms and credit ratings of enterprises. In fact, revising the lending rate down to 2.5% annually barely affects profit margins of multiple lenders since few customers are able to gain access to loans with such a low rate, Minh remarked. Furthermore, customers will have to commit to using other services of the banks that are their creditors, he stated. Foreign-invested banks mainly provide foreign currency loans at annual rates of less than 5% and many others may fix the rate at less than 3%, according to Minh. There are lots of banks placing the remaining foreign currency deposits at overseas lenders to cut capital costs after finishing mobilizing and lending, Minh noted. But foreign currency deposit volumes sent abroad by local lenders are small while their terms are very short due to a small gap between deposits and loan balances, he said. For example, Minh said, the six-month loan balances of foreign currency of HCMC totaled about VND166 trillion while the city’s foreign currency deposits were a combined VND180 trillion in the period. Idle foreign currency amounts are not as big as dong supply in the banking system, he added. Tuna fishing boats inactive over sharp price drop Many tuna fishing boats are sitting idle onshore since tuna price drops have taken their toll on sales revenues. In the year to date, over 5,400 tons of tuna has been caught in the waters off Binh Dinh, down nearly 3% year-on-year. Meanwhile, Phu Yen’s catch has reached some 4,100 tons, a sharp fall of 31% over the same period last year, said the Ministry of Agriculture and Rural Development. In Phu Yen, frozen tuna sold for VND130,000-135,000 per kilo in the third week of June before tumbling further to VND100,000-110,000 a kilo in early July, a decline of VND40,000-50,000 from early this year and down by half from June 2012. The tuna price falls, coupled with an oil price hike, have prompted fishermen to use strong light beams for fishing, instead of the traditional angling method, affecting tuna quality. Therefore, tuna captured via this method only sells for VND50,000-55,000 per kilo, only one third of the prices in the same period last year, bringing losses to many fishermen. Statistics show that in early July, about 78% of the fishing boats with a capacity of 90 CV or above in Phu Yen were idle. The remaining 12%, or only 117 boats, remained active. The reduced output has affected the export value of tuna. Tuna exports in June brought in US$40.65 million, down 12% from May, taking the total exports in the first half of 2013 to nearly US$294 million, according to the Vietnam Association of Seafood Exporters and Producers (VASEP). In 2011, tuna exports reached US$380 million, accounting for 6.3% of Vietnam’s total seafood exports. Vietnam has shipped tuna to 83 countries. In 2012, tuna exports generated nearly US$570 million. Tuna is now seen as a major export seafood item of Vietnam together with tra fish. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR