BUSINESS IN BRIEF 10/4 Soft loans help boost agricultural productivity Financing for agricultural and rural development with a reasonable loan period and low interest rates has proven effective in ensuring the efficiency of agricultural production and increasing profits for farmers, the Nhan Dan (People) online newspaper reported. Following the Government’s direction, the State Bank of Vietnam (SBV) has strengthened co-operation with related authorities, agencies and the banking system to develop better financial programmes for the field. Given that approximately 70 percent of the Vietnam’s population lives in rural areas, agricultural production has made tremendous contributions to national socio-economic development. The sector has drawn great attention from the Party and State, resulting in a range of guidelines and policies, among which the Government Decree No. 41/2010/NĐ-CP on credit policy for the development of agriculture and rural areas is considered an important breakthrough. To date, it is not only the Vietnam Bank for Agriculture and Rural Development (Agribank) that has played a key role in providing credit programmes for agricultural sector. Most commercial banks - such as Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank), Bank for Foreign Trade of Vietnam (Vietcombank), Bank for Investment and Development of Vietnam (BIDV) and Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) - are supporting the agriculture sector by providing aquaculture loans, buying rice for temporary storage, and issuing loans for agricultural exports and tea and coffee purchasing and processing. Prior to Decree 41, loans provided for of agricultural and rural development reached just 293 trillion VND (13.7 billion USD) in 2009, yet, at the end of the second quarter of 2013, the figure increased over 2.2-fold to more than 621 trillion VND (29.2 billion USD). As of September 2013, many localities had recorded positive results in credit operations, including in Hanoi, where outstanding loans reached 46.9 trillion VND, an average annual growth of 25.3% (from 2010 to 2013), and in Ha Giang province with 3.8 trillion VND and an average annual growth of 17%. However, difficulties and shortcomings do exist. Due to the poor planning and management of agricultural production and businesses, the increased credit to the sector has still not met the demand and vast potential to develop high-tech agriculture with sustainable high-added values remains untapped. Besides, Vietnamese seafood products are threatened by the unfair anti-dumping laws of some countries, improper aquaculture planning, and inefficient investment, creating negative impacts on credit quality and scaring away investors. Dr. Nguyen Van Thanh, Chairman of the Deposit Insurance of Vietnam Board of Directors, admitted that bank loans have contributed greatly to socio-economic development and poverty reduction in the past years, though agricultural credit operations still face many challenges. Taking the reality of economic development in the Mekong Delta as an example, rice and fruit planting along with aquaculture farming have been almost spontaneously developed in a fragmented manner and on a small scale, resulting in low quality and large losses. According to LienVietPostBank Vice Chairman Nguyen Duc Huong, unstable prices and frequent natural disasters are among the common reasons that discourage farmers from borrowing from banks, and for which banks decide not to offer loans. In rural areas, underdeveloped agricultural credit insurance seriously affects farmers’ ability to repay, as it does not cover large variations in price due to natural disasters or epidemics. For that reason, banks only lend moderate amounts of capital. SBV Governor Nguyen Van Binh said that this year, credit programmes for the development of agriculture and rural areas focus on a number of major important fields such as science and technology in agricultural production, new production model development, and seafood exports. SBV is currently co-ordinating with the Ministry of Agriculture and Rural Development and the Ministry of Science and Technology to develop suitable mechanisms to help credit institutions expand investment in the sector, especially to agricultural production operations with strong application of advanced technologies. According to SBV Credit Department Head Nguyen Viet Manh, the newly developed credit programmes will be applied first in some effective large-scale production models, including the dairy farms of TH Group, some southern seafood processing plants and the large-scale rice field models in the Mekong Delta. Manh suggested that, in order to develop effective credit policies, it is necessary to have detailed planning for each sector and production region and to ensure smooth connections between partners in supply and consumption. Dr. Huong stressed the need to create breakthroughs in vision, policies and measures for the sector’s growth, focusing on allowing agricultural land accumulation to develop large-scale fields, forming a value chain from production to processing, and adopting agricultural enterprise equitisation. It is also necessary to attract further investment from both domestic and foreign sources in agriculture and rural development, Huong said, adding that mechanisms for agricultural credit insurance development are crucial to supporting farmers and agriculture businesses. In addition, stimulating banks to maintain a minimum ratio of 20% of their capital for agriculture and rural development is considered a practical measure that could facilitate credit activities in the field, as banks are still the main providers of loans to the sector.- Many Spanish firms come knocking Many Spanish enterprises are coming in droves to explore business and investment opportunities in Vietnam as this market is growing even in troubled times and still attractive to foreign investors. The key message was delivered by Jose Manuel Garcia-Margallo, Spain’s Minister for Foreign Affairs and Cooperation, at the Vietnam-Spain trade promotion conference in Hanoi on March 26. He is in Vietnam together with representatives of 15 Spanish companies. Garcia-Margallo also pointed out one more reason for more Spanish companies to explore the Vietnamese market that Vietnam and Spain had signed an agreement on double taxation avoidance and many more agreements were underway to facilitate trade between the two countries. Hoang Van Dung, vice president of the Vietnam Chamber of Commerce and Industry (VCCI), told the conference that Vietnam’s export to Spain reached US$1.5 billion in 2012, with apparels, footwear and coffee being major export earners. Spain had pledged investments of around US$35.5 million in Vietnam as of 2013. “This investment remains modest,” Dung said. However, there are opportunities for enterprises of the two countries. They were able to cooperate in many sectors, including infrastructure, telecom, electronics, farm produce processing, garment, footwear, woodwork and tourism, Dung said. Speaking at the conference, Dang Kim Son, director of the Institute of Policy and Strategy for Agriculture and Rural Development, said Spain had been known as Europe’s big exporting country for fruits and vegetables produced with green technologies. “So, Vietnam wants to learn how Spain applies technologies to its agriculture, especially in vegetable and fruit processing,” Son said. Seafood industry spends low on after-harvest technology Vietnam’s seafood sector is incurring big losses due to its backward technology for post-harvest processes. The current situation was discussed at a review meeting after three years of developing the country’s seafood sector. The event, which was organized by the Ministry of Agriculture and Rural Development, also touched on a scheme to restructure this sector until 2020. From 2010 to 2013, the seafood sector had contributed 27-29% of the agricultural gross domestic product (GDP) but the spending on the technology only accounted for 11% of the total investments in scientific studies and technological advances of the whole agricultural industry, according to the agriculture ministry. Investments for economic development of the sector only made up 7% of the total, the lowest rate compared to the forestry, husbandry and farming sectors. Vice Minister Vu Van Tam said to increase the added value of seafood products, the first thing was to invest in technological improvements for the sector. According to the ministry, the country now has 61,000 fishing ships with capacity under 20 horsepower (HP), 38,000 vessels from 20 HP up to 90 HP and 26,000 others having a capacity of over 90 HP. Most of the ships do not have a frozen cellar to preserve fish after they are caught. So far, the fisherman uses ice or dries the fish, therefore they cannot boost exports because their products’ quality fails to meet importers’ requirements. Ngo Anh Tuan, a consultant of the Food and Agriculture Organization, urged a restructuring of the seafood sector. The seafood sector has set a target of earning US$8-9 billion from exports, contributing to 30-35% of the gross domestic product for the agricultural industry. According to information released at the review meeting, the sector had met all its targets for the 2011-2015 period. Last year, it netted an output of 1.15 million tons of tra fish, surpassing the goal of 1.14 million tons for 2015. Its export turnover last year was US$200 million higher than the target of US$6.5 billion set for 2015. Producers object to special tax for carbonated drinks Member companies of the American Chamber of Commerce (AmCham) and experts have expressed disapproval of a tax rate of 10% for carbonated soft drinks as proposed in the draft Law on Special Consumption Tax. The proposed supplements to the law, including the 10% tax for carbonated soft drinks, will go before the National Assembly for consideration and approval in the coming time. Speaking at a forum on Vietnam’s food and beverage industry in Hanoi last Friday, lawyer Sesto Vecchi from Russin & Vecchi law firm, said no nations in the world imposed a special consumption tax on drinks based on their carbonation and that Vietnam would be the first country to tax this. This is unfair to foreign investors because American enterprises accounted for 88% of the carbonated soft drinks market in Vietnam, and the tax rate is regarded as an act of discrimination if it comes into force, according to the lawyer. He assumed that this tax was aimed at the foreign-invested firms and it would draw objection since it went against the country’s commitments to the World Trade Organization (WTO). Mason Cobb, head of the healthcare committee of AmCham Vietnam, said the proposed tax was illogical and strange as the sugar-free and non-carbonated drinks were not subject to the tax. This means the tax targets the carbonation, not the sugar, which is a threat to human health. Earlier, the Vietnam Beer Alcohol Beverage Association (VBA), while proposing the tax, quoted the media as saying that carbonation might cause obesity, and stomach and digestion problems. However, AmCham experts presented scientific results to prove that carbonation is not harmful in itself and can boost digestion. Some research works showed that a reasonable carbonation portion was good for human health, Vecchi said. AmCham’s member companies said the regressive tax would benefit the State budget but would make consumers pay more for the carbonated soft drinks they would purchase. Tran Kim Chung, deputy director of the Central Institute of Economic Management (CIEM), calculated that the Government would collect US$8.46 million if the special consumption tax of 10% was imposed (based on factory prices). On the contrary, the beverage industry will lose US$40.5 million and the economy will lose US$12.1 million. Vietnam’s beverages output will decline 0.58% and the nation’s gross domestic product (GDP) will slide by 0.01%. Christopher Snowdon, director of London’s Institute of Economic Affairs, said 14 nations had weighed such a tax but finally called it off. As carbonated drinks are primarily produced by foreign firms while domestic manufacturers make non-carbonated beverages, the tax will place negative impacts on not only the foreign makers but also sugarcane growers, sugar plants and packaging firms and retailers. The special consumption tax on carbonated soft drinks would also affect consumers, employees and the economy. Therefore, it was necessary to give it a second thought, Snowdon stressed. Good time for ready-built homes The protracted woes faced by the real estate market, coupled with a host of complaints about the poor quality and slow construction tempo of housing projects, have severely eroded the confidence of home buyers. To win customers back, a number of developers have changed their business strategy by completing their projects prior to launching sales. This business practice is stark contrast with what property developers have embraced over the years: selling homes even before they are built. In the past, whenever developers announced their projects, people would rush to place a big deposit without seeing the physical home. Since early this year, multiple finished townhouses and villas have been launched onto the market by local developers. According to property traders, this trend is looming large as numerous professional investors are expected to join in near future. Tan Binh Construction Investment Joint Stock Company has launched a sale in the Green Life townhouse project covering 27 hectares in HCMC’s Binh Chanh District, with each unit measuring 98 to 138 square meters. These two-storey townhouses cost VND2.6 billion a unit or higher, with a payment term lasting up to 15 months. The developer says the project is now complete and has sufficient home ownership certification, so buyers can move in immediately. Similarly, Khang Dien House Investment and Trading Joint Stock Company on March 9 launched a housing sale in the Mega Residence project in District 9 in the city. Half of the project’s 120 townhouses are finished and priced at VN13.5 million per square meter or above, including VAT. Homebuyers just need to make a down payment equivalent to 30% of the home’s value while the rest will be financed by bank loans. All the homes of the project have been issued ownership certificates, said a representative of Khang Dien. Dai Viet Real Estate Joint Stock Company has also introduced its ready-constructed townhouses in the Nam Saigon Riverside project on over 25,000 square meters in Nha Be District. Apart from some land lots, the project has a lot of finished townhouses covering 50-90 square meters each, which are offered at VND660 million or VND799 million a unit. Notably, Nam Long Investment Corporation last year succeeded in the launch of the Ehome 4 North Saigon housing project located in Thuan An District in the southern province of Binh Duong. Each townhouse covers 75 square meters and costs VND800 million or higher. Also, the ready-built home market has seen another entrant, Kien A Investment Joint Stock Company. Its Venture villa project in the Cat Lai urban area in District 2, HCMC comprises 92 villas measuring 119 to 227 square meters each and costing VND3.5 billion or higher for a villa whose interior is not complete. Commenting on the fresh market trend, Ngo Huu Truong, general director of La Ban Real Estate Company, said this was a solution developers should adopt to win back customer confidence at a time when business conditions remain tough. Health insurance likely to be made compulsory All Vietnamese people might have to buy health insurance if the draft amendments to the Law on Health Insurance are passed. Tong Thi Song Huong, director of the Health Insurance Department under the Ministry of Health, told Chinhphu.vn that according to the draft, people must be medically insured for a number of reasons. Huong explained the essence of health insurance was sharing and the country’s health insurance fund would go bust if it was not contributed by a majority of citizens. She added if health insurance was not compulsory, laborers, officials and those who should buy the insurance would not voluntarily contribute to the fund. One of the proposed amendments to the law is that it will also include households in addition to individuals required in the existing regulations, with an aim to change the fact that only the physically weak and sick people buy health insurance. Members of a family do not have to pay the same fee, as discounts of 20%, 30%, 40% and 50% will be offered to the second, third, fourth and fifth member of the family. And a payment equivalent to only 40% of the original fee will apply to the sixth buyer in the family. The draft law also proposes “a package of basic health services” paid by the national fund for health check-up, treatment, recovery and prevention. Another amendment to the law is that the fund will cover all the bills. After deducting the insurance pay, if the remaining health cost is still higher than six months of basic salary and the patient has bought health insurance for more than consecutive years, it will be covered by the fund. Huong said the objective was to create favorable conditions for those who have to pay high for treatment of chronic diseases. Firms at EPZ bemoan lack of guiding document Many enterprises in Tan Thuan Export Processing Zone complained about their export and import activities grinding to a halt and workers facing job loss due to Decree 164/2013/ND-CP at a recent meeting in HCMC. Under the decree issued last November, enterprises at the export processing zone (EPZ) have to set up separate branches when trading outside EPZ. However, they do not know what to do as there has not been a guiding document for such regulations. Responding to the questions of enterprises, a representative of the Ministry of Industry and Trade said that the establishment of branches outside EPZ was specified in Circular 08/2013/TT-BCT issued last April. However, speaking to the Daily, deputy director of the General Department of Customs Vu Ngoc Anh said that the circular was issued prior to Decree 164 and thus was not valid as a guiding document for the decree. At this time, according to Anh, ministries and agencies charged with the enforcement of Decree 164 like the Ministry of Planning and Investment and the Ministry of Industry and Trade have not given any guiding document and the customs department cannot clear goods for enterprises. Nguyen Huu Nghiep, deputy head of the HCMC Customs Department, told the Daily that his agency and the General Department of Customs had worked with enterprises at Tan Thuan EPZ last week to discuss the problem and work out solutions. According to Nghiep, the regulation requiring enterprises to establish branches outside EPZ should be postponed until June 30 instead of January 1 as mentioned in Decree 164. Besides, whether to establish branches or not should be the legitimate right of enterprises and decided based on their scales and conditions. Goods of enterprises at EPZ are mainly for export, Nghiep said. As a result, in the meantime enterprises should not be required to open branches, which is a costly process. Firms cautious about wage rises this year Enterprises are more cautious about increasing wages and bonuses for employees this year than last year, according to Towers Watson Vietnam. Vu Thi Huyen Trang, manager of global data services at Towers Watson Vietnam, said on the sidelines of a seminar on personnel held by the firm in HCMC on March 27 that enterprises had not seen signs of getting out of the woods soon. Low consumer demand is one of the reasons for them to tighten their wage and bonus budgets of this year. A quick survey on wage, bonus and welfare trends of Tower Watson this year showed that up to 90% of respondents had had plans to tighten spending on training, development, wages, bonuses and recruitment. Businesses plan to increase their wage and bonus budgets by an average 9.6% this year, which Trang said was lower than in previous years. To calculate wage and bonus increases, the corporate sector looks to inflation and business results to find out whether budgets can afford such increases. Trang said that there were only a small number of enterprises with good business results increasing wages by 10-15%. Finance-banking and pharmaceutical enterprises take the lead in spending more on their employees. The survey collected date from 173 enterprises (those in the FDI sector accounting for some 90%) operating in finance, production, pharmaceutical-healthcare, hi-tech, fast consumer goods and energy-chemical. Draft amendments to construction law seen unclear Tran Trong Tuan, director of the HCMC Department of Construction, on March 31 requested clarity for some articles in the draft amendments to the Construction Law, saying that construction and construction investment concepts should be separated. The draft was put on the table during a workshop in HCMC on March 31. Delegates spent much time discussing Article 1, which regulates construction investment, rights and obligations of organizations and individuals in the activity. Tuan said that the concept of construction investment was narrower than that of construction. “Construction licensing involves building and design assessment issues. Meanwhile, regarding rights and obligations of organizations and individuals in construction investment, we rule contractors out,” Tuan said. In fact, contractors are included in the concept of construction. As the Construction Law was issued in 2003 while the nation was drafting the Investment Law, there had been confusion between construction and investment definitions. The concept of ‘construction investment’ should be replaced with ‘construction’ in Article 1. In addition, the Ministry of Construction should add one subject to the law – organizations and individuals that implement construction-related work, Tuan said. Minister of Construction Trinh Dinh Dung said that the Government and the law compiling board had strongly debated revisions to the law when the draft received many suggestions from the National Assembly Standing Committee. In fact, construction investment comprises of two processes: spending and building. “It would be more complete to use the term ‘construction investment’. Construction is okay but a further explanation for it is needed. Therefore, adjustments to the law must be considered carefully,” he said. Delegates at the seminar also discussed construction insurance with many saying that insurance is not necessary for all projects. Firms at odds over VND50-trillion package A new VND50-trillion credit package has been launched in a bid to help revive the real estate market but many enterprises have yet to understand the nature of the program, so their responses are limited. Vietnam Construction Bank (VNCB), in collaboration with Thien Thanh Group, launched the commercial credit package last week to help ease difficulties of the property market and speed up sales of building materials. Le Huu Nghia, director of Le Thanh Co., said that his firm had no demand to take out loans from the package. Le Thanh has signed credit contracts with banks for existing projects with the same lending rate, so it would not leave current lenders with long relationship to partner with a new bank. “If the VND50-trillion package offers a lower lending rate than commercial rates, I will certainly be interested in the program,” Nghia said. A real estate expert said that homebuyer benefits in the package are minimal. “It takes time to evaluate impacts of the package. However, it would only gain success if homebuyers could reap clear benefits,” he said. Dinh Quang Huy, chairman of the Vietnam Building Ceramic Association (VIBCA), said that this credit package looks like a sentiment stimulus than a real credit support as its lending rate is not low. PVFCCo awards formaldehyde plant contract to Toyo PetroVietnam Fertilizer and Chemicals Corporation (PVFCCo) has awarded Toyo Vietnam Co. Ltd. an engineering, procurement, construction contract worth around VND400 billion to build a UFC85/Formaldehyde production plant in Ba Ria-Vung Tau Province. The project invested by PVFCCo will go up in the area of Phu My fertilizer plant in Ba Ria-Vung Tau Province. It can annually produce 15,000 tons of UFC85 or 25,000 tons of formalin. The plant will be operational after 16 months and supply 7,000 tons of UFC85 and 13,000 tons of formalin, which are used in the process of producing urea grains and help harden grains. Cao Hoai Duong, general director of PVFCCo, said all the urea fertilizer plants in Vietnam had to import UFC85 or formalin from the Middle East. The overseas supply is not stable given many factors, including transportation distance, weather and price. Therefore, the forthcoming UFC85/formaldehyde plant will help ensure a domestic supply of such materials for production of urea fertilizer. The project is expected to contribute greatly to generating PVFCCo’s profits as a ton of UFC85 is sold at some US$800 and formalin at US$500. The plant also marks an important step of PVFCCo in its chemical production and product diversity. New VAT rule makes life hard for business start-ups Newly-registered enterprises are struggling with a new rule on value added tax (VAT) as it requires them to have assets worth more than VND1 billion (US$47,440) to enjoy VAT deductions or else they will have to pay the full tax rate. They said the rule, which was issued by the Ministry of Finance in December last year and came into force on January 1 this year, will lead their products prices to climb and erode their competitiveness. The director of a wooden furniture firm specializing which was set up in January said the rule makes it hard for his company to sell products. He explained that if his firm cannot fulfill the requirement of having VND1 billion worth of assets, it will have to pay the full VAT for its inputs, which will result in its production costs surging. The tax will make business start-ups less competitive on both domestic and export markets than those enjoying a lower VAT, he said. Pham Ngoc Hung, vice chairman of the HCMC Union of Business Associations, told the Daily that many enterprises are asking the association for help to deal with the new VAT regulation. Hung said the new regulation on VAT of the Finance Ministry is unworkable since business start-ups in the services sector do not need huge investments. The requirement is not fit for processing enterprises as many of them do the outsourcing for their customers, he said. Although the new ministry’s new rule is designed to thwart the illegal trading of VAT receipts, Hung said, the tax authority should find ways to tackle those dishonest and fraudulent firms, instead of all enterprises. Agriculture ministry wants 400,000 tons sugar export The Ministry of Agriculture and Rural Development has proposed that the Ministry of Industry and Trade (MIT) allow local companies to export 400,000 tons of sugar to China this year in order to reduce inventory this year. The agriculture ministry has estimated the sugar inventory this year at around 377,000 tons, exclusive of the volume smuggled into Vietnam through the country’s southwestern border with Cambodia. The ministry told a meeting in Hanoi last week that sugar output this year was forecast to reach 1.6 million tons, surpassing the estimated demand of 1.4 million tons. This means around 200,000 tons will add to the already-high inventory. Moreover, Vietnam is set to import some 77,000 tons of sugar this year in line with the country’scommitments with the World Trade Organization. Responding to the suggestion, the Mountainous and Frontier Trade Department under the trade ministry said sugar was mainly exported to China through the Ban Vuoc sub-border gate in Bat Xat District in the northern province of Lao Cai. Sugar shipments via this small border gate are not easy, and moreover, Vietnamese enterprises are frequently forced by Chinese buyers to undercut their prices. Local sugar exporters have been permitted to sell 200,000 tons of sugar to China but only half of the volume has been shipped. The Vietnam Sugar and Sugarcane Association suggested at the meeting that the two ministries allow its members to export an unlimited volume of sugar of different types to China without having to apply for a license. However, this proposal was turned down. As sugar is entitled to the country’s price stabilization program, enterprises must secure permission for export, according to representatives of the two ministries. The ministries also agreed that enterprises could be allowed to sell another 200,000 tons of sugar after they had finished export of the first 200,000-ton batch. According to the Ministry of Agriculture and Rural Development, factories sell a kilo of sugar for around VND12,500-12,700 (59-60 U.S. cents) in northern Vietnam, some VND12,200-12,500 in the central region and up to VND13,000 in the south. HCM City to need 75,000 employees in Q2 The HCMC Center of Forecasting Manpower Needs and Labor Market Information (FALMI) has estimated the city’s second quarter labor demand at 75,000 employees. Tran Anh Tuan, deputy director of the center, said those employees with basic and intermediate vocational skills would have greater chance of landing a job than university graduates. The center’s report on employment trends shows enterprises’ demand for the workers with basic to intermediate skills accounts for 35% and 38% while university graduates and those of higher educational levels make up only 27% of the total demand. According to statistics of the Ministry of Labor, War Invalids and Social Affairs, as many as 72,000 bachelors and masters were jobless last year. This shows an imbalance in labor supply and demand in the country. Central region faces breeder lobster shortfall The central region is poised to face a breeder lobster shortfall due to low catches in the sea and experts have predicted further price increases in this crustacean in the coming time. According to the Vietnam Directorate of Fisheries under the Ministry of Agriculture and Rural Development, farmers in Ninh Thuan, Binh Thuan, Khanh Hoa and Phu Yen provinces must rely on marine breeder lobsters. During the period of scarcity, fishermen have even used dynamites and anesthetic for catching lobsters, resulting in massive lobster deaths. In addition, some farmers have sold small lobsters and applied inappropriate transport and storage methods. Therefore, the breeder lobster loss ratio has jumped to 50% while the price of a breeding lobster sometimes surged to VND350,000. Speaking at a forum on sustainable lobster growing in Phu Yen Province on March 31, a representative of Khanh Hoa Province’s Department of Agriculture and Rural Development said the province had over 18,200 lobster breeding cages last year, a strong drop compared to 23,500 cages in the year before. The breeder lobster shortage is the main cause of the decline. Currently, the source of natural breeder lobsters meets only 30-40% of the demand in the province. The province has had to buy breeder lobsters from other localities or resorted to imports from the Philippines and Indonesia, the representative said. Authorities in the major lobster growing localities might ban breeder lobster fishing for several months each year to prevent overfishing, heard the forum. The government of Ninh Thuan Province has banned breeder lobster fishing between April and September, said the Vietnam Directorate of Fisheries. Meanwhile, Phu Yen Province used to invite a U.S. enterprise to invest in breeder lobster production but the firm then refused. The local agriculture department has asked for support from the Ministry of Agriculture and Rural Development and the Ministry of Science and Technology, but these ministries have rejected it. Explaining the problem, Dr. Nguyen Huu Dung from the Nha Trang University said that international scientists had yet to succeed in production of breeder lobsters. Last year, Japan turned out three breeder lobsters but the total farming research cost equaled to the price of a Boeing 747 aircraft while Australian scientists presented only 18 lobsters after 18 years of research. In Vietnam, breeder lobster production was still at a start, Dung said. In the coming time, the nation will still rely on the natural supply of breeder lobsters. Therefore, the agriculture ministry would limit lobster fishing to protect natural resources, said deputy minister Vu Van Tam. The nation now has around 43,000 lobster breeding cages, mostly in Phu Yen and Khanh Hoa provinces. Lobster prices stood around VND1.6 million per kilo in 2013. VN needs to carry out reforms to escape “middle income trap” Vietnam will face with the danger of the so-called "middle income trap" if the country does not take a route of substantial reforms with proper priorities, warned the Nhan Dan (People) online newspaper. Becoming a middle-income country has posed enormous challenges for Vietnam, including the danger of getting caught in the middle income trap. The issue is one of the biggest challenges facing the nation in the process of becoming a “high income” country and reaching still higher goals, said Deputy Prime Minister and Foreign Minister Pham Binh Minh. He made the statement on March 24 in Hanoi at the “International Conference on Economic Reforms for Inclusive and Sustainable Growth: International Experience and Lessons for Vietnam”, which was co-organised by the Ministry of Foreign Affairs, the UN Development Programme (UNDP) and the Vietnam Academy of Social Sciences. The conference attracted the participation of many international organisations, experts and lecturers from the US, India, Indonesia, Thailand and elsewhere. At the event, they shared the experience of countries that reached the middle income level but were able to escape from the trap. Dr. Thangavel Palanivel, chief economist and chief of the Regional Strategy and Policy Unit under the UNDP Regional Bureau for Asia and the Pacific, said that Vietnam can learn from the development model employed by the Republic of Korea (RoK), under which high-quality education and scientific development went together with economic growth and increased job creation on the labour market. The development experiences of countries around the world have shown that countries with persistent reforms, good institutional frameworks and high competitiveness indices can overcome the middle income trap. However, escaping from the trap is not as simple as blindly following a predetermined model. According to Professor Robert Lawrence of Harvard University, Vietnam’s joining the Trans-Pacific Partnership Agreement could contribute to enhancing the nation’s competitiveness, but it may also result in many problems. Among these, he said, were unintended consequences that could harm agricultural or industrial production, as the State is not allowed to subsidize domestic production under the agreement. He added that success is not decided beforehand, and that it is easier said than done. Discussing economic reform towards sustainable development, UNDP Administrator Helen Clark said that Vietnam should focus its efforts on improving the productivity and quality of agricultural production and on developing its high value sectors to gain from its competitive advantages both in the region and worldwide. She noted that Vietnam engages in a vast quantity of agricultural production; therefore, it is advisable to take advantage of agriculture to increase the added value of farmers. Clark expressed her willingness to share with Vietnam the experience of New Zealand, her homeland - a country whose economic development of the economy was largely based on agriculture. She also pledged the future assistance of the UNDP. The UNDP Administrator said that, while touring the Central Highlands and the Southeast Region to learn about poverty reduction in Vietnam, she saw many effective models that should be duplicated in other regions. She suggested that Vietnamese authorities seek ideas from such models for the upcoming reform process, one which she called “second generation economic reform.” According to the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), agricultural labour accounts for nearly 50% of the total national labour force and around 70% of the population in rural areas. However, the labour productivity of Vietnam is the lowest in the region. The UNDP recommends that Vietnam take action to improve labour productivity and the quality of agriculture and aquaculture as part of its development strategy, as nearly all the nation’s poor live and work in rural areas. VN plans to move to competitive power trading market Although the competitive power generation market has operated quite smoothly, it is not an easy job to move to a competitive power trading market next year, the Vietnam Economic News has said. Foreign experts supposed that Vietnam will still has much work to do to have a complete competitive power trading market after 2020. According to Dinh The Phuc, the deputy director of the Electricity Regulatory Authority of Vietnam under Ministry of Industry and Trade (MOIT), Vietnam will face many challenges by 2015 when it moves to a competitive power trading market. The reason is Vietnam is at its early stage to develop a competitive power market and has many limitations such as lack of experience to develop a power trading market and poor infrastructure regarding power plants and plans to train power operators. To make good preparations for the power trading market, Deputy Prime Minister Hoang Trung Hai recently asked MOIT to work out a real competitive power trading market by 2015. The Deputy Prime Minister noted that Vietnam should make cautious steps in developing this market based on learning experiences from other countries to find out the most suitable model for Vietnam. At a Vietnam-Norway workshop on hydro-power and electricity market reform recently held in Hanoi, Per Christer Lund - an electricity industry consultant based in Singapore, said that Vietnam’s annual power growth is over 12 percent, therefore the power industry needs to be transparent and fair in its sale prices. The participants in the market must have rights to make decisions as they thoroughly know about the operation and competition process of the power production, distribution to offer consumers the most competitive prices. Sharing the same view, E. Kirkeby Garber, the Vice Chairman of SN Power Group in Southeast Asia region said in the near future, if Vietnam wants to develop a competitive power trading market in a sustainable manner, the prices must be determined by the market and consumers accept it. Consequently, the power industry can attract more investment and develop without the government’s subsidies. Experts suggested that Vietnam needs to simplify investment procedures and raise transparency to create a flexible power market. A development roadmap to form a competitive retail power market including three phases is relatively suitable, however, they also warned that Vietnam needs to determine where it is in each phase of the roadmap. The first successful step would be a cushion step for further development in later phases. The roadmap for Vietnam’s electricity market reform offered by MOIT includes four phases. In 2010, it allowed foreign and private investors to produce and sell electricity to the Electricity of Vietnam; forming a competitive power generation market from 2011-2014; developing competitive power trading market (2015-2022) and operating a competitive retail sale power market (after 2022).- SOE restructuring under scrutiny The financial restructuring of State-owned enterprises (SOEs) is getting bogged down in a myriad of complex and exasperating problems, leading experts said at a conference in Hanoi on April 2. Those in attendance at the conference included Deputy Prime Minister Vu Van Ninh, Head of the Party Central Committee’s Economic Commission Vuong Dinh Hue, leading economists, and representatives from many SOEs. Deputy PM Ninh praised the significant contributions of SOEs to the nation’s development and displayed his strong determination and commitment to accelerate the SOE restructuring process and renovate the growth model. He stressed the need to increase the operational efficiency of SOEs, which he said plays a key role in the national economy, and is considered an effective tool to stabilize the macroeconomy and push up socio-economic development towards socialism. Ninh also suggested SOEs need to improve on administration work, be in the vanguard of the renewal process and the application of science and technology. Other participants at the conference reported that 167 out of 642 SOEs have withdrawn capital from non-core business areas, contributing VND7.8 trillion to the State budget. From now to 2015, 472 others are in the process of realizing plans for capital withdrawal. They pointed out a number of shortcomings in SOE restructuring, such as ineffective administration, poor risk management,lack of transparency, and wastefulness and cited capital shortage as one of the main reasons leading to the slow equitisation of SOEs. A host of measures were also proposed to speed up SOE restructuring process, including fine-tuning the legal framework, reinforcing inspection, increasing capacity, and clarifying responsibility for SOE management agencies – the Ministry of Planning and Investment, the Ministry of Finance, the Ministry of Home Affairs, and the Ministry of Labour, Invalids and Social Affairs. The Finance Ministry was required to draw up practical measures and provide financial assistance for the needy SOEs in order to help them iron out their snags. Vietnamese businesses attend Invest in Asia 2014 Seven Vietnam businesses participated in the – Invest in Asia 2014 – conference held in Singapore on April 1-2, discussing advantages and opportunities of investing in Asia with the roughly 100 representatives from foreign investment funds and financial institutions in attendance. Prominent Vietnamese business attendees in the conferences included Bao Viet Group (BVH), Cotec Construction Joint Stock Company (CTD), Hau Giang Pharma Corporation (DHG), Gemadept Corporation, Hoang Anh Gia Lai (HAG), Nam Long Investment Joint Stock Company and Vingroup (VIC). A representative from Bao Viet Group said that the participation of nearly 30 high profile investment funds and foreign financial institutions including France’s BNP Paribas Investment Partners, Japan’s Nomura Asset Management and Nikko Asset Management Asia Ltd, the US’ JP Morgan Asset Management and Oracle Management shows a strong desire to learn about investment opportunities in Vietnam. According to Nguyen Vinh Tran, general director of Nam Long Investment Joint Stock Company,the company’s involvement in the event aimed to mobilize capital for the first phase of a US$50 million urban development project in Long An to be implemented later this year. He unveiled the company’s long term plan to get listed on Singapore’ securities stock exchange after first securing a firm foothold in the marketplace and attract capital sources from overseas for national development. A Gemadept group representative – a leading logistics and port operator said he received an invitation to work with over 20 foreign investment funds, mostly from Japan such as Kasikorn Asset Management Co. Ltd, Tokio Marine Asset Management International. Bui Thi Thu Huong, the group’s financial director said that this creates an excellent opportunity for the group to approach foreign investors and devise proper investment plans for the future. She added that 2014 is the year for Vietnam to open its door to logistics businesses and Gemadept wants to seek a strategic partnership in this sphere. John Chong, MaybankKim Eng Group CEO said that 70 companies from six ASEAN members joined the event with the aim of raizing investors’ awareness about ASEAN and increase investment in the regional grouping President and Chief of Executive of Maybank Group, Datuk Abdul Farid Alias spoke enthusiastically about the fact that the ten ASEAN members have created the world’s fastest growing region with over 3,000 listed companies with total capitalization of up to US$2.300 billion. Regarding Vietnam’s market potential, John Chong said that the group formed an affiliated subsidiary in Vietnam in 2008 and highly anticipates bringing the total investment into the country to US$30 million in the future. More effective measures needed to boost tuna exports: experts Despite a sharp growth in tuna exports in recent years, experts asserted that yet more effective measures should be applied to promote the sustainable development of tuna fishing and processing. In the last five years, Vietnam has enjoyed a surge in tuna sales, which hit US$520 million last year, up from US$188 million in 2008. Currently, about 3,500 vessels, or 14 percent of the country’s fishing fleet, manned by about 35,000 fishermen, have engaged in offshore tuna fishing. Vietnam’s yearly tuna haul is estimated to reach 600,000 tonnes in 2014. However, Nguyen Ngoc Oai, deputy head of the General Fisheries Department, held that Vietnamese fishermen have yet to exploit the full potential of the sector. He attributed the limitations to old-fashioned technology in tuna fishing, processing and distribution. This has resulted in a decrease in the quality and value of the product, despite a surge in catching, he said, adding that the trademark and competitiveness of Vietnamese tuna have also been affected. According to Vice Chairman of the Vietnam Tuna Association Chu Tien Vinh, tuna fishing should be defined as a key factor in the country’s offshore fishing sector. Adequate attention and management are also needed, Vinh underlined. Sharing Vinh’s opinion, Pham Ngoc Tuan, deputy head of the Aquatic Resources Exploitation and Protection Department under the Ministry of Agriculture and Rural Department, said the links between tuna processors and exporters with the market have yet to be effective. This has led to the state of a concrete strategy for targeted markets. Meanwhile, Nguyen Van Hung, Vice Director of the State Bank of Vietnam in Khanh Hoa province, asserted that the bank should design support policies in credit for tuna fishers and processors. Currently, SBV has yet to deploy credit for owners of tuna fishing vessels due to the high risks in the sector. Bac Ninh accepts new investment projects The northern province of BacNinh granted investment licences to 32 new projects worth nearly US$200 million in total registered capital in the first quarter of this year, fulfilling 64 percent of the yearly target. The money was mainly sourced from the foreign direct investment (FDI) as local authorities concentrated on satellite projects from big companies, such as Samsung, Canon and Nokia, according to Ngo SyBich, head of the management board of the provincial industrial parks. Local authorities will continue mobilising all investment resources from home and abroad, adjusting policies and building a list of fields that encourage or limit investment to improve the quality of the investment flow into the province. Environmentally-friendly projects that utilise modern technology and facilitate the strengthening of links between domestic businesses will be prioritised. Others fetching high added value, such as banks, insurance companies and consultancy firms, will also receive special attention. Apart from attracting FDI in its support industry, the province also favours projects that are globally competitive. Bac Ninh has finalised a plan approved by the Government to develop 15 industrial parks in an area of over 7,500 ha by 2015 with a vision to 2020. Eight have already been put into service. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR