BUSINESS IN BRIEF 12/4 Coffee export earnings to hit US$3 billion The Vietnam Coffee and Cocoa Association (Vicofa) expects to export more than 1.5 million tonnes of coffee in the 2013-2014 crop, and earn US$3 billion, up 20% in value from the previous crop. Vicofa Vice President Do Ha Nam made the forecast at a Vicofa congress in Ho Chi Minh City on April 11. Nam revealed Vietnam raked in US$1 billion from shipping abroad approximately 700,000 tonnes since the start of the crop (October 2013), making up 40% of the projected volume.   He said Vietnam will continue to cash in on new orders as coffee prices keep rising due to prolonged drought in a number of coffee growing countries in the world in the coming months. Vietnam is expanding coffee growing areas to increase the volume, meeting foreign consumer demands.   “Vietnamese coffee is very popular with global consumers for its premium quality. Therefore, coffee must be considered a strategic commodity,” Nam said. “The crux of the matter is that when coffee output increases, growers will no longer worry about low prices,” he concluded. HCM City keen on cooperating with Indian businesses HCM City is committed to creating highly favourable conditions to support the continued attraction and development of their foreign investment. Le Manh Ha, deputy chairman of the HCM City People’s Committee, told a group of Indian business representatives at an April 11 meeting. Ha emphasized that fine political and diplomatic ties between Vietnam and India over the years have laid  a solid foundation for trade and investment relations between the two countries, adding that both nations are striving to bring two-way trade turnover to US$7 billion in 2015 and US$15 billion by 2020. Ha said that HCM city is center stage for the betterment of  all-around relations between the two nations, especially in the trade and economic fields with two-way turnover reaching over US$700 million in 2013, noting that India now has 26 investment projects in the city. For his part, to further develop cooperative relations between HCM City and Indian partners, India’s Consul General in HCM City, Deepak Mittal, said that in 2014, the Indian Business Association in Vietnam will organize seminars to promote investment and trade so that businesses can seek cooperative opportunities. India will also send delegations of businesses operating in the mechanical, pharmaceutical and oil and gas fields to HCM City to boost investment, he concluded. Representatives from the Indian Business Association in Vietnam said that HCM City offers good opportunities for Indian partners to implement projects for mutual benefits, adding that, Vietnamese businesses can seek promising business opportunities in India by opening a representative office there. Revise mechanical engineering plan: PM Prime Minister Nguyen Tan Dung yesterday called for a revision of the planning strategy for the country's mechanical engineering industry. Dung said it only met about 32 per cent of domestic demand in 2012, 10 years after the development strategy was rolled out. At a conference to review the strategy plan, reports showed that the sector posted nearly VND228 trillion (US$10.8 billion) in production value in 2012, a six-fold increase from 2000. The figure rose to over VND251 trillion ($11.9 billion) last year. Export revenue for the mechanical engineering industry hit $12.1 billion in 2012 and more than $13.1 billion in 2013. Deputy Minister of Industry and Trade Le Duong Quang noted that the sector could now manufacture hydraulic machinery for hydro-electric power plants, including those as large as the 2,400MW Son La Plant. Quang said the motorbike industry also made great progress, not only meeting domestic demand, but exporting 150,000 units a year. The local content rate in made-in-Viet Nam motorbikes has reached 85-95 per cent. However, Prime Minister Dung noted that many targets were not met. For example, the goal was to have 45-50 per cent of domestic demand met by 2010, but only 32 per cent was met. In addition, experts warn of the dominance of foreign-invested enterprises in the sector. They also warn that the sector has to import materials and machines, such as welding rods, driving up the trade deficit to $6.6 billion in 2006 and $16.04 billion in 2012. The country still lacks competitive products that can serve vital areas, such as farming, fishing, aquatic product processing and transport. Dung instructed agencies and ministries to make sure that policies to help the sector actually work, such as those relating to land, corporate income and value-added taxes and credit - and facilitate the development of supporting industries. "Our mechanical engineering sector has contributed very little to the increased application of mechanics in agricultural production," Dung said. Participants suggested that more enterprises other than State-owned companies be allowed to join the key mechanical engineering development programme. Nguyen Van Thu, chairman of the Viet Nam Mechanical Engineering Association, said the sector had the potential to generate revenues up to $300 billion by 2055, but so far, it had been plagued by low competitive products and outdated technology. Thu noted that little investment was put into the development of mechanical manufacturing. The association estimated that between 2002-12, not a single new factory in mechanical manufacturing was opened. "We don't have a clear-cut strategy, clear plan of investment and supporting policies," he said. "It's already 2014 and we still haven't figured out our priorities within the sector." Thu said the Government should provide policies that can support domestic companies, such as regulating the ratio of materials and industrial equipments made in Viet Nam used in projects. The Government should also provide favorable credit policies for farmers in the long term so that they could easily access mechanical made-in-Viet Nam equipment. Over 100 firms attend trade fair in Cambodia More than 100 Vietnamese businesses have registered to participate in a Vietnam-Cambodia trade, services and tourism fair in Phnom Penh, Cambodia from May 7-11. HCM City 2014 fair will feature a number of leading Vietnamese companies such as Vinamilk, Vissan, Cadivi, Duy Tan plastics and Uu Viet Cushion which are favourites with Cambodian people. Pho Nam Phuong, Director of the HCM City Trade and Investment Promotion Centre (ITPC), said the fair is held annually to promote Vietnamese brands among Cambodian people. “We are also working with the Vietnam-Cambodia Friendship Association to organise a seminar to introduce new trade and investment policies of Cambodia, helping businesses from two countries to seek cooperative opportunities,” she added. Some businesses reveal Cambodia still needs to import consumer products and materials for agricultural and industrial production and construction, offering Vietnamese businesses a chance to further penetrate this market. Vietnam considers joining UN e-commerce convention Communications by paperless means and defining the criteria under which they replace paper-based communications is a matter of the utmost urgency. Leading trade policy experts made the point while attending a Hanoi seminar on April 11 emphasizing that this is a prerequisite for Vietnam’s membership in the United Nations Convention on the Use of Electronic Communications in International Contracts. The convention, approved at the 38th meeting of the UN General Assembly in New York on November 23, 2005, aims to facilitate the use of e-communications in international contracts which substantively are as valid as paper-based written contracts in commerce. Participants weighed up the pros and cons of joining the convention, especially its impact on Vietnamese businesses and compatibility between the convention and Vietnam’s legal system concerning e-commerce. Lai Thu Huong from the Legal Affairs Department under the Ministry of Industry and Trade emphasised that joining the convention will bring about many benefits for Vietnam. It will help businesses handle less disputes arising from international transactions, while helping promote research, supplement and adjust domestic e-commerce laws, Huong said However, she said Vietnam will face a number of difficulties due to differences between domestic and international laws, and weak human resources who could not keep up with technology changes. Experts at the seminar proposed Vietnam quickly prepare procedures to join and implement the convention. Vietnam investment forum in Germany fruitful A Vietnam investment forum that took place in Berlin on April 10 was a success as it drew the participation of nearly 200 German companies. The event was a joint effort among the Berlin Chamber of Commerce and Industry (IHK), the Vietnamese Ministry of Planning and Investment, and the Vietnamese Embassy in Germany. In his opening remark, Minister of Planning and Investment Bui Quang Vinh hailed Germany as the biggest European economy with a system of modern public governance and hi-tech innovations which are crucial to Vietnam’s economic restructuring. He assured participants that promising chances are awaiting them once Vietnam fully joins the ASEAN Free Trade Area and strikes a free trade agreement with the European Union and the Trans-Pacific Partnership (TPP) deal. Vietnam will further renew economic institutions, regulate the economy based on market tools and allocate a fair share of capital and resources, making it easier for investors to do business in the country, he noted. Citing successful joint projects such as the Vietnamese-German university, Governing Mayor of Berlin Klaus Wowereit expressed hope that the coordination between Berlin and Vietnam’s major cities of Hanoi and Ho Chi Minh City will go stronger, particularly in transport infrastructure, water supply and treatment, and research as well. According to him, Germany has picked out Ho Chi Minh City as host of its Asia-Pacific economic cooperation forum, which demonstrates the fact that Vietnam is on the radar screen of German investors. At the forum, representatives from such high-profile groups as Braun, Bosch and Duane Morris shared their working experience in Vietnam . A lot of queries about the country’s investment climate were also cleared up. Earlier, Minister Vinh joined a discussion with Mayor Wowereit and IHK President Eric Schweitzer, who also takes charge of the German Chamber of Commerce and Industry, to seek stronger bilateral connections. While in Berlin, he also met with State Secretary to the Federal Ministry for Economic Affairs and Energy Stefan Kapferer, State Secretary to the Ministry of Economic Cooperation and Development Thomas Sillberhorn and Siemens executives. In Frankfurt city, Vinh met Chairman of the German Asia-Pacific Business Association and Deutsche Bank Chief Executive Officer Jurgen Fitschen before holding talks with executives of Western Berlin groups operating in Vietnam. Vietnam attends Singapore Yacht Show Vietnam is taking part in the Singapore Yacht Show - the largest of its kind in Asia - that opened on April 10, with the aim of exploring its river tourism potential. The country offered a pavilion of the Ho Chi Minh City Department of Culture, Sports and Tourism advertising the river tourism potential of the city and surrounding areas. Deputy Director of the department La Quoc Khanh said this first attendance at the show will help the city’s sector assess its river tourism capacity, particularly that for the high-end segment. The total value of yachts at the fourth Singapore Yacht Show is estimated at US$500 million. The organizing board said the scale of the event almost doubles year after year. At the event, Singaporean Minister of the Prime Minister's Office S. Iswaran said Asia Pacific has become an attractive cruising option for the world's most sophisticated vessels. Beyond direct tourism receipts, the yachts have brought with them wider economic benefits, such as to marinas, and repair and maintenance facilities, he added. The Singapore Yacht Show is part of the ninth Singapore Maritime Week that began on April 6. 500kV power line inaugurated in QuangNinh Electricity of Vietnam’s National Power Transmission Corporation put into use a 500kV power line in the northern province of QuangNinh on April 10. Construction on the VND946 billion (US$45 million) QuangNinh-Mong Duong power line began on December 24, 2012. As part of the power development strategy in the northeastern region, the project was implemented by the Mong Duong 2 thermoelectricity contractor under the form of build-operate-transfer (BOT). The 25.2 km line, stretching from the Quang Ninh 500kV station to the Mong Duong thermoelectricity plant, transmits power from the plant to the national grid, helping reduce power losses and increase the sector’s production efficiency. The corporation has set a target of providing between 122-122.5 billion kWh of electricity in 2014, up 9-9.5 percent from last year. It safely transmitted more than 111.8 billion kWh of electricity in 2013, eight percent higher than the previous year. Mexico businesses seek cooperation opportunities A Mexican business delegation has worked with An Giang province to consider the possibility of cooperation for seafood imports from the locality to Mexico, offering new opportunities for An Giang tra catfish to achieve greater penetration of the international market. During the working visit on April 10, Mexican businesses surveyed the production and processing process of frozen tra catfish to move forward the signing of contracts for the imports of pangasius fillets and fast food products from the An Giang. The delegation was briefed on farming, processing, consumption and types of fish products. Mirpac Norte Mexico Company General Director Alex Orozco said he was satisfied with the production and processing process that ensures the quality of An Giang Tra catfish can meet international standards. An Giang has two main export items--rice and Tra fillets. An Giang’s annual aquaculture outputs reach 300,000 tons of raw fish. Currently there are 17 seafood exporters in the province which export seafood to nearly 100 countries and territories from across the globe. In particular, An Giang’s high value products include fillets, fish ball, fish steaks, fried fish and fish oil products. According to the provincial Department of Industry and Trade, in the first quarter of this year, the province exported 38,600 tons of frozen seafood, earning over US$93 million, an increase of 5% in volume and 10% in value over the same period. Mexico is considered a new market for An Giang. Earlier in mid March 2014, representatives from the Mexican Rice Council in the Asia-Pacific region toured the locality to learn about the production, import and export of rice in An Giang. UK Bank supports Vietnamese coffee producer The UK Standard Chartered Bank (SCB) and Tin Nghia Corporation in the southern province of Dong Nai have signed a credit agreement worth US$22 million to help this business boost coffee production and exports. SCB Vietnam General DirectorNirukt Sapru said the credit package aims to support Tin Nghia’s operations, showing business capability and cooperation between Tin Nghia and Standard Chartered Bank in the field of trade finance. Douglas Anthony Barners, UK Consul General in Ho Chi Minh City said that the signing of the credit agreement between Tin Nghia and the SCB will contribute to deepening the relationship and cooperation between businesses as well as the two peoples. Tin Nghia is listed as one of three major coffee exporters in Vietnam. In recent years, Tin Nghia exports an average of 100,000 tons of coffee per year, gaining more than US$200 million in export earnings. Apart from purchasing coffee from the domestic market, the corporation has heavily invested in Arabica coffee plantation in Laos with an area of up to 1,000 hectares. It is expected to build a processing plant applying wet processing technology. 113 businesses nominated for Top Trade Services Awards One hundred thirteen businesses operating in the trade, service, industry, finance and banking sectors have been nominated for the Vietnam Top Trade Services Awards 2013. This was announced at an April 10 press conference in Hanoi  by Nguyen Huu Quy, Editor-in-Chief of Industry and Trade newspaper, who is also President of the selection council.Quy said that the organizing board selected 113 enterprises out of 400 entries nationwide for the prestigious award. Seventeen entrepreneurs and 96 businesses have also been nominated for outstanding prizes. Quy emphasized that this year’s prizes highlight businesses which have implemented “Vietnamese people priotize using Vietnamese goods” and “Bringing Vietnamese goods to rural areas” campaigns. Since 2007, the Ministry of Trade and Industry launched the event to honour hundreds of businesses and entrepreneurs nationwide for their positive contributions to the country’s economic development. This year’s awards ceremony will be held at the My Dinh National Convention Centre and live broadcast on VTV1 on April 19. Over 500 companies join int’l exhibition Saigon Tex 2014 More than 500 companies from 22 nations and territories around the globe attended the Vietnam Saigon Fabric and Garment Accessories Expo 2014 (Saigon Tex 2014) which opened in HCM City on April 10. On display at the exposition were the latest in fabrics, equipment and components for the Vietnamese and region’s fabric and garment sectors. The event offered an opportunity for garment and textile businesses to get an up close look at advanced nations’ modern equipment and speak directly to the manufacturer’s representatives on detailed product specifications. It also provided a great occasion for businesses to establish new business contacts and seek cooperation partners to promote their businesses and establish alternative supply channels. Last year, Vietnam’s garment and textile sector posted a high growth with export turnover reaching US$20.4 billion, up 18% from the previous year. The sector is likely to achieve export target of US$25 billion by 2020. At present, the Vietnamese Government is speeding up Trans-Pacific Partnership (TPP) agreement negotiations and other important Free Trade Agreements (FTAs). Megamall in Hanoi’s Long Bien taking shape Japanese giant retailer AEON and Vietnamese Him Lam Joint Stock Company have announced plans to break ground on a multi-million dollar shopping complex in Hanoi’s outlying district of Long Bien later this month. The AEON Mall Him Lam will be constructed on 10ha in Say Dong industrial park at an estimated cost of US$200 million. It will include a commercial centre, hotels, restaurants, entertainment areas, offices, and a sports complex. Once completed in 2015, the AEON Mall Him Lam will have a total leasing area of 75,500 square metres. Earlier, AEON opened its first shopping complex in Vietnam called “Aeon Mall Tan Phu Celadon” in Ho Chi Minh City in January 2014. A second complex by the Japanese firm in the southern province of Binh Duong is scheduled for completion this November. Sustainable cocoa project launched in Binh Phuoc A ceremony was held in the southern province of Binh Phuoc on April 10 to launch a new cooperative project of the Cocoa Development Centre (CDC) aimed at strengthening sustainable development. This is a cooperative project to strengthen long-term economic development of cacao among the Vietnamese, the Netherlands governments, and organizations such as Robobank, Mars Group, Gargill Group, IDH, and Oxfam. The project has been successfully implemented since 2012 in Dak Lak and other provinces. Addressing the ceremony, Masterfoods' Cocoa Sustainable Development Institute Director, Peter Van Grinsen, expressed his conviction that the CDC/CVC (Cocoa Development Centre - Cocoa Village Centre) model which will bring practical efficiency to the cocoa sector in Binh Phuoc province when fully operational. “It will also help farmers get access to techniques and input materials at competitive prices,” he said. Phan Van Don, deputy director of the province’s department of agriculture and rural development added that this is the right direction for the province to take, which will bring many benefits to cacao growers. “In the future, the department will co-ordinate with the centre to provide training in advanced cultivation techniques so that farmers can grow cacao in the most effective manner”, he concluded. The CDC/CVC model involves transferring techniques which have been applied in many nations in the world, aiming to encourage farmers to grow cacao in a professional and sustainable manner. Steel businesses encouraged to invest in modern technology The circular on technology, machinery and equipment used in the steel industry is seen as an engine for steel businesses to invest in modern technology in order to improve competitiveness, said the Vietnam Economic News on April 8. According to Circular 03/2014/TT-BCT issued by the Ministry of Industry and Trade, machinery and equipment used in the industry must meet provisions of the law on energy saving. Before an introduction of the new circular, many steel businesses actively applied modern technology in production, contributing to reducing costs and improving competitiveness such as installing energy-saving devices mounted with inverter and taking advantage of exhaust fumes from smelting furnaces to dry raw materials. These are large businesses having high competitiveness in the steel industry. Trinh Van Hoan from the Vietnam Steel Corporation’s Technical Safety Department said that the Thu Duc Steel Joint Stock Company conducted research and successfully applied the system to load hot billets in order to roll steel, contributing to saving fuels for the company. In the previous period, it was necessary to wait for cooling time and then put into rolling, causing oil and gas losses. The new solution has contributed to saving 30 percent of power consumption. In terms of the Thai Nguyen Iron and Steel Joint Stock Corporation, the main materials for pig-iron production remain coal and power. Therefore, the plant has used 207kW electric current instead of 210kW electric current in order to save power and limit power wastage in a case of power cut. In addition, restarting smelting furnaces will take a lot of energy. Therefore, the plant has minimized outage and idling time by rearranging production hours. Moreover, old incandescent bulbs were replaced by power-saving compact fluorescent bulbs. These solutions have helped the plant significantly reduce power consumption. In terms of the Vietnam Steel Corporation, to save power, the corporation has actively invested in modern machinery and equipment, applied advanced technical measures and rearranged the organisational structure in order to reduce power consumption and improve efficiency in steel production. These solutions have helped the corporation shorten molten time and increase the life of furnaces as well as reduce power consumption. In addition, the corporation has organised production based on two shifts of 20 hours per day in off-peak and normal hours to take advantage of low price power. The corporation has spent peak hours to maintain machinery and equipment and prepare raw materials for production. The corporation also removed all electric furnaces with a capacity of less than 10 tonnes and purchased electric furnaces with larger capacity. In particular, reorganizing production hours was implemented. These solutions have helped the corporation reduce about 20 percent of power consumption. Trinh Van Hoan said that in the near future, Vietnam Steel Corporation leaders will direct member units to apply advanced technical measures in order to continue reducing power consumption from five to seven percent.- Vietnam dressing up Vietnam may soon become a fashionista paradise with scores of leading fashion retailers vying against one another to distribute their brands in the fast growing country. Chairman of Luala Fashion Company Do Ngoc Minh just inaugurated their second store in Ho Chi Minh City. He forecasted that Vietnam will soon be a leading destination for fashionable shoppers from throughout the region. Foreign luxury retailers would rather work together to grow their collective market share quickly, than catfight over mere metres of sales space. Luala’s second store is over 300 square metres and has occupied a location previously held by Gucci and neighbouring the Milano store. Luala was founded in 2006 and is managed by DX Fashion Group, it opened its first store in Hanoi and specialises in distributing numerous international fashion brands. In May last year, Luala merged with Milano with the aim of establishing a firm foothold in the southern market. Experts say Ho Chi Minh City is an ideal market for high-end fashion brands, but Luala is also faced with competition from similar companies such as Imex Pan Pacific Group (IPP), Tam Son Fashion, and Four Seasons. Minh said that location is critical in developing a business. Luala was confident that the company’s buyers have over 20 years experience in the fashion industry and have a clear understanding of Vietnamese consumer trends. Minh added that DX Fashion was on a smaller scale than its competitors but that Luala included a private development strategy unique to it and Milano. Instead of opening single brand stores within a trade centre, DX Fashion invests in department stores offering scores of brands. Luxury fashion companies have noticed several interesting aspects of Vietnam likely to lure international tourists. Moreover, they also have strategies to win over medium and high-end domestic customers. Le Hong Thuy Tien, general director of IPP said that sales to international tourists were growing and that just last year IPP saw 20 per cent growth in the face of shrinking consumption. Minh said that Vietnam’s retail market still has plenty of room but that high-end fashion brands faced challenges such as complex customs procedures and high import taxes. According to Minh, if the state supplies sound policies, current fashion companies in the countries will fare even better and therefore potential entrants would be more eager to invest. Brands that have made significant investments in Hong Kong, Singapore and Thailand have their sites set on Vietnam and are just waiting for the right time to strike. “Right now, the right policies and thereafter establishing presence are more important to these companies than fighting over market share,” Minh explained. Minh added that at present, Vietnam is not yet considered an attractive high-class shopping destination in Asia. He explained that compared to other ASEAN countries, Vietnam’s tourist volume was high, but their spending was quite low. Most international tourists spend a lot on souvenirs handicrafts. Not only DX Fashion, but other groups such as IPP, Tam Son and Four Seasons are also eagerly awaiting a policy shift in their favour. One policy they would like is a value-added tax (VAT) refund. Thailand is notable in this regard. But in Vietnam, the VAT refund procedure is complex. That said, until this changes, if fashion companies want sales to international tourists to increase they may have to loosen their own purse strings. Discussing IPP’s business plan for this year, Tien said they hope the economy will get back on track as their goal is to double last year’s turnover. Minh said DX and Luala were preparing for challenges in 2014 but that they are confident in their long-term strategy. HCM City’s EPZs, IPs fall short of workers Labor shortage is one of the headaches faced by companies in industrial parks (IPs) and export-processing zones (EPZs) in HCMC at the moment, according to the HCMC export processing zones and industrial parks authority (Hepza). Labor demand in the city’s IPs and EPZs rose slightly in the first quarter of this year, especially for unskilled laborers, which is attributable to a number of workers having quit jobs in the year to date and operational enterprises’ strong need for production expansion. The demand at local enterprises in EPZs and IPs was estimated at about 17,130 workers in the first quarter, particularly in textile-garment and footwear-leather industries. Meanwhile, the job placement and corporate assistance center of Hepza could only introduce 1,480 candidates to these employers but only 450 of them met employers’ recruitment requirements. Despite the rising employment demand, the city has seen a labor undersupply in EPZs and IPs. To deal with the situation, the Hepza center has worked with the Voice of HCMC (VOH) to air information about recruitments by enterprises at IPs and EPZs in the city in the latter’s radio programs. Besides, to ensure a sustainable labor supply, the center has also joined forces with vocational schools and other localities to organize training courses for workers. For instance, the center and the Military Region 9 Vocational School in the Mekong Delta province of Vinh Long have jointly supplied skilled workers for EPZs and IPs in HCMC. The center has worked with Esuhai Co., which specializes in training and sending local workers to Japan for guest work, to provide high-level employees for companies in the zones. Also, the center has organized job-seeking skill consulting and job placement fairs for students from Ton Duc Thang University and HCMC Economics and Technology College among others. Currently, there are around 1,290 investment projects active in local EPZs and IPs with total registered capital of over US$8 billion. The current number of employees at these IPs and EPZs are roughly 269,800, dropping by more than 4,200 compared to the same period in 2013. HCM City’s FDI posts strong rise in Q1 While fresh foreign direct investment (FDI) approvals in the country suffered a sharp fall in the first quarter of this year, those in HCMC rose strongly in the period. A recent report by the HCMC Department of Planning and Investment says the city licensed 78 new investment projects with total pledges of over US$691 million in the first quarter, jumping 332% over the year-ago period. Besides, 26 operational FDI projects in the city spurred capital by a combined US$62.3 million in the first three months. As such, both fresh and additional FDI pledged for the city amounted to nearly US$754 million in January-March, growing 125% year-on-year. Of the amount, up to more than US$406 million was channeled into the projects outside the city’s export-processing zones (EPZs) and industrial parks (IPs), said the Investment and Planning Department. Late last month, the General Statistics Office (GSO) estimated the foreign direct investment (FDI) capital pledges for new and operational projects across the country in the first three months at US$3.33 billion, down by 49.6% from a year ago. As of March 20, 252 new FDI projects had been registered with total investment capital of more than US$2 billion, a year-on-year increase of 6% in number and 38.6% in capital while investors of 82 operational projects had registered to add US$1.29 billion in total. The local EPZs and IPs witnessed a strong rise in foreign investment in the first three months, according to the HCMC export processing zones and industrial parks authority (Hepza). The FDI inflow into local EPZs and IPs was estimated at more than US$234.5 million in the first quarter, surging 97% year-on-year, Hepza office manager Ho Xuan Lam said. The major FDI contributors there include a US$140 million high-class textile-garment project by Vietnam Worldon Ltd. Co., a US$50 million high-class fabric weaving project by Sheico Vietnam Ltd. Co. and a rubber glove scheme of Cleanwrap Latex Vietnam Ltd. Co. worth US$10 million. The city’s IPs and EPZs have also attracted plenty of hi-tech schemes in recent times. These schemes comprise a US$4 million electronic components plant of Merrimack River Precision Mechanical Ltd. Co., an electronic components facility of Arirang Vietnam and another Japanese-invested scheme. Lam said that in the second quarter Hepza would concentrate on supporting the Vietnam-Japan Hi-tech Area project in Hiep Phuoc IP in a bid to woo Japanese hi-tech supporting schemes. In addition, the authority will accelerate construction and expansion of An Ha, Dong Nam and Tan Phu Trung IPs to lure more investors. Hepza targets investors with hi-tech and supporting schemes, especially those in mechanics, electronics, chemical and processing industries, which are identified as the top priorities by the city’s government. Honda to set up power tools unit in HCMC Honda Asian Motor Co. Ltd. is seeking approval to invest US$4.1 million in a power products unit in HCMC. The company said it sent an application to HCMC authorities late last month for establishing Honda Vietnam Power Products Co. Ltd., which is expected to be up and running in October this year. Honda has since 1994 been cooperating with Hoa Binh Corporation in Vietnam to distribute its power products. The Japanese manufacturer said last year it sold a total of 380,000 power products like generators and motors in the Vietnamese market. Q1 revenue from software outsourcing grows strongly Software outsourcing companies recorded high revenue growth in the first quarter of this year versus last year’s same period and expected to maintain this momentum in the coming months based on the contracts they have won for the entire year. Tran Phuc Hong, managing director of TMA Solutions, forecast the software outsourcing market would maintain stable growth towards the year-end as most of the contracts had been secured in the year to date. “TMA’s revenue rose by around 20% in the first quarter against last year’s same period. We have signed contracts for the entire year,” Hong said. Similarly, Global CyberSoft won many outsourcing contracts from the Japanese and North American markets in the first three months of this year and this helped the company register strong growth of some 25%, said deputy general director Ngo Van Toan. On the optimistic side, Chu Tien Dung, chairman of the HCMC Computer Association and chairman of Quang Trung Software City Development Company, said the major markets for local software outsourcing firms in the period included Japan, North America and Europe. In January-March, enterprises at Quang Trung Software City posted a year-on-year revenue increase of 34% to VND678.1 billion, with exports up 37.4% to US$16.82 million. These firms outsourced software products for 20 markets, including the United States, Japan and Europe. “The current demand for new technologies, including cloud computing, mobility and big data, is forecast to surge this year and is opening many opportunities for enterprises to increase earnings. However, enterprises are encountering a lack of programmers,” Dung said. This challenge was also mentioned by Toan at a recent conference held by the HCMC Computer Association that that software companies were thirsting for employees as the number of outsourcing orders had kept growing since last year. Statistics of the association showed enterprises in HCMC needed around 80,000 information technology employees while schools can meet only 20% of the demand. Moreover, the quality of new graduates has yet to meet the requirements of employers with only ten of every 100 engineers having necessary skills. No gov’t role in VND50-trillion realty credit plan – SBV The State Bank of Vietnam (SBV) has denied any Government role in a VND50-trillion credit program for the real estate sector recently announced by Vietnam Bank for Construction (VNCB). The central bank last Friday issued a statement asserting this lending program is a commercial one, so it is not associated with any subsidies from the State budget. The program is VNCB’s effort to set up a four-side linkage between investors, contractors, building material manufacturers and banks. Lending under the program depends on how customers can meet credit requirements such as project feasibility, economic efficiency and debt solvency; how banks can raise capital; and on agreements between VNCB and other lenders. Joining this program, banks will be able to keep track of how credit is used and to instill confidence in the construction sector, according to the central bank statement. The SBV stressed VNCB’s lending program is different from a four-side credit program which the central bank is planning to pilot and has no connection with the Government-initiated VND30-trillion preferential home loan program. However, both programs are aimed at reviving the distressed real estate market, reducing construction material stockpiles and settling bad debts in line with the Government’s Resolution 02. The central bank said in the statement that it encourages commercial banks to extend loans through this four-side format, consider new credit programs to help enterprises ride out the current woes, support the property market and reduce bad debts. The central bank said it supported VNCB’s credit program as it helps the housing and building material markets. However, VNCB will have to decide which banks to cooperate with and how much participating lenders can lend. VNCB will lend over VND10 trillion in the VND50-trillion program to 33 projects as earlier registered with the central bank. HCM City’s banks offer VND3.4 trillion loans HCMC-based banks have guaranteed VND3.4 trillion preferential loans for over 100 enterprises following five business matching sessions since early this year, said Nguyen Hoang Minh, deputy director of the central bank’s HCMC branch. The lenders have offered lending rates from 7-8% per annum, down by 1-1.5 percentage points against the fourth quarter of 2013 and lower than normal lending rates by 1-2 percentage points. Aside from businesses in the five priority sectors of agriculture, export, supporting industry, small and medium-sized enterprises and hi-tech firms, enterprises in other fields such as construction materials and chemistry have also taken out loans from the program. Sacombank, Agribank, DongABank, VietinBank, Vietcombank, Eximbank, ACB, ABBank, VNCB and MHB signed credit contracts to lend nearly VND1.2 trillion to 52 enterprises in Tan Binh District on April 7. As of the end of the first quarter, the city had reported a 1% rise in credit growth compared to late 2013. Credit fell in the first two months of this year. Bright prospects seen for garment, textiles The garment and textile industry has achieved significant success in the first quarter and its outlook for the whole year is optimistic, the Ministry of Industry and Trade reports. The ministry said that the garment and textile industry achieved the highest growth rate at 20.2 per cent in the first three months. The average increase in the rate of the country's industrial production in the same period was only 4.9 per cent. The industry's export revenue in Q1 also surged 21.9 per cent to US$4.5 billion. The ministry said many garment and textile producers had won export contracts extending to the end of Q3, with some scoring contracts lasting until the end of the year. All producers are also using designated production capacity to meet the spike in demand. Preparing to seize opportunities from trade agreements including the Trans-Pacific Partnership (TPP) that are expected to be signed this year, local textile and garment producers have also sped up their investments in fibre production, knitting, dyeing and garment production. Deputy general director of the country's largest textile and garment producer Vinatex, Le Tien Truong, said investment in material production was imperative for raising the use of local inputs and raising the quality of products. He also said that investing in production would benefit the textile, garment, leather and footwear sectors affected by the TPP. The TPP, which has entered the final stretch of negotiations, will lower import taxes in many large member economies like the US, Canada, Australia, and Japan. China is not a member. Import tariffs in the US, the biggest buyers of Viet Nam's leading exports, textiles, will be cut from 17-32 per cent to zero. But it will also impose conditions. Under the TPP's ‘yarn forward' rule of origin, to be eligible for the tax breaks, all manufacturing processes including yarn spinning, knitting, and dyeing must be carried out in a TPP member country. Truong said Vinatex was seeking VND9.72 trillion ($458 million) to invest in 57 projects, including fibre production, knitting, dyeing and garment production. However, he acknowledged that the sizable $458 million investment capital would be difficult to raise if there is no support from the Government. Given Vietnamese garment manufacturers do not possess the financial arsenal to invest in their own yarn and textile facilities and rely on China and other Southeast Asian countries for most of the feedstock, many foreign firms from mainland China, Taiwan and Hong Kong have entered Viet Nam's garment and textile sector to build yarn and textile facilities. Economists have said that if there is no change in the domestic material production for the garment and textile industry, the trade deal would benefit incoming foreign firms more than local companies in the sector. To deal with the shortcoming, the Ministry of Industry and Trade has urged domestic garment and textile producers to develop all aspects of the sector's value chain, including yarn spinning, knitting, and dyeing; and improve their designs, trade promotion and distribution networks to capitalise on the opportunities afforded by the TPP. Release funds faster: developers Property developers called for quick disbursement of the Government's VND30 trillion (US$1.43 billion) stimulus package so that home buyers can pay in time at a meeting with Minister of Construction Trinh Dinh Dung in HCM City on Monday. "The disbursements of loans [to home buyers] from the VND30 trillion package has been tardy," Truong Anh Tuan, the chairman of Hoang Quan real estate company, said. His company is building HQC Plaza for low-income residents on Nguyen Van Linh Street in HCM City's Binh Chanh District. Hoang Quan wants loans to home buyers to be speeded up to ensure timely payment and enable builders of low-cost apartments to accelerate construction. HQC Plaza was the first development in HCM City to be allowed by the Government to convert from a commercial project (with 1,060 houses for sale) into low-cost apartments (1,735 apartments for low-income residents). It will have four buildings of 23 or 24 storeys and apartments of 59-69sq.m, and cost VND1.5 trillion ($71.1 million). Hoang Quan has got a VND186 billion loan from another Government stimulus package, this one worth VND540 billion ($25.6 million). "We have asked for further financial support from the VND30 trillion package," Tuan said. The city Department of Construction has allowed developers to sell apartments once they complete the foundation of the tower. Optimistic signals seen in Hanoi’s housing market Hanoi’s housing market saw many positive signals in the first quarter of 2014, according to Richard Leech, Executive Director of CBRE Vietnam – a commercial real estate services firm. At a news briefing on April 2, CBRE senior manager Nguyen Hoa An said almost all transactions were made for the mid-end segment, but the high-end one, with apartments priced at over 30 million VND (1,430 USD) per square metre, also sold well. Over the period, prices of mid-end apartments in Hanoi’s secondary market bounced back after decreasing for 11 straight quarters and they rose by 1.1 percent from Q4 of 2013. Most of the price hikes were made for completed projects with sufficient facilities, while many projects nearing completion also attract buyers, she added. CBRE’s statistics show that 1,540 residential units from four projects in Hanoi went on sale in Q1, up 17 percent from a year earlier. On the other hand, the construction of 2,716 units was also finalised. An said the completion of many housing projects in 2014 will cause more fierce competition with existing on-sale apartments as buyers favour completed or nearly completed projects to avoid quality or progress problems. A brighter situation has also been observed in the villa and semi-detached market. Some projects were offered with lower prices, thus directly competing with mid-end and affordable apartments worth 2 billion – 3 billion VND (95,240 – 142,860 USD) per unit. An noted that an increasing number of investors have been offering promotion programmes, for example providing free services, issuing membership cards, and accepting various forms of payment in order to attract buyers. Due to an abundant supply and keen competition from mid-end and affordable projects, such promotions are effective measures to accelerate selling, the CBRE expert said. In terms of serviced apartments, those located in Tay Ho district and downtown Hanoi were still preferred. Most of the clients are from Japan and the Republic of Korea, since investment from these two countries is being strongly poured into industrial parks in nearby Hai Phong city and Bac Ninh and Thai Nguyen provinces. Once a Samsung factory in Thai Nguyen and the Hanoi – Thai Nguyen highway become operational, demand for serviced apartments in the capital and its surrounding areas will burgeon, according to CBRE. VND3.2 trillion project approved for Hanoi – Hoa Binh route upgrade Deputy Prime Minister Hoang Trung Hai has approved the combination of two projects on upgrading National Highway No. 6 section from Hanoi to Hoa Binh province. Accordingly, the Deputy PM agreed with the Ministry of Transport’s proposal to join Xuan Mai-Hoa Binh route upgrade (under the National Highway No. 6) with the Hoa Lac – Hoa Binh route construction project in the form of Build - Operate - Transfer (BOT). Total investment for the new project is expected to be VND3.2 trillion (US$150.4 million). There are two toll stations on the route to collect road toll project, with a payback period of about 29 years. The Hoa Lac – Hoa Binh upgrade project, once completed, will help shorten travel time for traffic between Hanoi and Hoa Binh province, as well as facilitating transportation and trade between the capital city with the Northwest region. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR