BUSINESS IN BRIEF 14/6 Middle East, Africa potential untapped Vietnamese firms should be proactive in boosting exports to the promising African and Middle Eastern markets, a seminar heard in HCM City on Thursday. Together, the two regions have 70 countries with a population of more than 1.2 billion and a huge demand for all kinds of goods, especially consumer goods, offering great potential for Vietnamese exports, said Pham Trung Nghia, deputy director of the Middle East, Africa, West and South Asia Markets Department, said. African countries need consumer goods, food and foodstuff, machinery, and drugs while the Middle East needs food and foodstuff, agricultural produce, seafood, and consumer goods, he said, adding that Viet Nam is capable of meeting all these needs. "Many Vietnamese products have won trust among African consumers and the Middle East, with its high per capita GDP, has high purchasing power and payment capability," he said. He noted that Viet Nam's trade with Africa and the Middle East has risen sharply in recent years, reaching US$4.3 billion and $9.6 billion respectively last year compared to $3.49 billion and $6.6 billion in 2012. Vietnamese investment in African countries has increased recently, mainly in telecom and oil and gas, and many companies plan to set up factories to process cashew and timber in Africa, he said. Many African and Middle-Eastern firms too have invested in Viet Nam in many sectors including industrial processing, wholesale, retail, information technology, oil refining, infrastructure development, dairy farming, and steel. Despite the potential, a lack of information about each other as well as differences in culture, religion, and business practices have prevented trade with the two regions from fulfilling their potential, the seminar heard. Besides, there are still risks Vietnamese companies face while doing business with them, including payment issues, Nghia said. To avoid this, payment should be made by banks using letters of credit and exporters should negotiate with importers at least 30 per cent advance payment, he said. Since each country in the two regions has its own import regulations, enterprises should study the markets carefully, delegates said. Besides, food, pharmaceuticals, and cosmetics exported to the markets must have Halal certification, they said. Bui Thi Thanh An, deputy head of the Viet Nam Trade Promotion Agency in HCM City, said Viet Nam has diplomatic relations with all African and Middle Eastern countries, creating favourable conditions to boost exports as well as investment. Viet Nam's main exports to Africa and the Middle East are agricultural produce, mobile phones, computers and accessories, seafood, coffee, garment and textile, footwear, and pepper. It imports crude oil, copper, liquefied gas, feedstock for plastic, cashew, and wood. The seminar was organised by the agency and department. Wood exports on track for $10b goal With an optimistic export growth, the target of generating US$10 billion from exports of wood and wooden products by 2020 is on the reach, Nguyen Ton Quyen reported. The goal was set in an action plan on developing the wood market from now to 2020, approved by the Ministry of Agriculture and Rural Development last month. Quyen, general secretary of the Viet Nam Timber and Forest Products Association (Vietfores), said that his assessment was based on the fact that exports to major markets such as the US, Japan and EU will continue to increase in the future. In 2014 alone, exports to the three markets will witness growth rates of 10 per cent, 15 per cent and 18 per cent, respectively. Currently, wood and timber product exports ranked fifth among Viet Nam's top 10 export industries. With effective solutions and support policies, the sector will potentially earn $15 – 20 billion in the next 10 years, Quyen said. Bilateral and multilateral agreements, including Free Trade Agreement with the EU and the Trans-Pacific Partnership (TPP) Agreement, are expected to be signed this year and will create a good opportunity for Viet Nam, Quyen pointed out. Coal sector eyes domestic market, lowers exports Since the beginning of 2014, the Viet Nam National Coal and Mineral Industries Holding Corporation (Vinacomin) has taken measures to boost domestic consumption while reducing its export of coal. In the first five months of this year, the corporation raked in VND23.8 trillion ($1.1 billion) from selling 15.5 million tonnes of coal, including 3.3 million for exports and 12.2 million tonnes for domestic consumption. In the period, it produced 16.7 million tonnes of crude coal, meeting 44.7 per cent of its yearly plan. Vinacomin's coal consumption last year was about 39 million tonnes, almost the same as that of 2012. New tea processing plant opened in northern province Tam Duong Tea Development Investment Co inaugurated O Long Tam Duong tea processing plant in the northern province of Lai Chau on Thursday. The VND13.5 billion plant is the seventh unit built in the province's tea growing region, with a designed capacity of 1,300 tonnes of fresh tea per year. The plant will create job for around 100 employees. The company has been exporting its tea products to various countries and territories, including Russia, UK, Pakistan and Taiwan. HCM City to host construction exhibit Vietnamese companies and their counterparts from 18 countries will showcase their latest products at the Construction – Building Material-Real Estate and Interior-Exterior International Exhibition to be held in HCM City from June 18 to 22. Vietbuild 2014, as it is called, will feature 2,340 booths displaying building materials, internal and external decorative items, and equipment like solar energy systems and LED lighting. The event will be a platform for businesses to meet, exchange information, and explore co-operation as well as introduce their latest products and technologies to local and foreign visitors. Huda Gold wins superior taste award The Hue Brewery Company's Huda Gold, won the Superior Taste Award from the Brussels-based International Taste and Quality Institute (iTQi) in Belgium. Making this announcement, Carlsberg Viet Nam Trading Company, a subsidiary of the Carlsberg Group in Denmark, said the award made Huda Gold the only internationally-recognised Hue brew for taste and quality this year. Northern province to get free wi-fi in public areas People will get free wi-fi Internet access at governmental offices, public places and tourism destinations in the northern province of Bac Ninh from December 31. It is part of a project passed by its People's Committee on June 11 to have wi-fi in the province. The Vietnam Posts and Telecommunications (VNPT) will invest nearly VND10 billion (over US$476,000) in building technological infrastructure and installing equipments as well as providing training courses for staff and managing the project in the province. The People's Committee also said it would support VND150 million (over $7,000) per month to maintain the service for five years. According to the project, there will be 50 spots covered with wi-fi, including 16 outdoors places installed with free signals. At the remaining places, users will get cards to access the Internet. People, who access government and provincial portals in the area covered by wi-fi, will get it free. VNPT Bac Ninh will give 600 free accounts to access the Internet with cards worth from VND100,000 ($4.76) to VND300,000 ($14.28) per month for some agencies and tourist groups to enhance information technology applications and boost tourism. Bac Ninh is expected to be the sixth tourism destination in Viet Nam providing free wi-fi, after Hoi An, Da Nang, Hue, Ha Long and Tam Dao. Thai energy firm PTT reschedules $27b project report Thai oil and gas group PTT has asked Viet Nam's south central province of Binh Dinh to reschedule feasibility study reports of a US$27 billion oil refinery plant to July. Vietnam News Agency's bureau in Binh Dinh sourced that the rescheduling by one month was done to allot time for the group to gain personnel approvals from Thailand's new government. The sources also confirmed that the local authority appeared confident that PTT was determined to carry out the mega project in Nhon Hoi Economic Zone. According to Reuters and Nikkei Asian, PTT, 51 per cent owned by Thailand's finance ministry, now requires permission for state-related projects. Shares in PTT, which has the largest market capitalisation on the Stock Exchange of Thailand, have been slumping since the military took control of the government on May 22, shedding more than 4 per cent even as the benchmark SET index has advanced 3.7 per cent. Once PTT obtains approval and all study procedures are completed, the group will report on the project feasibility. Binh Dinh Province and other relevant ministries will submit the project to Viet Nam's prime minister in July. Its construction is expected to begin in 2016 and production in 2019, with an estimated capacity of 33 million tonnes, one of the largest in the world. Industry experts reported that the grant project, called Nhon Hoi Petrochemical Complex Project, may sell 50 per cent of the products to the regional market and the remaining will be shipped back to Thailand. Viet Nam now has a sole oil refinery Dung Quat in the central province of Quang Ngai, with an output of 130,000 barrels per day. Dung Quat plant started commercial production in 2009 and has satisfied one-third of the domestic demand. Excluding several brief closures due to technical problems, the plant was shut down for the second major maintenance in May and production will resume in July. Viet Nam currently only had access to markets in Germany, France, Britain and Spain. If Viet Nam could export to the 27 EU countries, market potential will grow, he added. However, he noted that if Viet Nam could become a TPP-member country this year, domestic enterprises should be prepared to adapt to large markets such as the US, Japan, Australia and New Zealand, as well as Canada. In order to reap the full benefits of these agreements, Quyen petitioned the State to revise policies and mechanisms that will better facilitate domestic businesses. Local enterprises should be aware of the trends in global market while improving their management capabilities and should foster technological innovation to enhance their competition. Closer cooperation between the wood producers and exporters is also required, he added. Year-on-year growth Currently, wood and timber product exports ranked fifth among Viet Nam's top 10 export industries. With effective solutions and support policies, the sector will potentially earn $15 – 20 billion in the next 10 years, Quyen said. The latest statistics of The Ministry of Industry and Trade revealed that export of wood and wood products have experienced a year-on-year rise of 17.5 per cent to $2.42 billion over the last five months. Viet Nam aimed to export a total of $6.3 billion worth of wood and timber products this year, up 10 per cent compared to 2013. Exporters have signed a significant number of export contracts in many markets, especially in the US and Japan, the Handicraft and Wood Industry Association of HCM City (HAWA) deputy chairman Huynh Van Hanh said. A representative of a furniture export company said many US and EU customers wanted to place big orders with her company, but her company, which is small in scale, had to turn them down. Nguyen Quoc Khanh, Hawa's chairman, said that many importers had shifted orders from China to Viet Nam because of rising Chinese labour costs and a desire by buyers to diversify suppliers. However, the majority of Vietnamese furniture roducts are produced nd exported following foreign buyers' designs which do not have high added value, Khanh said. Only thre to five per cent of Vietnamese frniture enterprises produce prducts under the ODM business model (Original Design Manufacturer), in which the company designs and manufactures products that are eventually branded by another firm, he said. Khanh said the association had mapped out plans, including establishing a design centre, to help the local wooden furniture and handicraft design industry raise the ODM rate to 10 per cent in the next five years. At the seminar, Khanh, who is also chairman of AA Corporation, and Nguyen Chien Thang, former chairman of Hawa and managing director of Scansia Pacific, spoke about their experiences with local wood and wood-product exporters. AA Corporation focuses on providing interior decor products and services for some of the most acclaimed properties in more than 35 countries. Scansia Pacific provides many kinds of products for the Swedish company IKEA, the world's top furniture retailer. Among the factors that can help businesses succeed, Khanh said, are confidence, patience, ability to adapt to change, market research, qualified marketing teams with good English speaking skills, and ability to identify appropriate products. In addition, Vietnamese companies should participate in trade fairs to seek new customers, he said. To meet customer demands, Thang said that firms must cut inessential costs and improve productivity. Chad Ovel, director of Mekong Capital, urged local firms to focus on improving workforce skills and productivity. The opportunity for Viet Nam to develop the wood and handicraft industry is enormous, said Dominic Price, a financial consultant and founder of the Dominique Saint Paul brand. Khanh said that HAWA had set a target to earn $10 billion from wood and handicraft exports by 2019. The Government on Thursday awarded Hawa the Labour Order Third Class for its contribution to economic development in the last 24 years. Russian group to buy stake in Vietnamese refinery The Russian oil and gas group, Gazprom Neft is set to acquire 49 per cent stake in Binh Son Refining and Petrochemical Company (BSR), which operates the Dung Quat refinery. According to the deal recently struck by directors of the two groups, Gazprom Neft will also join a project to upgrade and expand the Dung Quat refinery, situated in the central province of Quang Ngai. This aims to increase the plant's production capacity to around 10 million tonnes per year from the current 6.5 million tonnes. Both sides agreed on the optimal processing technology to use and crude oil sources to chase in order to realise the target. Since launching operations in 2009, the Dung Quat Oil Refinery, the first of its kind in Viet Nam, has sold 26.7 million tonnes of products, raking in VND543 trillion (US$25.5 billion) in revenue. In 2013, it produced 6.6 million tonnes, 17 per cent higher than its set target, and gained over VND154 trillion ($7.3 billion) in revenue and VND2.9 trillion ($138 million) in profit. This year, the BSR is striving to earn VND113.6 trillion ($5.3 billion) from trading 5.18 million tonnes of products. Source: VNS/VNN