BUSINESS IN BRIEF 4/6 NA backs measures for growth National Assembly (NA) deputies yesterday agreed in principle with socio-economic development solutions proposed by the Government - maintaining macroeconomic stability, accelerating economic restructuring and revamping the current growth model. At the plenary debate in Ha Noi, the lawmakers expressed general agreement with salient features of the Government's report as well as the NA Standing Committee's verification report on socio-economic development in 2013. They also noted progress made in the first months of this year. The lawmakers acknowledged efforts made by ministries and local authorities in ensuring macro-economic stability, easing difficulties for businesses, maintaining security and improving people's lives. Minister of Industry and Trade Vu Huy Hoang informed the session that Viet Nam has set up trade ties with over 180 countries, signed eight free trade agreements and is conducting negotiations on six others. Hoang said Viet Nam was also pursuing a policy of protecting farmers to help them gain economic growth benefits. He said talks on the six trade agreements will be tied to the principle of respect and non-interference in Viet Nam's internal affairs as well as the imperative of narrowing the development gap. Many NA deputies proposed that the Government assesses the potential impacts of the current East Sea situation on socio-economic development in 2014 and the coming years. They said a mechanism was needed to continue attracting investment while ensuring national sovereignty. Most of the deputies expressed their agreement with plans to balance central and local budgets for 2013; and invest more in law enforcement forces at sea including the coast guard, fisheries administration agency and offshore fishermen. The East Sea situation continued to dominate discussions in the afternoon session, with most NA deputies trying to anticipate possible impacts thereof on socio-economic development targets set for the year. They also pointed out shortcomings in implementing development plans in the first months of this year, stressing the need to increase demand, boost the economy's internal strengths, ensuring social welfare, security, social order and safety, and firmly safeguarding national sovereignty. Voter Do Thi Kim Loan, General Director of Sao Viet Timber Company said the meeting session reflected the voice of voters nationwide, emphasizing the country's determination to protect its sovereignty. She also backed the Government's plan to spend VND16 trillion (US$756 million) supporting fishermen expand their fishing efforts further ashore and to improve the equipment of marine police defending Viet Nam's sovereignty. Loan said that while raising the people's voice to demand China remove its oil rig, Viet Nam should also focus on developing production and trade. Voter Pham Thu Hang, a software expert at FPT Joint Stock Company in Ha Noi, agreed, saying that the fight to protect Viet Nam's sovereignty over its seas would take a long time. Meanwhile, the country needed to prepare itself by building capacity, restructuring its economy and reducing dependence on trade with China, she said. Exporters yet to apply for priority treatment Few Vietnamese exporters have applied for Authorised Economic Operator (AEO) status, which would allow them to benefit from expedited customs procedures. Vice head of Post-Customs Clearance Examination Department under the Viet Nam General Administration of Customs Le Thu said that in 2011, Viet Nam started allowing certain businesses to be prioritised during customs procedures. These businesses would have to submit fewer documents to customs offices and undergo fewer tests and inspections. An exporting enterprise can earn the priority status if it has yearly export value of at least US$200 million. Enterprises specialising in exporting farming products, aquaculture products, textiles or footwear with yearly export value of at least $50 million are also eligible for the title. A hi-tech enterprise recognised by the Ministry of Sciences and Technology can receive the status regardless of export value. So far, 16 enterprises have gained prioritised enterprise status: ten foreign direct investment companies and six domestic ones. Their export value last year was over US$40 billion, accounting for 25 per cent of the total export value of Viet Nam. Thu said that while many companies met the criteria, most—especially textile and footwear companies— were not ready to apply for the prioritised status. Foreign enterprises usually had better accounting and internal auditing practices, so they were more prepared to apply. She said that this year, Customs General Administration planned to recognise nine enterprises as prioritised enterprises. It would also review preferential procedures to match with the newly-launched Viet Nam Automated Cargo and Port Consolidated System/Viet Nam Customs Information System (VNACCS/VCIS). Thu suggested that Viet Nam expand the programme's scope so that more enterprises could qualify. She also recommended that the country pursue mutual recognition agreements with foreign countries so Viet Nam-based AEO firms could benefit from customs priorities in those countries. Firms bond to decrease dependence on imports Vietnamese companies were advised at a recent seminar in HCM City to improve cooperation to reduce their dependence on imported raw materials. Speaking at the seminar late last week on "Connecting Material Supply in ASEAN ++" , Pham Ngoc Hung, deputy head of the HCM City Enterprise Association (HEA) said that such co-operation was still weak and that big and small companies should start to work together. To make one product, companies should not have to produce all of the components, and instead should share jobs with each other, he said. Hung said that co-operation among companies would help all of them and would reduce the need to import parts that they cannot produce. Hung and other participants agreed that co-operation was necessary, especially if the country becomes an important player in the ASEAN Economic Community. At the seminar, representatives said that the price of raw materials produced in Viet Nam was expensive, and consequently, companies preferred imports. They said that it was not too late to develop the industry that produces raw materials. Companies should invest in technology, and produce raw materials at cheap prices if they can, representatives said, this would enhance Vietnamese companies' competitiveness. To strengthen co-operation, the HEA suggested several solutions. Hung of HEA said that they needed clear guidance about where they could buy raw materials in Viet Nam. "It takes a lot of time and money for companies to find an address selling commodities that they need," he said. Trade promotion activities should also be organised regularly, he said, adding that building confidence in the business community was necessary. Vietnamese producers currently have to rely heavily on imported raw materials, especially in the sectors of garments and textiles, footwear, feed, aquaculture and plastics. This reliance has contributed to a trade deficit with many Asian countries, including China and South Korea. Viet Nam targets a localisation rate of 55 per cent by 2015 and 65 per cent by 2020. It has set a goal of 70 per cent by 2030. SBV plays key role in financial system: forum The State Bank of Viet Nam's (SBV) key role in stabilising the monetary and financial system topped the agenda at a recent seminar in Ha Noi. Recognising the SBV's role in overseeing the financial system, participants at the forum noted that banks and financial companies managed by the SBV made up 90 per cent of the total assets of financial organisations in Viet Nam. Central banks around the world are aware of the importance of financial stability, which serves as an essential condition for macroeconomic stability, they said. Affirming the State Bank's role in stabilising the financial system, economist Vu Dinh Anh said it was necessary to create a mechanism to coordinate information on the financial sector, to improve oversight. If all relevant agencies recognised how vital monetary and financial stability was, there would be significant potential for collaboration, he said. Sharing the same view, banking expert Can Van Luc said there was no perfect financial and monetary stabilisation model but that the central bank was playing an increasingly important role. He also emphasised the need to coordinate policy between the State Bank and the relevant ministries, and build a transparent deposit insurance tool in case of a crisis. He also proposed the establishment of an international financial and monetary council with the State Bank as the main actor. Participants also suggested the SBV closely follow the financial system's developments and recommend suitable monetary policies. Quoc Cuong Gia Lai outlines share sale plans to tackle debts Quoc Cuong Gia Lai Joint Stock Company (QCG) has unveiled plans to issue 150 million shares worth VND1.5 trillion (US$71.1 million) this year to help pay its debts, said chairwoman Nguyen Thi Nhu Loan. Loan told a shareholder meeting on Sunday that the company needed to raise funds for on-going projects, including the Phuoc Kien residential development, Ben Van Don project and two hydropower plants. In addition, the capital hike would help alleviate the company's interest payments, said Loan. The real estate company is expected to raise a charter capital between VND1.3 trillion ($61.6 million) to VND2.8 trillion ($132.7 million). Total debts have swollen to nearly VND1.24 trillion ($58.8 million), of which VND136.5 billion ($6.5 million) were convertible bonds from VinaCapital. Loan said the company was in negotiations with lenders over converting the debts into shares at a rate of VND10,000 a share. "The company doesn't necessarily issue shares worth up to VND1 trillion to pay lenders. If existing shareholders want to buy more shares, the company will negotiate with lenders to reduce the number of shares offered to them while increasing shares sold to shareholders," she said. "However, I don't think there are many shareholders willing to pay VND10,000 to buy QCG shares at present," Loan admitted. QCG has recently traded at around VND9,000-10,000 a share. Ending 2013, the real estate developer earned nearly VND973 billion ($46.1 million) in revenue and more than VND6 billion ($284,400) in after-tax profit. The company decided not to set up a provisional fund and will use the profit to cover losses from previous years. QCG has set ambitious business targets for the year, with revenue increasing 150 per cent during last year to VND1.5 trillion ($71 million), while the pre-tax profit goal has been set at VND100 billion ($4.7 million), up 700 per cent from the previous year. $50m footwear factory kicks off A ground-breaking ceremony for the first stage of a plant manufacturing footwear for export was held by King Riches Footwear Viet Nam at the Viet Nam-Singapore Integrated Township and Industrial Park (VSIP) in the central province of Quang Ngai yesterday. The plant, which covers an area of 25.39ha with an investment of US$30-50 million, will be operational by May 2015. King Riches, a subsidiary of Kingmaker Footwear Group, opened its first plant at VSIP Binh Duong in 1999. Construction on VSIP Quang Ngai, the fifth of its kind in Viet Nam, started last year. The park has drawn eight projects from seven investors with total investment capital of nearly $200 million. VN, Romanian city ink co-op pact The central city of Da Nang and Timisoara, Romania, signed a co-operation deal on investment, trade, tourism, high-tech, information technology, culture and education last week. The deal aims to boost co-operation between the two cities in various fields. Timisoara is the second largest city in Romania after Bucharest, but two-way trade between Da Nang and Romani remains small, around US$50,000. The central city, situated at the end of the East-West Economic Corridor, has drawn 286 FDI projects with an investment of $3.3 billion. Forum to boost VN-Poland business A Poland-Viet Nam Business Forum will be set up in HCM City to enable businesses from both countries to explore partnership opportunities. It will include 50 Polish companies from a range of industries like agro-food, finance, ceramic tiles/sanitaryware, environmental protection, IT, mining, real estate, and shipbuilding. Barbara Szymanowska, the Polish ambassador to Viet Nam, Katarzyna Kacperczyk, Polish undersecretary of state for foreign affairs, and Monika Piatkowska, vice president of the Polish Information & Foreign Investment Agency, will speak at the inauguration to be held at the Rex Hotel on June 13. Retailer wins Independence Order The Saigon Commercial Co-operative Union, or Saigon Co.op, which runs supermarket chains, has been conferred the Independence Order, second class, for its contribution to economic development on the occasion of its 25th anniversary. After 25 years of development, Saigon Co.op has become a leading retailer in Viet Nam and been among the top 500 Asian retailers for many years, said Le Thanh Hai, secretary of HCM city Party Committee, The co-opertive now runs 70 Co.opmart supermarkets, 77 Co.op Food stores, 175 Co.op shops, the Co.opXtraPlus Thu Duc hypermarket, a trade centre named Sense City, and the HTVCo.op shopping channel. VietJet Air receives three new Airbus Leading low-cost airline, VietJet Air welcomed three new aircraft to Tan Son Nhat airport on June 1, bringing the airline’s total number of planes to 15. The new additions are modern airbus A320 aircrafts namely VN-A690, VN-A691 and VN-A692. With the exploitation of the new aircraft, VietJet Air will provide over 37,800 seats per week, meeting passengers’ growing demand for flights this summer. The airline’s bold move also aims to expand its network, increase its number of flights and provide passengers with various options on air routes and flying times. Exports to the UK reach over US$1.16 bil in four months Vietnam earned US$1.16 billion from exporting goods to the UK in the first four months of the year, up 4.7% against the same period last year, according to Vietnam’s trade office in the UK. It’s worth noting that Vietnam’s exports to the UK hit just US$808 million in the first three months, down 5.3%  from last year’s same period, but fetched over US$350 million in April alone. In the reviewed period, major exports to the UK earning high value include plastics (nearly US$32 million), wood and wooden products (over US$72 million), seafood (US$38 million), coffee (nearly US$39 million), garment and textiles (nearly US$150 million), footwear (over US$160 million), mobile phones and components (over US$440 million). Meanwhile, commodities posting negative growth were means of transport, components, computers, and pepper. Super-jet Boeing 787 Dreamliner premieres in Hanoi All eyes at Noi Bai international airport in Hanoi on June 1 were focused on the first landing of the stunning Boeing 787 Dreamliner aircraft carrying 169 passengers from Haneda, Tokyo. The magnificent aircraft has an overall body length of 57 meters, wingspan of 60 meters, and flying range from 14,170 to 15,200 kilometres. It is the third largest wide-body aircraft manufactured by Boeing, after Boeing 747SP and 777-200LR. Japanese All Nippon Airways (ANA) said that as from June 1, the airline will officially utilize the Boeing 787 Dreamliner aircraft for all daily flights between Hanoi and Haneda. Each day the flight departs Haneda at 8.55am and arrives in Hanoi at 12pm. On the same day, the return flight from Hanoi departs at 2pm and arrives back in Haneda at 9pm.   Vietnam, US move to hasten TPP negotiations US Secretary of Commerce Penny Pritzker began a one-day visit to Vietnam on June 2 in a bid to accelerate Trans-Pacific Partnership (TPP) agreement negotiations. Pritzker, who is accompanied by leading retail giants including ACE, Qualcomm and Mead Johnson Nutrition, is scheduled to meet with the State President, Prime Minister and Minister of Industry and Trade. US business representatives will hold discussions with the President of the Vietnam Fatherland Front Central Committee and leaders of the Ministry of Finance, Ministry of Planning and Investment, and Vietnam Chamber of Commerce and Industry. Alexander Feldman, President of the US-ASEAN Business Council, said on June 1 that the visit demonstrates the US business community’s trust in economic development prospects in Southeast Asia, including Vietnam and the Philippines. It also reaffirms US businesses’ long-term investment commitment in Vietnam and the Southeast Asian region. US businesses seek investment opportunity in Vietnam Representatives of leading US businesses met with Vietnam Fatherland Front (VFF) Central Committee President Nguyen Thien Nhan on June 2, expressing their desires to deeper penetrate the Vietnamese market. The businesses including those operating in insurance, energy and education and training said during their one-day visit, they are scheduled to discuss with government officials and the local business community measures to boost bilateral trade relations and accelerate the Trans-Pacific Partnership (TPP) agreement negotiations. They expected to work with ASEAN governments and business partners, to speed up the establishment of the ASEAN Economic Community (AEC) in 2015 as planned. VFF President Nhan briefed the guests on Vietnam’s socio-economic development, its competitive advantages, and major development goals and orientations by 2020. Nhan and US executives examined Vietnam’s economic situation, its investment opportunities, ASEAN community building efforts, and TPP negotiations. The US delegation’s visit to Vietnam is conducted by the US-ASEAN Business Council which is the leading organisation in promoting US-ASEAN trade relations. Its members include the US’s largest groups which are operating in ASEAN member states. US businesses acknowledge Vietnam’s potential Vietnam boasts great potential for cooperation with US companies and the US pledges to support Vietnam’s economic development for prosperity. US Secretary of Commerce Penny Pritzker made the remark at a press conference in Hanoi on June 2 as part of her visit to Asia which focuses on developing the economy, promoting US technologies, and heightening the importance of environmental management. Ms Penny Pritzker said that 20 years of Vietnam-US normalization has witnessed a significant milestone with two-way trade increasing by 50 times from US$225 million to US$30 billion. Prizker said that Vietnam has experienced remarkable growth which has been maintained for many years. Last year, the US exported goods worth more than US$5 billion to Vietnam, up 8% against the previous year and imported US$24.6 billion from the country , up 21.6%. The US’ economic goal is to promote long-term and sustainable development with ASEAN countries, boost the US’ economic development, and demonstrate its commitments to cooperative trade activities. This visit has also contributed to developing both software and hardware infrastructure to support US businesses in cooperating with ASEAN. Prizker said that Vietnam has great advantages in joining the Trans-Pacific Partnership (TPP) Agreement which benefited to the relevant parties, as the Asia-Pacific region has accounted for 40% of  global GDP. The US official said that this is a wonderful time to strengthen trade ties between the two nations,, when the final TPP negotiation round is expected to take place soon and many US businesses are keen on investing in Vietnam and have committed to their long-term operations in Vietnam and ASEAN countries. Regarding China’s illegal positioning of oil rig Haiyang Shiyou-981 in Vietnam’s exclusive economic zone, Prizker stated that this is a intentionally provocative act which has escalated tension in the East Sea. The US’ tasks are to maintain peace, stability and ensure safety and freedom of navigation in the region. US businesses want to do long-term business in Vietnam and the ASEAN market which has a population of 600 million. US businesses have advantages of technologies, energy, tourism, insurance and financial services. They see great potential in Vietnam and ASEAN and want to make their stronger presence and long-term development in Vietnam and the regional grouping. HCM City, Japanese region further industrial cooperation The Ho Chi Minh City People’s Committee and the Economy, Trade and Industry Department of Japan’s Kansai region on June 2 signed a framework agreement on cooperation, under which they will enhance connections in support industry. The two sides will also speed up the establishment of a business environment that can facilitate Kansai enterprises’ investment in the support industry in Ho Chi Minh City. The city has assigned its management board of industrial and export processing zones to set up a division in charge of connecting ties with Kansai and providing consultations for its enterprises. At a meeting with the Japanese guests earlier, Chairman of the municipal People’s Committee Le Hoang Quan said that Vietnam in general and Ho Chi Minh City in particular, commits to creating all favourable conditions for foreign investors, considering them part of the country’s economy. Toshinori Kobayashi, head of the Kansai department, the region’s businesses, especially those operating in the support industry, are paying much attention to boosting investment in Ho Chi Minh City and its surrounding areas. Japanese company confident in Vietnam business climate More and more Japanese businesses are flocking to Vietnam, said Japan’s Foval Corporation Chairman and CEO Hideo Okubo, who is also Chairman of the Supporting Committee for Globalisation of Japanese small and medium enterprises (SMEs). Japanese investors have confidence in the country and consider Vietnam their most attractive destination. However, a few Japanese businesses raised concern over the recent disturbances in some Vietnamese industrial zones, Okubo said. Most Japanese firms understand Vietnam’s stance on the East Sea issue and show their sympathy with the country, he added. Okubo highly valued the Vietnamese government’s effective solutions for dealing with the chaos, supporting affected foreign businesses and ensuring social order and security. The Foval Corp CEO predicted that the number of Japanese investors to Vietnam will continue rising. They will either directly invest in overseas markets or pour money in the form of authorised production, he said. Okubo also highlighted the role of the Vietnam Chamber of Commerce and Industry (VCCI) and the Japan Chamber of Commerce and Industry (JCCI) in creating a close link among businesses from both countries. HCMC FDI soars Between January and May, Ho Chi Minh City reported an increase of over 356 per cent in investment capital of new foreign-invested enterprises against the same period last year. A total of 120 new FDI projects were licensed with a combined capital of more than $724 million in the southern economic hub over the first five months, down 8 per cent in project number in comparison to last year’s first five months, but with a very significant value increase. In addition, 40 existing foreign invested enterprises increase their capital by $69 million in the period, putting total FDI inflow to the city at $793 million, up 119 per cent, according to the Ho Chi Minh City Department of Planning and Investment. A report issued by the department on May 26 showed that 9,566 Vietnamese enterprises were licensed in the city with combined capital in dong equal to almost $2.53 billion over the first five months of this year, up 26 per cent. However, the number of enterprises decreased by 2 per cent. Addressing a five-month review meeting on May 26, city chairman Le Hoang Quan remarked that both FDI and local investment flows to the economic hub were positive. He added that in the remaining months of the year, the city would give priority to business loans for agriculture, manufacturing for export, support industry, small and medium-sized enterprises, and hi-tech companies. PM orders tougher management of guest workers in RoK PM Nguyen Tan Dung has tasked inferior levels to work with the Republic of Korea (RoK) to tighten management of Vietnamese guest workers in the Northeast Asian country. The move aims to prevent Vietnamese guest workers from breaking contracts and illegally residing in the RoK. The PM requested the Ministry of Labor, Invalids and Social Affairs (MoLISA) to cooperate with other ministries, agencies and localities to provide adequate information on policies and regulations for guest workers. The MoLISA directs localities and labor export companies to raise the quality of selecting and training for guest workers. Each year, Viet Nam sends around 90,000 guest workers abroad, including 10,000 to the RoK. Experts call for fruitful linkages Developing close links between stakeholders involved in fruit production and consumption is one of the measures required to sustainably develop fruit production in the Cuu Long (Mekong) River Delta, a forum heard last Saturday. The delta, which has conducive climatic and soil conditions for fruits, has more than 466ha of orchards that yield 4.6 million tonnes of fruits annually, accounting for 62 per cent of the country's total output, according to the National Agriculture Extension Centre. The region has in recent years developed zones for growing specialty fruits like Hoa Loc Mango in Dong Thap, dragon fruit in Tien Giang Province, Nam Roi pomelo in Vinh Long, and green skin pomelo in Ben Tre, ensuring a stable source for local consumption and exports and significantly improving farmers' incomes, Phan Huy Thong, the centre's director, said. But fruit production and distribution in the region still face many problems, with farmers often hit by falling prices in case of bumper crops, delegates said. Besides, the small scale and scattered nature of farming, huge post-harvest losses, inconsistent quality, unreliable outlets, diseases, and lack of tie-ups with businesses threaten sustainable development, they said. The small scale of production precludes mechanisation and the region is unable to supply large quantities with similar size, colour and quality for exports, they said. According to the Southern Fruit Research Institute, 90 per cent of the region's fruit output is consumed in the domestic market, with only the rest exported, mainly to China. Other markets like the US, EU and Japan have approved import of a few Vietnamese fruits like dragon fruit, pomelo, banana and rambutan. These market have a large demand and offer higher prices, but also have strict hygiene and food safety requirements, it said. To sustainably develop fruit farming, each province should restructure production and link up production and consumption, delegates agreed. Local agricultural extension centres should ensure farmers use good agricultural practice (GAP) standards to add value to their fruits and enable exports to choosy markets, they said. Proper planting techniques should be adopted to control diseases, they said. Nguyen Van Hoa, director of the Southern Fruit Research Institute, said training is needed for human resources, especially those who analyse fruit production and demand. Global fruit demand is expected to continue rising in the coming years, giving the region an opportunity to boost exports, he said. The forum, organised by the National Agriculture Extension Centre, saw nearly 500 policymakers, scientists, business executives, and farmers from the delta take part. Manufacturing continues to rise Overall business conditions in the manufacturing sector strengthened in May amid an ongoing increase in client demand as output increased for the eighth consecutive month amid another solid expansion in new business, according to the HSBC Vietnam Manufacturing PMI report. The report released yesterday said headline seasonally adjusted Purchasing Managers' Index (PMI) - a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy - posted 52.5 in May from 53.1 in the previous month. The PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in around 400 manufacturing companies. An index reading at 50 indicates a neutral level, above 50, a positive level, and below 50, a negative one. Growth of new orders was recorded for the sixth successive month in May, with the solid rate of expansion only slightly weaker than April's record high. Panellists reported that improving economic conditions had helped to support client demand. New export orders also rose in May, albeit at a slight rate. Higher customer demand led to another rise in production during the month, the eighth time in a row. Some panellists reported that purchase of materials in recent months had enabled them to raise their output. Backlogs decreased modestly following a rise in the previous month. The recent changes to transportation rules again had an effect on the manufacturing sector in May as suppliers' delivery times lengthened to the largest extent in the survey's history as new tonnage rules meant that suppliers had to make more trips to deliver the same amount of goods. The rules also impacted the cost of shipping, in turn pushing the rate of input cost inflation up for the second month running to the fastest since March 2012. Despite the sharp rise in input costs, manufacturers left their output prices largely unchanged during the month. While some panellists reported having passed on higher cost burdens to their clients, others indicated that efforts to stimulate demand had led them to reduce their charges. Employment increased for the second month running in May, though the rate of job creation slowed and was only slight. Higher production requirements led some panellists to raise staffing levels. Increased output requirements also led to a rise in purchasing activity during the month. Input buying has now increased in each of the past nine months, with the rate of growth remaining solid despite easing from that seen in April. Stocks of purchases decreased modestly as inputs were used in the production process. Stocks of finished goods also fell marginally following a rise in the previous month. Commenting on the Vietnam Manufacturing PMI survey, Trinh Nguyen, Asia Economist at HSBC, said: "The latest PMI shows that the manufacturing sector in Viet Nam is competitive, with activity still expanding, albeit at a slower pace. "The concern really is the added costs to manufacturers, which come at a time when exporters already incur high logistic costs. "Profit margins are being squeezed, as weak domestic demand makes it hard for manufacturers to raise output prices despite rising production costs. "We expect the SBV to keep rates steady to support domestic demand." Experts urge banks to lower cost of lending for local businesses There is a need for banks to cut the lending interest rates further to make bank loans more accessible, and to rethink the implementation of the real interest rate policy. This message was delivered at a workshop held by the State Bank of Viet Nam in Ha Noi last Saturday. "Vietnamese enterprises are bearing too high capital costs that reduce their competitive and productive capacities in exports and domestic markets," said Luu Duc Hai at the Development Strategy Institute under the Ministry of Planning and Investment. Although Vietnamese exporters have privileged interest rates between 8 and 10 per cent yearly, the borrowing costs are estimated to be 1.4 to 2 times higher than in some regional countries. The exporters in China pay only 6.6 per cent per year, while those in Thailand and Malaysia pay 6.9 per cent and 4.9 per cent respectively. On the other hand, Vietnamese producers in non-priority sectors are paying between 10 and 13 per cent. This is a big disadvantage if they have to compete with foreign direct investment (FDI) enterprises in the domestic market. The FDI enterprises from the US, Japan, South Korea and Taiwan have to pay only between 1.5 and 4.7 per cent annually to gain financial sources for their business in Viet Nam. Hai said that if the lending interest rates are not cut, it would be hard to score high and achieve sustainable economic growth in the medium and long term. Experts said that a practical implementation of the negative real rate of monetary policy was likely to be the answer. The real interest rate is the rate of interest a depositor or an investor expects to receive after allowing for inflation. It is used to measure the purchasing power of interest receipts and is calculated by adjusting the nominal rate charged by taking inflation into account. Accordingly, a positive real interest rate is a situation when the nominal interest rate is higher than the inflation rate. A negative real interest rate occurs when the nominal interest rate is lower than the inflation rate. Implementing a real interest rate is supposed to balance the interests of depositors or the investors and the credit system. Viet Nam has followed the positive real interest rate, but it's unlikely to help the economy in practice because of the high accumulation of gold and foreign currencies, and the overall inflation. Hai said that using the overall inflation rate to decide the positive real interest rate unnecessarily pushed up deposit interest rates in the banking system. When the inflation rate was still high, maintaining the policy of positive real interest rate would further fuel the growing lending interest rate. This kind of practice would harm enterprises, experts said. Under the current circumstances, experts said a negative real interest rate policy would cut the lending interest rate, and create agreement and sharing among depositors, banks and enterprises. In 2008, Viet Nam maintained a negative real interest rate policy to deal with the 22 per cent inflation rate. A similar situation happened with the US in 2004 and with China in 2004 and 2008. The credit growth of Viet Nam's banking system reached 1.31 per cent between January and May 23; the total supply was an estimated 5.28 per cent higher than the end of last year; and the total mobilised capital increased by 4.2 per cent. The country's consumer price index in May inched up 0.2 per cent against the previous month amid rising supply and low demand, according to the General Statistics Office. Compared with the first five months of 2013, the index rose by 4.72 per cent. Garment, textile sector seeks out new suppliers Garment and textile companies have been actively seeking material suppliers to reduce dependence on imports from China, due to complicated changes in the market. Cao Anh Dung, Director of the Ministry of Industry and Trade's Light Industry Department, told reporters at a press briefing in Ha Noi yesterday to review the country's economy in the first five months of the year, that exports of businesses in the light industry including garment and shoes had shown a positive trend. In addition, imports of materials for the garment and textile sector have been normal at the border gates. Statistics from the ministry showed that cloth production from natural fibre in May was estimated at 27.2 million sq.m, reducing 5.4 per cent over the previous month. The total production in the five-month period was 129 million sq.m, posting a 17 per cent year-on-year increase. The sector's export turnover in May was US$1.45 billion, reducing 8 per cent against April. However, total turnover in the first five months of the year was $7.44 billion, up 17 per cent over the same period last year. Deputy General Director of the Viet Nam Garment and Textile Group (Vinatex) Hoang Ve Dung said the raw material market for the garment and textile sector has not been changed much though several companies in the group imported materials from China. The Viet Nam Garment and Textile Association asked enterprises to actively seek materials from Thailand, South Korea, Indonesia, Malaysia and India. Rice exports increase Phan Van Chinh, Director of the ministry's Import-Export Department, said rice exporters have signed export contracts worth 4.3 million tonnes, an increase of 17 per cent as compared to the same period last year despite the difficulties in the market. By the end of May, rice exports reached 2.7 million tonnes while another 1.6 million tonnes are awaiting shipment. Asked whether the Ministry of Industry and Trade would remove floor prices on rice exports, Chinh said the issue was being discussed with ministries and relevant agencies. The Government has told the ministries of Industry and Trade, and Agriculture and Rural Development, to consider the impact of pilot removal of the floor prices on rice exports and propose appropriate management measures to facilitate export activity. The Viet Nam Food Association (VFA) proposed to allow local firms to export rice to their clients at prices agreed upon by the two sides, instead of the floor prices set by the association. The FOB floor prices set by the VFA are $410 per tonne for 5 per cent broken rice, $375 per tonne for 25 per cent broken rice and $365 per tonne for 35 per cent broken rice. No power tariff rise Speaking further, Deputy Minister Do Thang Hai affirmed that electricity tariff would not be increased in the near future. Instead, the sector would ensure power supply to production and consumption in the summer months. In a recent decision, Prime Minister Nguyen Tan Dung had ruled that electricity retail prices will apply to six price levels instead of the current seven levels. The decision, which will take effect as of June 1, stipulates that power tariffs for households consuming 0 to 50kWh will be 92 per cent of the average price, 95 per cent for households consuming 51 to 100kWh, and 110 per cent for those in 101 to 200kWh bracket. It would be 138 per cent for those consuming 201 to 300kWh, 154 per cent for the 301 to 400kWh bracket and 159 per cent for households consuming more than 401kWh of power. Dinh Van Phuc, Deputy Head of the Electricity Regulatory Authority of Viet Nam (ERAV) said the new calculations did not mean an increase in power tariffs. The average retail price was VND1,508.85 per kWh. The ministry's figures showed that power output in the first five months of the year was 52.42 billion kWh, increasing 11.1 per cent over the corresponding period last year. Ministry urged to hasten support to riot-affected workers Deputy Prime Minister Vu Van Ninh has asked the Ministry of Labour, Invalids and Social Affairs to continue instructing localities to assist workers who had to stop working due to recent social disorders. The workers will receive wages during their days-off between May 12 and July 1, the day before those enterprises are scheduled to resume their normal operation. The payment is equivalent to the wage level agreed upon by affected enterprises and labourers or their representatives, but not below the minimum level prescribed by the Government. The expense used to pay workers would be deducted from corporate income tax later. The disturbances in some localities, including central Ha Tinh and southern Binh Duong and Dong Nai provinces, erupted during workers’ rallies against China’s illegal placement of its oil rig Haiyang Shiyou – 981 in Vietnam’s continental shelf and exclusive economic zone from early May. Some extremists incited others to destroy the property of foreign firms, as well as some national businesses and individuals, and acted against law enforcement officials, disrupting social order and business activities. Authorities have arrested and brought to trial hundreds of rioters. Vietnam heeds aquaculture sector restructuring Vietnam will boost restructuring its aquaculture production in the coming time in a bid to raise the added value of products and promote sustainable development in the sector, the Ministry of Agriculture and Development has said. Accordingly, the model on the linkage of farming, processing, distribution and production will be developed for the aquaculture field in order to improve the quality of products, thus meeting requirements and standards for export. Meanwhile, in the field of exploitation, models of offshore fishing teams will be intensified in connection with fishery logistics services. Under the Action Plan for implementing the restructuring issued by the ministry, the sector will also allocate money from its budget to building fishing ports and shelters for fishing boats, and developing concentrated production and farming areas. Vietnam is now the third largest aquaculture country in the region and among the top 10 exporters of aquatic products in the world. Particularly, the country accounts for 90 percent of the world tra fish supply, with its products being sold to 149 countries and territories. The European Union, ASEAN, the US and China are now major importers of Vietnamese tra fish, making up 77.5 percent of the country’s total exports in 2013. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR