BUSINESS IN BRIEF 9/9 Vung Ro oil refinery project to kick off in Phu Yen A US$3.2 billion oil refinery project of the UK Technostar Management Ltd in Vung Ro is set to get off the ground in central Phu Yen province on September 9. The 538-ha project, in the Hoa Tam industrial park in Dong Hoa district, is expected to stimulate local socio-economic development. With a design capacity of processing 8 million tonnes/year, it aims to process and distribute petrochemical products, apart from importing and exporting oil and gas products. Vice Chairman of the Phu Yen provincial People’s Committee Le Van Truc said despite numerous difficulties caused by the global economic downturn, Phu Yen has worked closely with relevant ministries and agencies to keep the project up and running. The Vung Ro project, using the latest in state-of-the-art technologies in the world, has received incentives from the Government, such as preferential tax rates and financial assistance in infrastructure construction, Truc said. Nguyen Chi Hien, Director of the Phu Yen provincial Department for Planning and Investment, said the project will attract investors in the fields of petrochemical and support industries, and create jobs for local workers. Most recently, he said, a business delegation from Belarus has visited Phu Yen to seek investment opportunities, showing their keen interest in the oil and gas industry. Vietnam ranks second in ASEAN in attracting US investors US firms consider Vietnam the second most attractive destination, after Indonesia, in the ASEAN region for investment, according to a recent survey conducted by the American Chamber of Commerce in Singapore (AmCham Singapore). Foreign investors cited the dynamism of the Vietnamese young highly qualified labour force as the key advantage for conducting business along with its stable socio-political environment. The survey shows US investors have a positive assessment of Vietnam’s ability to attract and retain businesses and foreign talent and they remain optimistic about the economic prospects in the region, said President of Amcham Singapore James Andrade. Of the 588 enterprises surveyed, 74% of them said trade and investment activities within ASEAN have increased over the past two years while nearly 90% of them expect the trend to continue and burgeon over the next five years. The establishment of the ASEAN Economic Community (AEC) and the Trans-Pacific Partnership (TPP) agreement in the coming time, will help further increase trade ties with big partners and enhance the region’s appeal as an attractive destination, said Amcham Tami OverbyVice President. Exports to Belgium sharply increase Vietnam earned US$1.06 billion from commodity exports to Belgium in the first seven months of 2014, representing a year-on-year surge of 42.87%, according to data from the Ministry of Industry and Trade. Among export items, footwear fetched US$385.28 million, up 32.37% from the same period last year, and coffee brought home US$155.91 million, up 141.8%. Iron and steel products earned a modest US$30.55 million but enjoyed the strongest export growth of 338.55%. Vietnam is also shipping more and more goods to the EU market via Belgium’s seaports and airports. By the end of 2013, Belgium was Vietnam’s seventh largest trade partner in the EU and the 35th biggest investors in the country. Can Tho guest of honour at trade fair in Belgium Can Tho City is an honoured guest, at the 69th Accenta International Trade Fair taking place from Sept. 6-14 at Ghent City in Belgium. More than 50 companies from Can Tho and the surrounding Mekong Delta Provinces are displaying their high quality Made-in-Vietnam products and services in over 38 pavilions spanning a 1,200 square metre area at the fair. The event, expected to draw over 10,000 visitors, provides an excellent opportunity for them to popularise the Vietnamese land and its people as well as to tout the region’s investment potential to Belgian and other foreign visitors. Vietnamese goods and services on display include aquatic products, textiles, handicrafts, processing industry, logistics, electronics, and tourism services. At the event, Belgian Deputy Prime Minister Alexander De Croo noted the country has considerable expertise in the fields of agriculture and fisheries while Vietnam has a number of attractive handmade products, consequently both sides should be able to capitalise on cooperation opportunities. For his part, Truong Quang Hoai Nam, Vice Chairman of the Can Tho City People’s Committee said the city wants to strengthen trade cooperation with East Flanders and European enterprises and hopes that a number of contracts will be signed at the event. Within the framework of Accenta fair, a series of seminars introducing the city’s policy and business environment and exchanges on education and training are being staged. The Vietnamese delegation will also conduct market surveys in a number of European countries to obtain better insight into potential opportunities for expanded cooperation and investment. Dak Lak coffee available in 80 markets overseas Coffee bean and instant coffee processors in the Central Highland province of Dak Lak have exported products to 80 countries and territories worldwide, 20 more markets than the beginning of this year. Germany, Japan, the US, Switzerland, the Republic of Korea, India, Spain, Indonesia, and Russia are Dak Lak’s largest coffee bean consumers, making up 64% of the province’s total export volume. Coffee beans are Dak Lak’s major export item, contributing largely to its coffee export earnings of over US$440 million since January 2014, meeting nearly 60% of the yearly plan. The September 2 Import-Export Company Limited (Simexco Dak Lak), the leading coffee bean exporter in the province, has expanded outlets to Japan, the Republic of Korea, the Philippines and other Asian markets, alongside traditional consumers of Britain, France, the US, Spain, Poland and Germany. The company has so far this year shipped 73,657 tonnes of coffee beans to 50 countries and territories, earning more than US$147 million, an increase of 114% compared to the same period last year. To improve coffee quality to meet importers’ requirements, Dak Lak has taken synchronous measures, from variety selection to planting, tending and harvesting, using the wet processing technology. The province has expanded sustainable production of coffee applying international farming models such as UTZ Certified, Rainforest Alliance, Fairtrade and the Common Code for the Coffee Community (4 C coffee), to meet traders and roasters’ requirements. Garment exports hit US$13.65 billion in 8 months Garment and textile exports in the first eight months of the year accelerated 19.7% on-year to US$13.65 billion, according to the the Ministry of Industry and Trade (MoIT). In August alone, garment exports were US$2.2 billion, up slightly 0.2% over July but a significant jump of 20.9% over exports for August 2013. Dang Phuong Dung, Secretary General of the Vietnam Textile and Apparel Association (Vitas), said despite the increase in exports, added value of the local garment industry is still not up to snuff due to overdependence on imported input materials. Dung attributed the rise in exports to the active participation of the industry in the global supply chain. The sector is currently installing modernized equipment using the latest production technology, which helps improve product quality. The new equipment is also resulting in increased added value and helping diversify product lines, Dung said. Le Tien Truong, Director General of the Vietnam National Textile and Garment Group (VINATEX), in turn said the domestic garment sector has the requisite production experience and management skills to be competitive in the global marketplace. It also has an a sufficient workforce comprised of skilled workers to meet the requirements of demanding markets, creating a firm foundation for developing original design manufacturer (ODM) and free-on-board (FOB) products, Truong said. However, to increase added value, he said, local garment producers need to nurture human resource development, enlarge the support industries, and study the markets carefully. HCMC hosts 2014 Audio Visual Equipment Show Techno giants from around the globe are participating in the 2014 Audio Visual Equipment Show (AV Show) taking place from Sep 6-8 at the Sheraton Hotel in Ho Chi Minh City. The event will be witnessing a galaxy of techie experts from companies the likes of Zu Audio, Nguyen Audio, HMT Audio, Legacy Audio, PGI, Son Ha Audio, and AnhDuy Audio coming to the city to promulgate the next generation of audio visual technologies. On display, at the largest exhibition of its kind, are all the latest technologies in ultra-high-end and full-range loudspeakers, amplifiers, latest ear headphones, 4D television, and other home appliances. The exhibition creates a good chance for suppliers and distributors to promote their brands to Vietnamese consumers.     Businesses to tap Brazil market, increase exports Vietnamese businesses should capitalise on Brazil’s massive import tax reductions to further penetrate this large South American market, according to the Vietnam Trade Office in Brazil. The Brazilian government recently decided to temporarily slash import duties from 16% to 2% on 240 machinery and equipment and 10 computing and telecommunication products. The decision is in effect from June 2014 to December 31, 2015. Brazil is the world’s seventh largest economy, and two-way trade between Vietnam and Brazil is increasing rapidly, trailing after the US in the Americas. In 2013 alone, bilateral trade value surpassed the US$2 billion mark, making Brazil Vietnam’s largest trade partner in Latin America. The first seven months of 2013 saw impressive trade growth between the two sides, with value hitting more than US$1.7 billion, of which Vietnamese exports fetched US$723 million. Manufacturing integrated circuits for domestic use and export at 4P Company in Hung Yen (Photo:TTO) Currently, Vietnam mainly exports mobile phones and accessories, footwear, frozen fish fillets, artificial fibre, and integrated circuits. Brazil mostly ships to Vietnam corn seeds, soybean and by-products resulting from the extraction of soybean oil, tobacco materials, cotton, leather and footwear accessories, and chicken by-products. Brazil is rich in natural resources, a large potential market, and the most advanced industry in Latin America. It is a major economy of the Common Market of South America (MERCOSUR), the group of 25 (G-25), and the BRICS group (Brazil, Russia, India, China, and South Africa).   Experts say in its foreign affairs policy, Vietnam should consider Brazil an important partner to boost economic, trade and investment cooperation. The Vietnam Trade Office in Brazil recommends that Vietnamese businesses boost trade promotions in Brazil to deeper penetrate and expand this market in order to increase their exports. If market expansion measures are put in place, two-way trade between Vietnam and Brazil is likely to hit US$3 billion this year, it forecasts. Hi-tech park allocates area for Japanese firms Twenty hectares of land have been earmarked in HCM City's Sai Gon Hi-Tech Park for Japanese companies in supporting industries. Under an agreement between the park and the Department of Trade-Industry-Tourism of Japan's Shiga Prefecture on Friday, they will help companies from Shiga and HCM City link up with each other and provide support for research and development activities. Vietnamese businesses will be helped with attending trade fairs and exhibitions in Japan, information about socio-economic development in both countries will be provided to businesses from Shiga and HCM City, and exchanges between them will be enabled. Speaking at the signing ceremony, the head of the SHTP management, Le Hoai Quoc, said Shiga is one of the most industrialised provinces in Japan, with many industrial and manufacturing companies. Shiga leads Japanese provinces in industrial growth rate. Industry accounts for 41 per cent of its economic output, much higher than the average of 23.7 per cent in Japan. According to the director of the Shiga Department of Trade – Industry – Tourism, Hazumi Hiroshi, businesses in his province, especially medium-sized and small ones in hi-tech supporting industries, have been looking for business opportunities abroad. Viet Nam and HCM City are attractive destinations for Japanese investors, especially those from Shiga, he added. VN imposes new steel tariffs The Ministry of Industry and Trade (MoIT) on Friday issued the order to impose tariffs on stainless steel products imported from four countries to protect the domestic market. This is the first time Viet Nam has ordered the imposition of duties on imported stainless steel products following its integration into the world economy. The MoIT's Decision No. 7896/QD-BCT imposes tariffs ranging from 10.71 per cent to 37.29 per cent on stainless steel from mainland China, Taiwan, Indonesia and Malaysia. Under the decision, which takes effect 30 days from the day it was signed, duties will be imposed specifically on cold-rolled stainless steel products classified under Harmonization System Codes or HS Code of 7219.32.00, along with 7219.33.00, 7219.34.00, 7219.35.00 and 7219.90.00, as well as 7220.20.10, 7220.20.90, 7220.90.10 and 7220.90.90. The highest duty, at 37.29 per cent, is to be imposed on Yuan Long Stainless Steel Corporation of Taiwan. Other Taiwanese steel manufacturers such as Yieh United Steel Corporation will be subjected to a 13.79 per cent tariff. Among the Chinese steel manufacturers, Fujian Southeast Stainless Steel Company Ltd, will be assessed a 6.87 per cent tariff while Lianzhong Stainless Steel Corporation will be paying a 4.64 per cent tarrif and Fujian Southeast Stainless Steel Company Ltd, 6.58 per cent. PT Jindal Stainless Indonesia and other Indonesian steel manufacturers will be assessed a 3.07 per cent duty while Bahru Stainless Sdn Bhd and other Malaysian manufacturers will be subjected to a 10.71 per cent tariff. In July 2013, the MoIT's Viet Nam Competition Authority (VCA) initiated an anti-dumping investigation on stainless steel imports at the request of Posco VST and Hoa Binh Inox, which have urged the imposition of anti-dumping duties on stainless steel products from the four countries. The two manufacturers account for 80 per cent of Viet Nam's inox market shares. They have complained about increasing losses, falling revenues and prices and high inventories resulting from competition with cheap imported products, which were up to 25 per cent lower in price than their own products. At present, imported cold-rolled steel products are charged a zero to 10 per cent import tax based on their origin. The zero per cent tax rate applies to products from China and the ASEAN nations in compliance with commitments made by Viet Nam under ASEAN Free Trade Agreements. In December 2013, the VCA concluded its investigation and said the steel manufacturers of the four countries had showed signs of dumping products in the Vietnamese market and forcing the domestic steel industry to suffer heavy losses. The VCA then proposed that anti-dumping tariffs, ranging from 6.45 per cent to 30.73 per cent, on stainless steel imports from these countries be imposed within 120 days. On August 13, the assembly reviewing the anti-dumping tariffs met and agreed to impose duties that were higher than those proposed by the VCA last year. Trade surplus with Japan grows Viet Nam saw a trade surplus of nearly US$1.86 billion from exports to Japan in the first eight months of 2014, representing a 40 per cent increase over the same period last year. According to data released by the Ministry of Industry and Trade, Viet Nam has exported an estimated $9.74 billion in goods to Japan during the eight month period, a yearly increase of 11 per cent. Bizlive.vn quoted the ministry as saying that Vietnamese exports of textiles and garments to Japan experienced encouraging growth of 6.5 per cent, valued at over $1.6 billion. Trade experts forecast that the country's apparel exports to Japan would likely reach $2.7 billion by the year-end due to increasing orders from Japanese importers and the positive influence of Japanese participation in negotiating the Trans-Pacific Partnership, which would assist in bringing Vietnamese garment exports to the market. Besides leather and footwear, seafood, bags and suitcases, exports of agricultural products to Japan also witnessed a healthy growth, as Vietnamese enterprises gradually adapted and then met Japan's technical barriers and standards. In the January to August period, Viet Nam's imports from Japan hit $7.88 billion, surging 6 per cent against last year's corresponding period. Among major imports included machinery equipment and their parts, computers and components, electronics, steel and steel products, as well as plastic. Four years after inking the Viet Nam-Japan Economic Partnership Agreements (VJEPA), many Vietnamese export businesses have effectively exploited the advantages of preferential tariffs to boost exports to the Japanese market. However, in order to enhance the share of Viet Nam's goods in this difficult market, exporting companies must study the market for a better understanding of the commitments of the free trade agreements. They must also be prepared to face the challenges of meeting high technical standards, especially in overcoming the strict barriers imposed on food products entering the Japanese market. Firms move to boost Myanmar investment The Association of Vietnamese Investors in Myanmar (AVIM) hopes to raise their investment in the country to around US$1.5 billion by 2015, placing Viet Nam among the country's five largest foreign investors. AVIM Chairman Tran Bac Ha unveiled the goal at a meeting in Ha Noi yesterday with Speaker of the Assembly of the Union of Myanmar Thura U Shwe Mann, who is here for an official visit from September 5 at the invitation of National Assembly Chairman Nguyen Sinh Hung. Ha also said the businesses would work to help raise two-way trade between the two countries to $650-700 million and the number of Vietnamese tourists to Myanmar to 35,000. To realise these targets, AVIM representatives proposed that Myanmar's government and parliament build an open-door legal system, in addition to setting up investment incentives for foreign investors, signing agreements encouraging and protecting investment and issuing regulations on the ownership of investment assets for Vietnamese firms in Myanmar. The association voiced hope that Myanmar would accelerate the licensing process for Vietnamese projects in the fields of textiles, agriculture, health care, energy, construction material production, finance and banking. Myanmar's parliament leader U Shwe Mann appreciated the contributions made by AVIM to his country's socio-economic development, saying that Myanmar and Viet Nam shared many similarities in geography, economy and culture that could be advantageous for promoting trade links and investment. He noted that Myanmar was focusing on institutional reform and opening its market with the goal of boosting living standards and economic development. During the process, the country was learning from the experiences of other countries in improving its legal framework and simplifying administrative formalities in order to attract more foreign investment to Myanmar. U Shwe Mann took note of AVIM's requests and asked the association to continue acting as a bridge to bring more investment from Viet Nam to Myanmar, especially in the agriculture, tourism, finance and banking sectors. Established under an initiative by the Bank for Investment and Development of Vietnam (BIDV), AVIM comprises 76 members, including prestigious businesses such as PetroVietnam, Vietnam Airlines, Hoang Anh Gia Lai Group and Song Da Corporation. Vietnamese investors currently have seven projects worth $600 million in Myanmar, and 56 Vietnamese businesses have been licensed to operate in the country. The biggest investment among them is Hoang Anh Gia Lai Group's $440 million hotel, apartment and office complex. Dong Nai timber shipments climb The southern province of Dong Nai generated approximately US$602 million from exporting wood products during the first eight months of 2014, a year-on-year rise of 8.2 per cent. According to the provincial Statistics Department, in August alone, the export value of wood products was estimated at $88.3 million, up by $11.2 million from the previous month. The increase was attributed to a growing demand from the province's main export markets, such as the US, Canada, the UK, the Republic of Korea and Japan, as well as several new markets in Latin America and Africa, Le Van Danh, director of the local Department of Industry and Trade, said. Many companies have received orders for the first quarter of next year. According to the Handicrafts and Wood Industry Association of Vietnam, the stable macro-economy, controlled inflation, reasonable credit growth and abundance of human resources had made Vietnam's wood production industry attractive to foreign investors. Bui Quang Hoi, a director at the Bui Chan Hung Limited Company, said buyers had shifted their orders from China and Thailand to Viet Nam, in order to benefit from its tariff incentives. Viet Nam had already signed trade agreements with numerous countries which determine that import-export taxes for several commodities, including wood, will gradually be reduced to zero. Dong Nai now has over 600 wood-related enterprises that earned $2 billion in revenue last year, with nearly $1.5 billion generated from exports. Dong Nai's exports account for 27 per cent of the national timber sector's total export value. Seafood imports rise to meet export demand Viet Nam has imported a large volume of seafood products for export processing because of a lack of material from domestic sources, experts revealed. Figures from the Viet Nam Association of Seafood Exporters and Producers (VASEP) showed that in the first eight months of 2014, Vietnamese seafood export enterprises registered a 73-per cent year-on-year increase in seafood imports to US$72 million. Truong Dinh Hoe, VASEP general secretary said that the increased import volume consisted largely of material for export processing because of the high demand for seafood exports in the world market. During the first eight months of the year, Viet Nam gained a year-on-year surge in seafood exports of 25.4 per cent to $4.95 billion, Hoe said. According to the General Department of Customs, in the first seven months of this year, Viet Nam imported seafood products worth $203 million from India, $42 million from Taiwan, $34.8 million from Norway and $33 million from Japan, as well as $28.7 million from Indonesia. Hoe revealed that seafood exporting enterprises had to import more material to expand their export customer base by year end and meet domestic demand, especially for tuna and salmon. According to the Ministry of Agriculture and Rural Development, Viet Nam's largest source of seafood imports is India, which accounts for 33.5 per cent of total seafood imports, followed by Taiwan, Norway, Japan and Indonesia. The main import is shrimp because disease has adversely affected the country's domestic shrimp production, said Nguyen Van Kich, chairman of Cafatex Seafood Joint Stock Company. Kich added that the country's seafood export processors had to import shrimp from India, which was cheaper at $1 to $2 per kilo, to ensure that they would meet the deadline for deliveries of exports. Kich also noted that domestic factories' export processing capability remained high, so they decided to continue processing in spite of a lack of domestic material. In the future, domestic enterprises are expected to import more seafood as the Trans Pacific Partnership (TPP) agreement is signed by TPP member countries, said Kich. The agreement is expected to create opportunities for domestic enterprises to export their products at zero tax rates. The anticipated high demand serves as a great challenge for the domestic seafood industry, added Kich. Pham Anh Tuan, deputy director of the General Department of Fisheries, said that in the future, the country's fisheries industry would prioritise the review and adjustment of plans for growing and consuming key seafood products, including tra fish, shrimp, prawn and tilapia, as well as molluscs. VND2.75 trillion for Thai Nguyen-Bac Kan expressway Prime Minister Nguyen Tan Dung on September 7 attended a ground-breaking ceremony for a Thai Nguyen-Bac Kan expressway and an upgrade of 25km long National Highway 3 section. The BOT (Build-Operate-Transfer) project, estimated to cost nearly VND2,750 billion, is scheduled for completion by the end of 2016. The project aims to meet the transport demand, reduce congestion and traffic accidents on Highway No 3.  It will also serve as an important link in the overall transport network connecting the northern mountainous provinces with Hanoi and enhance national security and defence. At the ground-breaking ceremony, PM Dung said the project will play a key role in improving local people’s daily life, and contribute to promoting socio-economic development in the region and the country as a whole. He asked localities and contractors to pay particular attention to site clearance and carry out the project on in a timely manner, meeting schedule and technical specifications. EVN optimise hydroelectric capacity during flood season The Electricity of Vietnam (EVN) group aims to optimise their hydropower plants’ capacity by taking full advantage of September’s abundance of water resources during the main month of flooding. According to the group, the country’s total electricity output reached 95.6 billion kWh during the first eight months of 2014, up by nearly 10 percent compared to last year. EVN has instructed its subsidiaries to develop measures to combat floods and safely operate reservoirs with high water levels in order to cope with possible unusual weather events. The group also intensified communication efforts to promote safety and conserve electricity during the rainy season. HCM City encourages IT enterprise development Authorities are ready to solve any remaining problems that could be a hindrance to development of the information technology sector, a key industry for the country, the deputy chairman of the Ho Chi Minh City People's Committee said at a meeting on September 4 in the city. "The city wants to support enterprises but policies have not been updated and have been unreasonable, and State offices have been slow in implementation and have harassed enterprises," said Le Manh Ha at the meeting with IT enterprises. "The city has tried to support and talk with enterprises to allow us to adjust policies so they can be suited to reality," he added. Representatives from IT enterprises in the Tan Thuan Processing and Industrial Zone said while technical and service infrastructure in the zone had met the requirement of IT and high-tech electronics businesses, companies had not received full tax incentives for investment in high-tech parks. Also, the Thanh Nhan Computer Limited company asked local authorities to allow companies to sell IT products at big discounts six months after being imported, because IT products have a short-life circulation and become outdated quickly. They also asked the city for permission to reduce by 20 percent prices on such products after six months, 35 percent after nine months, 50 percent after 12 months, and 90 percent after 24 months. Representatives from the municipal Industry and Trade Department replied that the suggestion needs to be approved by the Ministry of Industry and Trade. The department will submit statements about the problems to the ministry. At the meeting, the Sao Thang Joint Stock Company pointed out that even though State offices were asked to give priority to purchase IT products from local companies, companies were not required to have a fixed number of human resources or quality certificates such as ISO and CMMI. Representatives from software enterprises said they wanted to invest in many new fields like cloud services, e-commerce and database centres, but there were no regulations that allowed implementation. "The Ministry of Information and Telecommunications should regularly update new trends and provide conditions to operate," said a representative for software enterprises. Speaking at the meeting, Deputy Minister Nguyen Minh Hong said: "The Ministry of Information and Telecommunications will try our best to solve all problems in order to support enterprises. The Ministry has released many decrees and we would like to get feedback from the business community to make such decrees useful." Ministry mulls VND30-trillion fund for supporting industries Individual and corporate producers and suppliers of products and services for supporting industries will be able to take out low-interest loans from a supporting industries fund worth a total of VND30 trillion, as stated in a draft decree. Different from the previous five drafts, the addition of VND30 trillion to the fund is a new point cited in the latest draft of a decree on developing supporting industries. Truong Thanh Hoai, deputy director of the Heavy Industry Department under the Ministry of Industry and Trade, said the ministry would send the draft decree to the Prime Minister for consideration, who is expected to sign off on this decree later this year. The supporting industries fund would be financed by official development assistance (ODA) loans, the State budget and other investment funds, including initial financial aid of VND2 trillion as a catalyst in the first three years, Hoai told the Daily. There are 1,400 domestic enterprises nationwide making components and accessories for supporting industries such as electric, electronic, metal and rubber parts. Many investors are afraid of putting their money in supporting industries due to long capital recovery and high risks while supporting industries companies also are running into difficulty over financial constraints, the ministry said. The inadequate supply of components in supporting industries has forced manufacturers to look for foreign suppliers, thus leading to the prolonged trade deficit in industrial production over the past many years. Vietnam imported a wide range of supporting components and materials worth US$53.1 billion last year, and that number is expected to jump to US$67.6 billion this year. However, many enterprises also expressed their concerns over the mechanism of the supporting industries fund, doubting whether the fund can actually help them overcome hardships. They said it is more urgent to bring out appropriate policies for supporting industries rather than to establish a new fund. HSBC: Central bank likely cuts OMO rate further HSBC Bank has predicted that the central bank would mull another cut of the open market operations (OMO) rate to beef up domestic demand and growth thanks to low inflation this year. In a macro economic report released on September 4, HSBC said Vietnam is in the slow lane towards economic recovery. After expanding solidly since September 2013, the HSBC manufacturing PMI index eased markedly in August to 50.3 and the bank forecast next month’s performance to be lackluster as inventories are high and orders are weak. Headline inflation decelerated further to 4.3% year-on-year on low domestic demand. With the exception of food, price pressures subdued and core inflation slowed to 4.2% year-on-year in August from 5.1% in July. Credit growth slowed to 10.3% year-on-year in August from 10.6% in July. The central bank already reduced the OMO rate by 50 basis points to 5% to support domestic demand. “Should inflation stay below 4.5% in September, the central bank may deliver another rate cut to the OMO rate to shore up domestic demand,” the bank said. Meanwhile, the Ministry of Finance is also doing what it can to help the business community. The corporate tax rate was cut to support businesses and attract manufacturing foreign direct investment (FDI) capital, especially high-tech firms. In January this year, the rate was reduced to 22% from 25% and by 2016, it will be lowered to 20%. Foreign-invested enterprises in prioritized sectors and regions get even more advantageous rates. Tax incentives coupled with slowing gross domestic product (GDP) growth heightened concerns over Vietnam’s fiscal position. In 2013, the budget deficit widened to 5.5% of GDP from 5.4% in 2012. The concern is not over the Government’s reported deficit but the lack of clarity about what is the “real” nature of the Government’s liability, leading to a wide range of debt estimates. The report also mentioned Vietnam’s fiscal accounting to identify key weaknesses and strengths. The primary difference between the Government’s method of accounting and the international standard method is the definition of what qualifies as expenditure and revenue. For example, the inclusion of principal payment in expenditure has led to higher deficit estimates by the Government. As a result, estimates of the debt stock also vary, skewing on the upside. In general, HSBC said Vietnam’s budget is quite comprehensive, with some issues remaining regarding carry-over, extra-budgetary funds, off-budget capital spending and State-owned enterprises (SOEs), obscuring the true picture of Vietnam’s fiscal health. By category, corporate, customs and oil revenues are the key contributors. This year, Vietnam’s revenue collections have bounced back. With expenditures sticky, the fiscal deficit will likely stay on track, if not surprise on the upside, the bank commented. Real estate FDI ranks second in first seven months Foreign Direct Investment (FDI) in the real estate sector was ranked second in Vietnam in the first seven months with 20 new projects that have been licensed at US$1.13 billion. The real estate FDI accounts for 11.9 percent of the total FDI capital in the country, according to the Foreign Investment Department under the Ministry of Planning and Investment. Several projects of foreign and domestic investors have restarted after a long delay. Vietnam’s real estate market is escaping from its bottom with initial positive changes, said Dr. Su Ngoc Khuong, director of property company Savills Vietnam. Meantime, other real estate markets in the Asia region that have developed into their tops since last couple years, are now in the downward trend. This is believed to create attractiveness for the Vietnamese market, Khuong added. Thai garment firms seek opportunities in HCM City Thai trade and investment promotion agencies are actively implementing an array of programmes to connect businesses and support them in seeking business investment opportunities in Vietnam. These activities are seen as preparations for future opportunities after the establishment of an ASEAN Economic Community (AEC) in 2015,   Thai Consul General Malinee Harnboonsong told an exchange between Vietnamese and Thai garment businesses in HCM City on August 27. Bilateral trade relations have seen strong development in recent years with two-way trade turnover reaching nearly US$9.5 billion last year and nearly US$5 billion in the first half of this year. Many Thai businesses highly appreciated the Vietnamese market’s potential and long-term cooperative opportunities with Vietnamese partners, she said. Thai businesses, through the exchange, want to introduce prime quality products and services to distributors and agents to enable Vietnamese customers be in favour of Thai products, Malinee said. A Thaiwahknit Wear Co representative said the company is keen to expand business in Vietnam, particularly in HCM City aiming to seek importers, agents and outlets for knitwear and sports wear production. According to the Ministry of Industry and Trade, bilateral garment trade turnover reached US$160 million in the first half of this year, including US$20 million from Vietnam’s exports and US$140 million from its imports. Nguyen Van Tuan from the Vietnam Chamber of Commerce and Industry (VCCI)’s branch in HCM City suggested garment businesses from two countries should find the best ways to bridge the different gap of their export turnover and increase trade exchange for mutual benefits. US opens door to tropical fruits from Vietnam Vietnamese litchi and longan will be allowed to be sold in the U.S. starting in October, following an amended regulation from the Animal and Plant  Health Inspection Service (APHIS). The APHIS, an agency of the United States Department of Agriculture (USDA) responsible for protecting animal and plant health, has amended the “fruits and vegetables regulations to allow the importation of litchi and longan fruit from Vietnam into the continental United States,” according to a document published in the Federal Register on Thursday. The APHIS said Vietnamese litchi and longan will be required to undergo a systematic approach that includes requirements for treatment and inspection and restrictions on the distribution of the fruit. “This will allow for the importation of litchi and longan fruit from Vietnam into the United States, while continuing to provide protection against the introduction of quarantine pests,” the document, serving as the final rule on the issue, reads. The APHIS first proposed to allow importation of Vietnamese litchi and longan fruits in 2011, and eventually “adopted the proposed rule as a final rule, without change.” The final rule takes effect on October 4. However, the importation of Vietnamese litchi and longan fruit will not be allowed in Florida and Hawaii, where the tropical fruits are commercially grown, The Packer, a weekly on fresh fruit and vegetable industry news, said in its Wednesday report, citing the USDA. The two states collectively produced 535 metric tons of litchi and 776 metric tons of longan in 2008, according to USDA data. The USDA believed Vietnam's litchi and longan may have a negative economic impact on U.S. fruit growers, the Kansas-based newspaper said. Imported fruit from Vietnam could hurt the price of U.S. fruit sold in Asian and Hispanic markets, where the demand for produce is more price-sensitive, according to the USDA. Between 2007 and 2010, the Southeast Asian country shipped around 600 metric tons of litchi and 1,200 tons of longan to the U.S., the USDA said, citing Vietnamese trade sources. It is also likely that Vietnamese litchi will be able to enter the Australian market, with local businesses promising to consider importing the fruit, according to the Vietnam Trade Office in Australia. The office has recently proposed an increase in the importation of Vietnamese products, including fruits and vegetables, to Australia. “The proposal was highly appreciated by businesses in the state of Victoria, as well as Coles, a subsidiary of the country’s second largest retailer, Wesfarmers Limited,” the trade office said earlier this week. World Bank, IMF identify Vietnam’s financial vulnerabilities in joint report A comprehensive framework through which Vietnam can identify its financial system vulnerabilities and develop appropriate policy responses has been provided by a program jointly designed by the World Bank (WB) and the International Monetary Fund (IMF). The Southeast Asian country’s key financial sector vulnerabilities and developmental challenges have been included in the Financial Sector   Assessment Program (FSAP) report, finalized in June but only published in late August, according to the WB. Besides pinpointing financial vulnerabilities, the FSAP Vietnam report also provides policy recommendations for the further and sound development of the Vietnamese financial system. The report summarizes the findings of a joint mission from the WB and the IMF that visited the country in October 2012 and January 2013 to conduct the assessment of the local financial system under the FSAP. In their report, the WB and the IMF said that Vietnam has achieved remarkable progress since the start of its transition from a centrally-planned economy in the mid-1980s to a mixed economy with greater reliance on markets and increased participation of private financial and non-financial institutions. “These reforms contributed to an impressive performance in the last two decades – since 1990 the annual GDP growth has exceeded 7 percent and per capita income has increased three-fold,” the document reads. However, in recent years the Vietnamese economy has shown signs of corporate and financial distress, and weaker growth, the report noted. Several segments of the corporate sector exhibit poor performance and financial distress, and have affected the health of the banking system.   Large state-owned enterprises have defaulted on their obligations and several others appear to be overleveraged. Meanwhile, the banking system has accumulated a significant amount of non-performing loans, estimated conservatively at 12 percent of total loans at the end of 2012, and many small banks have experienced more serious liquidity and insolvency problems in the same period, leading to interventions by the State Bank of Vietnam. “The reduced lending capacity of the banking system is one of the factors that have contributed to a sharp slowdown of credit growth,” according to the FSAP. The FSAP attributed the weak performance of the financial sector to a complex array of institutional and regulatory factors, including inadequate governance structures and risk management capacity, weaknesses in financial infrastructure, and deficiencies in financial regulation and supervision. “Increased macroeconomic volatility in the last five years has compounded these problems and led to further deterioration in the quality of loan portfolios.” The report also provides a broad set of policy recommendations that can be used to operationalize a comprehensive reform program, including banking restructuring, SOE restructuring, and public investment reform approved by the Vietnamese National Assembly in November 2011. The recommendations include a plan to work out the large stock of existing non-performing loans, measures to ensure sound new flows of finance and prevent the accumulation of additional non-performing loans, and a set of policy steps designed to protect the financial sector during the reform period. Launched in 1999 in the wake of the Asian financial crisis, the FSAP brings together WB and IMF expertise to help countries reduce the likelihood and severity of financial sector crises. Real estate experts forecast further decline in housing market Professor Dang Hung Vo, a senior Vietnamese real estate expert, has predicted that housing prices in Vietnam will drop as the year comes to an end. Professor Dang Hung Vo, former Deputy Minister of Natural Resources and Environment, cited a report by released by Savills, which said that the supply of apartments and offices in July of this year increased by 3% to 5% against the same period of last year. Higher supply has contributed to a fall of real estate prices. According to Savills, in the second quarter of 2014, around 2,500 apartments were sold in Hanoi, and 3,800 in HCM City, which was a rise from last year. According to experts in the industry, government policies in regards to the real estate market are showing their effectiveness. In particular the disbursement of VND30-trillion (USD1.41 billion) in the form of a financial support package. Professor Vo said that from now to the end of the year is an opportunity for companies to boost their revenues, which should decrease prices in real estate. Many commercial and residential projects have been cutting their prices per square metre and banks have also launched programmes to boost demand with preferential loans. The Vietnamese tourism property sector has benefited from a wave of investment, including projects in Quang Ninh Province’s Halong City and Phu Quoc. According to Vo, this sector holds more promise than other sectors. He added that, in the past Vietnamese tourism sites lacked large hotels, and investors, a fact not ignored by investors, who have poured money into these neglected areas. The combination of building hotels and resorts at tourist destinations is good for Vietnam's tourism industry, according to Vo, who also predicted a burgeoning of high-end establishments in the near future. This helps t bring more tourists to tourism resorts. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR