BUSINESS IN BRIEF 25/10

MHIVA opens new factory to supply passenger doors for Boeing777

MHI Aerospace Vietnam Co., Ltd. (MHIVA), a group company of Mitsubishi Heavy Industries, today opened its new manufacturing factory in Hanoi to supply passenger doors for the Boeing777.

The firm also marked the shipment of its 1,000th inboard flap for the Boeing737 at the opening ceremony of the new factory.

“The MHIVA door factory opening and 1000th 737 inboard flap delivery milestones we celebrate today are recognition of the skilled local workforce and proven high quality manufacturing performance that MHIVA and Vietnam bring to the table,” said Skip Boyce, president of Boeing Southeast Asia.  “This stringent requirement for high quality manufacturing capability will only continue to grow in importance as Boeing ramps up production rates to keep up with global aircraft demand.”

The newly completed factory, with the total capacity of 32 doors per month, has a building area of 6,500 square metres, which was constructed as an addition to MHIVA’s head office in the Thang Long Industrial Park (TLIP) on the outskirts of Hanoi. Initially the factory will only undertake structural assembly of passenger doors for the Boeing777, a task transferred from MHI’s Nagoya Aerospace Systems Works. Subsequently MHIVA will take full responsibility for the total assembly work of the passenger doors.

Boeing’s 777 family of jets has been well received by passengers, and as the air transport market’s leading large-size twinjet passenger aircraft more than 1,200 units have been produced since the first flight in 1994. MHI has been a risk-sharing partner in the development and mass production of the series, being responsible not only for passenger doors but also for aft fuselages. In 1993 the company delivered parts for the very first 777.

Production of inboard flap for the Boeing 737 has been undertaken at MHIVA’s existing factory with the total investment capital of $7 million since the facility was completed in 2009. Initially MHIVA only handled partial assembly work; later, production processes were gradually expanded, until today the company is responsible for total assembly capacity of 60 inboard flaps per month.

MHIVA was established by MHI in 2008 as one of various initiatives targeting the establishment of an efficient supply chain as a way of enhancing the company’s competitive strength.

MHI is presently undertaking numerous large-scale commercial aircraft projects – production of composite-material wing boxes for the midsize Boeing 787 passenger jet; production of the recently rolled-out MRJ (Mitsubishi Regional Jet), Japan’s first domestically developed passenger jet; and participation in the development and mass production of the 777X, successor to the Boeing 777 – and the company is taking steps to build up its production systems and expand production capacity.

Vietnam 2nd fastest-growing smartphone market in SE Asia: GfK

Vietnam came second among the three fastest growing smartphone markets in terms of volume turnover in Southeast Asia in the past 12 months, a German market research firm said Tuesday in a press release.

During the Sep 2013 – Aug 2014 period, Vietnam reported 56 percent increase in smartphone demand compared to the previous period, Sep 2012 – Aug 2013, GfK said, citing findings from its latest survey.

Vietnam stood behind Indonesia, which posted 70 percent spike, and was followed by Thailand, where demand for smartphone expanded 44 percent.

“In value terms, it was Vietnam, Indonesia and Thailand which drew in 52, 32 and 31 percent increased sales dollars against last year,” the GfK said.

The latest GfK findings for the smartphone ownerships in seven key Southeast Asian markets, including Singapore, Malaysia, Thailand, Indonesia, Philippines, Vietnam and Cambodia, show that sales of the hi-tech devices in these countries reached more than US$16.4 billion in the past 12 months.

Total smartphone sales at these seven markets in the Sep 2013 – Aug 2014 period rose to nearly 120 million units, according to the market research firm.

GfK said smartphone sales in these countries spiked by 44 percent in volume and 24 percent in value compared to the same period a year ago.

“The big developing countries are the ones fuelling the strong surge in adoption as many outside the big cities are probably just making the switch from their basic feature phone and acquiring their first smartphone,” Gerard Tan, Account Director for Digital World at GfK Asia, said in a statement.

“For instance, the markets of Indonesia, Vietnam and Thailand have performed extremely well this year, reporting high growth of over 30 percent in generated revenue and even more in sales volume.”

Tan said the introduction of more low-end models by new Chinese manufacturers is a key driver that fueled the strong market performance especially in the developing countries as they “make smartphones more affordable.”

“These budget smartphone models have gone down particularly well in the developing markets,” Tan said, adding they would take competition in the marketplace to “an even more intense level.”

Indonesia is the only market where homegrown brands have continued to grow in popularity, garnering over 16 percent share in volume and 7 percent share in value of the local market.

Meanwhile, Chinese smartphone brands are more prevalent in Indonesia, Malaysia, and Vietnam where their respective proportion of consumer spend have reached more than 10 percent of the total market.

“Although international brands dominate the region’s smartphone market, Chinese brands are gaining significant presence,” Tan stated.

“Major international brands are losing shares to the Chinese brands in price competition due to the low-cost of the latter which are selling their smartphones, including phablets, within the $50 to $200 range.”

More than 345 Chinese branded smartphones now exist across the Southeast Asia, according to GfK.

While an internationally branded smartphone averaged at around $253, a Chinese branded one cost only $159, or 58 percent lower.

“Competition in the market will further intensify, as Chinese manufacturers are stepping up their activities in more countries, notably Singapore, Philippines and Thailand,” Tan commented.

Tan added fierce competition in the region is anticipated as several international brands are poised to launch new models there.

Consumers will be the “eventually winners who will gain from the price wars” between the brands, he concluded.

Vietnamese, German firms join hands to power Con Dao Islands

Vietnam’s Duc Long Gia Lai Group (DLG) will co-operate with Germany’s Merica Group (MGC) to provide electricity for the Con Dao Islands.

The two firms signed a memorandum of understanding for the project on October 15, witnessed by Prime Minister Nguyen Tan Dung and German Vice Chancellor and Minister for Economic Affairs and Energy Sigmar Gabriel during the former’s visit to Berlin.

The project, using German technology, is hoped to support the economic development of the islands and Vietnam in general.

After a successful pilot of this model in Con Dao, Duc Long Gia Lai will expand the use to the whole of the country, a representative of the firm said.

Merica is one of the 10 largest independent providers of electricity and gas in Germany with its annual revenues topping $1.5 billion.

Yen Bai encourages concentrated processing tech

The northern province of Yen Bai is giving priority to mining enterprises that apply concentrated processing technology so as to raise the mineral content of extracted ores from 20-25 per cent to 65 per cent.

The Yen Bai Provincial Department of Natural Resources and Environment deputy director Ha Manh Cuong announced this decision and said it was a response to the licensing of many mining projects that have been largely ineffective at removing anything but iron ores.

Cuong said the technology could help make full use of local mineral resources, reduce waste, and protect the environment. Furthermore, he underscored that Yen Bai would be more supportive of mining firms that have identified buyers.  Yen Bai reportedly has iron reserves totalling 91 million tonnes.

Minh Duc Mining JSC is one of only a handful of firms that will benefit from this policy. Minh Duc opened a VND650 billion ($30.9 million) mine that applies concentrated processing technology in Yen Bai in February 2014.

“We went to China and found technologies that could help us boost the iron content of ore to 64.8 per cent,” said Hien, the firm’s general director.

In 2012, after two years of exploration, Minh Duc was licensed to exploit 10 million tonnes of iron ores from Yen Bai’s Mountain 300 iron mine over 30 years.

“The firm will soon be licensed to exploit additional six million tonnes. We are thankful for the support we have received from the provincial authorities, as we are not the only firm looking into this golden land,” Hien added.

The manufacturer runs a deep iron processing line with the capacity of over 80,000 tonnes of concentrated ores per year.

“We are waiting for the state’s permission to import two similar lines, raising the  total capacity to 250,000 tonnes per year,” she explained.

As of June 2014, Minh Duc had delivered 15,000 tonnes of concentrated magnetite iron ores to the Vietnam-China Iron and Steel Company, located 250 kilometres away, at a selling price of VND1.8 million ($86) per tonne.

However, tax policies are still burdensome to many mining firms like Minh Duc. According to the company’s general director, at a mining cost of VND1 million ($47.6) per tonne, along with VND500,000 ($23.8) in taxes and environmental protection fees, profit margins are thin.

President of the Lao Cai Young Entrepreneur Association Nguyen Huy Long said that deep processing technology not only maximised the output of natural resources, but also reduced transportation costs.

“Instead of carrying 720 tonnes of low-quality iron ores, mining companies only pay for around 200 tonnes of concentrated ores. Concentrated processing has proven to be highly efficient and the state should get behind firms that apply this technology,” he said.

As a northern mountainous province, mining is one of the leading industries in Yen Bai. The area is rich in minerals including one billion cubic metres of white limestone, 91 million tonnes of iron ores, and 150,000 tonnes of kaolin clay.

So far  Yen Bai has licensed 36 iron mining operations for 27 companies, of which two were issued by the Ministry of Natural Resources and Environment to Development Number One Single Member Ltd, and Minh Duc Mining JSC. The other 34 were issued by the Yen Bai Provincial People’s Committee.

Cai Mep-Thi Vai authority proposed

The Ba Ria-Vung Tau Provincial People’s Committee has proposed the Vietnamese government to establish a port authority to administer the Cai Mep-Thi Vai port complex in a bid to optimise its investment efficiency.

The proposal complies with a recent prime ministerial decision approving a transport sector restructuring plan that will serve industrialisation and modernisation for sustainable development through 2020 in the province.

In the plan, the Cai Mep-Thi Vai port complex is specified as a top investment priority area to be developed into a modern port venue.

Under the Ba Ria-Vung Tau Provincial People’s Committee proposal, the port authority will be a state management agency directly run by the provincial people’s committee which oversees the investment and operational activities of area seaports, as well as associated logistic centres.

Other functions such as land fund management, infrastructure investment for leasing services, and supply of maritime services at port venues and logistic centres will be assumed by a specific business under the direct management of the port authority.

If the proposal is green-lighted, the port authority of Ba Ria-Vung Tau will develop in two phases. First, in a five-year plan beginning in 2015, the Cai Mep-Thi Vai port complex management unit will be created to act as a state management agency under the provincial people’s committee direction.

In the second phase, which starts in 2020, the port authority will be created through organisational change from the Cai Mep-Thi Vai port complex management unit.

According to Deputy Chairman of the Ba Ria-Vung Tau Provincial People’s Committee Ho Van Nien, through field surveys conducted throughout Asia and Europe, port authorities have proven to be quite effective models in respect to business management. They have brought multiple benefits to business communities, particularly with the application of a one-stop-shop mechanism for conducting administrative procedures.

“Applying the port authority model is a smart move, matching the world development trend,” Nien said.

Earlier this year, the Vietnamese government allowed the Vietnam Maritime Administration to pilot the model at some ports.

Ba Ria-Vung Tau has lodged its proposal and is awaiting the government’s final decision before proceeding at its Cai Mep-Thi Vai port complex. In fact, Cai Mep-Thi Vai has become an international transshipment port venue in the last five years. Many problems, however, persist with local port system management, including the lack of consistency among diverse state management agencies.

The put-through cargo volumes at the Cai Mep-Thi Vai port complex remain rather low, at 550,000 TEUs in 2011, increasing to 950,000 TEUs in 2012 and 2013. In the first four months of this year, the port group only received 348,000 TEUs, meaning about 15 per cent of port capacity was tapped, causing great waste.

As the cargo volume is far below port capacity, there has been fierce competition among ports in this area to attract customers. Some ports have cut fee levels - an imprudent move that has lowered port investment efficiency.

Current procedures still prove cumbersome, causing inconveniences to ship consigners.

Ba Ria-Vung Tau is currently home to 52 port projects worth VND134.2 trillion ($7.06 billion) in the total committed investment capital. In the first nine months of 2014, the disbursed sum of the province’s seaport projects mounted to VND1.516 trillion ($72 million), bringing the total realised capital of seaport projects in the province to VND42.1 trillion ($200 million) by September 2014, according to the Ba Ria-Vung Tau Provincial Department of Transport.

Ocean Dune golf course controversy continues

The developer of the controversial Ocean Dune golf course in Phan Thiet of the central province of Binh Thuan last week was requested by the Ministry of Construction to justify transforming the site into a new urban township.

In a document sent to the Ministry of Planning and Investment (MPI) and Rang Dong Group – the developer of the Ocean Dune - the Ministry of Construction (MoC) requested clarifications on how to harmonise the interests of the state, the community, the developer and golf club members.

The MPI previously sent a memo to related bodies, to collect suggestions on Rang Dong Group’s proposal to transform the existing and largely underused golf course into an urban township. The company cited huge losses incurred in the operation of the course as reasoning for its decision.

However on its return submission, the MoC claimed that the proposal from the MPI only referred to removing the Ocean Dune from the national golf course development plan, but not transforming it to an urban township.

“The MoC requested the MPI add the information on how to actually implement the proposed change,” the MoC said.

The debate on the move of the Ocean Dune into an urban township has gone on for many years. Located in the central province of Binh Thuan’s Phan Thiet city, the course was built in 1993 by a Hong Kong-based investor, with famous golf billionaire Larry Hillblom recruited as a consultant. At the time, the local authorities gave them an investment certificate with the hope of developing the local site of Phan Thiet into an attractive tourist destination. However, continuous losses have forced Rang Dong Group, which bought the golf course in 2013, to convert it to a new urban township. According to a report from the Binh Thuan Taxation Department, over the last 10 years, total losses sustained by the golf course have reached VND115 billion ($5.4 million), and it has not contributed anything towards the local state budget.

Rang Dong Group’s chairman Nguyen Van Dong, said that changing the function of the golf course would also free up much needed space for local housing. With an estimated investment capital of around VND3 trillion ($142.8 million), a third of the investment will be put into infrastructure such as roads, power and water, drainage and parks.

Dong said that changing the function would massively increase the efficiency of the land use and bring an estimated VND1 trillion ($47.6 million) in land taxes to the provincial budget.

The group chairman added that apart from commercial housing, the investor would develop the Blue Sea Street urban township into a modern, environmentally-friendly part of the city.

However the existing members at the Ocean Dune golf course have opposed the move, claiming that Rang Dong’s unilateral decision to close the course infringed upon the legal interests and property rights of the members.

According to Dong, of the 180 members in the Ocean Dune golf course database, 70 have been unavailable for contact for the last five to 10 years, while 80 other members had agreed to move to the Sea Links golf course, a nearby golf course also owned by Rang Dong Group. Twenty other members agreed to accept financial compensation.

 Income tax flows in from mineral, petroleum firms

The minerals and petroleum sectors remain the largest tax contributors in the 2014 list of 1,000 largest corporate income taxpayers in Viet Nam (V1000).

The Viet Nam Report Company (VNRC) and the Taxation Department released the V1000 list yesterday.

According to the list, the minerals and petroleum sectors made up 36.4 per cent of total tax contributions in 2014 while the telecommunications and information sector ranked second with 15 per cent and the financial sector ranked third with 10.5 per cent.

The list also showed that total tax contributions from the V1000 this year reached VND80.46 trillion (US$3.8 billion), a 0.54-per cent year-on-year decline. But the amount accounted for 10.2 per cent of the entire State budget.

The list also revealed that the100 biggest businesses contributed more than 57 per cent of total tax contributions.

Phung Hoang Co, VNRC management board vice chairman, said State-owned enterprises (SOEs) accounted for 29 per cent of the list and made up 65.6 per cent of total tax contributions.

In addition, SOEs contributions to the State budget this year are expected to reach VND184.5 trillion while foreign direct investment is expected to chip in VND111.6 trillion and the non-government sector, VND107.2 trillion.

Co cited the figures as proof that SOEs were making efforts to improve their effectiveness and investment in the State budget, as well as obey tax laws.

This year's top 10 taxpaying enterprises:

1. Military Telecommuni-cations Group (Viettel)

2. Vietnam Mobile Telecom Services Company (VMS)

3. PetroVietnam Gas Joint Stock Corporation (PV Gas)

4. Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)

5. Honda Vietnam Company

6. Vietnam Dairy Company

7. VietsovPetro Joint Venture Enterprise (VietsovPetro)

8. JSC Bank for Foreign Trade of Viet Nam (Vietcombank)

9. Bank for Investment and Development of Vietnam (BIDV)

10. Vietnam Brewery Company.

Conference links producers, retailers

Retailers met with nearly 130 enterprises, co-operatives, and craft villages in HCM City and southern provinces yesterday to exchange information and seek business partners.

Participants included Aeon, BigC, Saigon Co.op FairPrice, Metro and Weixin Cargo Services Co., Ltd, which owns the online supermarket Golmart. Thu Duc and Hoc Mon wholesale markets were also represented.

The meeting was organised on the sidelines of the high-tech agriculture and food processing fair of the HCM City Investment and Trade Promotion Centre.

Ho Xuan Lam, the centre's deputy director, said the event would help create stable outlets for Vietnamese farm produce.

Nguyen Huu Nghi, an executive with Thai Binh Investment Trading Corp, said his company wanted to seek suppliers of agricultural products to export to the South American market.

His company exports many Vietnamese products to Cuba, with export revenue reaching US$70 million a year in the region, he said.

Greg Matthews, a representative of online supermarket Golmart in Australia, said he was looking for Vietnamese food products to import to Australia.

Seafood and vegetables are in high demand in Australia, he said.

To penetrate the Australian market, Vietnamese goods must meet requirements set by the market, including requirements on quality and packaging, he said.

At the meeting, Weixin Cargo Services Co., Ltd, which owns online supermarket Golmart, signed agreements with four enterprises - Truong Son Co.operative, Linker Viet Nam, Cho Gao Cocoa Company and Tan Lam Long Co., Ltd.

Under the agreement, Weixin will market and distribute their products, including coffee, cocoa powder, butter and hibiscus tea via its agencies and e-commerce website, said Le Thanh Canh, business development director of Weixin Cargo Services Co.

The company has distributed Vietnamese goods to many overseas markets, including Australia, the US, and France, she said.

Hoang Van Nhan, managing director of Truong Son Co.operative, which owns Con Soc coffee and tea brand, said currently his products were available in many supermarkets, including Aeon, Lotte Mart, Maximark and Co.opmart as well as in many airports in Viet Nam.

He said the Golmart agreement would help promote his products to more foreign customers as well as increase sales.

A fruit trader at the Hoc Mon Wholesale Market also signed a memorandum of understanding with Viet Thuy Phat Organic Vegetable Company on consumption of pear-shaped melons.

Pham Thanh Phuong, director of the Viet Thuy Phat Organic Vegetable Company, said his company began planting the melons in 2011 in the HCM City Hi-tech Agricultural Park. It uses VietGap standards to grow the fruit.

He said he also plans to expand the cultivation area to 8ha from the current two hectares.

Summit to look at IT in agriculture industry

The upcoming Asian-Oceania regional summit on information and communication technology (ICT) is expected to jump-start the application of ICT in the agriculture sector, organisers said yesterday.

The Asian-Oceania Computing Industry Organisation (ASOCIO) ICT Summit 2014, the biggest annual event of the regional software, IT and communications industry, will be held here from October 28 to 30.

The Viet Nam Software Association (Vinasa) is organising and hosting this year's event , "ICT: The new paradigm in socio-economic development and agricultural restructuring", which is held alternately in the cities of 22 member countries.

"This is an opportunity for Viet Nam to study experiences from around the world and make IT the new paradigm in socio-economic development and agricultural restructuring," said Vinasa chairman Truong Gia Binh.

Binh explained that the summit, which was expected to attract about 700 domestic and international participants, would help speed up the development of the Vietnamese IT industry, as well as the country's economy and society, and create a new mark for Viet Nam in the IT industry.

The summit will create numerous business co-operation arrangements between Viet Nam enterprises and international businesses in the region and around the world, Binh added.

Viet Nam first won the right to host the summit in 2003 and won it again after 11 years.

The event represents the largest international association of IT in the Asia-Oceania region with 22 full member countries, including Japan, South Korea, India and Sri Lanka.

Australia, Taiwan, Hong Kong and Malaysia are likewise members, as well as Singapore, Thailand and Viet Nam. The United States has joined France, Britain, Spain and Canada in observing the proceedings.

Refinery set for expansion

A 108.2ha site has been earmarked for the expansion of the Dung Quat Oil Refinery, which is estimated to be worth US$1.8 billion to $2 billion.

Viet Nam National Oil and Gas Group (PetroVietnam) deputy general director Le Manh Hung made the announcement at a working session with authorities of this central province last October 22.

According to VnExpress online, work on the project is expected to begin early next year and be completed by 2021. PetroVietnam will submit a plan scheduling the progress of new developments to Prime Minister Nguyen Tan Dung by the end of this year. Hung also revealed that the expanded factory would have more crude oil and product storage facilities and safety corridors.

The expansion is expected to increase the refinery's current annual output from 6.5 million tonnes to 10 million tonnes, thereby meeting 50 per cent of the national demand for refined petroleum products.

PetroVietnam may form a joint venture with Gazprom Group of Russia to implement the project and is working with Japanese consultant JGC to finalise detailed schemes.

Dung ordered Quang Ngai authorities to clear land for the expansion earlier this month while provincial People's Committee chairman Le Viet Chu said a completely cleared site would be available by the third quarter of 2016.

Site clearance will cost about VND770 billion ($36.67 million), and the province will cover a part of the expense, besides speeding up the resettlement of more than 400 households to be displaced by the project, Chu added.

The Binh Son Refining and Petrochemical Company is running the 810ha refinery, which was launched at the Dung Quat Economic Zone in 2009. The refinery has produced roughly 30 million tonnes of products and met about 30 per cent of nationwide demand for petrol.

It has raked in VND580 trillion (US$27.23 billion) in revenues and contributed VND93 trillion ($4.37 billion) to the State budget after five years of operation. Chu said the upgrade of this key national facility was needed to accelerate provincial and national socio-economic development.

Petrolimex continues cutting petrol prices

The Viet Nam National Petroleum Group (Petrolimex) reduced the price of RON 92 and E5 RON 92 gasoline by VND550 to VND22,340 ($1.05) per litre yesterday.

The price of diesel 0.05S was cut by VND480 to VND19,760 per litre, and the price of kerosene was slashed by VND440 per litre to VND20,060.

Petrolimex attributed the cut to falling global prices. This is the eighth time petrol prices have been cut this year.

Source: VOV/VNS/VIR/dtinews