BUSINESS IN BRIEF 12/12 Vietsovpetrol revenue forecast to reach US$4.34 billion The Russian-Vietnamese oil and gas joint venture Vietsovpetro on Sunday said their revenue is estimated to reach US$4.34 billion this year, equivalent to 112.4 percent of its plan. Of these, the revenue is estimated to hit US$386.7 million for Vietnamese side and US$393.6 million for Russian side, accounting for 107.9 percent and 114.3 percent of their plans respectively. The joint venture is expected to submit a total of US$2.2 billion to the State budget this year. By the end of the year, Vietsovpetro will exploit over 5.35 million tons of crude oil, at least 250,000 tons beyond their expectations. The joint venture has found oil and gas in seven out of nine exploratory wells at blocks 09-1 and 09-3. They have successfully determined five areas to install BK oil rigs. Weak competitiveness puts Vietnamese businesses in challenges from AEC 2015 is considered as an important transitional year of Vietname’s business environment when ASEAN Economic Community (AEC) will be established. It is expected to bring many opportunities but also many challenges especially when the competitiveness of local businesses has improved very slowly. . Nearly eight years experiencing the global economic crisis and inherent difficulties in Vietnam’s economy, the number of Vietnamese businesses have kept increasing. However over 90 percent of them are of small and medium scales. Several of these are of very small scale and weak competitiveness. Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) Vu Tien Loc expressed concern over the competitiveness of Vietnamese businesses at a seminar hosted by the Ministry of Foreign Affairs, VCCI and the World Economic Forum (WEF) in November. A WEF report shows that Vietnam’s competitiveness index increases two notches from 70 to 68 out of 148 economies in the 2014-1015 period. Another report by World Bank ranks Vietnam 78th out of 189 nations in 2014. Mr. Loc said that Vietnam’s economic institution is ranked 92th in the world and ninth out of ten nations in ASEAN region, just before Myanmar. The country’s creativeness is listed 87th in the world, education and training quality is at the 96th position. Especially, Vietnam is ranked 99th in the readiness for new technology application. Deputy Minister of Foreign Affairs Bui Thanh Son said that Vietnam’s competitiveness has been improved very slow and is named lower than many countries in the Asian region. Vietnam has seen trade deficit with ASEAN nations. In 2013, the country’s export value to ASEAN reached US$18.4 billion while import value hit US$21.35 billion. Fifty percent of Vietnam’s export turnover was from the US, EU and Japan, it was only 22 percent from ASEAN. According to statistics, the country has nearly 600,000 businesses with a total capital of VND6,000 trillion. Nearly 97 percent of them have less than 300 workers and VND10 billion in capital. About 51.3 percent have below 10 workers. The number of small and medium enterprises in Ho Chi Minh City and Hanoi accounts for nearly 45 percent of the total number in Vietnam. In a report on Vietnamese businesses’ competitiveness, the Ministry of Planning and Investment’s said that the number of businesses has quickly developed however the competitiveness has not been improved considerably. Most of them are of small scale, with limited market share, low potentials in science and technology. They have mainly done outsourcing and depended on input material import. Capital and technology limitations have prevented small and medium enterprises from attending in large projects. Beside, they have also faced with unclear business environment with many complicated tax procedures, the ministry reported. Many experts said they felt worry because there has no official study about businesses’ consideration and awareness of integration as well as the number of businesses who can take advantage of tax incentives from AEC to boost exports. Vinalines raises VND315 billion from share auction Vietnam National Shipping Lines, or Vinalines, has raised more than VND315 billion from the sale of over 20 million shares at Maritime Commercial Bank. The Hanoi Stock Exchange auctioned the shares on December 8 at the starting price of around VND15,650 each. Only two investors (one organization and one individual) took part in the bidding and acquired all the shares at the average price of VND15,654 each. The highest bid was VND15,850 and the biggest bidding volume was 19.4 million shares, or 96% of the total put up for auction. Vinalines will use the proceedings to restructure its loans, which were estimated at over VND16 trillion at the end of last year. It has since been trying to reduce the debt via various channels such as debt trading, capital divestment and restructuring. According to a restructuring plan approved last year by the Government, Vinalines should dissolve two enterprises, let two firms go bankrupt and withdraw capital from 37 others from 2012 to 2015. The corporation will focus on shipping, seaport and maritime services as core operations in the coming years. Maritime Bank now has total chartered capital of VND8 trillion and total assets of nearly VND110 trillion. The bank has around 230 banking units nationwide. ACE Life opens new Vietnam sales office ACE Life, the global life insurance division of ACE Group, yesterday announced the opening of a new sales office in Tam Ky city in Vietnam’s Quang Nam province to better serve its growing base of customers in this south-central coastal region. Located centrally between the north and the south, Quang Nam features a younger population and is considered as one of key economic areas in the central region. Following ACE Life’s strategy to expand its footprint in Vietnam, this is the sixth new office opened this year and the Quang Nam office is the company’s 23rd office in the country. “ACE Life always strives to satisfy our customers’ rising demand in life insurance through our product quality, innovative solutions, as well as reliable and professional services. We hope that this new office will provide the local residents with the most effective and relevant financial protection solution,” said Lam Hai Tuan, chairman and country president of ACE Life in Vietnam. The new sales office will be the working base for more than 300 agency leaders, account representatives and staff. After nearly 10 years in Vietnam, ACE Life now has a network in 21 provinces and cities nationwide with an agency force in excess of 10,000 professionals. Recent expansions to the network are part of ACE Life’s development and growth strategy, which aims to build a strong distribution network not only to develop ACE Life’s business, but also to affirm its long-term commitment to the local market. Vingroup named Vietnam’s seventh biggest taxpayer in 2014 Vingroup was ranked seventh among Vietnam’s biggest taxpayers in 2014 according to results announced on December 2. Vingroup paid the biggest amount of tax for the year 2013 among private companies with a total VND2.6 trillion ($122 million) paid, up 308 per cent on year. This is the first year Vingroup made it onto the list of the country’s top ten tax payers after five consecutive years listed on the V1000, the list of Vietnam’s 1000 biggest tax payers. In terms of financial results, 2013 was the best in the group’s history with VND7.15 trillion ($335.7 million) earned in net profit and revenue of VND18.3 trillion ($860 million), up 132 per cent on year. The V1000 aims to honour firms that make the greatest contributions to state coffers. The list is released by the General Department of Taxation and Vietnam Report, with the consultation of independent domestic and foreign experts. Viettel Global eyes $1.8 bln telecom project in Myanmar Viettel Global, the international investment arm of the military-run Viettel group, will cooperate with companies in Myanmar to establish Viettel Myanmar to implement the investment in a telecommunications network project in the Southeast Asian country. The decision came after a vote of Viettel Global’s shareholders in it shareholders’ meeting on last Wednesday. The total investment of the project is expected to be at $ 1.8 billion, in which the total money funded by Viettel Global is approximately $800 million, the rest,  about $ 1 billion, will be covered by its foreign partners. As the investment of the project is expected to exceed half of the total assets recorded in the most recent audit report of Viettel Global, according to the company’s rules, Viettel Global is required to consult with its shareholders before implementation. As its mother firm, Viettel group, owns 97.58 percent of the stake in Viettel Global, the plan will easily be adopted in the shareholders' meeting. Currently, Viettel Global has invested in eight countries, including five operational projects in Cambodia, Laos, Haiti, Mozambique, and East Timor. Three other projects in Africa, including Burundi and Cameroon is expected to go into operation in the 4th quarter of 2014 and the 3rd quarter of 2015. Viettel Global’s project in Tanzania is completing the procedures to deploy network infrastructure. Network Bitel run by Viettel Peru, owned directly by Viettel Global, went into operation in October this year. In the first 9 months of 2014, Viettel Global’s net revenues and pre-taxed profit reached VND10.1 trillion and VND2.1 trillion, respectively. As of September 30, 2014, its total assets and equity were reported at VND31.7 trillion and VND15.6 trillion, respectively. Prior to 2014, the telecommunications market, including mobile and landline networks, in Myanmar was monopolized by state company MPT. From 2014, there were two more international network operators, Ooredoo (Qatar) and Telenor (Norway). In 2013, Ooredoo and Telenor won the bidding to run their own telecommunications network in Myanmar after paying a very high bid. Viettel also participated in this bidding but did not succeed. The representative of Viettel then said Viettel would not give up because it can continue to cooperate with Telenor and Ooredoo in joint investment projects in the telecommunications industry in Myanmar. According to Viettel, by the end of the 2nd quarter of 2014, the total number of mobile users in Myanmar reached 6.5 million users, accounting for 10.7 percent of the total population and 13.1 percent of the population in the age of mobile usage (from 12 to 70 years old) - the lowest in Southeast Asia. In Vietnam, the figure is 94 percent of the population in the age of mobile usage with 66.7 million users. In Myanmar there is a large difference in the rate of mobile penetration between the city and the rest of the country. Mobile penetration rate is the highest in the capital Naypyitaw (32.2 percent), Yangon (25.3 percent), and Mandalay (11.7 percent), while the rest of the country's mobile penetration rate is only 5.2 percent on average. 3G penetration rate is much lower, only 3.7 percent and the density of Internet users as of May 2014 reached 4.8 percent (nearly 2.9 million users). Tan Hoang Minh persists with luxury property projects Despite facing accusations of lengthy delays in some of its luxury projects in inner Hanoi, the Tan Hoang Minh Group last week confirmed it planned to start yet another two projects early next year. The group has claimed is finishing legal documents to start the projects and has no intention of changing their function or transferring them to other investors despite rumours to the contrary. In its press briefing held last week in Hanoi, Tran Hong Son, deputy general director of Tan Hoang Minh said that the group was finishing documentation for starting D.’ San Raffles in Hang Bai street, Hoan Kiem district, and D.’ Le Roi de Solei in Dang Thai Mai street, Tay Ho district by the second quarter of 2015. According to Son, the delay of these projects has nothing to do with the financial capability of the developer. Instead, it has been caused by the changes in Hanoi’s zoning as per the revised Hanoi Master Plan when it merged with neighbouring province of Ha Tay in 2008. In addition, due to changes in terms of building heights in inner Hanoi as regulated by the municipal authorities, documentation for the projects had been lengthened. At D.’ San Raffles, the land clearance and compensation was finished in 2011, but its construction was delayed until the approval of the Master Plan of Hanoi and the regulation on high-rise buildings in Hanoi’s centre. This project received its licence for an eight-storey building in March this year. However, in order to secure this licence, the developer had to negotiate with the local residents and needed approval by a 27-member council of architects. When making land clearance, the developer had to compensate previous residents with VND1 billion ($48,000) per square metre, which was the highest compensation price at that time. This price was calculated based on the plan to build a 15-storey building like the nearby Sun City. However, after the changes in zoning D.’ San Raffles was only granted approval for an eight-storey construction. “This means that the investment returns on this project were dramatically reduced, and we may even incur losses. However, we are determined to make this the most luxurious office, retail and residential building in Hanoi city centre,” Son claimed. D.’ San Raffles was designed in a French neo-classical style. The developer also received the final documentation to proceed with D.’ Le Roi de Soleil in Dang Thai Mai street in September this year, after five years of red tape procedures. The project will consist of two 25 storey residential buildings with five basement levels, connected by an eight-storey service building. According to Tran Nhu Trung, another deputy director of Tan Hoang Minh, the group was still willing to proceed with the developments because of their prime locations. Tan Hoang Minh is also pushing forward with the completion of their D.’ Palais de Louis and D.’ Le Pont D’Or projects. D.’ Palais de Louis, which consists of 244 luxury apartments, is in the finishing stages. The project’s technical infrastructure system and the first 15 show apartments will be completed by mid-2015. The group has returned all the deposits for 60 potential buyers and will re-launch sales next year. Despite difficulties in sales, Trung denied the rumours that the developer would convert the project into a hotel. Meanwhile D.’ Le Pont D’Or has 308 apartments still under construction with semi-top down technology and is scheduled for completion by the end of next year. Google to meet local app developers A product management director of Google will meet 600 Vietnamese developers of apps for mobile phones, tablets and computers running on Android operating system in HCMC to discuss cooperation opportunities. Sophie Tran, marketing director of Google in Vietnam and Asia Pacific, said Vietnam has recorded strong growth in apps for mobile devices in the Asia Pacific region. Google hailed the quick response of local app developers to the demand around the world and believed that they will be able to create high-quality apps for mobile users worldwide. Domestic firms are advised to pay their attention beyond Vietnam when making apps. At the meeting, Google will introduce Google Developers Startup Launch, a tool which helps developers with ideas, recourses, training and selling their products. Vietnam is the second market where Google launches this app after the United States. HCM City firms in deal to sell safe products Twelve producers and distributors in HCMC have pledged to provide the market with products meeting quality and safety requirements in line with an agreement they signed with the city’s market monitoring agency on December 8. The participating firms include supermarket chains Big C, Aeon, Citimart and Maximark, Thien Hoa Electronics Center, and other consumer products and electronics distributors. Hat firm Non Son, Thu Duc rice vermicelli firm, and Binh Minh Gas Ltd. Co. are among the producers joining the program. The enterprises promise not to store, trade or produce banned and fake products, and the items unsafe and unqualified or violating intellectual property rights. The management boards of Pham Van Hai, Ben Thanh, Dan Sinh, Binh Tay, Tan Binh and An Dong wet markets also pledge with HCMC authorities to discourage vendors from selling prohibited and counterfeit products. Food distributors and producers of the city’s safe food chain program also clinched deals to consume products of one another. In the middle of last year, HCMC initiated a pilot program to apply food management to the process of production, processing and distribution to ensure food hygiene and safety for consumers. Huynh Le Thai Hoa, head of the city’s food safety agency, said 45,000 tons of vegetables, seafood, livestock and poultry meat and 197 million eggs have been certified as safe and qualified products more than one year after the program was launched. Interested enterprises should register with the city’s food safety agency to join the program. The agency will appraise their products and issue certificates for the items meeting standards. Information about high-quality products of the program is available at www.atvstp.org.vn Competition pushes rice prices down Vietnam’s price of 5% broken rice dropped over 10% early this month from the previous month and last year’s same period due to fierce competition from Thailand and India, according to the rice market site Oryza.com. According to analyses of Oryza.com, the world average index of white rice fell to US$438 per ton on December 1-5, down US$17 compared to last month’s average and US$25 compared to the same period last year. The nation’s 5% broken rice was offered at US$390 per ton in the aforementioned period, falling by US$45. Meanwhile, the offered prices of Thailand’s and India’s rice of similar grade decline by smaller amounts to US$410 and US$400 per ton respectively. The rice prices simultaneously tumbled due to Thailand with high rice inventories having to sell the staple food, whereas India’s rice output was high. This results in a tough competition among big rice exporters, including Vietnam. The U.S. Department of Agriculture (USDA) earlier estimated Thailand’s rice inventories at some 13 million tons. However, rice expert Nguyen Dinh Bich quoted statistics of Thailand saying the country’s inventories have amounted to 19 million tons, around six million tons higher than USDA’s forecast. According to Bich, with such huge inventories, Thailand has to sell rice at any cost to prevent the quality of rice from declining further. “Therefore, the world price fall is inevitable,” he said. Another factor that impacts the world rice market, according to Bich, is that India has entered into the harvest season with yield amounting to 38.18 million tons as of end-October, slightly decreasing by 180,000 tons against the same period last year. Amid such situations, Bich said India needs to lower the price accordingly and so does Vietnam in order to be able to compete with these countries. The export price decline has dragged the price in the Mekong Delta region. According to Ngo Ngoc Yen, director of the HCMC-based rice trading firm Yen Ngoc, the price of IR 50404 at Ba Dac wholesale market in Tien Giang Province hovers around VND6,800-6,900 per kilogram, down VND1,000 from a month ago. Meanwhile, fresh IR 50404 paddy is priced at VND4,500-4,600 per kilogram and a kilogram of long-grain types like OM 6976 and OM 5451 sells for VND4,700-4,900. Yen said stagnant rice export to China via unofficial channels is also a reason for the recent domestic price drop. Bich forecast the rice price will continue the downtrend towards the year-end and even early next year. According to the Vietnam Food Association (VFA), VFA members exported nearly 485,000 tons with a free-on-board (FOB) value of over US$225 million in November. Accumulated exports as of November 30 were 5.8 million tons with over US$2.5 billion in FOB value. Most private firms remain small A report of the Vietnam Chamber of Commerce and Industry (VCCI) points out that most private enterprises in the country are small and super-small. The report uncovered big-sized businesses account for a mere 2% of over 390,000 operational enterprises in Vietnam, medium-sized firms make up 2%, and the remainder are small and super-small. VCCI chairman Vu Tien Loc said due to their small scale, many domestic enterprises are unable to compete in exporting goods or joining the global value chain. He added while foreign direct investment (FDI) enterprises assemble and produce high-quality products for global markets, domestic firms mostly target the home market or export products of low added value. Currently, Vietnam imports around 90% of materials used to turn out export products. Vietnam’s main contribution to the global value chain is the supply of low-cost labor. However, the private business sector has contributed significantly to Vietnam’s development and helped Vietnam get out of the group of low-income countries, according to Loc. The report indicated private enterprises contributed 22.9% of total investments in 2000 and 37.6% last year. The sector comprising of non-State enterprises and non-farm trading households creates 14.5 million jobs, accounting for 76.7% of the current total number of non-farm jobs. As of January 1 this year, 764,374 enterprises had been established in accordance with the Enterprise Law. Of these, 391,547 are currently operational. In January-October, 60,023 businesses were set up with total registered capital of VND352.5 trillion, down 6.5% in number and 9.5% in capital. VCCI said private enterprises account for around 96% of the total in operation. Decree boosts SOE supervision The implementation of strategies and plans and the progress of investment projects, as well as violations committed by State-owned enterprises (SOEs), must be reported regularly to ministries and provincial authorities in charge. This reminder served as a key point of Decree 115/2014, which will come into effect on January 20 next year. The proclamation aims to regulate the inspection procedures with respect to the implementation of the appropriate 10-year strategies and five-year plans of SOEs with State holdings of 100 per cent charter capital. Accordingly, governing ministries and provinces must keep a close watch on the implementation of SOEs. In addition, the officials in charge will be required to report to the Ministry of Planning and Investment before the designated deadlines. Reports must be issued in the sixth year of the 10-year strategies, the third year of the five-year plans and within 90 days after the completion of the strategies or plans. Reports must cover the results and progress, as well as an evaluation of the shortcomings or violations during the implementation of the strategies or plans. Annually, the governing ministries and provinces must check on several enterprises, especially those under special financial supervision. They must also inspect the performance of those that play important roles in regulating the market, ensuring social security and contributing largely to the State budget. The designated officials must also scrutinise enterprises that fail to submit complete reports. The decree also included provisions regulating the administration procedures of the inspections and checkups of the implementation of strategies and plans of SOEs with State holdings of more than 50 per cent of charter capital. This decision aims to ensure that SOEs implement their assigned strategies and plans efficiently, as well as tackle problems effectively and prevent violations strictly. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR