BUSINESS IN BRIEF 31/3 Q1 GDP growth at four-year high Gross domestic product (GDP) this quarter is put at over VND534 trillion, growing 6.03% against a year ago, the highest quarter-one GDP growth in four years, according to the General Statistics Office. The first-quarter GDP growth rates of 2012, 2013 and 2014 were 4.75%, 4.76% and 4.96% respectively. Statistics of the office released on March 26 showed that industry and construction have recorded the highest growth, at 8.35%, accounting for 34.8% of GDP. They are followed by services that are up 5.82% growth and make up 42.23% of GDP, and agro-fisheries with 2.14% growth and 12.35% of GDP. Reports delivered at a meeting of the Ministry of Planning and Investment on Wednesday show a significant economic recovery in quarter one. The industrial production index is up 9.1%, total retail sales 9.97% and export turnover 6.9% on a year earlier. According to Deputy Minister of Planning and Investment Bui Quang Thu, initial statistics and reports show the economy is performing better than last year’s same period. With such a recovery, the country can achieve the GDP growth target of 6.2% this year. FDI flow into city’s IPs remains strong Though the nation has seen a 45% decline in fresh foreign direct investment (FDI) approvals in the first quarter of this year, the industrial parks (IPs) and export processing zones (EPZs) in HCMC have reported positive FDI inflows. Speaking at a conference on a 2014 review and 2015 plans for the IPs and EPZs on March 26, Nguyen Bach Hoang Phung, deputy head of the HCMC Export Processing and Industrial Zones Authority (Hepza), said the IPs and EPZs have attracted around US$345.5 million in FDI capital this year, surging 43.7% from the same period last year. There are seven newly-approved projects worth US$302.8 million, up 37% year-on-year, and nine existing projects have added an extra US$42.6 million to expand production, 2.2 times higher than last year. This is a clear indication that FDI flow into the city’s IPs and EPZs is not affected by the nation’s lower-than-expected FDI approvals over the past three months. Besides, the IPs and EPZs have attracted a lot of domestic capital. There are 15 new domestic projects approved with combined capital of over VND713 billion (US$33.5 million), up 121% year-on-year, while VND66.6 billion has been added to four operational projects, up 120% against the previous year. In all, the IPs and EPZs in HCMC have attracted US$381.7 million in the first quarter, meeting 54.5% of this year’s US$700 million target and jumping 48.5% year-on-year. Among 22 fresh projects approved this year, two have started operation, 10 have upgraded their workshops and investors are applying for construction licenses for 10 other projects, Phung added. To improve investment capital attraction, Phung said Hepza will focus on infrastructure development at Hiep Phuoc and Le Minh Xuan 3 IPs for supporting industries and multi-storey workshop buildings at four IPs and EPZs – Dong Nam, Hiep Phuoc, Linh Trung and Tan Thuan. Hepza will coordinate with the Japan External Trade Organization (JETRO) and the Japanese Business Association of HCMC (JBAH) to develop the Vie-Pan Techno Park and attract Japanese capital into the park and other IPs. Both sides will also help enterprises approach credit programs and improve technologies. Notably, Hepza will call on investment in hi-tech sectors and supporting industries and continue boosting administrative reform to make life easier for investors. BOP surplus at US$2.8 billion Vietnam’s balance of payments has registered a surplus of US$2.8 billion in the first quarter of 2015 although the country has a trade deficit of US$1.75 billion so far. The central bank announced the figures on March 26 to explain its earlier decision to let the Vietnam dong-U.S. dollar exchange rate move within a band of 2% on either side this year. Some have advocated a further dong devaluation to support the export sector. With the surplus, the central bank said it has strong grounds to maintain the stability of the exchange rate as targeted early this year. The exchange rate has become strongly volatile in recent times, driven mainly by concerns over a huge trade deficit in the first two months and a half this year. Meanwhile, foreign currency supply and demand have stayed normal. Banks have maintained a balance between dollar supply and demand while enterprises have shown no sharp demand for dollar funds. The greenback has been firmer against the dong on the informal market. The dollar has appreciated against other currencies since early this year. It is actually up 9.7% versus the euro, 7.51% versus the Canadian dollar, 4.65% against the British pound, 4.35% against the Malaysian ringgit, 3.6% versus the Australian dollar and 3.06% against the Singaporean dollar. In addition, the central bank said, a stronger-than-expected dong devaluation will pile pressure on foreign debt owed by the Government and businesses. The central bank on Wednesday announced to keep the exchange rate unchanged. Local banks also cut greenback prices by around VND50 against the previous day to VND21,525-21,540 a dollar. They raised the prices by a slight VND10-15 to VND21,540-21,550 a dollar on March 26. The central bank said on Wednesday it would ensure a stable exchange rate after it closely monitored developments in the country and elsewhere in the world and a policy statement issued on March 18 by the U.S. Federal Reserve. Firms borrow to pay social insurance Twenty enterprises in the northern province of Hai Duong have taken out loans totaling VND30 billion (US$1.4 million) from the Bank for Investment and Development of Vietnam (BIDV) to pay social insurance for their employees, according to BIDV’s Hai Duong branch. These firms, which are from the State, foreign investment and private sectors, borrow VND7-8 billion a month each on average to cover social insurance for their staff. BIDV-Hai Duong said it had collected VND40 billion in social insurance premiums a month from 350 companies on behalf of Vietnam Social Insurance (VSI). BIDV on Wednesday signed a contract with VSI in Hanoi to collect social insurance premiums and arrears from enterprises in the nation’s 63 provinces and cities. The deal came after the two sides had successfully executed an agreement inked on July 14 last year to collect social insurance premiums from businesses in 31 northern provinces. At present, BIDV has over 700 domestic and foreign branches and transaction offices, and has a work force of around 18,000 people. IBM continues to invest in data, cloud IBM Viet Nam this year will continue to follow advanced-technology trends in cloud, data and engagement to bring better services to their customers. Company experts said that data was the new foundation that created competitiveness, and that the cloud was the path leading to a new business model. Luu Danh Anh Vu, country manager for Cloud of IBM Viet Nam, quoted research, saying that 2.5 billion gigabytes of data were created every day and that 880 billion pictures were taken in 2014."By 2016, one of four of applications in the world will be run on the cloud. About 80 per cent of new software being developed is for the cloud," he said. Software on immunization for children launched Japanese Software Engineer ISB Vietnam Company Limited (IVC) launched a software programme called Doctor Babee this week that manages children's vaccination schedules. The free software runs on Android OS and iOS. It reminds parents about their children's immunisation in accordance with the recommendations of the Ministry of Health and World Health Organisation (WHO). An ISB Vietnam representative said the software's main advantage was that it calculated the children's immunisation schedules based on their birth dates. Users enter the baby's birth date, and the software automatically displays a vaccination schedule. In addition, the software sends notifications to parents to remind them of upcoming immunisations. Most students want to learn coding As many as 95 per cent of Vietnamese students want to learn more about coding and 83 per cent hope it will be included in their schools' curriculum, according to a Asia Pacific regional report released by Microsoft Inc. The report said most students recognised the value of learning programming and its job potential. Many had received great support from their schools and parents to learning coding: 66 per cent had opportunities at school, and 63 per cent said their parents considered learning coding crucial to their future. According to the survey, coding helped 62 per cent of students think more logically, and 52 per cent said it made them understand the modern digital world better. Lenovo launches new server system in Viet Nam Lenovo Viet Nam earlier this week officially launched server M5, a new reliability and security system for enterprise solutions. Equipped with the most advanced technologies, the compact server is packed with performance, reliability and security to fuel any workload. In order to assist customers to minimise costs and simplify management as well as increase their incomes, the company has introduced six different systems, the x3500M5, x3650M5, x3550M5, x240M5 and nx360M5. Sever M5 matches enterprises' demands as it has data-security services and can support many applications. It also can be used as an infrastructure, cloud or big-data analyst. Bank stocks sale needs SBV nod State-owned enterprises that want to sell stakes worth 5 per cent or more in credit institutions must get permission from the State Bank of Viet Nam (SBV). The central bank issued a document on the issue late on Wednesday. The regulation follows Prime Minister Nguyen Tan Dung's instructions earlier this month on capital divestment by State-owned enterprises (SOEs) in the banking sector. Under the new rule, any transfer of shares from an SOE to a credit institution investor that makes the investor a "big" shareholder (both direct and indirect holdings of 5 per cent or more of the total voting shares) must be follow the Law on Credit Institutions and Circular No. 06/2010/TT-NHNN. This also applies if the transferee is already a big stakeholder in the credit institution. SOEs are responsible for collaborating with credit institutions on selecting suitable partners for the transfers, who must meet criteria set by the central bank. The transfers must approved by the central bank. For share transfers not subject to the case above, the divestments of SOEs in credit institutions must comply with Decree 71/2013/ND-CP on investment of state capital in enterprises and financial management of State-owned enterprises, and other related laws. To date, many SOEs hold large stakes in commercial banks. According to market insiders, this regulation may further slow state capital divestments in banks. PetroVietnam owns 52 per cent of PVCombank's charter capital and a 20 per cent stake in Ocean Bank. Petrolimex holds a 40 per cent stake in PG Bank; Electricity of Vietnam owns 16 per cent of ABBank's total capital. Meanwhile, Vietnam Posts and Telecommunications Group, often known as VNPT, holds 9 per cent of Maritime Bank's charter capital. In October, PetroVietnam said it prepared plans to sell stakes in the two banks and expected to earn around VND5 trillion (US$233.6 million) from the deals. However, Ocean Bank unexpectedly fell into crisis late last year, with many senior management staff members detained. Deputy Governor Nguyen Phuoc Thanh said if no investors were interested in buying Ocean Bank's stakes, the State Bank of Viet Nam would acquire it. In February this year, SBV took over the loss-making Vietnam Construction Joint Stock Commercial Bank for free with the aim of helping the bank ensure its liquidity and strengthen its operations. Meanwhile, PetroVietnam, VNPT and Vinacomin said they had yet to find potential buyers to transfer shares in those banks. Upscale Accor hotel opens in Hoi An City Hotel Royal Hoi An, a member of the MGallery Collection, has opened Accor's first upscale property in the ancient port city of Hoi An. The property can be a romantic getaway and is located in culturally rich city. Standing majestically on the banks of the picturesque Thu Bon River, the upscale property holds an important position in the UNESCO World Heritage town of Hoi An in Central Viet Nam. The hotel's 119 guestrooms induce total relaxation and act as a serene haven of peace and tranquillity, each exhibiting an antiquated yet romantic touch. Southern expressway in need of funding An investment of VND5.6 trillion (US$261 million) is required to build the first phase of the Bien Hoa-Vung Tau Expressway project, the builder, the Viet Nam Expressway Corp (VEC), has said in a report it sent to the Ministry of Transport. The 30km, four-lane expressway will run from the HCM City-Long Thanh-Dau Giay Expressway to National Highway No 51. It will be a BOT (build-operate-transfer) project, with construction of the first phase lasting from 2015 to 2018. VEC said it would invest VND639 billion ($17.1 million) from its own funds and the remaining would come from bank loans. It has proposed collecting a toll for 22 years starting in 2019. Starting at VND2,000 per kilometre, the toll will increase by 18 per cent in 2022 and 15 per cent in the next three years, according to VIR. Retail, service sectors post encouraging growth in Q1 The total retail sales and service revenue earned in the first quarter this year was VND790.8 trillion (US$37.13 billion), according to data from the General Statistics Office (GSO). The figure represents a 10 per cent year-on-year rise, GSO said, adding that the increase would be 9.2 per cent if inflation was excluded. The increase, however, is lower than the 10.7 per cent for the first two months, but it is fairly high compared to the 5-6 per cent growth in the final months of last year. GSO statistician Vu Manh Ha attributed the high growth at the start of the year to the sliding consumer price index (CPI). The average CPI growth for the first three months was minus 0.03 per cent. The CPI saw four consecutive months of reduction with minus growth from November last year to February this year. It rose again by 0.15 per cent this month. Retail sales accounted for three fourths of total revenue, reaching VND604.5 trillion ($28.38 billion) in the first quarter this year, a rise of 10 per cent compared to the same period last year, said Ha. Meanwhile, the hotel - restaurant sector's total revenue increased by only 8.8 per cent, lower than the average. The total revenue for tourism was down by 22.8 per cent. The gap between the increase in total revenue when inflation was included and excluded was narrowed. The gaps between the increase in total revenue when inflation is included and excluded in the first two months were 11.4 per cent and 10.7 per cent, while that of the first three months were 10 per cent and 9.2 per cent. The gap was often double or nearly double that of last year. The gaps between the increase in total revenue when inflation is included and excluded in 2014 were 10.6 per cent and 5.5 per cent and that for the first six months of last year were 10.7 per cent and 5.7 per cent. World Bank to help back power grid The Ministry of Finance has authorised the Bank for Investment and Development of Viet Nam (BIDV) to on-lend US$500 million for improving the power grid in key economic regions. The two parties signed the on-lending contract last Thursday and the loan will be granted by the World Bank for disbursements during the 2015 to 2020 period. The project will help enhance capacity and stability in the performance of the electricity transmission systems in Ha Noi and HCM City, as well as the central region and the Mekong (Cuu Long) Delta. The National Power Transmission Corporation, an affiliate of Electricity of Viet Nam, will be responsible for upgrading control systems for 500 kilovolt (kV) and 220kV to reduce power failure incidents. The project is also aimed at intensifying operational and financial abilities of the firm. The State Bank of Viet Nam said BIDV was entrusted with the contract because it had significant experience in on-lending official development assistance (ODA) and other preferential capital sources that the Government received from international organisations. In the electricity industry alone, BIDV has already been designated for distributing a $312 million loan of the World Bank, and $480 million in loans from the Asian Development Bank. Tech stocks contribute 48 per cent to VF4 profit The Vietnam Blue-chip Investment Fund (VF4) reported a total profit of VND67 billion (US$3.1 million) last year, lifting its net asset value (NAV) to nearly VND8,977 ($0.42) per fund certificate by the year's end. This figure represented a 2 per cent decrease compared with market growth of 8.1 per cent for the whole year. Luong Thi My Hanh, the fund's deputy director, attributed the modest results to the East Sea crisis and the steep drop in global oil prices in the last two months of the year. "VF4 achieved a growth rate of up to 28 per cent in the third quarter, but losses on global oil pulled the fund's growth to just 6.1 per cent by the end of the year," Hanh said in VF4's annual investors' meeting last week. She said energy stocks made up 20 to 25 per cent of the total market capitalisation and their losses dragged down other shares on the market. VF4, set up in January 2008, is an open-ended fund under the management of Vietnam Fund Management Co. It invests in blue chips on the stock market, as well as the leading State-owned enterprises operating in fundamental sectors such as energy, materials, finance and banking, telecommunications, infrastructure, real estate and consumer goods. The portfolio landscape saw big changes last year. The material, which ranked fourth in 2013, rose to the top position with a share of 13.5 per cent of the fund's NAV. Real estate came second with 11.3 per cent of NAV. The fund plans to expand investment in these two sectors in 2015, hoping for the recovery of the real estate sector and the devaluation of the euro, which will benefit the companies having borrowed a lot of the money. The proportion belonging to technology hardware and equipment decreased strongly toward the end of 2014 with 5.7 per cent of NAV. But it contributed nearly 48 per cent of the fund's total profit, mainly from the sale of 50 per cent of its holdings in FPT Corp (FPT). Regarding the energy sector, while the fund sold shares of PetroVietnam Drilling and Wells Service Corp (PVS) at the right time and realized good profit, the delay in selling shares of PV Gas (GAS), which at some times occupied 10 per cent of the fund's NAV, pulled down its overall profit. The finance and banking, material, utilities and auto parts sectors saw growth last year between 7-20 per cent. In 2015, VF4 said it would its faith in the potential growth of materials, real estate, utilities, transportation, health care services and banking industries. These sectors are expected to benefit from the foreign exchange rate and material cost reduction. Meanwhile, it will trim down investments in industrial goods, financial services, automobiles, consumer goods and energy. The fund's cash holding by the end of the year reached 14.2 per cent of NAV. It has set a target to increase its net profit 7.8 per cent in 2015. Dai Hung gets floating storage unit The Viet Nam Oil and Gas Group inaugurated and handed over two units to PetroVietnam Transportation Corporation (PVTrans) and PetroVietnam Domestic Exploration Production Operating Company Limited (PVEP POC) in central Quang Ngai Province on March 26. The two units are the Dai Hung Queen floating storage and offloading unit (FSO) and Dai Hung 01 floating production unit (FPU). Speaking at the ceremony, Deputy Prime Minister Hoang Trung Hai appreciated the two projects that are new landmarks in the development of the domestic engineering industry as well as oil and gas services, contributing to reducing dependence on imports, ensuring national energy security and boosting the country's economic development. Hai said he wanted the domestic mechanics and oil and gas companies to undertake similar projects, meeting the demand for mechanical products for the domestic and export markets. Dai Hung Queen is a modern and also the most complicated oil storage facility of the country's petrol and gas sector. It was built in three years, under the supervision of DNV GL, an international certification body and international ship and offshore classification society located in Norway, and Viet Nam Register. The storage is 260.7m long, 42m wide and 21.4m tall. It can handle 105,000 tonnes at a speed of 14.5 nautical miles per hour. The two projects will help in oil and gas exploitation at the Dai Hung oilfield. Compete, co-operate, firms urged Viet Nam is in the process of reaching various free trade agreements (FTA) with its partners, and for survival and growth, they should seek opportunities and connections while competing in the market. Speaking yesterday at a workshop on business leadership and management in HCM City, Vo Tri Thanh, deputy director of the Central Institute for Economic Management (CIEM), said that companies would have to learn how to cooperate and connect while accepting competition. "Competition does not exclude association in a world where many production networks and value chains exist," Thanh said. He advised them to associate with leading firms and cooperate with strategic partners to take advantage of their strong points, thanks to their larger scale and value chain for their growth. He said FTAs would offer opportunities if businesses define their capacity (for connections) in production networks and value chains as well as grab openings in new sectors such as the "green" industry (environmental preservation, waste collection and treatment). Thanh said ASEAN alone had a population of 600 million that could be tapped. Businesses should also learn how to mobilise capital by accessing capital in global circulation, which is generally governed by commercial banks, investment funds and other financial institutions, he said. "In developing countries, the state is a giant investor. In Viet Nam, State investors represent 35 per cent of the total social investment. Forms of capital mobilisation are more diversified, including the issuance of shares and bonds," he said. He said that businesses should be aware that financial investors were placing more and more importance on the "green" factor in business projects. They should also learn how to manage instability through risk-prevention tools like insurance and derivatives. Thanh also recommended that they stay abreast of the Government's information on integration commitments as well as grasp existing and incoming policies of the government. However, he also warned against "excessive closeness" to ensure transparency. "Negotiation and implementation of business contracts should be done according to legal procedures to ensure the rights of partners, especially in wide and deep integration that is based on international practices and standards," he said. Ha Thu Thanh, chairwoman of Deloitte Vietnam, and vice chairwoman of the Vietnamese Association of Women Entrepreneurs, said that integration was not a choice but an inevitable fact and global integration would depend on the three revolutions of technology, finance and leadership thinking. "Leadership thinking is the key to governing important strategies of a company," she said. This year marks important milestones in globalisation and economic integration since Viet Nam will be integrating deeply and comprehensively with the regional and global economy when many Free Trade Agreements (FTAs) take effect. The ASEAN Economic Community (AEC) will also be officially established, and Viet Nam will participate in the upcoming Trans-Pacific Partnership agreement (TPP). Joining AEC and TPP will mean that the market will be "flat", without any major barriers of national legal protection. Enterprises will also have the chance to join the global value chain in a "flat market, a joint, equal market with consistent manufacturing space and services". Products, services and capital flows will shift freely. No borders will exist in trade, and there will be no tariffs as well as non-tariff barriers. Investors will be allowed to invest in all areas and the labour market will be free to move. Some of Viet Nam's competitive advantages such as cheap labour will change under these circumstances. This new situation is expected to have a significant impact on the operation of enterprises in Viet Nam, not only bringing many opportunities for breakthroughs but also containing many new challenges. Viet Nam joined the ASEAN Free Trade Area (AFTA) in 1995 and World Trade Organisation (WTO) in 2007. By 2014 it had signed and joined eight FTAs; another seven are under negotiation. Foreign trade between Viet Nam and countries participating in FTAs represented almost 64 per cent of total import value and 39 per cent of export value in 2014. Agriculture sector struggles for sustainability The decline in exports of several key agricultural products during the first months of 2015 demonstrates the long-term challenges facing farmers and exporters, and shows that urgent solutions are required to ensure more sustainable development. According to the Ministry of Agriculture and Rural Development (MARD), exports of agricultural, forestry and seafood products in the first two months were worth over 4.17 billion USD, 1.9 percent lower than the same period last year. Most key export commodities suffered a downturn, including seafood, rice, coffee and rubber. Seafood trade was valued at 907 million USD, an annual plunge of 9.4 percent, raising concerns about the unpredictability and instability plaguing the industry. Prawn and tra fish exports might suffer this year due to a high anti-dumping tax rate imposed by the United States and growing competition from other suppliers, particularly Indonesia , Bangladesh and India . Rice exports also experienced a bad time, as the product only brought home 243 million USD during the period, down 34 percent year on year. China , Vietnam ’s largest rice buyer, plans to tighten its hold on cross-border rice trading and welcome more imports of lower-priced rice from India , Pakistan and Myanmar . In addition, oversupply and fierce global competition are believed to be dragging down the rubber prices early this year to 1,423 USD per tonne, a drop of 31.27 percent, the Vietnam Rubber Association (VRA) has announced. Economic experts revealed that the weakening of agricultural exports might stem from inadequate marketing efforts and a lack of hi-tech farming products used by local exporters. Most products are exported in their raw form at relatively high prices. To solve the problems, Luu Bich Ho, former Director of the Development Strategy Institute at the Ministry of Planning and Investment, suggested exporters play a greater role in the farming production chain, ensuring the provision of high quality inputs and outputs. Increased market information for farmers, and proper research regarding customer taste and habits, is also essential when planning an export strategy, he added. Tay Ninh, Cambodia partner prepare for one-stop border customs check The southwest province of Tay Ninh and its neighbouring Cambodian province of Svayrieng along with the Ministries of Transport of Vietnam and Cambodia have agreed on the building of two goods storage sites for joint customs checks at the Moc Bai-Ba Vet border gates. The sides will ask their respective governments for permission to go ahead with the construction, which is part of a bilateral project to apply the one-stop-shop customs check at border gates between the two countries. The two sides have also agreed on the locations for the goods storage sites, which both are about 500m from the border gate, facilitating the work of customs officers when conducting joint checks on goods. According to Deputy Minister of Transport Nguyen Van The, the congestion at the Moc Bai-Bavet has become more serious, affecting trade activities between the two countries. The implementation of a one-stop-shop mechanism is urgent to ease congestion, reduce time for checking goods, and facilitate bilateral trade exchanges, he said, adding that the good storage sites should have all the necessary facilities for animal and plant quarantine with modern equipment. Low Vietnamese rice export in Q1 Vietnam shipped 536,570 tonnes of rice worth 236 million USD abroad during the first quarter of this year, marking the lowest Q1 figures since 2009, announced Huynh The Nang, Deputy Chairman of the Vietnam Food Association (VFA). He said the reasons for the drop include low demand and exporters’ limited access to loans. Nang added that the world rice market presented a number of challenges due to low demand and high supply from Thailand, India, Pakistan and Myanmar. According to the VFA, rice exports will continue facing difficulties as African countries purchase considerable amounts of cheap and low-quality rice from Thailand. Meanwhile, Vietnam’s key markets, such as China and Southeast Asia, have lowered their demand. In 2014, Vietnam exported 6.32 million tonnes of rice and earned 2.8 million USD, becoming the third largest rice exporter in the world after Thailand and India, according to the association. Chinese enterprises to invest in Binh Duong A delegation from the China Business Association - Ho Chi Minh Branch (CBAH) led by President Miao Ren Lai visited southern Binh Duong province on March 27 to evaluate the local investment climate. Chairman of the provincial People’s Committee Tran Van Nam briefed the delegation on the locality’s socio-economic context in recent years, noting that the province prioritises projects using advanced and environmentally-friendly technology. To prepare Binh Duong for the impacts of the Trans-Pacific Partnership (TPP) Agreement and other international and regional agreements, the province has zoned off areas for the textile support industry in Bau Bang district and Ben Cat town as well as for the timber support industry at Bac Tan Uyen Industrial Zone, according to Nam. The locality will continue to upgrade its infrastructure and reform its administrative procedures to attract more investors, he pledged. About 125 Chinese enterprises currently operate in Binh Duong with a total investment of 352 million USD, said Miao Ren Lai. He believes the coming TPP and free trade agreements between Vietnam and foreign partners will pave the way for additional Chinese investment in the country. Another CBAH delegation plans to visit Binh Duong in early April, he noted. Forestry service looks to collect 1.3 trillion VND from environment services The forestry sector is looking to collect more than 1.3 trillion VND (60 million USD) from payments for forest environmental services in 2015. As of March 25, organisations and individuals using the services had paid 234.9 billion VND (10.9 million USD), it was reported at a conference held by the Fund for Forest Protection and Development in Hanoi at the end of March. To achieve the 2015 target, Deputy Head of the fund Pham Hong Luong said the fund will direct and guide its members to follow the policy on payments for forest environmental services while disseminating policy details to organisations and individuals involved. At the conference, participants agreed that after four years of implementation, the policy on collecting fees for forest environmental services has produced positive results in forestry management, improving forest owners’ awareness of protection and development and contributing to poverty reduction in mountainous areas. In 2010, Vietnam introduced new regulations on payments for forestry environmental services, which took effect in 2011. Water supply for hydropower plants, the supply of clean water for water stations and eco-tourism are three main sources of income from the forest environmental services At present, 37 localities across the country have funds set up for forest protection and development. Last year, the funds collected 1.3 trillion VND (60 million USD) from forest environmental services, protecting around 5.78 million hectares of forests. De Heus Vietnam opens animal feed plant in Vinh Phuc De Heus Vietnam put into operation an animal feed plant in the Binh Xuyen Industrial Park , northern Vinh Phuc province on March 27. This will be the fifth factory of the Dutch De Heus group in Vietnam . The plant cost 30 million USD and is capable of turning out 400,000 tonnes of animal feed per year. General Director of De Heus Vietnam Gabor Fluit said the latest technologies and imported production systems will allow the plant to produce high-quality animal feed for cattle, poultry, as well as the aquaculture. So far, the company has animal feed factories in Binh Duong, Dong Nai, Hai Phong, Binh Dinh, Vinh Phuc and Vinh Long. Established in Vietnam in the end of 2008, the company is in the top five producers of animal feed in the country. De Heus specialises in the manufacture of animal feed. It has more than 3,000 employees worldwide and exports products to over 50 countries around the world. Dong Nai records 270 mln USD trade surplus in Q1 The southern province of Dong Nai ran a trade surplus of 270 million USD in January-March, according to the provincial Department of Industry and Trade. The province pocketed 3.23 billion USD from exports and spent 2.96 billion USD for imports, up 12.2 percent and 6.4 percent against the same period last year, respectively. Major export lines were footwear, garments, fibers, wooden furniture, machines and spare parts, with garments raking in 545 million USD, a rising of 13 percent over the same period last year. Director of the Department Le Van Danh said the province’s big importers were the US, Japan, China, the Republic of Korea, Germany and Indonesia. The locality imported mostly garment and footwear materials and equipment for production. In 2014, footwear became the province’s leading export sector as it gained 2.23 billion USD, increasing 19 percent from 2013’s figure. It aims for 2.5 billion USD in export this year. Local exports are expected to grow further in the next quarters on the back of the signing of eight trade agreements and lower tariffs on export commodities, Danh said. He was confident that the province’s export earnings will surge, driven by the official formation of the ASEAN Economic Community and the completion of Trans-Pacific Partnership (TPP) negotiation by the end of this year.- Getting ready for the ASEAN Community Tax-related policies are among key measures the Government has taken to improve the business community's capacity to cope with competition when the ASEAN Economic Community (AEC) begins operations late this year. The establishment of the AEC provides both opportunities and challenges for Vietnam's business community. It will help Vietnam expand markets, but at the same time attract fiercer competition at home, particularly in industrial and agricultural sectors. By the end of 2014, about 75% of import tariffs in ASEAN countries were reduced to zero under the ASEAN Free Trade Agreement, which precedes and complements the establishment of the AEC. Joining the AEC means that tariffs committed for elimination under the ASEAN Free Trade Agreement will be made ahead the scheduled 2018. Vietnam is now ready for the AEC and is joining other ASEAN countries to complete tax procedures and one-stop customs system and step up other necessary preparations for the establishment of ASEAN Community. It has dropped tariff rates to zero percent for 80% of tax lines and removed tariffs for another 13-15%. The rest will be progressively removed until 2018. Authorities have taken steps to help businesses improve competitiveness through training and trade-promotion programmes - or sharing experiences in applying advanced technologies as well as having preferential tax policies. Corporate income tax was reduced from 25% to 22% last year and is expected to drop to 20% next year. Small and medium-sized businesses enjoyed a 20% rate from last half of 2013. Besides, businesses also enjoy regulations on preferential treatment and investment protection under the double-tax avoidance agreement that Vietnam has signed with other countries. Nguyen Van Phung, head of the Department of Taxation's Large Taxpayers Office, told Dien dan Doanh nghiep (Business Forum) newspaper that there were three key issues relating to preferential tax that businesses needed to improve competitiveness. Firstly, businesses with income generated from agriculture will get preferential tax from this year to encourage more investment in the field of agriculture. Specifically, corporate income tax exemption is applicable to co-operatives with income from farming, husbandry, agricultural processing, fisheries and salt production. The lowest rate of corporate income tax of 10% will be applied for businesses with income from forest protection and planting as well as aquaculture and seafood processing in disadvantaged areas. Secondly, a new tax regulation has been applied this year to encourage more businesses to invest in auxiliary industry and hi-end technology. Under the regulation, a preferential tax rate of 10% of corporate income tax will be applied for 15 years to businesses investing in industrial products prioritised for development. The regulation also targets new projects with a minimum capital of VND12 trillion (US$560.74 million) using hi-end technology. However, investment in production of products subject to special consumption tax or mineral exploitation projects will not benefit from the regulation. Thirdly, preferential tax has also been applied from the start of the year to projects with adverse impacts on job creation and economic structure in Vietnam. The AEC aims to establish a single common market and production base for ASEAN member countries that enables the free movement of goods, services, capital and skilled labour within ASEAN. The AEC is one of the three pillars of the ASEAN Community, together with the ASEAN Political Security Community (APSC) and the ASEAN Socio-Cultural Community (ASCC). Fertiliser firms seek VAT waiver on inputs Domestic fertiliser makers say they will face difficulties if they are not granted exemptions from value-added tax on input materials they need for production. According to the Vietnam Fertiliser Association, the Government is set to grant VAT exemption for imported fertiliser products from this year. If domestic firms cannot deduct VAT for materials to produce fertiliser, their production costs will rise and they will not be able to sell it at competitive prices to farmers, the association was cited as saying in a Vietnam Plus article published early this week. The article quoted a "chemical expert," Phung Ha, as saying the fertiliser industry has been identified as a priority sector in the national development plan for chemical industries approved by the Prime Minister. But, he added, without the VAT exemption for inputs, which include equipment and machinery, domestic firms will have to increase investments in production and selling prices will go up correspondingly, and the industry's development would be affected. Bui The Chuyen, deputy general director of Vietnam Chemical Group (Vinachem), said its members are likely to suffer losses without preferential policies to reduce input costs. For instance, the Ninh Binh and Ha Bac fertiliser companies spend 60-70% of their production costs on coal, which does not enjoy the VAT exemption. Other companies that produce the di-ammonium phosphate fertilisers (as opposed to NPK – nitrogen, phosphate and potassium), like Dinh Vu, Lao Cai and Van Dien are also in the same situation, Chuyen said. Nguyen Van Thanh, head of the Chemical Department under the Ministry of Industry and Trade, said import taxes on finished-fertiliser products would reduce from 11% to 6% after the VAT expansion. Local fertiliser products will face tough competition because imported ones will have lower selling prices, he said. However, Pham Dinh Thi, head of Tax Policy Department under the Ministry of Finance, said local fertilisers cannot blame the lack of VAT exemption for the difficulties they face in competing with imported fertilisers. At present, the VAT for input products for fertiliser production is still deducted when calculating corporate income tax, he said. Moreover, in near future, Vietnam is mandated to ensure a level playing field for firms from all countries as it furthers its international integration via free trade treaties and other agreements. Furthermore, the selling price also depends on the supply and demand situation in the market, so fertiliser makers should seek other solutions to overcome their current difficulties, not rely only on preferential tax policies, he said. Vietnam tightens management on economic zones Vietnam is tightening management over its booming economic zones as success gives way to inefficiency. The Ministry of Finance has turned down a proposal by the Ministry of Planning and Investment (MPI) to introduce a range of tax priorities on the Chu Lai Open Economic Zone (EZ) in the central province of Quang Nam, saying that they are unsuitable. Under the proposal, a company operating at Chu Lai EZ would get corporate income tax exemption for four years, paying a tax rate of 5% for the next 10 years and 10% for the following six years. The MPI also wants a corporate income tax of 10% for another 10-year period for projects which produce finished products such as autos, machinery for ago-forestry-fisheries, or involve capital of more than VND2 trillion (US$95.2 million) and employ more than 4,000 workers. But the Ministry of Finance said these recommendations were not in line with the government’s regulations for economic zone priorities. Businesses with new projects in economic zones already enjoy corporate income tax exemption for the first four years and get a 50% over the next nine years. Only companies which have the minimal capital of VND12 trillion (US$571.4 million) and annual revenue of more than VND 20 trillion (US$952 million) are eligible for tax concessions for a maximum of 15 years. The Ministry of Finance said a proposed 70% cut in personal income tax in the first five years and a reduction of 50% in subsequent years for people working at Chu Lai EZ was inappropriate. A proposal to exempt from value added tax (VAT) companies making autos and machinery for ago-forestry-fisheries has also been refused. These products are levied a VAT of 10%, as specified by the National Assembly. A report from the Ministry of Construction recently showed a large number of economic zones have been built in many localities nationwide, but they mostly lack investment and care, as the investment source relied on the state budget. Vietnam has 44 coastal and border-gate economic zones, which cover at least 10,000 hectares each, but occupancy rates are very low. Industrial parks are in the same situation. The Ministry of Planning and Investment said that by the end of 2014, the country had 295 industrial parks, with a combined area of nearly 84,000 hectares. Deputy Prime Minister Hoang Trung Hai said the average occupancy rate of Vietnam’s economic zones and industrial parks was just 65%, which is not commensurate with their potential. Hai urged the Ministry of Planning and Investment and localities to close ineffective industrial parks to reduce waste and boost investment promotion to attract projects into zones with good infrastructure. Dip in coffee prices sparks hoarding Vietnamese coffee exports in the three months leading up to April dropped 41.4% in volume and 37.3% in value according to the latest figures from the Ministry of Agriculture and Rural Development (MARD). Exports tallied in at 350,000 tonnes valued at US$734 million for the January-March period. Market analysts have been reporting that shipments declined for the quarter due to the long Tet holiday and widespread domestic hoarding. At current prices farmers are not selling, it has been widely reported. The average price of robusta futures in Europe buy the International Coffee Organisation (ICO) has been hovering only around US$1,974 per tonne. Germany and the US remained the largest imports of Vietnamese coffee, accounting for 17.95% and 11.70% of the total export market respectively. Vietnam is the world's largest producer of the robusta bean, often used to make instant coffee powder. Source : VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR