BUSINESS IN BRIEF 2/10 Manufacturing climbs 10% The Index of Industrial Production (IIP) posted a growth of nearly 10 per cent in the first ten months of 2015 driven by the Government's efforts in improving macro-economic situations. According to the General Statistics Office, IIP was regaining its growth rate recorded in the seven-month period this year, compared with the growth rate of 6.9 per cent recorded in the same period last year. The processing and manufacturing industry, which accounted for more than 80 per cent of the country's industrial production, rose by 10 per cent, contributing 6.8 percentage points to the overall growth. Many products registered considerable growth, including automobiles, televisions, mobile phones, and footwear products, in addition to milk and powder products, power, cement and crude oil. However, motorcycle, raw steel, urea fertilisers and synthetic fabrics were among products which posted declines in production during the period. Among 63 provinces and cities, Thai Nguyen Province led in industrial production with the IIP jumping 121.9 per cent over the same period last year. This also led to a rising recruitment demand with the number of labourers working in industrial production in the northern province up by more than 50 per cent, the highest growth rate among provinces and cities of large industrial production scales. The GSO statistics also revealed that in the ten-month period, there were more than 77,500 newly-established firms with a total registered capital of VND486.1 trillion (US$21.6 billion), rising by 29.2 per cent and 37.9 per cent over the same period last year, respectively. Together with a sum of VND737.8 trillion ($32.8 billion) in increased capitals of existing businesses, a total of VND1.223 quadrillion ($54.4 billion) was poured into the economy in the first ten months of this year. The period also saw the resumption of operations of 3,350 firms in October alone, a hefty rise of 121.1 per cent against the previous month. For the ten-month period, more than 16,190 firms resumed operations, up 24.6 per cent. GSO said macro-economic improvements coupled with the Government's efforts and solutions in improving business climate helped prop up difficulty-hit firms. However, there still existed problems that needed to be tackled as the number of firms forced to temporarily halt operations or dissolve reaching nearly 68,000, equivalent to the number in the entire 2014.  Producers eye better quality Vietnamese businesses were urged to strengthen co-operation with distribution channels in addition to enhancing product quality as ways to directly put their products on shelves of foreign supermarkets. Currently, most Vietnamese products must go through intermediaries to reach foreign retailers due to various reasons from the lack of a brand name, poor design, to tight regulations on product quality, experts said. Direct procurement of foreign retailers was considered a good way to help local producers earn higher profits and also be a bridge to boost exports through sales with retailers in foreign markets. It was not easy to bring locally-produced products into the foreign supermarket chains amid global integration with anticipated increased inflow of import products given trade liberalisation, according to Nguyen Ngoc Hoa, member of the National Assembly's Economic Committee. This was because locally-made products were generally less competitive by design, quality and prices compared to imported ones, Hoa said. He said that there would be opportunities, however, if Vietnamese businesses enhanced their product quality to meet foreign requirements and re-organised the distribution system to cut intermediaries. Tran Duc Toan, director of the T&N Garment Company, which recently devised ways to directly sell products at several outlets in France and the US, said that working directly with purchasing departments was the first door, which would bring higher profits than through intermediaries while receiving helpful consultation for improvements. Earlier in September, Prime Minister Nguyen Tan Dung approved the plan to promote Vietnamese businesses to directly participate in foreign distribution networks to 2020. The project aimed to promote exports through ensuring Vietnamese products are directly sold into major distribution systems of countries in Europe, North America, Southeast Asia and Northeast Asia which signed free trade agreements with Viet Nam. Previously, Deputy Minister of Industry and Trade Do Thang Hai said that the ministry firstly would focus on negotiating with foreign retailers which were currently operating in Viet Nam to ensure Vietnamese products could penetrate their store chains not only in Viet Nam but also in foreign markets. According to the ministry, many foreign supermarkets such as BigC, Aeon and Lotte Mart have programmes to bring Vietnamese products overseas.  MoF denies banks tax breaks despite restructuring efforts The Ministry of Finance has refused to offer preferential tax policies to credit institutions that are participating in the restructuring of the banking sector. Deputy finance minister Do Hoang Anh Tuan said that the tax exemption or reduction was not in accordance with Viet Nam's regulations as well as international rules. Merger and acquisition (M&A) were the business activities of banks so there would be no reason for the tax preference, Tuan said, and added that credit institutions would not have to pay taxes unless they make a loss or break even after selling mortgaged assets that are non-performing loans (NPLs). The move was made after some credit institutions and financial companies requested the Government to exempt or reduce taxes, mainly corporate income tax, for them after their M&A with ailing or smaller credit institutions and financial companies. Last week, Sai Gon-Ha Noi Joint Stock Commercial Bank (SHB) was the latest to ask for the tax preferential policy. In a petition to the finance ministry and the central bank, SHB sought a corporate income tax reduction in the first five years after its merger with the Vinaconex Viettel Finance Company (VVF) at the end of this year, citing VVF's large quantum of NPLs. Besides, SHB also asked for a tax exemption from the Government between 2013 and 2015, three years after its merger with ailing Habubank. Earlier, at a shareholders' meeting, after approval to merge with the Song Da Financial Company, the Military Bank (MB) also asked for a corporate income tax exemption in the first five years after the merger, which is estimated at roughly nearly VND2 trillion (US$89.28 million). PetroVietnam Finance Corporation (PVFC)'s case was similar, with a proposal for a tax exemption in the first three years and another 50 per cent reduction in the next two years, after merging with Western Bank. It said that the tax preference would help the new bank improve its performance after the restructuring. Some experts also said that a tax preferential policy was necessary to encourage the involvement of credit institutions and financial companies in the restructuring of the banking system. Dang Ngoc Duc, director of the Finance Banking Institute under the National Economics University, said that after the M&A, credit institutions should receive reduction or exemption in corporate income tax. Besides, Duc said, measures on tax and fee reduction or exemption related to trading of NPLs and mortgaged assets that were restructured should also be taken.  Transfer pricing office opens in bid to mitigate tax fraud The Ministry of Finance yesterday in Ha Noi announced the establishment of the Office for Transfer Pricing Inspection under the General Department of Taxation. Speaking at the launch ceremony, Bui Van Nam, the department's director said the establishing of such an office is being considered a useful solution to discover and resolve transfer pricing with increasingly complicated and sophisticated changes which have resulted in losses to the State budget. Statistics from the department showed that Viet Nam has 13,000 foreign direct investment (FDI) companies of which 4,098 transactions having signs of transfer pricing. Nam said FDI firms have made an active contribution to the country's development. However, several FDI enterprises have resorted to tax fraud, and transfer pricing has been the most sophisticated violation. "Tax fraud has given rise to unhealthy competition between local and FDI firms. The inspection on transfer pricing has many issues such as collecting data, and international co-operation. Inspection has been the most difficult issue in tax management across the world. Tax agencies took 2 to 3 years for inspection of several transfer pricing cases," Nam said. The office would provide consultancy to the department in transfer pricing inspections such as building planning, building inspection process and collecting information. It would also collect information and study businesses operating in Viet Nam which have signs of transfer pricing. He said the tax sector would enhance tax inspection in the year-end months of the years. The office would also be established in four localities including Ha Noi, HCM City, Binh Duong and Dong Nai which have high risks of transfer pricing. Last year, the sector conducted inspections on transfer pricing at 2,866 businesses which reported losses or having signs of transfer pricing, increasing 80 per cent over the previous year. Tax agencies reduced losses of VND5.83 trillion (US$259.1 million) at inspected companies and tax arrears of VND1.7 trillion ($75.5 billion), posting 82 per cent and 112 per cent year-on-year increase respectively. The sector would promote tax inspection together with e-commerce management. Nguyen Quang Tien, director of the department's Tax Reform and Modernisation Department said over the past three years, the sector discovered 29 violations, reducing losses of VND300 billion ($13.3 million) in one case and collecting tax arrears of VND20 billion ($888,000) each on average. The southern Dong Nai Province has been one of the active localities fighting against transfer pricing. In 2013, the province's tax department uncovered several FDI firms with signs of transfer pricing. He said they built up data based on special risks, especially for garment and textile and leather shoe sectors since Viet Nam is expected to become a global manufacturing and processing hub. Listed firms now have 24 hours to disclose unusual information The Ministry of Finance has issued a new circular on information disclosure on the stock market with amendments which aim to enhance transparency and meet the growing market demand. The Circular 155/2015/TT-BTC, which was issued on October 6, 2015, and takes effect on January 1 next year, will replace the old one dated April 2012. Companies must disclose unusual information within 24 hours of receiving requests from the State Securities Commission (SSC) and the stock exchange where they are listing shares up on the occurrence that will likely affect legitimate interests of investors. Unusual information include changes in operations of the company such as expansion or reduction in businesses, corporate restructuring and personnel, treasury and dividend policies, accounting regime, and prosecution and detention of corporate insiders such as directors, and senior officers, apart from issuance of convertible bonds, and changes in the number of voting shares. The new circular gets rid of the regulation that forces companies to reveal their capital contribution or divestment from subsidiary and affiliate companies within 72 hours to ensure the information aptness. In addition, public companies must notify investors of changes in foreign ownership in their companies to conform to Decree No 60/2015/ND-CP issued in June 2015, which allows higher foreign holdings in public companies. Circular 155 also requires firms to disclose information related to their sustainable development policies in line with international practices which aim to strengthen corporate responsibility for environment and society. With regard to financial reports, companies must still publish their audited annual financial statements within 10 days after the endorsement of the auditor but not exceed 90 days from the end of the fiscal year. In case a company fails to submit the financial reports on the due date because of the lengthy and complex report of consolidated financial statements or delays caused by their subsidiaries and affiliates, the SSC will consider a time extension, but it shall not exceed 100 days from the end of the fiscal year. The regulation also specifies the time for big public companies with the equity capital of over VND120 billion (US$5.4 million) to send their quarterly and semi-annual financial statements, in which quarterly reports will be submitted within 20 days, since the end of the quarter and semi-annual reports must be sent within 5 days after the review of the auditor, but not exceeding 45 days from the end of the first half of the year. The new circular also puts in more regulations about disclosure responsibility of internal shareholders, securities companies, fund management companies, and the stock exchanges, apart from the Viet Nam Securities Depository Centre (VSDC). VSDC and stock exchanges are required to deliver information in both Vietnamese and English while other institutions are only encouraged to disclose it in English. Transport ministry divests from non-core businesses to equitise The transport ministry has divested from 110 enterprises so far, collecting nearly VND4.4 trillion (US$196 million). The enterprises comprise seven corporations and 103 affiliates and associated companies of these corporations. During the 2011-15 period, 50 enterprises in the transport sector were restructured, and 137 enterprises were equitised, including large corporations such as Vietnam Airlines, the Airports Corporation of Viet Nam and Viet Nam National Shipping Lines. About 98 enterprises have become joint stock companies. The ministry has also transferred its state capital representation rights in six enterprises – involving VND581 billion ($26 million) – to the State Capital Investment Corporation. The ministry will try to complete the equitisation of all enterprises where the state does not need to hold 100 per cent of the capital in 2015. After 2015, the ministry is likely to have control over four corporations – Viet Nam Railways, Viet Nam Air Traffic Management Corporation, Northern Viet Nam Maritime Safety Corporation and Southern Viet Nam Maritime Safety Corporation – and two companies, Viet Nam Maritime Communication and Electronics LLC and the Transport Publishing House.  HFIC and IPC in infrastructure development deal HCMC Finance and Investment Company (HFIC) have clinched a comprehensive cooperation agreement with Tan Thuan Industrial Promotion Company Limited (IPC) to get involved in infrastructure development projects in the city. According to HFIC, the two sides will initially give priority to those projects conducive to the city’s growth such as Hiep Phuoc new urban area, Hiep Phuoc port complex, phase three of Hiep Phuoc Industrial Park, Nguyen Van Linh interchange, and the north-south road. With professional experience and skilled labor, HFIC and IPC can help the city raise capital for infrastructure development and bring more positive changes in the years to come so that the city will be able to remain as the nucleus of the southern key economic region and maintain its lead in terms of economic development. HFIC is a state finance firm in charge of funding social and technical infrastructure projects in the city. It has already been involved in multiple major projects such as Saigon Bridge 2, Tan Cang-Hiep Phuoc port complex, a water treatment plant in Thu Duc District, and Phu My Bridge. As one of the biggest enterprises in HCMC, IPC plays a key part in infrastructure development in the city in particular and the southern economic region in general. Tan Thuan Export Processing Zone, Nguyen Van Linh Boulevard, Phu My Hung New Urban Area, and Hiep Phuoc Industrial Park are among the projects which IPC has participated in. In the coming time, IPC will be one of the key companies responsible for developing a special economic zone in the city. VEC seeks special mechanism for expy development Vietnam Expressway Corporation (VEC) is seeking Ministry of Transport approval for a special mechanism to raise capital from different sources for expressway projects in the country. Tran Quoc Viet, chairman of VEC, said at a review meeting on the corporation’s operations with the Ministry of Transport in Hanoi last week that after going public, VEC wants to borrow from international lenders, issue bonds and manage State capital in expressway projects. VEC also requested the ministry to allocate certain sums of money for expressway operation, maintenance and repair work. Expressway projects, according to VEC, require huge investments while the corporation’s equity is just VND1 trillion (US$44.87 million). Moreover, it is hard to take out bank loans and issue corporate bonds to raise funds for expressway projects.  VEC is a leading firm in raising funds from different sources to develop expressways in the country with support of the Government, but its equity is limited while its debt-to-equity ratio is high. This will make it hard for the firm to observe the Law on Public Debt Management if it relies on bank loans and bonds. Due to financial constraints, VEC has encountered difficulties in mobilizing capital from investors, speeding up site clearance for its projects and recovering investment capital from expressways via toll collections which take many years.     To fasten the construction of the approved expressways, VEC petitioned the transport ministry to allow it apply a special mechanism for investments in expressways. The ministry has completed the equitization plan for VEC and submitted it to the Government for consideration and approval.  At a meeting with former British Prime Minister Tony Blair in Hanoi on Monday, Transport Minister Dinh La Thang sought support from the Office of Tony Blair for the restructuring of VEC and Vietnam National Shipping Lines (Vinalines).  Blair said the two enterprises are attractive to foreign investors and will develop strongly if they find good investors. The Office of Tony Blair in Vietnam pledged to help the transport ministry find capable businesses. VEC reported that it has so far put into use 50 kilometers of the Cau Gie-Ninh Binh Expressway, 245 kilometers of the Noi Bai-Lao Cai Expressway and 55 kilometers of the HCMC-Long Thanh-Dau Giay Expressway. Work has started on the Danang-Quang Ngai and Ben Luc-Long Thanh expressways. VEC expects to complete 540 kilometers of expressway by 2018. To realize the target, the corporation has worked out plans to raise around VND54 trillion and take out bank loans for the Cau Gie-Ninh Binh Expressway. The corporation has worked with the Asian Development Bank (ADB) over funding for site clearance at the Noi Bai-Lao Cai and other expressway projects due to a lack of reciprocal capital.   The ministry expects 2,500 kilometers of expressway will be opened to traffic by 2020. Work starts on new road Construction has begun on a 2.7-km road that will connect HCMC-Trung Luong Expressway and HCMC’s Vo Van Kiet Highway. Pham Van Diet, general director of Yen Khanh Manufacturing Trading Service Co., Ltd., the investor of the VND1.55-trillion project, said the 60-m-wide road would link Vo Van Kiet road with Tan Tao and Cho Dem interchanges that lead to the expressway between HCMC and Tien Giang Province’s Trung Luong. The first phase will see two parallel roads with 14.5 m in width built. A 31-m-wide strip in the middle of the road will be reserved for road expansion in the next phase. The investor will also build two overpasses at the two ends of the road and two bridges in the middle. The company will fund the whole project and recover investment capital by collecting tolls. The project is scheduled to be up and running by 2017. Currently, if vehicles from the downtown want to enter HCMC-Trung Luong Expressway, they will have to go from Highway 1A to Binh Tan District, and then go to Tan Tao and Cho Dem interchanges or Binh Chanh District. The new road will shorten the distance and save time when going from the downtown to the expressway to go to the Mekong Delta. It will also help to reduce traffic on Highway 1A and at the southwestern gateway (Binh Tan and Binh Chanh districts) of the city. Credit Suisse to invest more in Asia-Pacific Credit Suisse has just announced a new global strategy further focusing capital and resources in the Asia-Pacific region, including Vietnam. Specifically Credit Suisse targets to double pre-tax income and client assets under management in Asia-Pacific by the end of 2018.   “We plan to expand further in our core markets, capitalizing on our strengths in South East Asia and building out our China franchise, while maintaining a consistent culture of compliance and controls,” said Helman Sitohang, chief executive officer of Credit Suisse Asia-Pacific. The announcement came following a global strategic review of Credit Suisse Group. Accordingly, Credit Suisse reported record results for Asia-Pacific, with revenue rising to CHF3 billion ($3.07 billion), up 17 per cent on year and pre-tax income of CHF1.1 billion ($1.13 billion), up 48 per cent, for the first nine months of the year. According to Sitohang, Asia-Pacific now accounts for 15 per cent of total Credit Suisse’s revenues and 28 per cent of the latter’s pre-tax income.  “This is a strong performance, particularly given the current market conditions and demonstrates the resilience of our business model and our ability to generate profitability through the cycle,” he said. According to the Credit Suisse Research Institute Family Business Model 2015 report, 57 per cent of new wealth in Asia-Pacific is driven by first generation entrepreneurs and family ownership of listed companies is expected to grow in many markets in the region as more wealth is created.  “As wealth in Asia-Pacific grows and financial markets deepen, we see significant opportunities to help our clients capture this growth.  Our track record of performance, our culture of partnership and our strong client franchise gives Credit Suisse in Asia-Pacific a strong platform.  With the additional investment in the region, we expect to further build on this platform to the benefit of our key Entrepreneur and Investor clients,” he said. First established in Vietnam in 2011, Credit Suisse has become the biggest capital mobilisation bank in Vietnam ever since with over $6 billion for the government and local businesses including state-owned and private firms as well as foreign companies in Vietnam.  Credit Suisse comes out as the top among the international investment banks in Vietnam in terms of stock mobilisation, USD capital liability and in exchange value-based mergers and acquisitions. Credit Suisse was elected several times by The FinanceAsia, Euromoney and The Assets as the Best International Investment Bank and Best Mergers & Acquisitions Bank in Vietnam. Various transactions that Credit Suisse participated in were Best Transaction of the Year in Vietnam.  In 2012, Credit Suisse successfully advised Vietcombank during its $567 million strategic sale to Mizuho Bank. It has been chosen by Vietcombank as the financial consultant for the latter’s equitisation through international bidding. GM Vietnam builds and sells 50,000th Chevrolet GM Vietnam, part of US auto giant General Motors (GM), today celebrated the production and sale of its 50,000th Chevrolet vehicle since introducing the brand in December 2006. It officially reached the new milestone in September. “Vietnam is one of Chevrolet’s more than 115 markets globally and one of the fastest-growing markets in Southeast Asia,” said GM Vietnam’s managing director Wail A. Farghaly.  “We are proud to be part of the remarkable growth of Vietnam’s economy and automotive industry through Chevrolet,” Farghaly added. Chevrolet’s portfolio of high-value, high-quality vehicles in Vietnam includes the locally produced Spark mini-car, Aveo small compact car, Cruze medium compact car, Captiva SUV and Orlando MPV, in addition to the imported Colorado pickup.  The Spark, Captiva and Cruze have accounted for more than 62 per cent of production and sales. The Cruze entered the list of the 10 best-selling vehicles in Vietnam in September. In August, Chevrolet introduced the Chevrolet Complete Care customer service programme, which is being implemented nationwide.  It provides a range of services (including 24/7/365 roadside assistance; express service; a warranty for up to one year or 25,000km (whichever comes first) for genuine parts and accessories; a warranty for up to three years or 100,000 km (whichever comes first, for new Chevrolet buyers) to ensure an outstanding ownership experience.  GM Vietnam assembles vehicles at its facility in Hanoi. Its vehicles are sold through 18 Chevrolet dealerships across the country. It has also exported about 500 vehicles, making it the first automaker in Vietnam to export small cars. “GM Vietnam and our employees will continue to build and sell products that offer world-class design, performance, quality and safety, backed by best-in-class service,” said Farghaly. “With our philosophy of putting the customer at the centre of everything we do, we look forward to capturing the hearts of more vehicle buyers.” Opportunities, challenges brought about by Vietnam-EU FTA examined Vietnamese and European experts pointed out opportunities and challenges that will affect local businesses and authorities once the free trade agreement between Vietnam and the European Union (EU) is signed, while at a seminar in Ho Chi Minh City on October 26. Deputy Foreign Minister Le Hoai Trung said once it is officially authorised, the Vietnam-EU Free Trade Agreement (VEFTA) will open up numerous opportunities for Vietnam, especially for exports which are expected to profit from tax reductions. Vietnam needs to improve its business climate in legal and policy aspects to respond to new opportunities and challenges, he noted, adding that localities should be proactive in learning about such possibilities, build business partnership, improve policy effectiveness, and enhance human resource preparations. The official highlighted that his country and the EU signed the Partnership and Cooperation Agreement (PCA) on June 27, 2012, providing a framework for the comprehensive expansion of their cooperation. The two sides began talks for the establishment of the VEFTA on June 26, 2012, and officially concluded negotiations on August 4, 2015. The EU became the second largest importer and trading partner of Vietnam last year. Seminar participants evaluated the potential and effectiveness of the VEFTA once it is signed and applicable while proposing concrete measures to enhance the awareness of local authorities and enterprises’ of the deal, as they are decisive to the overall successfulness of the agreement. As part of the event, European entrepreneurs met with Vietnamese counterparts and authorities to boost connections and seek business opportunities in the country. Miriam Garcia Ferrer, Head of the Economics and Trade Section at the EU Delegation to Vietnam, said Vietnam is an important market of the EU and the bloc is also a market full of opportunities and potential for Vietnam. The VEFTA will substantially benefit the people and business circles of both sides, creating a legal corridor for them to have regular dialogues and ensure business stability. At the seminar, the Vietnamese Foreign Ministry inked a Memorandum of Understanding on cooperation with the European Chamber of Commerce in Vietnam and the EU – Vietnam Business Network with the aim of increasing connectivity; promoting European firm investment, trade and business activities in Vietnam; as well as helping local companies access European markets. Vietnam attracts US$19 billion FDI Foreign investors have pumped more than US$19.292 billion in 1,657 new and 667 existed FDI (foreign direct investment) projects in the first ten months of this year, a rise of 40.8% against the corresponding period last year. Of the figure, US$11.8 billion has been disbursed, a year-on-year increase of 16.3%, the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment (MoPI) reported. The processing and manufacturing industries drew the largest share of foreign investment with US$12.484 billion, accounting for 64.7% of the total registered capital, trailed by electric production and distribution, gas, hot water, steam, air conditioner, and real estate. Tra Vinh led 47 provinces and cities with the largest number of newly licensed FDI projects and a registered capital of US$2.526 billion. It was followed by HCM City, Dong Nai, Binh Duong, Hanoi, Tay Ninh, Haiphong and Quang Ninh. Malaysia topped 59 foreign investors in Vietnam, injecting US$2.416 billion or 19.4% of the total FDI, trailed by the Republic of Korea, the UK, Japan, Taiwan (China) and Singapore. Tourism workers to feel pinch of regional competition An agreement on mutual recognition of tourism laborers in ASEAN would create both job opportunities and competition in Vietnam when it takes effect next year as part of the ASEAN Economic Community (AEC). According to the Vietnam National Administration of Tourism (VNAT), ASEAN countries are rushing to complete steps for the agreement to come into force from early 2016. These include promoting the launch of a regional secretariat to implement the agreement, developing teams of trainers, and establishing tourism industry and professional certification councils. Under the deal, people working in reception, room-kitchen and catering services fields and for travel agencies and tour operators under 32 job titles certified by any of the professional certification councils in ASEAN nations will be recognized by all member states and allowed to travel freely for guest work within the bloc. Therefore, local tourism workers will have more opportunities to find jobs in other ASEAN countries but have to compete with their peers from other regional countries for jobs on the home market. More experts and firms have voiced concerns over the competitiveness of Vietnamese workers in the sector as the year 2015 has more than two months to go. The domestic tourism industry directly employs 700,000 people and its indirect employees number over 1.5 million, heard a conference on human resources for the sector held by the British Council, Human Resources Development Center (HRDC) and Vietnam Institute of Management in HCMC in July. But many of them lack skills and foreign language proficiency, so they will find it hard to compete with their regional peers.   Regarding foreign language skills, a key requirement for tourism workers, only 60% of the workers in the sector can speak foreign languages. Of them, only 42% can use the English language but 15% have a good command of spoken English. SMEs face tough market as FTAs kick in Small- and medium-sized enterprises (SMEs) contribute 40 per cent of national GDP but the proportion is expected to fall as competition will increase under new international free trade agreements. Under such a scenario, SMEs will likely experience a smaller market share, decline in production, and more bankruptcies. SMEs make up 95 per cent of total national enterprises. The economy also includes 3.5 million privately run household businesses, 10 million farmer households and 140,000 co-operatives. SMEs are involved in every kind of business, including retail, wholesale, manufacturing, production and in fields that are typically State-owned, such as electricity, gas, water supply, mineral exploitation, information and telecommunications. Five per cent of SMEs are involved in other public services such as education and healthcare. "SMEs have contributed 40 per cent of GDP, 61 per cent of jobs, 31 per cent of export turnover, 30 per cent State budget and attracted 38 per cent of social investment," To Hoai Nam, deputy chairman of the Small-and Medium-Sized Enterprises Association, was quoted as saying in the Sai Gon Giai Phong (Liberated Sai Gon) newspaper. "SMEs' economic efficiency is only 0.7 times that of foreign invested companies, but 2.3 times higher than State-owned enterprises," he added. Nguyen Thang, director of the Society and Science Institute's Forecast and Analysis Centre, said: "The size of SMEs is smaller because their business fields are more limited. Since 2010, most SMEs have cut their workforce by nearly a third. For individual workshops, most of them only have two to four workers." Besides being limited in size, they are weak in creating value-added products. Most SMEs do business in trade and service, while enterprises working in manufacturing and production with high-level links with the international market are small. To support SMEs, the Government and authorities have created 14 programmes for information management, 15 for technology development, and eight others for finance and tax. However, many experts said that authorities had designed policies but not carried them out. No report had been issued on the effectiveness of such policies to the SME community. "These policies only support SMEs, but they are not able to protect them," Nam said. While State-owned enterprises, most of them being groups or corporations, have large investments, SMEs are limited in capital, lack high-quality human resources and modern technology and have poor business governance. They also find it hard to borrow loans from banks. Sometimes, SMEs have to borrow loans at interest of over 20 per cent each year. "SMEs mostly do not receive legal and information assistance to meet international standards for their products and services so they can compete with foreign companies," Nam added. "We can find global plastic market analysis information much easier than figures about the local market," Nguyen Hoang Ngan, general director of Binh Minh Plastics Joint Stock Company, said. The company has sought support from all authorities and business associations, but has found little information. In addition, the SME community lacks maturity and is not large enough to join global supply chains. SMEs in agriculture, garments and textiles, footwear, food processing and wood furniture depend on imported material and production technology. Under global integration, Viet Nam has new opportunities to develop SMEs in multi-national groups with leading technology. "To take advantage of this opportunity, the Government should release new policies to support SMEs so they can overcome capital limitation, reduce risks, and increase high-quality human resource training and other conditions to promote reform and creativity," Nam said. "Developed nations have certain conditions for SMEs. SMEs don't need to become bigger. They only need to develop a stable market share and have close links with global supply chains" he added.  Apartment inventories plunge in city Apartment inventories in HCMC have tumbled to 3,042 units from nearly 14,500 in late 2012, according to the municipal Department of Construction. A report of the department released last week showed that real estate firms had sold 11,088 apartments over the past three years. Better sales have spurred credit growth and disbursements for the real estate sector, especially the VND30 trillion home loan package. The department said banks have pledged almost VND2.17 trillion (US$97.3 million) in loans for nearly 3,000 customers in the year to date, up 4.5 times over the same period last year. Banks have agreed to lend a total of VND4.05 trillion to more than 5,220 customers eligible for the package since it was launched, with nearly VND2.23 trillion disbursed. Lending commitments and disbursements have increased as more budget housing products have been made available on the market. The State Bank of Vietnam and the Ministry of Construction have provided more specific guidelines for eligible people to benefit from the VND30 trillion package, the department said. Regarding housing supply in HCMC, the department said there has been around 6.2 million square meters of floor space since early 2015, bringing the total area to 36.8 million square meters in 2011-2015 with an average of 17.22 square meters per person. In the remaining months of this year, the city will have an additional 2.36 million square meters and the average housing area will be 17.32 square meters per person. Ministry mulls tax on alloy steel imports from China The Ministry of Finance plans to impose a tariff of 10% on steel ingots and construction steel labeled as alloy steel from next year to prevent massive imports of cheap steel from China.  Nguyen Van Sua, vice chairman of the Vietnam Steel Association (VSA), cited the ministry’s recent document as saying that the 10% tax planned for imported steel containing boron and chromium is a short-term solution to stabilize the market and support domestic steel makers. Sua told the Daily that domestic steel makers have been coping with difficulties this year, stoked by cheap steel imports from China. According to VSA, more than one million tons of Chinese steel ingots had been imported into Vietnam in the year to mid-September, tripling that in the same period last year. The volume did not include hundreds of thousands of tons of construction steel said to contain boron to enjoy a zero tax rate, which has caused State budget revenue losses. VSA said such steel ingots were declared as alloy steel but contained less than 0.3% chromium as required to enjoy an import tax of 0%. Such construction steel labeled as alloy steel for tax evasion is threatening domestic steel makers. If no bold measures are taken to redress the situation, losses would be huge for local steel makers and the State budget as well. VSA has proposed Vietnamese authorities step up inspections into enterprises which have imported steel ingots containing chromium in the past year. If such steel ingots are found to be used for construction steel production, they should be fined and required to pay taxes. “It’s time for Vietnam to adopt a number of solutions to protect domestic producers and new tax measures to support the local steel industry,” Sua said. Vietnam imported nearly 10 million tons of steel in January-August, up a staggering 40% against the same period a year earlier. Nearly six million tons of the total volume was from China. Thinktank urges for more cautious monetary policy The Viet Nam Institute for Economic and Policy Research (VEPR) has said the central bank should adopt a more cautious monetary policy to avoid asset bubble risk in the future. The institute said there should be strict control of money supply in accordance with the nominal GDP growth rate, as the country's credit growth was showing signs of overheating and far exceeding the nominal GDP growth rate. Statistics from the central bank showed that credit growth in the first nine months of the year increased nearly 11 per cent against December last year. The rising rate was also much higher than the 7 per cent increase in the January-September period last year. A cautious approach should be also taken on the real estate market to be able to make the market growth sustainable and prevent the risk of a property bubble developing, which often occurred in the country like a cycle, the institute said. The institute was concerned about the growth of the real estate market as credit pouring into the industry this year has surged sharply, with most of the transactions in high-end segments and property prices continuously rising. The institute said when the property market recovered, the Government should readjust its existing policies that were encouraging lending on the real estate market. The institute also said the central bank should float the deposit interest rate based on market conditions, saying that it was time for a floating rate thanks to a stable financial market. "Keeping the interest rate cap for dong deposits under six months at 5.5 per cent per year, as is currently done, makes it difficult for commercial banks to attract deposits as it pushes the saving source to other asset markets with higher profit expectations," the institute said. The cap also caused a rise in consumption and an imbalance in the capital market, it said. As for the forex market, the institute said the central bank should adopt a more flexible exchange rate mechanism to be able to protect the country's macroeconomic stability and domestic production, especially in case Viet Nam saw an overheating capital inflow to the country after the signing of the Trans-Pacific Partnership (TPP), of which Viet Nam is a member. That had happened earlier when Viet Nam joined the World Trade Organisation (WTO) in 2007. A more flexible forex policy would also help the country against volatility that might be caused by strong adjustment made by China and emerging markets, the institute said.  Vietnam Airlines to launch Hai Phong-Nha Trang air route The national carrier Vietnam Airlines will open a new air route between the northern port city of Hai Phong and the central coastal city of Nha Trang from November 15. The airline will offer four round flights per week on every Monday, Wednesday, Friday and Sunday, using Airbus A321. The one-hour and 45-minute flights are scheduled to take off at 8:20 am from Nha Trang city in Khanh Hoa province and 10:50 am from Hai Phong. The route aims to cater for the traveling demand of passengers in the northern coastal and south central provinces. It also helps Vietnam Airlines expand its network to 95 air routes to 29 international destinations and 21 domestic ones. One-way tickets on the route will be delivered from October 21 to December 15 at prices ranging from 799,000 VND (35.9 USD) to 3 million VND (135 USD), applicable to flights departing from November 15 to December 15 this year. The fares exclude taxes and additional fees. Ca Mau’s seafood exports fall The southernmost province of Ca Mau has had difficulties meeting its seafood export turnover goal of 1.35 billion USD this year, according to the provincial Association of Seafood Processors and Exporters. The locality’s seafood export turnover is expected to reach only 89 percent of its yearly target. Export turnover in the first nine months of this year was valued at 700 million USD, a year-on-year decrease of 31 percent. Chairman of the Provincial People’s Committee Nguyen Tien Hai attributed the slow turnover to shrimp farming areas’ current recovery in a number of countries worldwide and the reduced price of exported shrimp. He asked enterprises to work together to overcome the difficulties, saying that it was necessary to enhance trade promotion and seek new export markets in order to reach the export targets. Local authorities pledged to continue to facilitate enterprises’ production and business, while promoting administrative reform, helping businesses access credit loans and loosening tax policies. Enterprises will also be given information on international integration, including how to fully tap advantages brought about by free trade deals such as the Trans-pacific Partnership (TPP) agreement. Ca Mau will continue working to expand shrimp farming areas and industrial aquaculture models in order to maximise the potential and strength of the locality, which is considered the country’s biggest shrimp farm. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR