BUSINESS IN BRIEF 28/11 Lilama sells 3% of initial public offering The Viet Nam Machinery Installation Corporation (Lilama) sold only 3 per cent of the total 35.6 million shares offered in its initial public offering yesterday. According to the IPO organisation, the Ha Noi Stock Exchange, there were 112 individual investors at the auction, but no institutional investor. Registering to buy 1.09 million shares, investors successfully bought the small portion of shares at VND10,362 (US$0.459) each, just 62 dong or 0.3 cent higher than the starting price of VND10,300 ($0.456). After the IPO, Lilama earned VND11.3 billion ($501,330) and the remaining 97 per cent of shares were kept unsold. As planned, Lilama would have chartered capital of VND1.5 trillion ($66.67 million) with 51 per cent stake owned by the State, 23.7 per cent to be sold to strategic shareholders, and 1.6 per cent sold to employees, while the remaining 23.7 per cent was designed to be sold in the IPO. The company was established in 1960 to restore the country's industry since the post-war period. It now specialises in mechanical manufacturing, engineering and civil works. Significant works of the company include Uong Bi Thermal Power Plant, Ca Mau Thermal Complex, and Vung Ang Thermal Plant, in addition to Nhon Trach 1 and Nhon Trach 2 thermal plants, and the Son La Power Plant. Based in Ha Noi, Lilama, with 15 subsidiaries and 7 associated companies, belongs to the Ministry of Construction. It expected to show earnings of VND4.213 trillion ($168.9 million), VND13.971 trillion ($619.9 million) and VND13.987 trillion ($620.5 million), in 2016, 2017 and 2018 respectively. Nov trade deficit narrows to $3.8b Viet Nam's trade deficit narrowed to US$3.8 billion in the first 11 months of this year, from the $4.1 billion recorded for the first 10 months. According to the General Statistics Office (GSO), the reduction was thanks to an $18.8 billion trade surplus achieved by foreign direct investment (FDI) enterprises, compared to a $15 billion deficit generated by domestic businesses during 11 months. So far this year, export revenues have totalled about $148.71 billion, up 8.3 per cent over the same period last year. Exports by FDI companies hit $105.10 billion, a year-on-year increase of 13.5 per cent, while those by local firms reached $43.6 billion, a year-on-year decline of 2.1 per cent. The FDI sector posted high turnover for most of its major exports. For example, telephones and components reached $28.5 billion, up 29.6 per cent; computers, electronic products and components reached $14.3 billion, up 38.2 per cent. Garment and textile products reached $20.7 billion, up 9.1 per cent, machinery and equipment reached $7.4 billion, up 11.2 per cent, while timber products reached $6.2 billion, up 9.5 per cent. Meanwhile, the domestic sector witnessed reduction in its key exports, with crude oil especially falling by 48.3 per cent year-on-year at $3.53 billion, following global oil price declines. Rice was also down 48.3 per cent at $2.66 billion, while coffee dropped by 29.3 per cent at $2.34 billion, and rubber declined 14.2 per cent at $1.38 billion. During the first 11 months, the country's import values totalled nearly $152.5 billion, an increase of 13.7 per cent over the same period last year. The total import value of local businesses was $62.3 billion, a year-on-year rise of eight per cent, while that of FDI companies was $90.2 billion, up 18.1 per cent. The GSO said imports mainly served production and processing for export, and the main imports were machinery and equipment, growing by 25.7 per cent at $25.3 billion; computer, electronic products and components, increasing 27.7 per cent at $21.6 billion. They also included telephones and components, which rose by 29.7 per cent at $10.1 billion, cloth, which increased 8.3 per cent at 9.3 billion, garment, textile and footwear materials, which were up eight per cent at $4.6 billion. Automobile imports soared 60 per cent at $5.3 billion. However, iron and steel were down one per cent at $6.84 billion, with cheap products being imported massively, and petrol plummeted nearly 32 per cent at $4.83 billion, due to the fall in the global oil price. The GSO forecast that the country's trade deficit will expand next month as crude oil and farm produce exports are likely to continue to decrease. But the agency expected that the deficit will be controlled at less than five per cent of all export revenues, as the country has targeted this year. Foreign firms seek consistency Inconsistencies in investment incentives have been one of the concerns for foreign direct investment (FDI) enterprises, participants heard at a conference on tax policies held in Ha Noi on Tuesday. Participants at the conference called to discuss updates on tax policies, said there was a difference among localities in applying preferential treatment for investors despite being under the same legal system. According to the Law on Investment, the agencies granting investment licences to FDI businesses have the right to decide the tax preferential levels. However, after a few years of investment, provincial taxation departments believed that the tax preferential levels were too high. The firms wondered whether they should follow the Law on Investment or the tax law. Responding to the question, Pham Dinh Thi, director of the General Department of Taxation's Tax Policies Office said there was a difference between the two laws and they have resolved the issue as per the circumstances. Huong Vu, deputy general director of tax and advisory services at EY Viet Nam said the conflict between the two laws would not only cause problems for businesses but also reduce the attractiveness of Viet Nam's investment environment. "The Law on Investment highly appreciates the Government's commitments to investors. Investment protection has been the country's trust issue toward investors," Vu added. She said that tax policies have been continuously and actively improved over the past two years, facilitating enterprises. However, the implementation has seen some shortcomings. Several new regulations and instructions were promulgated in the year of 2015, which affected the operations of businesses. Vu said that the reduction of administrative procedures would create favourable conditions for companies in implementing their tax duties, improving effectiveness of tax self-declaration as well as providing a better investment environment to investors. In reality, several tax officers have not adapted to the changes of policies and were asking companies for procedures which had been abolished, she said. Enterprises also said that there was a differentiation between specialists and workers in tax deduction for house leasing and building. They asked the finance ministry to review and stipulate the ceiling cost for house leasing of specialists. The conference was co-organised by the Viet Nam Chamber of Commerce and Industry and EY Viet Nam to update regulations and policies which would help businesses have an overall and more effective view in tax planning and risk management, and they could take advantage of the integration. Tax specialists also shared their experiences in tax management, checks and complaints. The event attracted the participation of more than 300 FDI firms. Customs takes on bottlenecks Prime Minister Nguyen Tan Dung has approved the project to enhance efficiency of specialised checks in import and export in an effort to improve the business climate and enhance competitiveness. The project was considered important to cut time for customs clearance and reduce costs for businesses in line with international practices, as the country was striving to hasten customs reforms, in which specialised checks remained a bottleneck. This was a part of the effort to reduce customs clearance time to the legal level of ASEAN-6, or below 10 days for export products and below 12 days for import products in 2016, and below five days for both import and export products by 2020. Notably, under the project, 87 legal documents related to specialised checks in customs clearance under the management of 13 relevant ministries must be amended. Of them, 49 circulars and decisions belonged to the Ministry of Agriculture and Rural Development, 10 were of the Ministry of Industry and Trade, nine of the Ministry of Health and four of the Ministry of Construction. The Prime Minister recommended that 85 out of the 87 documents be amended by the first quarter of next year while the deadline for the remaining two of the Ministry of Science and Technology was the end of 2016. In order to achieve the goals, the project said that the legal framework about specialised checks must be completed together with renovations in checking methods to create favourable conditions for exports of Vietnamese products while setting standards for import products. Coffee industry to boost quality, value The local coffee industry should reform production and processing of coffee products to gain added value from those products, experts said. Viet Nam has produced a total output at 1.4 million tonnes of coffee every year, and 95-97 per cent of the total output has been exported, but export value has not been high. Viet Nam has had a total area of 640,000ha to grow coffee, 7 per cent higher than the development plan of 600,000ha in 2020, according to the Ministry of Agriculture and Rural Development's Plantation Department. Ma Quang Trung, head of the department, said the old coffee tree is a challenge for the coffee industry because they would affect the income of farmers and the reputation of Vietnamese coffee on the world market. In addition, the small production scale and unequal production skills of farmers have prevented farmers from becoming major producers of coffee, from approaching credit for production, renewing of the coffee tree, and application of new technology for production, Trung said. Meanwhile, Viet Nam has processed 10 per cent of its total coffee output for export but the products including instant coffee products, and roasted and ground coffee products, have not achieved a high volume, strong brand or high quality to compete with popular brands around the world. Huynh Quoc Thich, deputy director of Dak Lak Agriculture and Rural Development Department, said production and processing stages have seen numerous problems and there has been very little co-operation in production, processing and consumption. Many coffee production and export enterprises in the province have not paid attention to development of material regions for coffee, he said. Also, the existing purchase price has not encouraged coffee growers to produce high quality coffee. Nguyen Nhu Hien, expert of the Plantation Department, said the department has promoted restructuring of coffee production to improve quality of coffee and ensure its sustainable development. By this year end, the Central Highland provinces would replace new coffee trees on a total area of 61,000ha. That would increase the area replacing new coffee trees to 77,000ha by 2020, reported Vietnamplus. To have sustainable development for the coffee industry in the long term, Trung said farmers should implement the correct production processes to ensure high capacity and quality. Meanwhile, enterprises should promote building of the brand and increase processed products to gain higher export value, he said. According to the Viet Nam Coffee and Cacao Association, at present, Viet Nam's instant coffee export has increased sharply due to more investment in the coffee processing sector from local and foreign firms. Exports of the product reached 54,000 tonnes in volume and US$274 million in value in 2014. The export volume of instant coffee products was expected to gain a year-on-year increase of 25 per cent for this year. Central province draws investors The coastal central province has granted 33 investment licences, of which six are for Foreign Direct Investment, in the first 10 months of this year. The total capital of these investments amounts to VND947.7 billion (US$45 million). Director of the provincial investment promotion centre Nguyen Bay said investors are pouring a great deal of capital into tourism projects in the province. He said domestic investors had received 80 per cent of the approved investment licenses so far this year, and major investment projects were planned for tourism properties and associated production. The province has attracted 54 projects, with total investment capital of $1.6 billion. The FCL Group is the largest domestic investor in the province, with total registered capital of VND3.5 trillion ($167 million) in the Nhon Ly Resort Complex project. Bay said the province had allocated 73ha to an investor who was developing a pig farm with VND300 billion ($14.3 million). The farm is expected to provide 10,000 pigs each year once it begins operations in July 2016. Earlier this year, the Bank of Investment and Development of Viet Nam provided a loan of VND621 billion ($29.5 million) for the construction of the 18MW Vinh Son hydropower plant No 4 in the province. The central province has 22 hydropower plants, with a total production capacity of 346MW. Gov't mulls sales of more short-term debt Three-year bonds might continue to be issued until the end of this year as the Government attempts to balance the budget deficit, said the latest bond report from Bao Viet Securities Company (BVSC). BVSC also saw a high market demand for three year bonds, predicting that the coupon rate would be around 5.9 per cent. The State Treasury offered VND7 trillion (US$311.1 million) worth of three-year bonds last week that sold out for the first time this year at the coupon rate of 5.9 per cent per. It also sold all of the 5-year bonds on offer at the coupon rate of 7.45 per cent. However, the treasury could only offload two per cent of the VND500 billion ($22.22 million) in 10-year bonds on offer. According to the Ha Noi Stock Exchange, the treasury would issue more short-term bonds including VND6 trillion ($266.6 million) in three year bonds and VND1 trillion ($44.44 million) in 15 year bonds on November 25. BVSC said it was no surprise to see three year bonds drawing great attention from investors. The Ministry of Finance reported that the treasury had sold bonds worth about VND127.43 trillion ($5.66 billion) during the first nine months, representing only half of the annual target and 60 per cent recorded in the same period last year. The report also said that the market was waiting for the National Assembly's comments on a Government proposal to extend more short term bonds besides bonds with terms of at least five years. SSC approves HASECO, AAS merger The State Securities Commission (SSC) has approved the merger between Hai Phong Securities Joint Stock Company (HASECO) and A Au Securities Company (AAS). During the ceremony held on Monday, SSC Chairman Vu Bang granted a certificate of business registration for the newly-founded securities company. This was the third merger between securities companies on Viet Nam's stock market. The new company has been named Hai Phong Securities Joint Stock Company, and has a charter capital of VND291.8 billion (US$12.95 million). It's head office will be based in the northern city of Hai Phong, and the company will operate in the fields of stock brokerage, financial advice and securities trading. Chairman of the HASECO Board Vu Duong Hien said the company had worked with the HCM City Stock Exchange (HoSE), the Ha Noi Stock Exchange (HNX) and the Viet Nam Securities Depository Centre to ensure customers' rights and interests during the merger process. SSC Deputy Chairman Pham Hong Son said the merger process had required efforts from leaders and shareholders of the two companies. Son said the restructuring of the stock market had been approved by the Prime Minister three years ago, which included restructuring securities companies. During the restructuring, local securities companies would increase their profitability, enhance risk management capacity and improve the quality of customer services, Son added. Son said the SSC had eliminated weak securities companies through acquisitions, mergers or dissolution to improve the management and supervision of the stock market. China eyes local farm produce China hopes that there will be more farm produce cooperation opportunities with Viet Nam as the two countries are both diverse in agricultural resources and their farm produce sectors complement each other. Rong Wei Dong, Vice President of the China Chamber of Commerce of Foodstuffs and Native Produce (CFNA), expressed this hope at the China – Viet Nam Trade and Investment Matchmaking Meeting yesterday in Ha Noi. The meeting aimed to create opportunities for enterprises from the two countries to boost cooperation and trade in the farm produce sector. Viet Nam was one of the biggest farm produce export markets in the ASEAN bloc for China, said Rong. Farm produce of China exported to Viet Nam hit US$2.4 billion in the first three quarters this year, a year-on-year increase of 13 per cent. Statistics showed that Vietnamese agricultural exports fell by 4.9 per cent in the first three quarters. Meanwhile, the country's rice, coffee, banana and pepper exports to China increased 19.4 per cent with a total export revenue of $4.3 billion. China mainly exports apples, mandarins, and grapes to Viet Nam while Viet Nam exports mainly longans, litchis, banana and rice to China. The president also highlighted that cross-border e-commerce development has created new cooperation opportunities as many orders on farm produce were traded successfully. It is forecast that advantageous products of Viet Nam such as coffee will access the Chinese market easier through e-commerce, said Rong. The president said that the association was willing to create favorable conditions for Vietnamese enterprises to work and do business in China. He also hoped there would be more such events to enhance understanding and cooperation between the enterprises of the two countries. On the Vietnamese side, Truong Viet Dung, deputy director of the Ha Noi Trade Promotion Agency, said that the centre would boost cooperation with relevant agencies of China to hold investment promotion activities to provide economic information to enterprises in the upcoming time. The centre would also continue to organise trade fairs to exchange and promote commodities and business meetings to study export demand of the two sides. "We commit to create the best conditions for the two countries' enterprises and associations to join market research programmes," he added. Dung expresses hope that Viet Nam-China cooperation in farm produce would harvest more success in the future, contributing to the increase of export revenue of the two sides. Viet Nam urges control over banned substance in animal feed Viet Nam was actively boycotting banned substances in animal feed, as well as "unsafe activities" in producing food, said Le Ba Lich, chairman of the Viet Nam Animal Feed Association. As Viet Nam joins the Trans-Pacific Partnership (TPP), the country's agricultural sector would be much influenced, therefore, the country would focus on improving the quality of farm products. In joining the TPP, the country's agricultural sector would have to face competitiveness in not only food safety but also price. The sector would innovate technology and equipment to increase quality to accept competitiveness right in its homeland, Lich said. Viet Nam would also tighten controls on animal feed smuggled through borders. Lich expressed hope that his association would receive cooperation from the Chinese side to tighten control on banned substances. Support sector lacks clients Vietnamese businesses operating in the support industry are finding it hard to seek big customers due to their backward technologies and weak management. Dam Tien Thang, deputy director of Ha Noi Department of Industry and Trade, told the conference called to review five years of a programme to develop the support industry from 2011 to 2015, held in Ha Noi last week that a majority of the enterprises had produced small and simple spare parts with low value adds. "The reason is that the support industry system between foreign direct investment (FDI) and local firms has not been connected and does not support each other," Thang said. However, he said, some domestic companies had the ability to join the multinational product value chain by providing spare parts for FDI firms in Viet Nam. Ha Noi has established special industrial park (IPs) clusters for the support industry such as North Thang Long, Noi Bai and Minh Quang. The capital's support industry has not met the local market's demand but is participating in the export markets. Several support industry products are produced on a relatively big scale and are of high quality, and have been recognised as key items in the capital. Participants said the capital should develop a network of support industry businesses together with producers and assembly companies. On the other hand, they should have a close connection of key industrial products while actively participating in the global production chain. Nguyen Duc Thang from Ha Noi Supporting Industries Business Association said the decree No 111 issued on November 3, 2015, by Prime Minister Nguyen Tan Dung on developing the support industry was timely. However, Thang said there were some issues in the decree such as preferential policies, support, and tax preferential which had not been stipulated clearly, and some unnecessary procedures which may create problems for businesses. Experts said Ha Noi should continue to build the programme for developing the support industry from 2016 to 2020. The city has made the support industry work hard to account for 30 per cent of total industrial value, meeting 50 per cent of local production demand and 30 per cent of export turnover. In addition, there should be 1,500 businesses with technology and management ability to be eligible to provide spare parts for multinational groups. Japanese execs see VN potential More than 500 executives from Japanese companies based around the world sought business opportunities in Viet Nam at a conference held in HCM City last weekend. Viet Nam's membership of ASEAN, the Trans-Pacific Partnership and several free trade agreements has helped the country attract much attention from foreign investors, including the Japanese. According to the Ministry of Planning and Investment's Foreign Investment Agency, Japan is the second biggest investor in Viet Nam with US$38.7 billion invested by its companies in 2,788 projects. According to Yasuzumi Hirotaka, director of Japan External Trade Organisation (JETRO) in HCM City, Japanese investment in the city has been increasing in recent years, and this year 6,000 Japanese companies sent representatives to Viet Nam scout for investment opportunities. Many Japanese companies with operations in China and Thailand – where costs have risen sharply – plan to expand to Viet Nam or even move here thanks to cheap labour and an improved investment environment. According to a recent JETRO study, Japanese investors are concerned about five issues in Viet Nam – the inadequate legal system and lack of transparency, increasing labour costs, red tape, complicated tax procedure, and poor infrastructure. But many multinationals expect Viet Nam to become a "factory of the world." With the investment environment deteriorating in neighbouring countries, Viet Nam is emerging as an ideal investment destination. But to take full advantage, the Government should speed up administrative reforms and further improve the investment environment. Vietnam’s garment and textile addresses challenges faced by TPP Vietnam and 11 other countries’ conclusion of negotiations for the Trans-Pacific Partnership (TPP) agreement has given opportunities to develop its economy. Vietnam’s garment and textile sector is one industry which stands to gain the most advantage from the TPP, while also presenting challenges. What Vietnamese garment and textile firms are concerned about now is input material supply sources for export production. Vietnam now has about 2,000 textile firms but few of them can be directly involved in designs and production to sell products to foreign partners. They mainly do outsource work for foreigners. But when Vietnam officially joins the TPP, domestic enterprises should step up the free-on-board production practice which means to take the initiative in material resources, increase of selling the finished products, and reducing processing. Nguyen Huu Toan, deputy director of Saigon Garment Company 2, said that Vietnamese textile firms’ biggest concern was to set up material zones for the manufacturing for exports and local consumption. Toan noted, “The biggest difficulty is material resources which are mainly imported or bought from illegal sources. Vietnam’s resources in locally-made fashion fabrics haven’t met domestic need.” When TPP takes effect, to enjoy tariff preferences Vietnam’s garment and textile products should first meet a certain rate over the localization of spinning, textile, and dyeing materials. The sector should also prepare capital and land for the construction of factories that can ensure product quality and the surrounding environment in line with the trade deal’s commitments. Ly Hoang Nguyen, director of Nguyet Nhan Technology and Service Trading Company, stressed, “Dyeing is an indispensable part in knitting a piece of fabric. But it requires a great amount of investment in building a dyeing factory, which can cover up to 10ha. It obviously goes beyond the capacity of a small or medium sized enterprise. I propose that the government and local administrations support these enterprises.” Pham Xuan Hong, President of Ho Chi Minh City’s Association of Garment, Textile, Embroidery, and Knitting, shared, "The government has been outlining programs in material support for the sector while foreign companies have conducted surveys in preparation for investment in material and auxiliary material zones." Hong added, “Vietnam began preparations a couple of years ago but the production of materials and raw materials remains slow. Although the scale of the production has been expanded, it can only meet up to 25%. The state has encouraged both domestic and foreign investment in the field hoping that linking these resources will increase output.” The changes that Vietnam expects from the TPP are significant and challenging. Vietnam will have to undertake some difficult domestic reforms to meet the TPP’s intellectual property rules and labor and environmental standards to fully gain TPP advantages over their rivals in Central and Southeast Asia. US Giant AO Smith has Vietnam fever Milwaukee based AO Smith Corp (NYSE:AOS), a world leader in the manufacture of water heaters, has unveiled plans to make a series of strategic investments to expand operations into southern Vietnam. In making the announcement, AO Smith Vice President Wilfried Brower, said the company is banking on the expanding middle class in Vietnam to clamour for the comfort of its hot water heaters. "We selected southern Vietnam for a number of tactical reasons," he pointed out. "Ho Chi Minh City is one of our key target markets with a growing consumer class interested in premium water heating solutions. Having already captured the top market share for water heaters in China with its principle manufacturing facilities in Nanjing, China, he said the company believes the move will position it to take over the lead market share in the whole of Vietnam. AO Smith currently only has revealed plans for sales offices and stocking warehouses judiciously placed throughout the country as well as putting a sales and customer service organization in place. The company, with gross revenue of US$2.4 billion annually, sells an extensive line of residential and commercial water heaters and boilers with manufacturing operations in the US, China, India, Mexico, Canada, and the Netherlands. Travel firms feel threatened by potential foreign investors ahead of TPP Many travel companies have been seeking to increase market share in anticipation of a Pacific Rim trade pact that will allow investors from 11 foreign countries to provide tour operator services in Vietnam for the first time. Big agencies such as Vietravel and Fiditour have made the move, expecting the evasion of foreign competitors when Vietnam permits "foreign investment to provide inbound services and domestic travel for inbound tourists" under the Trans-Pacific Partnership (TPP). The country will only reserve the right to "adopt or maintain any measure with respect to tourist guides services." Foreign companies currently are not allowed to operate inbound tours, and have to partner with local businesses instead. Once the restriction is removed, Vietnamese businesses will face "a huge challenge," considering that most of local tour operators are small and medium. Travel agencies from other TPP countries such as Australia, Japan and the US are big, according to local businesses and analysts. Nguyen Quoc Ky, CEO of Vietravel, expressed his concern that Vietnamese companies will have to compete with many big rivals when TPP takes effect, possibly in 2018. "Their presence will create a lot of difficulties to local businesses," he said. The Ho Chi Minh City-based travel firm recently organized its own exhibition to promote its tours, instead of waiting to take part in promotional events organized by tourism agencies, Ky said. Fiditour, on the other hand, has shifted its focus to online sales, because it is not only convenient to clients, but costs the company less, allowing it to offer more discounts, representative Tran Bao Thu said. She said it forecasts that foreign companies will tap the market through online services, given their long experiences in the business. However, Phan Xuan Anh, chairman of Viet Excursions, a known contract operator for cruise lines, said local travel businesses need to focus on improving their services' quality and innovating their products, instead. He warned that even though they are not officially present in Vietnam, many multinationals have been attempting to build up their customer bases through their joint-ventures with local partners and offering competitive prices. Huynh Van Son, a tourism management lecturer, said businesses need the government's support to expand their operation not only domestically, but in other TPP participants' markets so that they can capitalize on overseas markets. Vietnam reported more than 6.3 million international arrivals in the first 10 months, down 4.1% year on year, according to the latest figures released by the Vietnam National Administration of Tourism (VNAT). Public investment restructuring falls short of expectations: experts Public investment restructuring is still sluggish and has not focused on measures improving investment effectiveness, many experts pointed out at a seminar in Hanoi on November 24. The restructuring has just tightened disciplines in public investment while ignoring measures to promote investment effectiveness and eliminate wastefulness, said Nguyen Tu Anh – Director of the Research Department on Macro-economic Policies under the Central Institute for Economic Management. He elaborated that the Bidding Law and the Decree on public-private partnership have formed a crucial legal framework for the application of market principles in public investment capital allocation. However, they haven’t been enforced in reality due to a lack of implementation instructions. United criteria for the allocation, supervision and assessment of public investment among ministries, sectors and localities, are yet to be developed, he noted. He also pointed to lax disciplines for public investment, noting that violations have continually been reported in different localities despite stringent regulations and the Prime Minister’s directions. Meanwhile, economist Vu Dinh Anh blamed the restructuring’s disappointing outcomes on the unchanged role of the State in the economy. Aligning the State’s role with the market economy is critical for public investment restructuring, and vice versa. He suggested that public investment should be reduced to account for only 10% of gross domestic product, which would be in accord with the actual economic conditions, State budget deficit and public debt. The restructuring needs to be conducted according to sectors and public investment must be made in sectors and fields that private investors do not want or are unable to pour money into. The State should prioritise public investment in public infrastructure and services and minimise its presence in spheres that directly make money, Anh said, stressing that the restructuring must be associated with administrative reforms and the promotion of private engagement in public services like education-training, health care, science-technology, culture and sports. The expert emphasised that ineffective public investment will lead to macro-economic instability and undermine economic productivity, effectiveness and competitiveness. Restructuring and improving the effectiveness of the State’s investment must be the top priority in the economic restructuring and growth model change towards the economy’s stronger competitiveness, he added. Public investment restructuring is part of the economic restructuring scheme stated in the National Assembly’s Resolution No.10/2011/QH13 on the socio-economic development plan from 2011-2015. State-owned enterprise and the banking system are also being restructured. Agriculture urged to turn to domestic investors Experts have called for the agricultural sector to pay more attention to domestic investors than foreign firms as the latter’s interest seems to lessen upon Vietnam’s commitments to tariff cuts in free trade agreements (FTAs).    Speaker Tran Hai Yen told a forum on agriculture investment in HCMC over the weekend that there were more market entrants than those withdrawing. She explained some businesses have stopped investment in the sector as prices of farm produce have dropped sharply and it is hard to predict when prices rebound. A number of finance firms have poured money in the sector in hopes of making quick bucks but business conditions have turned sour, so they have left. It normally takes a long time to recover investment in agricultural projects, a discouraging factor for investors.          Yen forecast there would be merger and acquisition deals in the sector in the coming time.  This is the fastest way for enterprises to penetrate the sector but they must have strong financial capacity. A number of businesses have invested in the sector but this is just the beginning of a trend. Only firms with long-term investment plans will manage to find ways to ride out the current difficulties before opportunities come.    Vu Thi Minh of the National Economics University said foreign companies have joined the agricultural sector to turn out products for domestic customers rather than foreign markets. They mainly invest in the husbandry and animal feed sectors. Foreign direct investment (FDI) approvals in the agricultural sector have been small due to long capital recovery, low profit and unfavorable policies. In addition, FDI enterprises have wrestled with a host of challenges finding vast land for their projects. However, the biggest challenge FDI firms are facing is the openness of the sector. “FDI businesses entered the local market before 2000 to benefit from Vietnam’s protection of the sector. After 2000, the nation has opened up the market in line with its commitments to FTAs and protectionist measures have been gradually removed, leading to an FDI plunge,” Minh said.     Tran Tien Khai of the HCMC University of Economics said Vietnam is a member state of multiple FTAs including the Trans-Pacific Partnership trade pact. Globalization requires countries to follow the same set of quality standards, so Vietnamese businesses will have to meet all those requirements for food safety and hygiene if they want their products to go global. If domestic producers fail to meet these standards, local retailers will import quality items from other markets to meet demand of Vietnamese consumers. Therefore, domestic enterprises may lose home advantage. He said Vietnamese companies must apply advanced technologies to manufacture quality and safe products for consumers if they want to compete with firms in 11 other Pacific Rim nations joining the TPP. At the forum, Khai called on Vietnamese firms to build strong brands to get a competitive edge on both domestic and foreign markets. The forum was held by the General Association of Agriculture and Rural Development with experts, scholars and enterprises attending. Representatives of big enterprises in the agricultural sector like Masan, Hoang Anh Gia Lai, Vinamilk, Hung Vuong and TH True Milk also discussed issues of concern at the forum. According to experts, these businesses will remain major players on the local agricultural sector in the coming years as they have strong financial capability and good governance. However, farmers seem to be kept away from their production projects. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR