BUSINESS IN BRIEF 11/4 Transport firms seek more incentives for CNG buses Passenger transport enterprises are still reluctant to invest in vehicles running on compressed natural gas (CNG) as they are awaiting more tax and credit incentives from the Government. At a conference in HCMC on April 6 on use of CNG for transportation in the south, Le Hoang Minh, deputy director of the HCMC Department of Transport, said that since 2011 Saigon Passenger Transport Co Ltd (Saigon Bus) has test used 21 CNG buses imported from South Korea for Bus Route No. 1. Fuel consumption of these vehicles is 23% lower than diesel-fueled buses, Minh said. In addition to smooth operation, CNG buses’ carbon dioxide emissions are 20% lower than normal buses. Firms investing in CNG buses in HCMC are backed with loan interest rates. However, Minh said the incentive is not sufficient to attract investment in the field because the cost of CNG vehicles is high. There are only 137 buses running on CNG among around 3,000 buses in service in the city. Tran Van Quan, deputy director of Dong Nai Province’s Department of Transport, said demand for CNG vehicles in the southern provinces is huge. However, incentives relating to taxes, charges and bus development must be in accordance with the country’s  relevant regulations and the master zoning plan of the Ministry of Transport. He pointed out issues relating to the interest rate for loans used to buy CNG buses, the incentives for land used for bus parking lots and CNG recharging stations, and import duties on components for assembling CNG buses in Vietnam. Quan said HCMC and neighboring Dong Nai and Binh Duong provinces should join hands to ask the Government, the ministries of transport and finance for more incentives for CNG buses. At the conference, transport enterprises said a CNG bus costs VND2.7 billion (US$121,000), well above VND1 billion (US$44,840) for a diesel bus. Therefore, firms need support from the Government to lower costs and ensure the efficient operation of environmentally-friendly vehicles. Eximbank gets new general director Eximbank’s board of directors has issued a decision announcing Le Van Quyet as general director after the central bank approved his appointment. Speaking at a ceremony held on April 6 to hand over the appointment decision, Quyet said his responsibility at Eximbank would be huge in the coming time as the bank is now in the restructuring process. He cited a financial report as showing that the bank had incurred accumulated losses of VND817.5 billion (US$36.3 million) by end-2015, which has left a negative effect on the lender’s image. Eximbank sold properties to Eximland and lent to the latter to acquire those properties, which sent Eximbank’s income up to over VND1.1 trillion as of December 31, 2013. The lender used the proceeds to set up a fund and pay taxes and dividends in 2010-2013. This practice ran counter to the banking regulations, so Eximbank had to adjust its earnings, resulting in the losses. Quyet told reporters on the sidelines of the ceremony that Eximbank’s wrongdoing in previous years has seriously impacted the bank but given its well-established foundation, the lender would be able to solve them in the future. He said Eximbank will try to handle the VND817.5 billion losses. The bank will not tolerate any more losses this year as it posted losses in the two previous years, he noted. Earlier, the Hochiminh Stock Exchange issued a warning against Eximbank (EIB) with effect from April 8 as the bank incurred losses of VND834 billion by end-2014. Eximbank earlier announced profit of over VND114 billion, thus misleading investors. In addition, its undistributed negative profit had amounted to VND817.47 billion as of the end of 2015. According to the southern exchange’s regulations, a warning will be lifted when a firm releases positive earnings reports in the following years. If an enterprise reports losses in three years in a row, it must leave the bourse.      Eximbank said it has closely coordinated with shareholders, especially strategic stakeholder Sumitomo Mitsui Banking Corporation, to work out solutions to make Eximbank one of the leading commercial banks in Vietnam. These solutions will be announced at the upcoming general meeting slated for April 29. Quyet, 55, used to be an Eximbank board member. Earlier, he worked as Vietcombank director at Bien Hoa branch in Dong Nai Province and held different positions at the central bank’s Dong Nai branch.    Eximbank’s board on April 6 also handed over an appointment decision to Tran Tan Loc to serve as permanent deputy general director of the bank. Loc was Eximbank deputy general director and used to serve as acting general director. Vietnam to have more real estate investment funds Competition is going to heat up among real estate investment funds as Vietnamese developers consider establishing funds to call for capital from small investors. As the State Bank of Vietnam plans to tighten credit for the real estate sector, Vietnamese developers have started to think of alternative ways to mobilise capital for their projects. One of the ways is to call on small investors through funds. As of now, there are only foreign real estate funds in Vietnam, such as VinaLand, Indochina Land Holding, Vietnam Opportunity Fund, Vietnam Property Fund and Vietnam Property Holding. There has yet to be a truly Vietnamese real estate fund. Nguyen Tran Nam, chairman of the Vietnam Real Estate Association, said that developer Hoang Quan Group was working on a project named ‘Vietnam real estate investment fund’, and that many developers have shown interest in joining. The project is expected to be the flagship of more such funds, making it easier for developers to mobilise capital. Hoang Van Cuong, vice president of National Economics University, said that funds had to have prestige to be able to call for capital from individual investors. Another alternative is to list the project on the stock market. Dang Hung Vo, former Deputy Minister of National Resources and Environment, said that in the future this model is going to replace the nowadays common practice of direct investment between developers and buyers. No developer has attempted to set up a fund like this yet in Vietnam, though the legal framework allows it. Companies are only waiting for relevant government agencies to state the requirements for the projects to be listed. FDI inflow to Vietnam up 125.2 percent in first quarter The foreign direct investment (FDI) inflow to Vietnam in the first quarter rose to US$2.74 billion, up 125.2 percent compared to the same period last year reported the Foreign Investment Agency under the Ministry of Planning and Investment. Across the country, by March 20, authorities have granted licenses to 473 new FDI projects worth US$2.74 billion. In addition, 203 other projects had increased its investment by US$1.28 billion, an increase of 107 percent compared to the same period last year. Totally, fresh investment and increased investment are worth US$4.02 billion, up 119.1 percent compared to the same period last year. It is estimated that FDI projects disbursed over US$3.5 billion, 14.8 percent higher than that last year. There are 216 projects of industry processing and machinery, helping a surge of US$2.9 billion, accounting for 72.2 percent of total registered investment. The second sector attract FDI project is realty with 11 new projects, making total investment increase by US$239.78 million, accounting for nearly 6 percent of total registered investment. Experts suggest Gov't to finance enviro-friendly bus fleets The Department of Transport and state-owned enterprise Saigon Cooperative Mechanical Corporation (SAMCO) yesterday convened a meeting about Compressed Natural Gas (CNG) - methane stored at high pressure, which is used as an alternative fuel for gasoline, diesel, or propane in transport for the South region. The goal of the meeting is to share experience in using environmentally-friendly fuel and a petition of strategies for developing public transport and to convert available bus fleets to CNG will be sent to the government. Deputy Director of the municipal Department of Transport Le Hoang Minh said that most of 2,700 bus fleets in 136 routes are using diesel and releasing polluted fume; just 137 buses using CNG, accounting for 5 percent. As per the roadmap, from July 1, 2017 all bus fleets must meet vehicles emission standards. Accordingly the city will purchase additional 1,680 new bus fleets. The Department of Transport will make more policies to facilitate enterprises to invest more in manufacturing environmentally-friendly buses. The city targets that by 2020 the public transport means must meet 20- 25 percent of travelling demand along with fuel- saving buses and environmentally-friendly vehicles. Most of experts and officials supported the CNG-used bus project and suggested the Government to fund the project because of huge investment for these bus fleets. Road builders want higher tolls Investors of several road projects are seeking approval to adjust up tolls, citing consumer price rises over the past few years and more investment in road improvement. Vietnam Expressway Corporation (VEC) has asked the Ministry of Transport for approval to increase tolls from VND1,500 applied since 2011 to VND2,000 per passenger car unit (PCU) per kilometer for Cau Gie-Ninh Binh Expressway from May 15. Mai Tuan Anh, general director of VEC, said from early this year the corporation has spent VND589.9 billion (US$26.4 million) improving the surface and building more auxiliary works along the entire route to allow vehicles to travel at a maximum speed of 120 kilometers per hour, instead of 100 kilometers per hour. Moreover, the consumer price index (CPI) has risen by 21% since 2011 when the project was partly opened to traffic. Therefore, VEC wants tolls to go up by VND500 per PCU per kilometer to recover investment capital. VNG Infrastructure Investment Co Ltd, the investor of DT741 Road built under the build-operate-transfer (BOT) format, wants higher tolls for the road connecting Binh Duong and Binh Phuoc provinces. The company proposed the minimum and maximum increases of VND5,000 and VND 20,000 per kilometer respectively, because a lighting system worth VND47 billion (US$2.1 million) has been installed and this spending is an extra sum aside from the original investment cost. The company bemoaned that toll revenue is lower than expected, so it needs to collect more to ensure investment capital can be recovered and the road operated efficiently. Earlier in January, a number of BOT tollgates on National Highway 1A increased fees from VND30,000 to VND35,000 per trip for vehicles under 12 seats and from VND160,000 to VND180,000 per turn for trucks with load capacity of 18 tons or higher and 40-foot container trucks. Tolls went up at two tollgates on National Highway 5 in December last year and soared 50% from early April. Tolls on Hanoi-Haiphong Expressway, which was opened to traffic in late 2015, increased by 25%. Fake Shell bitumen found in Vietnam Transport Engineering Construction and Quality Management Bureau has just issued a warning regarding low quality bitumen being sold to transport infrastructure contractors. According to the bureau, the bitumen used in transport infrastructure projects used to be mostly imported from Singapore. The quality is consistent and the projects had good quality for a long time. But recently, according to Duong Viet Doan, deputy director of the bureau, the bitumen has come from many other countries. The quality is either not consistent or low. When these types of bitumen reach Vietnam, they may be mixed and then labeled as made in Singapore and supplied to transport infrastructure projects. “This is one of the reasons transport infrastructure projects recently show signs of disrepair very quickly,” he said. The bureau asked the investors of transport infrastructure projects to tighten control on the origin of the bitumen used in their projects. The warning was issued after Tin Thinh Trading-Production-Service Co., Ltd., the distributor of Shell Bitumen 60/70 made in Singapore, in March reported to the Ministry of Transport that it discovered bitumen mislabeled as made in Singapore. As discovered by the company, in January and February of this year, ITS - Asphalt & Material, registered address at 15/47 Phan Huy Ich Street in commune 15, Tan Binh District of Ho Chi Minh City filed the customs forms No. 100725945460 and 100752006830 at the Port of Ho Chi Minh City Tan Cang – Cat Lai Terminal to import two lots of Shell Bitumen 60/70 made in Singapore with total weight of 190.190 tonnes, equal to 1,235 barrels, from Malaysian company Obetech Pacific Sdn. According to Tin Thinh, the bitumen was not produced by the Shell Eastern Petroleum factory in Singapore. “The Malaysian seller and the Vietnamese importer stuck the Shell Singapore labels on the bitumen barrels without the permission of the owner of the brand,” said a representative of Tin Thinh. Shell Bitumen 60/70 is a penetration grade bitumen used in road and airport constructions and other similar applications. Three Liberty Central hotels listed among Ho Chi Minh City’s Top Ten 4-star hotels A chain of three Liberty Central hotels has awarded in the list of Top Ten 4-star hotels in Ho Chi Minh City at the Ho Chi Minh City Tourism Fair 2016 late last month in the southern hub. Managed by Odyssea Hospitality Management Company, Liberty Central Saigon Centre, Liberty Central Saigon Riverside and Liberty Central Saigon Citypoint hotels are among the top 10 four-star hotels of Ho Chi Minh City at the ceremony to honour tourism brands in the Ho Chi Minh City Tourism Fair held on March 23, 2016. The ceremony honoured the best tourism companies, transport companies and luxury hotels in the southern city. The vote was cast by the Ho Chi Minh City Tourism Department, newspapers and experts in the field of tourism management. Companies that were honoured are going to be promoted by the department to customers in Vietnam and other countries. “Local tourism companies play a big role in the development of city tourism industry. The awards aim to encourage these companies to continue bringing to customers quality and innovative products and services,” said Van Thi Bach Tuyet, director of the Ho Chi Minh City Tourism Department. “This is one of the most important awards for tourism sector in Ho Chi Minh City. We are very happy that all three Liberty Central hotels received the award. It shows that we are a leader in hospitality in Vietnam and recognised our effort to learn from international experience,” said Michel Serrano, CEO of Odyssea. “This award is the evidence that the Liberty Central brand leads among four-star hotels in Ho Chi Minh City in providing high-quality services,” said Dang Manh Tan, general manager of Liberty Central Saigon Citypoint. “We work hard to bring international standard services to customers while keeping the culture of the locality.” Odyssea Hospitality Management Company, based in Ho Chi Minh City, has 20 years of experience in hotel management. Hotels managed by the company include Liberty Central Saigon Centre, Liberty Central Saigon Riverside, Liberty Central Saigon Citypoint, Liberty Saigon Parkview and Liberty Saigon South in Ho Chi Minh City and Liberty Central Nha Trang in the southern province of Ba Ria-Vung Tau. The company is looking for partners to expand to more tourism destinations in Vietnam. Multimillion-dollar steel and iron plant on the verge of death, waiting for contractor The construction of VND8 trillion ($361.4 million) Thai Nguyen Iron and Steel Plant-Phase 2, invested by Thai Nguyen Iron and Steel JSC (TISCO), will not be implemented unless Chinese contractor comes back, according to newswire Vnexpress. The plant’s construction was kicked off in 2007 under the engineering, procurement and construction (EPC) contract with the initial investment capital of VND3.8 trillion ($170.4 million). The facility has a designed capacity of 500,000 metric tonnes of iron and steel products per year. In 2009, the expected cost of the project increased from VND3.8 trillion ($170.4 million) to VND8 trillion ($361.4 million). In 2012, the Chinese contractor namely China Metallurgical Group Corporation (MCC) decided to stop implementing the project and returned to China because the increase is too high while the investor had difficulty arranging capital after disbursing more than VND4.5 trillion ($216.35 million) for the project. Thus, the project’s construction has been delayed for four years. On March 29, TISCO announced that it can currently arrange the financial issue to continue implementing the construction. Notably, Vietnam Development Bank (VDB) and Vietnam Bank for Industry and Trade (VietinBank) will supply an added loan of VND1.3 trillion ($58.7 million) and VND1.1 trillion ($49.6 million), respectively.  Besides, State Capital Investment Corporation (SCIC) will contribute a total capital sum of VND1 trillion ($45.1 million). However, TISCO has yet to negotiate with MCC to continue to implement the construction. Besides the negotiation, TISCO has plans to maintain and repair the rusted machinery with an expenditure of VND90 billion ($4.1 million). TISCO has to pay the contractor VND100 billion because the machinery is downgraded during the past years due to the delay. The total maintaining and repairing fee and compensation, in collaboration with other arisen fees during the project’s delay period make the project suffer a huge cost overrun of VND9 trillion ($406.5 million). In early March, in order to decrease the construction cost, TISCO asked for an exemption from import tariffs worth VND530 billion ($23.9 million) on the contractor’s equipment. Besides, the company proposed VDB exempt it from paying an interest worth VND386 billion ($17.4 million) from its initial loan and asked VietinBank exempt it from paying half of the interest for its loan. TISCO is 42.11 per cent owned by Vietnam Steel Corporation and 35.21 per cent by SCIC. By the end of 2015, TISCO had total assets of VND10.9 trillion ($492.4 million) with a debt of VND8.4 trillion ($379.4 million), including short-term debts of VND2.8 trillion ($126.4 million) and long-term debts of VND4.01 trillion ($181.1 million), according the company’s latest report. Circular tightens loophole on third-party margin trading On January 18, 2016, the Ministry of Finance issued Circular No.07/2016/TT-BTC, effective on March 15, 2016, which amends and supplements Circular No.210/2012/TT-BTC on providing guidance for opening and running a securities company. According to the amended Article 43, securities companies cannot use money, company property, or customers to ensure payment obligations to third parties. This is intended to constrain the margin lending activities of securities companies by preventing margin trading using loans provided by third parties. Margin lending is currently controlled by Decision No.637/QD-UBCK (issued on August 30, 2011). The State Securities Commission (SSC) also listed stocks that can be bought through margin lending activities, and capped the lending margin at 50:50. Margin lending activities contribute a high proportion of revenues and profits of securities companies. There are two types of margin lending, and it is the second form that is affected by the amended Article 43. First: margin lending to purchase stocks from the SSC’s allowed list, and which apply the Ministry of Finance’s (MoF) lending limits as listed above. According to statistics, this accounts for nearly 80 per cent of total margin lending in the market. Large securities companies with large equity capital have an obvious advantage over others, although for some big companies such as SSI and HSC, the ratio of margin lending-to-total equity is still low. Second: margin lending through a third-party contract.  Demand for margin lending usually increases when the stock market is in an upward trend. Beyond the overall equity capital limit, if customer demand for margin lending exceeds other limits in Article 13 of Decision 637, or the SSC margin list and ratio mentioned above, securities companies would cease being able to offer margin lending to a customer, or for a particular stock, or on an entire exchange. Securities companies might therefore ask a third party – normally a commercial bank – to lend money to customers. This co-operation is implemented through a contract between the three parties, in which securities companies will use theirs or the customers’ money or property to ensure payment obligations for the loans customers receive from the bank. If the collaterals are the securities company’s cash or assets then it is, in effect, acting as the lender for securities trading. This service is provided by both large and small brokerages to expand their loan portfolio, and to increase lending to customers to expand brokerage market share. At companies with a large capital base, the proportion of total margin lending accounted for by this service is insignificant compared with the first form of margin lending. However, at smaller firms, it can account for a large proportion of margin lending. In accordance with Circular 07, such margin lending through a third-party contract will now be prohibited. The impacts on margin lending and the stock market depend on several factors: I) Whether three-party contracts are re-created in other forms once they are cleared. Banks might continue lending to customers, and keep funds from being withdrawn from the market, through mechanisms such as: (1) Brokerages becoming partnered with a fourth party, which in turn uses its assets as collateral to ensure payment obligations for customer loans. The amended Article 44 facilitates this option for brokerages. (2) A three-party contract split into two, two-party contracts. Banks sign a lending contract with customers, and a second with brokerages so that brokerages will manage the bank’s collateral, in accordance with current regulations. (3) Other creative lending structures. II) Second, there is a strong likelihood that some brokerages and banks are not yet fully prepared for, or do not accept, the new approach. A portion of the margin lending under existing three-party contracts might therefore be cleared and withdrawn from the market. The difficulties in borrowing money from partners other than brokerages may push investors to shift to invest in tickers allowed by the SSC, with a lending rate of 50:50 or less. In this case, large brokerages with a margin lending ratio below the limit can meet this demand. At the same time, risks to investors using margin lending are reduced. Margin loans will continue to stay with the market. 3) Third, in the case that all three-party contracts are cleared, without being re-created under new forms, how much money is there currently in the market that will actually be withdrawn? According to some statistics, standard margin lending provided by brokerages now accounts for nearly 80 per cent of total margin lending, and margin lending under three-party contracts for only about 20 per cent. Assuming the total margin lending of the entire market was VND20 trillion ($899 million), then margin lending under third-party contracts would be around VND4 trillion ($180 million). This amount would have to be cleared within one to three months in accordance with contract provisions, or within two weeks to one month in accordance with private agreements between the brokerage and the client. With the current daily trading value at VND2 trillion ($89.9 million), the pressure to clear the (assumed) VND4 trillion ($180 million) would not be large. In addition, it is unlikely that the investors will rush to sell, as they are not compelled to do so. Overall, we estimate that the impact of Circular 07 on cash flow in the stock market is not significant. More affordable high-quality office in 2016 No more Grade A building will enter the office market later in 2016, according to CBRE Vietnam. At its April 5 press conference reviewing the first quarter of Hanoi’s property market and provide forecasts for 2016, CBRE expected that approximately 290,000 square metres would come on stream throughout the year. However, no new Grade A buildings are on sight. Earlier this year, Grade A office TNR Tower, located on Nguyen Chi Thanh street, entered the market with 52,800 square metres of net lettable area (NLA), boosting Grade A stock by 15 per cent. By the end of the first quarter, the total office space in Hanoi reached approximately 1,158,000 square metres, of which Grade A and Grade B offices account for 36 and 64 per cent, respectively. As for CBRE, because new projects are offering promotional rental rates below the market average, the average asking rental price of Grade A buildings in the first quarter of 2016 posted a decrease of 4.2 per cent quarter-on-quarter, to $28.1 per square meter per month. Grade B buildings, on the other hand, saw a slight increase of 0.3 per cent quarter-on-quarter. “Increases in rent occurred mostly in the west, where the infrastructure is well-developed,” said Nguyen Hoai An, director of CBRE Vietnam’s Hanoi branch. “Rental rates in Grade A buildings, especially in the west and midtown, are becoming more reasonable, which enables tenants to lease high-quality office spaces for the same budget as Grade B buildings in the central business district,” she added. During the first quarter, the office market in Hanoi saw relatively strong demand, primarily from local occupants, with a net absorption of 37,320 square metres, up 26 per cent quarter-on-quarter and eight per cent year-on-year. Tenants in technology, electronics, IT, banking, finance, as well as insurance, still lead the market in terms of office expansion. In 2016, the outsourcing sector is expected to grow, occupying more space and renewing longer lease terms. Bank restructuring accelerated SBV directed to develop credit programs towards credit expansion in line with safety assurance and greater credit quality. The State Bank of Vietnam (SBV) must accelerate the comprehensive restructuring of credit institutions in Vietnam and the handling of non-performing loans. The task has been assigned to it under Resolution No. 23/NQ-CP from the government’s March meeting. The government also requested that the SBV actively and flexibly regulates monetary policy in close coordination with fiscal policy, curb inflation according to set targets, and ensure the stability of the monetary market. The central bank is also tasked with effectively developing credit programs to facilitate credit expansion in line with safety assurance and greater credit quality, creating easy access to credit for all. The Ministry of Planning and Investment will work with related ministries, sectors and localities to formulate a plan for economic restructuring during 2016-2020, promote public-private partnerships in order to attract investment from various economic sectors at home and abroad, and push the implementation of solutions for developing small and medium-sized enterprises. The Ministry of Finance, meanwhile, has been assigned to effectively implement tax policies for production and business and to boost the application of information technology in the reform of administrative procedures relating to taxation, customs and the State treasury. The government has asked the Ministry of Industry and Trade to identify solutions for developing the domestic goods and services market, boosting exports and creating links between domestic and foreign markets in order to set orientations for production, consumption and export activities. Ministries and sectors, localities and State economic groups and corporations are required to continue with the reorganization, equitization and improvements to the operational effectiveness of State-owned enterprises, promulgate according to their competence or submit to competent authorities for promulgation the organization and operational charters of wholly State-owned enterprises, review and supplement the list of enterprises subject to equitization or State capital divestment, and formulate an overall plan for the reorganization, renewal and restructuring of State-owned enterprises during 2016-2020 for submission to the Prime Minister in the second quarter of this year. Nielsen opens new Hanoi office Nielsen Vietnam has announced the official opening of its new Hanoi office on April 5. The new office covers an area of 900 sq m on the third floor of the Song Hong Parkview Building at 165 Thai Ha Street in Dong Da district and will be home to more than 130 Nielsen associates in the capital. Its offices in Ly Dao Thanh, Nguyen Du, Nguyen Thi Minh Khai and Hoang Van Thai streets in Hanoi have been closed. “Our associates in Nielsen Hanoi are finally together under one roof,” Mr. Vaughan Ryan, Nielsen Vietnam Managing Director, told the opening ceremony. “The change is indeed important because this office move and consolidation will help us foster integration and productivity between different teams in Hanoi. This stronger collaboration will help drive stronger business outcomes and better quality of services at Nielsen Hanoi.” Established in Vietnam in 1993, Nielsen Vietnam has become the country’s leading provider of service capability and local knowledge across qualitative, quantitative, media and retail measurements. EuroCham elects new Chairman Mr. Michael Behrens, CEO of Mercedes-Benz Vietnam, has been elected as the new Chairman of EuroCham for the 2016-2017 term. He follows Ms. Nicola Connolly, who held the post for the last two years. “Nicola did an excellent job putting Eurocham back on its feet,” said Mr. Behrens. “Now we need to concentrate on the implementation of the new EU-Vietnam Free Trade Agreement (EVFTA). We will strengthen ties with all stakeholders. We stand for openness, transparency and fairness.” Mr. Behrens will be supported by Vice Chairs in Hanoi and Ho Chi Minh City, who are also in charge of different Executive Committee (ExCo) working groups. The role of the ExCo is to provide guidance and oversee the activities of the Chamber as well as represent the interests of all EuroCham member companies and Business Associations. Beside aiming at further growth in membership and strengthening collaboration with authorities, EuroCham is heading towards EVFTA implementation through its Sector Committees and events and will have a deepened cooperation with the EU Delegation in 2016. 2015 was a year of growth for EuroCham regarding membership, advocacy and projects. Membership grew by 5 per cent from 876 in December 2015 to 920 in March 2016. Hanoi's office market has solid Q1 Hanoi’s office market witnessed better performance in the first quarter of the year as average rentals and occupancy increased across all grades, according to the latest Savills report released on April 4. In the first quarter one new project entered the market, supplying approximately 40,000 sq m. The capital’s office stock increased 5.5 per cent quarter-on-quarter and 8.7 per cent year-on-year. In 2016 nine projects will come online, providing approximately 127,000 sq m, Savills forecast. Compared to the previous quarter average rentals and occupancy increased across all grades. In rentals, Grade A grew 0.2 per cent quarter-on-quarter, Grade B 1.8 per cent and Grade C 2.1 per cent. In occupancy, Grade A was up 0.4 percentage points (ppts) quarter-on-quarter, Grade B 0.6 ppts and Grade C 0.1 ppt. The performance of Grade A in the CDB improved compared with the fourth quarter of 2015, with increases in both average rentals and occupancy, while the performance of Grade A in non-CBD areas was stable. Vietnam’s office market will see good performance in the time to come, according to Mr. Christopher Marriott, CEO of Savills Southeast Asia. He pointed out that the country’s office market has a lot of growth potential compared with other markets in the region. While commodity and financial markets in countries such as Singapore and Malaysia are slowing down, Vietnam’s manufacturing market is very strong, driven by the appearance of many Japanese companies coming to Vietnam.   The strong growth in manufacturing investment will contribute to increased demand for office for research activities. “Vietnam is not just a location for manufacturing but also a location for research and development (R&D) activities,” Mr. Marriott said. In the retail segment, the Savills report showed, average rentals and occupancy decreased. In serviced apartments, occupancy and average room rate (ARR) fell while the hotel segment recorded soft performance in the first quarter.   Hanoi's apartment for sale market dips slightly In the first quarter of 2016 a total of 4,318 new units were launched from 16 real estate projects in Hanoi; an 18 per cent fall compared to the first quarter of 2015, according to CBRE’s Hanoi Q1 2016 Review report released on April 5. A total of 4,048 units were sold during the quarter, indicating active sales activity despite representing a slight decline of 5 per cent year-on-year. It was noted that the high-end and mid-end segments dominated sales in the quarter, with market shares of 48 per cent and 36 per cent, respectively. The low-end segment saw a dip in sales, which may be attributed to recent changes in the implementation of the government’s VND30 billion ($1.35 billion) housing credit support package, according to Ms. Nguyen Hoai An, Director of CBRE Vietnam. The package will expire in June under Circular No. 11/2013/TT-NHNN and this has started to affect purchasers in the affordable sector. Another regulatory change that may have an impact on the residential market is the proposed amendments to Circular No. 36 regarding limits on and ratios of bank financing to the property market. The proposed amendments include lowering the ratio of short-term capital used for medium and long-term loans and increasing the asset risk ratio for property loans. In terms of pricing, the report noted that certain projects in good locations and with sufficient amenities and facilities have increased their prices. On average, however, only primary prices in the mid-end segment increased, by 2.9 per cent, while those in the high-end and low-end segments saw declines of 0.3 per cent and 7.8 per cent, respectively. On the resale front, average market prices have improved across the high-end, mid-end and affordable sectors, but declined in the luxury sector quarter-on-quarter as a number of aging luxury projects have seen resale prices fall. Moving forward, the west and southwest of Hanoi still have the most number of units, accounting for 75 per cent of total supply. Ba Dinh district is expected to welcome three high-end projects supplying 488 units. Given strong supply in the pipeline and seemingly strong sales, the market may be stabilizing after experiencing unprecedented growth in 2015. Foreign investors doing handsomely in Vietnam While local real estate enterprises are having difficulty selling all of their products, foreign investors have achieved initial success thanks to their financial capacity and experience in running large-scale projects. An important point in making properties in Vietnam more attractive than developed countries regionally is the high rate of return in the fledgling market, according to Ms. Nguyen Hoai An, Deputy Director of the Research and Consultancy Department at real estate consultants CBRE Vietnam. Home buyers are now more careful and “smarter” than before, she said. They look for as much information as possible and make comparisons between projects before coming to a decision to buy or not. Consequently, those projects that have been properly invested by prestigious local or foreign enterprises will be preferred. CBRE believes that the property market in Hanoi and Ho Chi Minh City has more room to develop, even more than Bangkok and Singapore, so foreign investors will invest in the two cities in specific real estate types presenting new opportunities. Vietnam is also a rapidly developing country with a young population of around 90 million and rapid urbanization and stronger foreign direct investment (FDI) inflows, creating huge demand for real estate. Rental is one of the most important criteria in evaluating the investment attraction of real estate markets. While it varies between 2 and 3 per cent in Bangkok and Singapore in Vietnam it reaches 7 or even 9 per cent. A typical example is Gamuda Land Vietnam, belonging to Malaysia’s Gamuda Berhad Group. The company invested hundreds of millions of US dollars in a low-lying and once polluted area of southern Hanoi. The company’s business performance in 2015 proved it made the right decision, with more than 90 per cent of its products being sold. Together with Gamuda Land, ParkCity, Ciputra, and Posco are other property enterprises that have succeeded in Vietnam thanks to a combination of methodical planning, smooth cash flows and, more importantly, long-term investment vision. Residential prices continue upwards The residential markets in both Hanoi and Ho Chi Minh City have continued to achieve positive outcomes, with condominium prices moving upwards by 1 to 2 per cent per quarter as expected, according to the latest Vietnam Property Market in Quarter 1 report released by Jones Lang LaSalle (JLL). Total new supply in both cities reached nearly 20,000 units in the first quarter and 18,000 units were sold in total; an impressive figure compared to recent years. The market in the first quarter continued the uptrend witnessed in 2015, with numerous projects achieving sales rates of up to 90 per cent at launch. In Hanoi prices have risen faster. In the primary market prices increased further, of 1 to 5 per cent quarter-on-quarter. At some completed projects, discounts of 1 to 3 per cent have been offered on remaining units. In the secondary market, the affordable segment reported the highest growth, of 1.9 per cent quarter-on-quarter. Price increases at completed projects were reported at 1.5 per cent quarter-on-quarter, compared with 1.8 per cent at under-construction developments. Ho Chi Minh City also saw continued high price increases in the residential segment. In the primary market, especially apartments, prices moved higher and considerably so in the mid-end segment. Marked increases were seen in Districts 2 and 4. Prices in villas/townhouses continued to rise at a fast pace, mostly led by some large-scale affordable projects in District 9. In the secondary market, apartment prices were higher across the board, with growth of 57 per cent quarter-on-quarter recorded at an increasing number of properties. Villas/townhouses, meanwhile, saw price rises continuing but at a slower pace than in recent quarters. 2016 remains a positive year for Vietnam’s real estate market with bright signs in most segments. According to Mr. Stephen Wyatt, General Director of JLL Vietnam, the property market has seen 25 years of development with various ups and downs. The market is developing and maturing at a faster rate than previously seen.   “Developers, investors, banks and government authorities are more alert to market dynamics and prudent in their actions and roles,” he said. “JLL believes in strong parameters and the development of the property market in the future, and 2016, in particular, will remain a year of promising prospects despite global challenges.” WB continues financing HCMC infrastructure projects Ho Chi Minh City People’s Committee chairman Nguyen Thanh Phong and related agencies yesterday afternoon received a delegation from the World Bank (WB) led by the bank’s country director for Vietnam Victoria Kwakwa, who came to work on cooperation programs with the city. According Ms. Kwakwa, the delegation’s visit aimed to prepare for the Fiscal Sector Development Policy Loan Program 2016 with the total funds of US$50-150 million, which will give top priority to the city’s green transport development and anti-flooding projects. Via the loan program, WB will assist HCMC to build environmentally friendly transport works. The first bus rapid transit (BRT) project under implementation suits HCMC development plan, she stated. However the city’s tramway project would be ineffective because of huge capital demand for site clearance and construction hence WB will reconsider financing this project, she added. She appreciated the progress of anti-flooding projects and hoped that site clearance and resettlement will be conducted reasonably in order not to affect citizens’ lives. WB has financed projects with an aim to ensure satisfactory compensation, accommodation and better employment. Therefore, Ms. Kwakwa suggested that the city should find out the best solutions for the city's residents when carrying out WB-funded projects. Chairman Nguyen Thanh Phong thanked WB for its assistances in conducting many important works, meeting the city’s welfare and development requirements. The city always has a sense and determination of using WB funds as effectively as possible. Hence he proposed WB to consider providing their loans for the fiscal year of 2016, continue sending experts to work with the HCMC Department of Finance to fully work out the outline of the Development Policy Loan Program. In response to Ms. Kwakwa’s statement, Mr. Phong affirmed that HCMC would positively work with the Ministry of Planning and Investment and the Ministry of Finance to seek their approval for the program’s outline and implementation. Local authorities have focused on carrying out the BRT project in an attempt to meet residents’ travel demand and reduce traffic jam. The tramway project is just an idea so the city will carefully consider it before investment. The target of anti-flooding and urban planning projects is to improve the living environment for citizens. However the city’s financial resources are limited so assistances by WB and others such as the Asian Development Bank are needed for it to implement these projects.  Local authorities have not only well resettled residents who have to remove for the projects but also looked after their employment and children’s schooling, given them savings and capital assistance to start new business. So far, 3,212 out of 3,141 households have handed over their land for anti flooding projects. The rest 71 households have refused to remove. Exports of vegetables, fruits rise by 41% Exports of vegetables and fruits over the first three months of the year have brought in US$526 million, a 41% year-on-year rise, said the Ministry of Agriculture and Rural Development (MARD). China remains the biggest importer of vegetables and fruits, accounting for 71% of the total volume. Meanwhile, Vietnam spent approximately US$153 million on imported vegetables and fruits, a 39% year-on-year increase, in which Thailand was the biggest provider and earned nearly US$41 million. In the first two months of the year, China imported fruits and vegetables from Vietnam worth over US$236 million. According to a representative from the MARD, though Vietnam’s produce has penetrated such highly-desirable markets as Japan, the Republic of Korea and the US, it is still difficult to find export markets to replace the major market of China. Last year, exports of vegetables and fruits brought in US$1.8 billion, a 23.7% year-on-year rise, making produce one of top five major agricultural products of Vietnam together with rice, coffee, cashew nuts and rubber. However, the country’s exports of vegetables and fruits accounted for merely 0.75% of the world market and 3.7% of the market of the Trans-Pacific Partnership member countries. Apartment prices up in Q1 Prices of apartments in all segments in Hanoi and HCMC rose in the first three months of this year, real estate service provider Jones Lang LaSalle said in a report. In HCMC, prices of many projects went up by 5% and 7% on the primary and secondary markets in the period, respectively. Especially, medium-end projects in districts 2 and 4 posted considerable price rises. Jones Lang LaSalle reported higher selling prices of villas and detached houses at large-scale projects with affordable prices in HCMC’s District 9 in January-March. Around 9,720 housing products in HCMC were sold in the period, soaring 28% quarter-on-quarter and 63% year-on-year. Medium-class units priced at US$1,000 per square meter accounted for more than half of the total. There were 279 villas and detached houses sold in the city in the year to March, tumbling nearly 44% compared to last year’s fourth quarter. In Hanoi, apartment prices grew 1-5% in the period. Apartment supplies rose to 9,900 units, with medium-end and budget units making up 43% and 50% of the total and luxury products with prices of over US$3,000 per square meter accounting for less than 3%. Meanwhile, demand in the capital city in the period fell by 5% to 8,000 units. The number of apartments sold at over US$1,500 per square meter accounted for 11% of the total, down 20% year-on-year. Jones Lang LaSalle forecast property firms would launch 20,000 units in HCMC and 16,000 units in Hanoi in the rest of the year. Prices and demand would continue rising, especially at projects invested by major developers. HCMC needs Japan investment in supporting industries The HCMC government said there is a lot of scope for Japanese investors to set up shop in supporting and hi-tech industries in the city in the coming years. The HCMC government painted a rosy picture for Japanese investment in the sectors after the city’s chairman Nguyen Thanh Phong led a delegation to Japan from March 28 to April 2. During the trip, Phong met the governors of Hyogo, Shiga, Osaka and Kanagawa prefectures and the mayors of Sakai, Osaka and Yokohama cities to discuss strengthening ties, heard a press briefing on the outcome of the trip on April 4. Vo Van Hoan, head of the HCMC government’s office, said the city learned that there is a new wave of Japanese investment and that Japanese investors are shifting production to Southeast Asia. According to Hoan, the Japanese prefectures that the delegation visited showed interest in the Vietnamese market, particularly HCMC. This is a chance for the city to lure more investment from Japanese firms. The notable part of the HCMC delegation’s Japan visit was Yokohama, the capital of Kanagawa Prefecture, said Nguyen Vu Tu, director of the HCMC Department of External Relations. Yokohama encourages companies based in the city in particular and Japanese companies in general to invest in seaports, and supporting and hi-tech industries in HCMC, and cooperate in human resource development. Phong expected that Kansai companies would invest in supporting and hi-tech industries, the environment and wastewater treatment while meeting with the Kansai Economic Federation (Kankeiren) and the Kansai Bureau of Economy, Trade and Industry (METI Kansai). These two bureaus are cooperating with HCMC in consulting and assisting Japanese firms investing in or having investment plans in the city, Tu said. The HCMC delegation dropped by a number of companies like Daiyu Kogyo, Kohnan Shoji, Nidec, Optex and Nipro during the Japan visit. To attract more foreign investors, particularly Japanese ones, HCMC will further streamline administrative procedures, help investors, and improve the performance of trade and investment promotion centers and organizations. In addition, the city will consider setting up a one-stop-shop investment promotion center to provide potential investors with information and assist them to complete procedures, according to Hoan. Hoan added Japan really cares about vocational training and wants Vietnam to provide young engineers. The HCMC delegation expressed hopes the Japanese government would continue ODA for its key infrastructure projects such as sanitation and metro projects. According to Su Ngoc Anh, director of the HCMC Department of Planning and Investment, Japanese companies are involved in 828 projects worth over US$2.7 billion in the city. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR