BUSINESS IN BRIEF 8/5 Haiphong finds funding for airport project Haiphong City has asked the Ministry of Finance for a budget of nearly VND1.7 trillion (US$76.2 million) to finance expansion of Cat Bi International Airport and other major projects. The northern city plans to put the key airport project into operation this month, a Vietnam News Agency report said. The project costs a total of VND3.66 trillion (US$164.2 million). Of the figure, the central budget covers 80%, or more than VND2.9 trillion, and the city is responsible for the rest. The project is 96% complete and VND2.83 trillion has been spent. However, the central budget has disbursed only VND800 billion, around 21% of the total. Haiphong had to issue municipal bonds to raise funds for the project and has allocated more than VND1.7 trillion for it. Therefore, the city asked the ministry to set aside nearly VND1.7 trillion to speed up work on the airport project. The finance should be sourced from the surplus export and import tax revenue in 2015. The Customs Department of Haiphong said it got tax revenue of around VND45.6 trillion last year, 8.5% higher than that set by the ministry. Shrimp export sales expected to recover after difficult 2015    Exports of Vietnamese shrimp products are expected to experience a strong recovery in the first half of this year after a slowdown last year. The export value of shrimp in the second quarter would increase by 10 per cent to US$788 million against the first quarter, the Viet Nam Association of Seafood Producers and Exporters (VASEP) said. The total shrimp export value for this entire year was predicted to gain a year-on-year growth of 12 per cent to $3.3 billion. In the second quarter, Viet Nam's shrimp exports to Russia and China would increase as they were considered the major markets, and the local exports to the United States (US) and European Union (EU) would also be higher because of lower inventory in those markets. The association reported that in the first quarter Viet Nam witnessed a recovery in exports after a drop last year. The export value reached a year-on-year increase of 7.9 per cent to $619.2 million. The growth was a result of higher exports to the world market, stability in the monetary market and higher demand from major markets, the association said. In addition, lower shrimp exports of other shrimp producers in the world such as India, Thailand and Ecuador, would be an advantage for Viet Nam's shrimp producers and exporters. In the first quarter, Vietnamese shrimp products were exported to 64 markets. The top ten major markets included the US, the EU, Japan, and mainland China, in addition to South Korea, Canada, Australia, ASEAN, Taiwan and Switzerland, accounted for 94 per cent of the total national export value. The exports to the US, were the highest at 30.6 per cent year-on-year in the first quarter, followed by China (up by 24.3 per cent), the EU (up by 2.9 per cent) and Japan (up by 0.7 per cent). Meanwhile, exports reduced by between 5.1 per cent and 30 per cent to South Korea, Canada, Australia, and ASEAN, apart from Taiwan and Switzerland. Viet Nam also earned $1.97 billion from fisheries exports in the first four months of the year, a 6.2 per cent increase year-on-year. After a decline last year, the recovery in 2016 is a good sign for exporters. According to the General Department of Customs, exports of two main items, shrimp and tra fish, were up 8 per cent and 2.4 per cent. But shipments of cuttlefish and octopus fell by 6.2 per cent and of tuna by 5.5 per cent. Exports of marine fish surged by 19.5 per cent and that of other marine creatures also saw an increase. Tuna, cephalopods, crabs, and marine fish accounted for more than 30 per cent of the total fisheries exports, and are forecast to increase significantly this year thanks to the steady supply and the rising demand in key markets. Tuna and cephalopod exports are expected to be worth $507 million and $470 million, up 12 per cent and 10 per cent respectively, while exports of crab, surimi and marine fish are expected to top $1.3 billion, up 13 per cent, according to VASEP. New pressure and motivation for public debts According to the Ministry of Finance (MOF), Vietnam’s public debt and service are increasing rapidly, close to the National Assembly-regulated debt ceiling and the safety threshold under current international practice, with increasingly stricter lending and debt payment terms. As of late 2015, the rate of outstanding public debt stood at 62.2% of gross domestic product (GDP) (the allowed level is below 65% of GDP), foreign loans at 43.1% of GDP, and outstanding government debt at 50.3% of GDP. Vietnam’s current longest-term loan is until 2025, with the average term of liabilities at about 12 years. Debt services (pay both principal and interest) are accounting for nearly 30% of the state budget’s regular spending. The moment many of Vietnam’s debts are due is from 2022 to 2025. Since Vietnam became a middle-income country in 2010, the sources of preferential loans for the country have also decreased, with no “fixed” commitments on lending scale, the average lending term of 30-40 years reduced to 20-25 years, the annual lending interest of 0.7-0.8% rising to 2-3.5% and nonrefundable aid reduced to the lowest level. Many donors have shifted from official development assistance (ODA) loans to mixed loans. As predicted, from July 2017 Vietnam will possibly be unable to access ODA loans and have to use preferential loans as well as market interest rate (BMIR) loans. Over the past decade (2005-2015), Vietnam has signed loans agreements worth US$45 billion in ODA and preferential loans. A third of the disbursed capital was added to the central budget to finance central projects and programmes, while each of the remaining two thirds were spent on local programmes and on-lent to the State’s key projects. Among the funding for local projects and programmes, the ratio of allocated capital accounted for 92.2% and the rate of on-lending capital only occupied 7.8%. The government still bore all credit risks of the capital proportion on-lent to the State’s key projects. On-lending agencies only functioned as serving banks and beneficiaries of service charges. The loans use and management mechanism like this was only suitable for the initial stage of the economic shift with preferential loans; meanwhile at present, the situation of overdiversified investment and wastefulness has multiplied the total investment capital and prolong the passive spirit of waiting for capital subsidies from the State. The less favourable loans condition means increasing borrowing costs and debt services as well as pressure on state budget deficit and macrofinancial balance instability; accelerated socialization and marketization of public service fares in the field of electricity, water and transport infrastructure; and risks of lacking the essential capital for several projects and policy beneficiaries. However, with public debt under pressure to reach the ceiling and lending terms getting stricter and stricter, the public debt management mechanism has an incentive to be renovated in a tighter fashion. Regarding on-lending to local authorities, the rate of on-lent capital will be identified based on the conditions of loans, the characteristics of borrowing projects and the level of self-balancing of local budget. This will serve to promote adjustment and transparency in borrowing and debt payment rights and obligations between the central budget and local budget; strengthen the borrowing right and debt payment obligation of local authorities; and raise responsibilities and loan use and management capacity of local authorities in line with the 2015 Law on State Budget, scheduled to take effect in 2017. By receiving on-lending capital, on-lending agencies will bear the risk pressure with the government with the rate of sharing risks depending on the nature of capital sources and the preferential level of the beneficiary project. In return, these agencies will also enjoy the higher differences in interest rates corresponding to the rates of sharing risks while on-lending the abovementioned credits. Through this, management and use of loans will become more effective. The pressure of public debts in highly commercial conditions will facilitate pressure on the obligation for repayment but also create motivation for accelerating the process of improving the public debt management mechanism towards borrowing prudently, using economically, enhancing the users’ borrowing-repayment responsibility and ensuring the principle of sharing risks with the government among investors and on-lending agencies. Japanese businesses explore investment environment in Tay Ninh A delegation from the Japanese Business Association in Ho Chi Minh City (JBAH) on May 7 visited the southern province of Tay Ninh to explore its socio-economic situation and investment opportunities. The delegation was led by Japan ese deputy consul general in HCM City Yakabe Yoshinori. At a working session with the delegation, Deputy Chairman of the provincial People’s Committee Nguyen Thanh Ngoc briefed his guests on Tay Ninh’s socio-economic situation. Tay Ninh is an important gateway that links the economic hub of HCM City and other regional provinces with ASEAN markets though the international border gates of Moc Bai and Xa Mat, Ngoc said. He added that the province has a stable climate and water resources that are suitable to develop hi-tech agriculture. The locality is now home to seven industrial parks approved by the Prime Minister, of which, five have been put into operation on a total of 3,000 hectares of land. The provincial leader said six Japanese businesses have, to date, invested in Tay Ninh with investment capital of 36 million USD. He also said that the province hopes to attract more Japanese investment in high-tech projects. For his part, Yakabe Yoshinori pledged to encourage Japanese enterprises to expand investment in Tay Ninh, especially in the Moc Bai Border Gate Economic Zone and the Phuoc Dong-Boi Loi industrial park. He suggested the provincial authorities promote a skilled labour force as well as collaborate with the JBAH to organise more investment promotion workshops for Japanese enterprises. On the same day, the Japanese businesses visited Ba Den Mountain tourism site and the Phuoc Long-Boi Loi industrial park. State bank governor gets strict with USD deposit rates The Governor of the State Bank of Vietnam (SBV) on May 6 issued documents requesting strict compliance with the rules on ceiling USD deposit interest rate which is capped at 0 percent annually. The move came following reports about several banks raising USD deposit interest rates to a level higher than the regulated limit to attract foreign currency. The Governor asked credit organisations and foreign banks to seriously abide by existing regulations on deposit rates, especially those for US dollars. The documents also ban technical measures to surpass USD rates and unhealthy competition. The SBV will not allow those credit organisations which are found in violation of the above rules to open new branches or representative offices, or launch new services. Violators may also have some banking operations suspended if necessary. The SBV Governor also asked for increased inspection and strict punishment for violations. Start Tel Aviv opens to women in start-ups The Embassy of Israel in Vietnam, the Ministry of Science and Technology’s Market Development and Science and Technology Enterprise Department, and the Centre of Business Studies and Assistance will co-organise a start-up contest entitled Start Tel Aviv 2016. The contest is organised following the success of the Startup Israel contest in 2014 and 2015. This year, the contest is unique in that it is open only to female candidates in an effort to promote the roles of women in the start-up community. Registration forms should be sent to the following email address: political@hanoi.mfa.gov.il before May 25. Start Tel Aviv is an international start-up competition held by the Israel Ministry of Foreign Affairs and Tel Aviv city authorities. Representatives of the best start-up companies will be selected from 30 countries worldwide and will have chances to participate in a five-day study tour in Tel Aviv to learn about the start-up ecosystem there. Joining this year’s competition, participants hail from Norway, the UK, Germany, Spain, Finland, Italy, the Republic of Korea, India, Japan and Russia. This is an opportunity for Vietnamese representatives to learn and exchange experiences in a dynamic and cross-cultural environment. Banks reduce G-bond purchases Proceeds from Government bond sales continued falling in April compared to the first two months of this year. Three- and five-year bonds were previously favored by commercial banks but their sales slowed the most in comparison to other tenors. Data of the Hanoi Stock Exchange showed the State Treasury got nearly VND30.31 trillion from 13 bond auctions on the primary market last month, down 11.6% against March. This indicates that G-bond trading was less active than early this year. In March, the State Treasury held six auctions of G-bonds valued at a combined VND48.5 trillion and mobilized around VND34.3 trillion (70.7%). The winning ratio was lower than 96.56% in February. Banks cut bond purchases as they concentrated on boosting lending. A couple of major banks reported sharp credit growth in April.   The winning coupon for three-year bonds inched down 0.01 percentage point and that of five-year bonds edged 0.09 percentage point lower in April compared to the previous month. Meanwhile, winning coupons for tenors of 15, 20 and 30 years remained unchanged. The winning coupon of three-year bonds hovered in a range of 5.52% and 5.55% while that of five-year bonds stood at 6.39-6.4%, 10-year bonds at 6.94%, 15-year bonds at 7.65%, 20-year bonds at 7.75% and 30-year bonds at 8%. Financial institutions are expected to continue picking more G-bonds with tenors of three and five years than those with longer terms. Bond yields have been nearly unchanged in recent weeks, except for a drop of three basis points in the coupon of three-year bonds. Bond yields will not fluctuate significantly in the coming time. Meanwhile, the State Treasury has announced a bond issuance plan in the second quarter with VND70-80 trillion worth of debt offered for sale. Of the amount, three-year bonds will account for VND15-16 trillion, five-year bonds VND36-41 trillion, 10-year bonds VND3-4 trillion, 15-year bonds VND9-10 trillion, 20-year bonds VND3-4 trillion and 30-year bonds VND4-5 trillion.    The State Treasury has set a target of issuing VND220 trillion worth of bonds this year. Panama to check Vietnam tra fish processors The Panamanian Authority for Food Safety (AUPSA) has decided to dispatch a team to inspect tra fish processors in Vietnam as requested by the ASEAN country. Though AUPSA has not confirmed an inspection schedule, the National Agro-Forestry-Fisheries Quality Assurance Department (Nafiqad) said it has stood ready to welcome the AUPSA team to Vietnam to check the food safety control system and tra fish processing facilities. Nafiqad asked the Ministry of Agriculture and Rural Development for approval to work with the inspection team when they come. Panama was asked to name the agencies and processors that it wants to inspect for the department to prepare a working schedule. According to Nafiqad, inspection costs will be covered by Panama to ensure the objectivity of inspections in accordance with international practices. Particularly, Nafiqad has proposed Panama cover expenses for air travel, accommodation and interpretation. Nafiqad will assist them with transportation and hotel bookings. In case AUPSA requires Vietnam to cover the costs, Nafiqad will ask AUSPA to send its written request to help it map out a payment plan for submission to the Minister of Agriculture and Rural Development for approval. Earlier, according to the Vietnam Association of Seafood Exporters and Producers (VASEP), some tra fish shipments exported to Panama were detected to contain pathogenic microorganisms and the Central American country warned Vietnam of this contamination. Panama still allowed import of Vietnamese seafood that tested negative for pathogenic microorganisms and met its food safety requirements. VASEP cited the Vietnam Trade Office in Panama as saying that Vietnamese tra fish farms and processors should be inspected by a competent agency of Panama. That is why Vietnam requested Panama to send an inspection team here. VIB plans to list on stock market in 2018 Vietnam International Bank (VIB) plans to list its shares on the stock market in 2018 to meet demands for capital and liquidity. Shareholders of the bank approved the listing plan at an annual general meeting held last Thursday. Representatives of the State Bank of Vietnam and over 100 shareholders of VIB took part in the meeting. According to the 2015 audited financial report, VIB attained VND655 billion in pre-tax profit, meeting the year’s target, while its credit growth stood at 25% and the bad debt ratio at 2.07%. With total assets of VND84 trillion, Moody’s said, VIB’s liquidity was high as its assets in cash and government bonds accounted for 30% of the total. VIB was one of the banks with the highest capital adequacy ratio (CAR) on the local market in accordance with the central bank’s regulations and the Basel Capital Accord II (Basel II) standards applicable to 10 credit institutions in Vietnam. At the meeting, leaders of the bank announced to pay a 2015 dividend at 25%, with 8.5% in cash and the remaining 16.5% in bonus shares, based on the bank’s year-end chartered capital of some VND4.8 trillion. The dividend inched up from the 2014 figure of 24%, with 9% in cash and 15% in bonus shares.   VIB looks to increase outstanding loans, capital mobilization and clients by 20-30% in the years to come. Its annual profit is projected to climb 20-30% from 2017 while the ratio of bad debt will be harnessed at below 3% and dividend payments will range from 15% to 25%. In 2016, VIB has set a target of obtaining VND675 billion in pre-tax profit, increasing outstanding loans by 25% and capital mobilization by 23%, and controlling the bad debt ratio at less than 3%. HoREA: Apartment demand ebbs, supply soars Demand for apartments in HCMC, the country’s largest property market, cooled in the first quarter of 2016 compared to the same period last year while supply rose sharply, according to the HCMC Real Estate Association (HoREA). A report of HoREA showed that about 9,000 out of 57,000 apartments planned for sale in HCMC this year were sold in the January-March period and only 700 foreigners purchased apartments, much lower than expected. Last year, HCMC’s real estate market posted robust growth in all segments, with 26,500 apartments finding buyers, compared to 16,955 in 2014. Despite the low demand, property investors launched many new projects from January to March, particularly social and resettlement housing projects with five new projects off the ground and four projects having 3,131 apartments completed. Supply of luxury apartments posted the highest growth in quarter one with more projects going up in the central, eastern and southern parts of HCMC. In the first quarter, 22 projects having a total of 8,326 condos, townhouses and villas were put up for sale, while only 35 projects with 16,827 apartments were launched in all of last year. HoREA said the property market slowdown was attributable to the State Bank of Vietnam’s policies to tighten credit for the market. In January, the central bank announced draft amendments to Circular No. 36/2014/TT-NHNN with an intention to limit credit for the market and this impacted housing transactions. Then, the central bank issued Document No. 1953/NHNN-TD ordering an end to new lending agreements under the Government’s VND30 trillion (US$1.35 billion) home loan package from March 31 because total loan pledges of eligible banks for beneficiaries had exceeded the VND30,000 billion limit. In mid-February, a number of commercial banks adjusted up interest rates for deposits of over 12 months to over 8% per year, and this stoked concern that lending rates could increase by one to two percentage points this year. HoREA said real estate firms were still mired in difficulties in the period and depended much on bank loans and the money they mobilize from buyers of their future products. Investors of five projects applied for share and company transfers in quarter one. The number for all of last year was 23. According to HoREA, an upsurge of steel prices in mid-March could affect apartment prices and construction tempo of housing projects. However, the association is pinning high hopes that the property market in 2016 will continue growing at a rate of no lower than last year and see a positive shift with more investment in social housing projects and products with affordable prices. HoREA said incoming remittances to HCMC in the three-month period stood at US$1.15 billion and 21.6% of it went to the real estate sector. The association also forecast increasing investment in industrial real estate, offices for lease, and serviced apartments. Insurance premiums up 20% in first four months The insurance market fared well in January-April with premiums revenue rising by 20% compared to the end of last year. This growth was the highest in recent years and an indication of good prospects for the market this year, according to the Association of Vietnamese Insurers (AVI). AVI said last year’s premiums revenue jumped 22% year-on-year, or over VND68 trillion, with life insurance expanding 29%. The Ministry of Finance said many more people, especially in the medium-income group, have realized the importance of insurance in recent years, becoming the growth driver of the market. On the equity market, shares of insurance enterprises like Bao Viet Holdings (BVH), PVI Holdings (PVI), Bao Minh Insurance Corporation (BMI), Petrolimex Insurance Corporation (PGI), Post-Telecommunication Joint-Stock Insurance Corporation (PTI) and BIDV Insurance Corporation (BIC) have edged up after years of sluggish trade. Last year, a number of Vietnamese insurance firms sold stakes to foreign investors. For instance, BIC, PTI and PVI sold large volumes of shares to foreign businesses while BVH and PGI plan to cooperate with foreign investors. Experts are optimistic about the growth prospect of the insurance market this year. They said that high gross domestic product (GDP) growth, foreign direct investment (FDI) capital, exports, investment plans, infrastructure projects and free trade agreements (FTAs) will push up demand for asset, technology and goods insurance. Besides, the Government is considering a couple of compulsory insurance products. However, businesses expressed concern over tough competition and fraud as they may negatively affect the business environment.      Vietnam now has 61 firms active in the insurance sector. Of them, 29 firms and one foreign branch operate in the non-life insurance segment, 17 companies in the life insurance segment and 12 in the insurance brokerage segment. Sacombank ties with Japanese banks The Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) on May 4 signed a memorandum of understanding with three banks under the Japanese Resona Holdings Inc on developing their customer networks. Under the agreement, the three Japanese banks, namely Resona Bank, Saitama Resona Bank and the Kinki Osaka Bank, along with Sacombank, will provide financial services for clients in Vietnam and Japan and to their their international branch network. Addressing the ceremony, Sacombank Director General Phan Huy Khang said his bank has promoted international economic integration via cooperating with many international organisations, including the banks under the Resona Holdings group. Meanwhile, Chairman of the group Kazuhiro Higashi, who is also Director General of Resona Bank highlighted the potential in Vietnam’s market, saying that the cooperation is expected to bring high-quality services to Vietnamese clients and promote the two nations’ business communities. Resona Holdings is the fourth biggest financial institutions in Japan, with its total assets reaching 46 trillion JPY (430.33 million USD). As of March 31, 2015, it has developed a network of 1,443 transaction offices in Japan, Thailand, China, Vietnam and Singapore. Binh Trieu No2 second phase to cost 88.7 million USD The Ho Chi Minh City Department of Transport has asked for approval of the city People’s Committee for the Binh Trieu No2 project’s second phase by the HCM City Infrastructure Investment Joint Stock Company (CII). The petition also asks for the department to co-ordinate with the city’s Interdisciplinary Working Group to negotiate the Build-Operate-Transfer contract with CII, along with appraising and ratifying subprojects. According to CII’s proposal, the subproject No1 will enlarge the existing Ong Dau Bridge with two bridge units on both sides of the existing one, each with 5.25 metres in width and 160 metres in length. The subproject No4 will enlarge and reverse the War Memorial intersection and build a traffic tunnel toward Xo Viet Nghe Tinh-National Highway 13; reconstruct Chu Van An Road and enlarge other roads connecting the intersection. The subproject No5 will expand the adjacent Ung Van Khiem Road to 30 metres in width and 1.8 kilometres in length. Total investment of all construction, including clearance compensation, is estimated to reach more than 1.98 trillion VND (88.7 million USD). CII will start collecting tolls at toll stations in Binh Trieu 1 and Binh Trieu 2 bridges after enlarging the Ong Dau Bridge and War Memorial intersection. Return on investment is expected to be reached in 23 years and 9 months. 2016 Hue Festival: Int'l hot air balloon fiesta kicks off The international hot air balloon fiesta kicked off in Hue city, central Thua Thien-Hue province on May 4 as part of the 9th Hue Festival. The two-day event is being participated in by pilots and balloonists from nine countries including Thailand, Malaysia, the Philippines, the Republic of Korea, Japan, the Netherlands, India, the United Kingdom and Vietnam. It features hot air balloons of 25 metres in height and 18 metres in width, offering an aerial view of Hue imperial city from a height of 150 metres. The balloon of Vietjet Air represented the host country Vietnam during the first day of the fiesta. The show takes place from 5:30 am to 8:00 am and from 17:00 pm to 18:30 pm with balloons taking off at Ham Nghi Yard in the Citadel and landing in separate locations in Phu My commune of Phu Vang district, Tu Ha ward of Huong Tra district and Huong Long ward of Hue city. Vice Chairman of the provincial People’s Committee Nguyen Dung said the fiesta brings a breath of fresh air to the 2016 Hue Festival as well as the province’s tourism industry. Gold prices fall in Viet Nam following holiday The price of the State-owned brand of gold, SJC, fell VND370,000 (US$16.5) per tael on May 4, after the four-day holiday in the local market. The Sai Gon Jewellery Joint Stock Company yesterday sold one tael of SJC gold at VND33.98 million ($1,506). Unlike Sai Gon Jewellery Joint Stock Company, other gold companies, such as Bao Tin Minh Chau and DOJI, still traded across the holiday; however, they also recoded the falling prices for the yellow metal. Bao Tin Minh Chau also listed the buying and selling prices of gold at VND33.81 million and VND34.26 million per tael, respectively, a reduction of VND150,000 compared to its last day's closing rate. DOJI Ha Noi listed the buying and selling prices of gold at VND33.93 million and VND34.03 million per tael, respectively, a reduction of VND220,000 compared to its last day's closing rate. According to DOJI, the gold market last weekend was quieter than on previous days because most traders had stopped trading to enjoy their holiday. Meanwhile, Bao Tin Minh Chau recorded a higher number of buyers than sellers on May 4, when the prices fell, with 60 per cent of transactions being purchases and 40 per cent being sales. The companies also advised their customers to buy more at this time and hold it in reserve. At the same time, on the global gold trading floor, the commodity also fell by some $6 per ounce, to be listed at $1,279.9. (One tael is equal to 1.2 ounces). According to reuters.com, gold fell for a second straight session on Wednesday, slipping further away from a 15-month high as the dollar steadied after recent sharp losses and as two Federal Reserve officials talked up US interest rate hikes this year. The State Bank of Viet Nam listed the reference rate per US dollar at VND21,828 on May 4. The commercial banks were allowed to apply a margin of +/- three per cent to their prices. On the same day, like most of the other commercial banks, Vietcombank listed its buying and selling rates as unchanged, at VND22,260 and VND22,330, respectively. Thus, with the Vietcombank rate, each tael of gold in Viet Nam was VND450,000 lower than the global gold price. Hai Phong thermal plant to list on UPCoM The Hai Phong Thermal Power Plant JSC is planning to list its shares on the unofficial market of UPCoM. The thermal plant announced at its general shareholders meeting late last month that with the production of 6,937 million kWh, it had reached a total revenue of VND9.1 trillion (US$407.5 million) and profit before tax of VND391 billion. Based in Thuy Nguyen District, the thermal plant has a charter capital of VND5 trillion. The company expects to pay VND350 billion in dividends, which amounts to 7 per cent of the charter capital. With 26 per cent stake, the firm's largest shareholder -- Pha Lai Thermal Power JSC -- has more than VND91 billion worth of dividends. This year the firm has planned the production of some seven billion kWh, a total revenue of VND9 trillion and profit before tax of VND449 billion. It also plans to pay 4 per cent dividends in cash. Jetstar Pacific flies higher with additional $139 million Jetstar Pacific will be pumped with an additional $139 million from its founding partners to further develop its fleet and secure a bigger market share for affordable flights, despite its current accumulated losses of $151.9 million. According to the low-cost carrier’s general director Le Hong Ha, Jetstar Pacific will receive the investment fund from Vietnam Airlines and Qantas Airways, to more than double its fleet size of 12 Airbus A320 aircrafts over the next four years. The Australian flag carrier airline, in particular, will inject some $42 million into Jetstar Pacific with Vietnam Airlines making up the remaining $97 million. Qantas currently holds 30 per cent of the carrier, while Vietnam Airlines owns the rest of the carrier’s stakes. Jetstar Pacific posted its first-ever annual profit of VND267 million ($12,247) in 2015, after operating at a loss as a low-cost carrier since 2008. The carrier, however, still had an accumulated loss of VND3.312 trillion ($151.9 million), as at December 31, 2015, and a tax payable of hundreds of billion VND being suspended from a few years back. Jetstar Pacific was first established some 25 years ago under the name of Pacific Airlines, under state-owned Vietnam Airlines, flying chartered cargo service. From 1996 to 2005, it started to operate passenger services. In 2007, Qantas acquired a number of the airline stakes and changed its model into a low-cost carrier, also switching the name into Jetstar Pacific. The airline is reported to have only 15 per cent of the domestic market share, it has a healthy 83 per cent load factor. Jetstar Pacific says that it is looking to grow business with an increase in routes as well as extra aircraft capacity on existing schedules. Jetstar Pacific operates 10 Airbus A320-200s and two A321-200s on flights to 16 destinations across Vietnam, China, Thailand, Macau, Singapore and Hong Kong. Taxi firms fight for fare share Domestic taxi firms are stepping up their game to compete against foreign transport services like Uber and Grab. Over the past two years, transport applications on smart phones such as Uber (from the US) and Grab (from Malaysia) have become hugely popular in Vietnam. According to the Ho Chi Minh City Department of Transport, there are currently 4,000 Uber taxis in the city, earning a daily profit of VND1 billion ($44,900). Meanwhile, GrabVietnam has branched out from its main application for taxi hailing (GrabTaxi) with the recent launch of motorbike taxi and express delivery services. The growth of these transport services has dented the profits of traditional taxi brands in Vietnam, most notably the two giants Vinasun and Mai Linh. For the first quarter of 2016, Vinasun only completed 26.5 per cent of its targeted profits. This result was said by the firm’s representatives to be particularly disappointing as the first quarter of the year tends to be their busiest season. Even Vinasun’s anticipated profit for 2016, standing at VND264 billion ($11.8 million), may be 20 per cent lower than last year’s figure. “Uber and GrabTaxi are wreaking havoc on Vinasun’s business, so we must prepare to fight back with our best weapons. We won’t stand still to let these foreign competitors eat up our market share,” stressed Dang Phuoc Thanh, chairman of Vinasun, at the firm’s annual shareholders’ meeting last week. Thanh then outlined five key areas that Vinasun can improve upon this year. Firstly, in response to Uber and Grab’s diverse range of services, Vinasun will undergo extensive restructuring and offer more services besides taxis. The firm will assess the needs of different regions in Vietnam to come up with the most suitable business option. Secondly, as Uber and Grab have attracted Vietnamese users thanks to their low fares, Vinasun will also reduce their own prices down from $0.7 to $0.6 per kilometre. Thirdly, the firm will invest heavily in its Vinasun App, which directly competes against the foreign transport businesses. Thanks to this smartphone application, Vinasun’s customers can get taxis much more quickly and conveniently compared to using traditional call centres. This also allows the firm to access the real-time and detailed business results of each taxi. In addition, Vinasun will add 1,150 new cars to its fleet this year, raising the total number of its vehicles to 6,441. Finally, the company will install non-cash payment machines in all of its taxis to match Uber and Grab’s credit card payment option. Meanwhile, the taxi brand Mai Linh will import 100 electric cars from French producer Renault as part of its deal to buy at least 10,000 non-fuel vehicles. According to Ho Huy, chairman of Mai Linh, electric taxis are more appealing to customers as they are environmentally-friendly. In addition to the broad benefits of zero gas emissions, they also cut operating costs. As Mai Linh can pass these savings on to its customers, it may have found a way to create an advantage over Uber and Grab. In order to drive for 100km, traditional cars will spend $5.38 on fuel, while electric cars only require $1.73 in electricity consumption. Moreover, the upkeep costs of electric cars are 35 per cent lower than those using fuel. “This will allow us to slash our taxi fares from $0.57 to only $0.38 per km – the lowest in the market,” Huy explained. PMI jumps to 52.3 in April The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI), a composite single-figure indicator of manufacturing performance, rose to a nine-month high of 52.3 in April from 50.7 in March. Business conditions have now improved in each of the past five months, according to the latest report from Nikkei and Markit Economics. “The recent soft patch in the Vietnamese manufacturing sector appears to have come to an end according to the latest PMI data, which showed the strongest improvement in the health of the sector since July last year,” said Mr. Andrew Harker from Markit, which compiles the survey. Of particular note was a solid expansion in new orders. “Something else that looks to have come to an end is the recent period of weak inflationary pressures, with input prices rising at the fastest pace in 20 months during April,” he added. A key driver of the latest improvement in operating conditions was a solid expansion in new business, according to the report. Moreover, the rate of growth was the sharpest since July 2015 amid reports from panelists of increased client demand. New export orders also continued to rise in April. Increasing new business contributed to a fifth consecutive monthly rise in manufacturing production. The rate of growth was modest but quickened to the fastest in nine months. Panelists responded to higher new orders by increasing their staffing levels. The rise in employment followed a slight fall in the previous month and was the strongest since May 2015. Higher staffing levels enabled manufacturers in Vietnam to work through outstanding business and complete projects. “As a result, backlogs of work decreased for the first time in 2016 so far,” the report stated. Manufacturers recorded a marked increase in input costs during April, with the rate of inflation quickening to the sharpest since August 2014. Panelists reported higher costs for raw materials, with steel mentioned in particular. Data suggested that the investment goods sector registered a much steeper increase in input prices than the consumer and intermediate goods categories. With input prices rising, firms increased their charges accordingly. Output price inflation was recorded for the first time in over a year-and-a-half, although the rise was only marginal, the report noted. Purchasing activity increased in April, with firms linking higher input buying to rising production requirements. Purchasing has now expanded in each of the past five months. Both stocks of purchases and finished goods continued to decrease, although in each case at slower rates than in March. Inventories of both pre- and post-production goods have fallen throughout 2016. “Finally, suppliers’ delivery times were broadly unchanged, following a marginal improvement during March,” the report stated. Real estate sees major changes in 30 years of renovation Vietnam’s real estate sector has boomed in the 30 years since “doi moi” (renovation) was introduced in 1986 and played an important role in the country’s socioeconomic development, according to a report released on April 30 by Jones Lang LaSalle (JLL) to mark the 41st anniversary of Reunification Day. JLL experts said that over the last four decades the country has gone from a backwater to a major Asian investment hotspot. The real estate market, most notably in Ho Chi Minh City, the country’s economic hub, and Hanoi, the political capital, developed rapidly soon after the Law on Real Estate was introduced in 2003. Strong economic growth, rising foreign investment and a booming middle class over recent years have led to healthy demand for real estate. Vietnam’s economy went through many difficulties after reunification in 1975, with almost two years taken to restore service to the backbone north-south railway line and associated infrastructure, under a five-year plan to kick-start modernization adopted in 1976. Doi moi was then launched in 1986 to push economic growth, helping the country usher in a new era of development. Since then the country’s real estate sector has seen a great many changes for the better. Ten years after the introduction of doi moi the first building complex opened in Ho Chi Minh City together with the first shopping and entertainment complex, the Saigon Superbowl. Two years later, in 1998, the Phu My Hung New Urban Area was introduced to the Ho Chi Minh City market, including the first modern township in Vietnam, My An My Canh. In 2003 the first high-end apartment building for sale, The Manor, opened in Ho Chi Minh City. 2010 then saw the opening of Bitexco Financial Tower, which remains the tallest building in the city, at 263 meters. Vinhome Central Park was recently launched as the largest mixed-used development in Ho Chi Minh City and confirming the boom in real estate. After years of development, property is now considered a primary industry. Thanks to relaxed property ownership legislation that came into effect on July 1, 2015, more than 1,000 apartments had been sold to foreigners as at the end of last year. This year some 25,000 new apartments are expected to be launched in Ho Chi Minh City, with the high-end segment accounting for 30 per cent. In the future Ho Chi Minh city’s real estate market will continue to experience many changes, with the building of the city’s first urban railway line, the North-South Expressway connecting it with Hanoi, and Vincom Landmark 81, the tallest building in the city, at 462 meters. FDI key to high trade surplus Vietnam’s economy is experiencing a record four-month trade surplus, the highest in the past four years, mostly driven by foreign-backed firms. The General Statistics Office reported that Vietnam’s total export turnover in the first four months of 2016 is estimated to be $52.87 billion, up 6 per cent year-on-year. Total import turnover hit $51.4 billion, down 1.2 per cent year-on-year, leading to a trade surplus of $1.47 billion over this period. “The four-month trade surplus is a very good sign for the economy in general,” senior economic expert Nguyen Mai told VIR. The economy suffered from a trade deficit of $3 billion in the same period last year, and a trade surplus of $683 million, $722 million, and $176 million in the first four months of 2014, 2013, and 2012, respectively. However, Mai said that this year’s four-month trade surplus was driven by foreign-invested enterprises (FIEs), which tactitly reflects the weak performance of locally-owned enterprises. Specifically, FIEs held a trade surplus of $7.1 billion, while locally-owned companies suffered a trade deficit of $5.6 billion. “Many types of goods have had a very high export turnover, such as electronics, computers, and mobile phones,” Mai said. “Of these, Samsung, Nokia, and LG have had impressive export turnover, occupying over 20 per cent of Vietnam’s total export turnover.” According to LG Electronics Vietnam, their export and import turnover reached $151.33 million and $155.34 million, respectively, in this year’s first two months. The firm’s two-month revenue hit $212.15 million. “FDI has helped offset a trade deficit from locally-owned enterprises,” Mai noted. “Many are lamenting that an increase in FDI in Vietnam is controlling the local economy. However, this is a competitive market. Without FDI, the economy couldn’t develop as rapidly, and Vietnam wouldn’t enjoy a trade surplus.” Mai also noted that this year’s first four months included many days off due to the traditional Tet celebration and other national holidays. “If there had been no days off, the trade surplus would have been much larger,” he said. FocusEconomics Consensus, which features economic forecasts from the world’s leading economists, announced last week that Vietnam’s economy was expected to continue growing at a solid pace of 6.5 per cent this year, “supported by robust export growth, buoyant private consumption, and higher FDI inflows.” Predicting that investment in Vietnam would rise 8.9 per cent this year, the firm also estimated that Vietnam’s industrial output, which is mostly financed by FDI, would grow 9.7 per cent. FocusEconomics Consensus also predicted that thanks to major FDI contributions, Vietnam’s export and import turnover for 2016 would be $175 billion and $177 billion, respectively. Skies clear for Lao Cai airport project The proposal to construct a $160-million airport in the northern mountainous province of Lao Cai under a public-private partnership model has recently received the support of the Ministry of Transport. The ministry (MoT) became the first government management agency to advocate the Lao Cai People’s Committee as the authorised agent overseeing the project’s implementation. The MoT explained that development projects normally source capital from the central budget under the 2015 Law on State Budget, however, in light of present budget constraints, it is necessary to find other capital sources to help build the transport infrastructure. They therefore would like the local authorities to select investors to support the airport project. “The MoT and relevant government agencies will support the Lao Cai People’s Committee and ensure they follow current regulations,” said Deputy Minister of Transport Nguyen Nhat. In February, the Lao Cai People’s Committee proposed that the project be implemented under the PPP format. In the meantime, they have requested that the government assign the provincial authority as the government agency handling the project. Essentially, this means that Lao Cai People’s Committee will draw up the project proposal, select investors, and sign contracts, as regulated in governmental Decree No.15/2015/ND-CP. Chairman of the Lao Cai People’s Committee Dang Xuan Phong said that once approved, the proposal could help resolve the project’s capital dilemma. Lao Cai airport is designed to become a 4C standard airport for both civil and military use, able to receive A320, A321, and equivalent aircraft. Once completed, the airport will contain two aircraft parking spaces, and will have an annual capacity of 560,000 passengers and 600 tonnes of freight. By 2030, its capacity will increase to 1.58 million passengers and 2,880 tonnes of freight per year, and will include five parking spaces for aircraft. In the future, Lao Cai airport will also encompass a specialised terminal on a 10,000 square metres space, with a designed capacity of 308 passengers/peak hour, increasing later to 634 passengers/peak hour. The airport will also be able to handle flights to all domestic airports, as well as certain international airports, namely in Indonesia (Jakarta), Singapore, Malaysia, China (Kunming), and Laos (Vientiane). Sun Group, a local leading property developer, was reported to be one of the first to file an investment proposal with the MoT and the Civil Aviation Administration of Vietnam (CAAV). “The early commitment of a big investor like Sun Group to the project shows that Lao Cai airport has great potential,” said CAAV’s deputy chief Dao Van Chuong. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR