BUSINESS IN BRIEF 14/6 Sacombank Laos inaugurates branch in Champasak The Lao branch of Ho Chi Minh City-based Saigon Thuong Tin Commercial Joint Stock Bank (or Sacombank Laos) inaugurated a branch in Dao Heuang market – the largest trade centre in Pakse township, the Lao province of Champasak, on June 10, as part of efforts to become the leading retail lender in the country. Speaking at the ceremony, General Director of Sacombank Laos Pham Quang Phu said since its presence in Laos in 2008 with a total registered capital of 12 million USD, the bank has so far raised its chartered capital to 39 million USD. As of May 31, Sacombank Laos booked assets worth 121.6 million USD and served more than 3,100 corporate and individual clients, he said. The inauguration of Champasak branch reflects Sacombank Laos’s determination to do long-term business in the country and forms part of its strategy to open branches in all cities and provinces nationwide, he said. Nah Chantalivong, Director of the Laos State Bank’s southern branch, expressed his belief that the newly-inaugurated Sacombank Laos branch will succeed in the future. In his speech, Secretary and Governor of Champasak province Bounthong Divisay confidently stated that the Sacombank Laos branch will help improve the lives of southern Lao people, and pledged his strong support for the branch which is expected to be a business model in the province. On the occasion, Sacombank Laos presented 5,000 USD to the fund in support of disadvantaged people in Champasak and another same amount to the Association of Overseas Vietnamese in Pakse to support victims of Dao Heuang market fire in May. Pleiku 2’s 500kV transformers ready to receive power from Laos   A project to install two 500/200kV-450MVA transformers as well as 500kV power distribution devices at Pleiku 2 transformer station in Ia Kenh commune, in the Central Highlands province of Gia Lai’s Pleiku city, were put into operation on June 10. The Pleiku 2 substation recieves power from Xekaman 1, Xekaman Xansay and Sekong 3 (upper and lower) hydropower plants in Laos to supply to the central, Central Highlands and southern localities through the 220kV Xekaman 1-Peiku 2 transmission line. It is expected to contribute to developing a sustainable power supply amidst the country’s international integration as well as regional cooperation, reducing power loss and optimising the operation of Vietnam’s power system. The 500/200kV-450MVA transformers were moved to the station from the 500kV O Mon transformer substation. Apart from two 500/200kV-450MVA transformers, necessary devices for receiving and reducing 500kV power; 220kV and 35kV transmission lines were also put into operation. The project, invested in by the Electricity of Vietnam’s National Power Transmission Cooperation (EVN NPT), has been handed over to Power Transmission Corporation 3 (PTC3) for management and operation.     Central, Central Highlands eye 8.8 pct rise in industrial production The industry and trade sectors of the central and Central Highlands provinces are striving to raise their industrial production value to nearly 420.8 trillion VND (18.8 billion USD) in 2016, a year-on-year surge of 8.8 percent. Pham Thai, Director of Dak Lak province’s Department of Industry and Trade made the statement at a review conference held in Buon Ma Thuot city on June 10. He said that the sector has also set the target of achieving 570.5 trillion VND (25.5 billion USD) from selling goods and services and over 8 billion USD from exports, up 13.5 percent and 13.7 percent, respectively, from last year. In a bid to fulfill the objectives, regional industrial and trade sectors will address difficulties, create favourable climates for enterprises to develop their businesses while effectively implementing economic restructuring and promoting exports, he noted. An equal competitive business environment, administrative reforms, high-quality human resources as well as modern infrastructure development will be given top priority. In addition, the sectors will also give support to enterprises in product consumption and reducing inventories and put local businesses up for having advanced technology applied to improve product quality. According to Deputy Minister of Industry and Trade Hoang Quoc Vuong, the central and Central Highlands regions have seen robust growth in industrial production, with an increase in proportion of industrial processing and manufacturing. The regional industry and trade sectors have also given a good performance in controlling the market and addressing violations in line with regulation, especially tackling smuggling and trade fraud, as well as ensuring food hygiene, he added. Regional industrial production value exceeded 211.2 trillion VND (9.5 billion USD) in the first six months of the year, rising 6.9 percent from the same time last year. Meanwhile, revenue earned from selling goods and services in the period reached 279.5 trillion VND (12.5 billion USD), a year-on-year surge of 13.4 percent. Dong Nai pledges to tackle obstacles facing Japanese firms The administration of Dong Nai province promised to remove obstacles facing Japanese companies in the southern locality during a dialogue on June 10. The event, held by the provincial Customs Department and the Japanese Business Association in Dong Nai, attracted representatives from more than 100 Japanese firms. They spoke highly of the local administration’s administrative procedure reforms and the favourable conditions for operating their businesses. Meanwhile, others pointed out problems pertaining to import-export procedures, new taxation and customs regulations, the establishment of affiliates, and hotlines for the firms to talk to relevant agencies. Le Van Danh, Director of the Customs Department, said authorised agencies will devise measures to tackle hindrances to business operations. His department will step up administrative reforms to smooth the path for trade activities. Regarding matters at the national scale, they will ask the General Department of Vietnam Customs, the General Department of Taxation and the Government to fine-tune related regulations. Vice Chairman of the provincial People’s Committee Nguyen Quoc Hung said Dong Nai always stands side by side with the business community to tackle obstacles efficiently and facilitate their business operations. Maeno Kojil, Chairman of the Japanese Business Association in nearby Ho Chi Minh City, said the dialogue helps both sides look into and seek to address arising issues, helping enterprises operate profitably in line with laws. He asked for similar functions to be held in the future. At the dialogue, the provincial Customs Department and the Japanese Business Association in Dong Nai signed a cooperation agreement to facilitate their information connectivity, which will enhance the companies’ adherence to trade-related rules and the State’s customs management. In the first five months of 2016, Dong Nai continued to be a leading FDI destination in Vietnam with nearly 900 million USD poured into the province, accounting for 15 percent of the country’s total FDI and 90 percent of the local target for the whole year. Japan invested in 10 projects with a registered capital of 49.6 million USD in Dong Nai between January and May. The province currently ranks fourth nationwide in terms of Japanese investment attraction with more than 205 projects worth over 3.7 billion USD. Petroleum product imports from ASEAN increased Vietnam’s import of petroleum products from the Association of South East Asian Nations (ASEAN) countries rose sharply in the past five months, according to the Ministry of Industry and Trade. From January to May, Vietnam imported 5.41 million tonnes of petrol and oil products, up 27.6 percent against the same period last year, with the major ASEAN markets being Singapore and Malaysia. The rise was attributed to the import tariff on petrol and oil products from ASEAN that went to zero since the ASEAN Trade in Goods Agreement took effect on January 1, 2016. In 2015, Vietnam bought 3.84 million tonnes of petroleum products from Singapore and 2.28 million tonnes from Thailand, which together accounted for more than half of the country’s petroleum imports of 10 million tonnes. Credit predicted to grow at faster pace Credit would increase faster in the next few months thanks to new regulations on lending, experts have forecast. This year, the government is targeting a credit growth between 18 percent and 20 percent. However, lending rose only 4 percent by the end of April and then slipped back to about 3.8 percent by the middle of May. However, after the issuance of new lending regulations recently, the Bao Viet Securities Company forecast that lending in both the dong and the United States dollar would receive a boost in the next few months. On May 30, the State Bank of Vietnam (SBV) issued Circular 06/2016/TT-NHNN which raises the risk index of receivable lending for real estate and securities from the current 150 percent to only 200 percent, lower than the cap of 250 percent as proposed earlier by the SBV. On the same day, the central bank also issued Circular 07/2016/TT-NHNN to supplement and amend some articles of the Circular 24/2015/TT-NHNN on providing foreign currency loans by credit institutions and foreign bank branches. Under the new regulation, from June 1, companies who have demands for short-term loans in foreign currency can borrow from banks to satisfy their short-term capital needs. However, BVSC analysts also anticipated that the credit growth this year would be lower than the government’s plan, fluctuating between 15 percent and 17 percent as banks would be more careful with lending related to the areas with high risk loans such as real estate. Dinh Duc Quang, deputy general director of Ocean Commercial Bank, said commercial banks tend to search the loan portfolio more stringently, especially after warnings about being careful of the growth of the real estate market. Under a report released recently, the Institute for Economics and Policy Research (VEPR) also recommended to the central bank that it control credit growth and quality. It also suggested to the central bank to avoid maintaining a loose monetary policy for too long, which led to the formation of asset bubbles. Concerning the return of high inflation, VEPR said that a credit growth target of 18 percent in 2016 is too high, suggesting that the central bank should consider a credit growth target for 2016 at 15 percent with credit flows aimed at the production areas. Increase in wood product exports The Handicraft and Wood Industry Association of HCM City (HAWA) has projected exports of wooden products to reach US$7.2 billion this year, up from $6.9 billion last year. Speaking at the association's seventh congress in HCM City on Wednesday, HAWA chairman Nguyen Quoc Khanh said despite difficulties the wood processing and handicrafts industry has enjoyed steady growth to make the country the largest wood products exporter in ASEAN. The latest figures from the Ministry of Industry and Trade show that in the past five months exports topped $2.68 billion, an increase of 2.08 per cent year-on-year. Huynh Van Hanh, HAWA's permanent deputy chairman, said with the positive situation in the US real estate market and the recovery of the European and Japanese markets (the country's three largest export markets for wood and wood products), exports would see good growth this year. The handicrafts and wood industries have grown strongly in the last several years, and the trend is expected to continue, he said. The development of the industry would surely bring about the development of its part supplier industry like machinery and equipment, glue, paint, raw materials and accessories, he said. Khanh said the association has been an effective bridge between the Government and businesses. It has organised training courses, trade promotions and seminars to help members become more competitive and expand markets both at home and abroad, he said. It admitted 47 new members in the last term, raising the total number to 369, he said. In the upcoming term HAWA would strive to help businesses operate more efficiently, he said. It would also enhance trade promotion and training to improve the competitiveness of its members and work to help them understand more about adding value to wood products through design, distribution and building brands, he added.      SBV moves to reassure property investors State Bank of Việt Nam’s (SBV’s) newly amended regulations on prudential ratios for the operation of credit institutions and foreign bank branches have provided significant relief to real estate investors. The policies are expected to help the market develop more sustainably as well. Since the circulation of the draft amendments to attract the opinions of the public earlier this year, property investors have raised concerns that they would immediately face a credit tightening from commercial banks even though they are heavily reliant on loans from these banks as sources of capital. The draft stated that the risk index of receivable lending for real estate will be raised from 150 per cent to 250 per cent, and the ratio cap for using short-term funds to provide medium- and long-term loans will be 40 per cent, down from the 60 per cent stated in the old document, Circular No 36, released two years ago. However, under the SBV’s new Circular No 06 issued in late May, the risk index will be adjusted to 200 per cent, instead of 250 per cent as proposed, and the increase will only come into effect on January 1, 2017. In addition, the central bank’s decision surprised investors by specifying a roadmap for the maximum ratio of short-term funds used for medium and long-term loans to be reduced from 60 per cent to 40 per cent. Accordingly, the 60 per cent ratio will be maintained until December 31 of this year. The ratio will be lowered to 50 per cent from January 1, 2017, to December 31, 2017. It will drop to 40 per cent from the beginning of 2018. Deputy General Director of Him Lam Land Ngô Quang Phúc said the new circular had great significance for the real estate market. The policy’s first priority was to reassure property developers that the capital source for the market would not be tightened immediately, he said. He added that with the roadmap, investors will have time to look back at their usage of capital and prepare for long-term plans. In addition, the amendments helped keep the interest rates stable at low levels, which would encourage people to buy houses, Phúc said. General Director of Hưng Thịnh Land Company Nguyễn Nam Hiền said that in reality, after the draft amendments were publicised, some banks had increased the interest rates of deposits to prepare for the changes, thus causing the lending rate to rise. But now that the new regulations have been finalised, it is expected that the lending rates will drop to assist home buyers who also had to borrow from banks, thereby consolidating property developers’ confidence in their investment activities. Nguyễn Bá Sáng, chairman and general director of the An Gia Real Estate Company, applauded the SBV’s decision, saying the newly issued regulations would help avoid shocks to the market, which was on track for recovery, as well as prevent the risk of “bubble” growth. Sáng said the property market currently depends largely on two capital sources, bank loans and capital mobilised from customers, noting that most customers often seek loans from banks, thus the market is very sensitive and vulnerable to changes in the credit system. He expected that in seeing the regulation changes, property investors would find ways to improve their own financial capacity to reduce their reliance on banks as sources of funding, as they are inherently risky in terms of interest rates and liquidity. Nguyễn Quốc Hiệp, chairman of the Global Petroleum Investment Corporation, said the SBV had lowered the risk index requirement from 250 per cent to 200 per cent, indicating that the agency did not want to place hard pressure on the real estate sector. The rate is enough to warn commercial banks to refrain from excessive lending, and it warns property developers as well, Hiệp said. He added that currently, Circular No 06 had not made much of an impact on the real estate market, but by the end of the year, the policy’s effects would be seen more clearly. According to Hiệp, projects that were underway or nearing completion would not be affected by the policy, but new projects or those currently in the early stages will face greater difficulty in mobilising capital, so they will face a higher risk level. Vũ Cương Quyết, director of Đất Xanh North – a subsidiary of Đất Xanh Group, said the circular would not have a negative impact on ongoing projects where capital flows are already controlled and guaranteed by banks. However, small enterprises with poor financial capacity will likely be affected the most as once the new regulations come into effect, banks will be more cautious and set stricter criteria for lending, Quyết said. Lại Văn Tư, deputy director of the Phúc Hà Industrial Zone Infrastructure Development and Investment JSC, the developer of the Thăng Long Victory project, said the SBV had provided a timely warning. At present, the property market is facing an imbalance in the supply of high-end projects and houses for low-income people, Tư said, so if enterprises were not forced to adjust their strategies, the market would face the risk of oversupply in the high-end segment. Tư also said if banks were too rigid in tightening their credit, capital sources for building cheap houses would become exhausted, so the chances for low-income people to own a house would drop. Therefore, he suggested banks should be more flexible in considering and screening projects, particularly those in the low-end segment because of its high liquidity. Korea's CEO Suite opens office in Viet Nam CEO Suite has begun operations from its first location in Viet Nam, offering premium serviced offices for entrepreneurs, small to medium-scale companies, and multi-national companies. Located on the 29th floor of the East Tower of the Hanoi Lotte Centre, CEO Suite offers world-class and elegantly designed executive office suites for short or long-term lease, fully-equipped meeting rooms with a breath-taking view of the city, "five-star hotel" standard reception area, and a VIP business lounge, in addition to a service area for document printing, scanning and photocopying, a business cafe with pantry facilities, and high bandwidth Internet WIFI access with a modern telephone system. As a one-stop office solutions provider, CEO Suite offers customised services for businesses of every size – these include business set-up requirements, virtual offices (use of a professional business address for company registration and branding), receptionist and secretarial services, and accounting and finance services, in addition to human resource and recruitment services, and IT support services. Executive office suite rentals are also on flexible terms whether it is in terms of size, period of rental or pricing. President of CEO Suite Mee Kim has seen the potential of Viet Nam as a business hub, by expanding the CEO Suite network to Ha Noi. "It is the first business centre of the CEO Suite in Viet Nam in its total network. But in the future, we will establish more CEO Suite at other locations in big cities here," she said. The Lotte Centre is a prestigious landmark in Ha Noi and home to the international five-star Lotte Hotel. This iconic structure was designed by two award-winning companies: the Seattle-based Callison Architecture and London-based Benoy Architects. With the establishment of the Vietnam-South Korea Free Trade Agreement last March, Korean business investors have started flocking to Vietnamese markets while benefitting from import tariff discounts and strong support from the Korean Chamber of Commerce. HCMC Party Chief prompts agencies to simplify real estate procedures Secretary of the Ho Chi Minh City Party Committee Dinh La Thang this morning urged responsible public agencies to solve difficulties for real estate businesses, review and simplify administrative procedures at the maximum level and consider this as a breakthrough solution to reclaim businesses’ belief. After listening to reports about the real estate market by chairman of the HCMC Real Estate Association (Horea) Le Hoang Chau, he urged the city to solve difficulties for real estate businesses. The real estate market is one of significant factors in boosting the city’s economic growth and contributing in the country’s growth target of 6.7 percent this year, he said. At the meeting, Mr. Chau reported to the secretary that the real estate market is still under recovery and growth phase. Compared to 2015 when the market saw a strong growth in all segments, but it showed signs of slowdown in the first five months this year with implicit unstable factors. For instance, transactions have slowed down and leaned toward high grade segment while there is a shortage of small and medium apartments having one to two bedrooms, affordable for a lot of citizens. In addition, there is a strong increase in the number of secondary transactions. The market has also seen some project investors not abide by regulations on investment and construction. Many apartment blocks have been opened for dwellers while yet to meet relevant conditions. Some businesses have not complied with regulations on mortgage and house sale causing damage to consumers and affecting social welfare. Conflicts have become complex in a number of apartment buildings. Forecasting the real estate market in the last seven months this year, Mr. Chau said that the market would be better than the first five months. However, it would be still in the state of slowdown for the entire year. According to Mr. Chau, although the Government and the city’s leaders have pledged to change and create some mechanisms and solve existing difficulties for businesses, the real estate market has till faced many problems including land use fee. The land use fee is a large budget revenue source of the city but many investors have to queue waiting for paying the fee. This is because the process to determine the fee is unreasonable for being undertaken by the Department of Finance and the Department of Natural Resources and Environment. The later department organizes online bidding to choose consultant companies to determine land price and propose the land use fee of projects. Afterwards, it will transfer the proposal to the Department of Finance to assess the fee level. If agreeing with the proposed fee, the Finance Department will submit the proposal to the city People’s Committee to get a final decision. If disagreeing, it will send documents back to the Environment Department to do procedures again. This process has been irrational and time consuming. Before the Land Law 2013 took effect, only the Department of Finance was in charge of assessing the land use fee, so it was faster than now. Therefore, Horea proposed the city to assign either of the departments to take responsibility for the process to save time, clear backlogged documents for investors to implement their projects and not to miss their opportunities. Mr. Chau said the current land use fee assessment phase is a lucrative land for corruption and other profit seekers and proposed the city’s leaders to pay attention to supervise this and especially cadre management. In response to Mr. Chau’s opinion, director of the Department of Natural Resources and Environment Nguyen Toan Thang said that the city has built a process to determine land prices for compensation or other financial obligations within 30 days. The process is available on the department’s website, he added. Meantime, a representative of the Department of Finance said that they have conducted assessment works within five days after receiving documents from the Environment Department. However he also admitted that the land price determination of some projects has been slow because of cadres’ faults although that plays a very important role to conduct following steps of projects. Equitisation process faces difficulties Dang Quyet Tien, deputy head of the Department of Entrepreneurial Finance, under the Ministry of Finance, said the most profitable deals had already been put on sale and now they were having to push the less desirable deals in order to minimise losses. By the end of 2015, the state’s divestment process from major sectors include real estate, finance and bank, insurance and stock markets had only achieved only 40% of it target. Ineffective businesses or firms that are debt ridden obviously find it hard to attract investors. In addition, there are firms that face investigation for corruption so investment issues have been delayed. Most of the wrongdoings were carried out by 2011. Talking about ineffective projects such as Thai Nguyen Iron and Steel JSC or Dinh Vu Polyester Fibre Plant, the ministry tried to explain that the state hadn't make direct investments. These decisions were made by member companies of state-owned firms. However, they are still tied to the country's interests so if the equitisation process fails, they'll let them go bankrupt. Tien said they would not punish business leaders who had followed all regulations and rules even though they incur losses. The equitisation process is facing some difficulties as several state agencies were reluctant to divest. For example, the Ministry of Construction still holds a 90% stake in the Vietnam Machinery Installation Corporation (Lilama) while many investors have expressed the desire to enlarge their share. Tien urged to re-exam the consultancy process if firms fail to find investors. "If a firm fails to sell their stake twice then it'll negatively affect the firm's image and make the equitisation process harder," Tien said. VND486 billion lent to boost litchi consumption The central bank’s branch in Bac Giang Province said VND486.3 billion (US$21.8 million) in loans has been secured to promote consumption of litchi grown in the northern province. The loans will be provided by commercial banks based on capital demand of six districts in the province. Of the total, Luc Ngan District will get the biggest amount, VND265.8 billion, followed by Luc Nam with VND61.5 billion, Yen The with VND51.5 billion, Tan Yen and Lang Giang with VND42 billion, and Son Dong with VND23.5 billion. The Bank for Agriculture and Rural Development (Agribank) will lend VND100 billion out of the total. The State-owned bank is followed by the Bank for Investment and Development (BIDV) with VND80 billion, the Joint Stock Commercial Bank for Foreign Trade (Vietcombank) with VND70 billion, each of the Technological and Commercial Joint Stock Bank (Techcombank) and the Maritime Commercial Joint Stock Bank (MSB) with VND50 billion, each of the Joint Stock Commercial Bank for Industry and Trade (VietinBank) and the Military Commercial Joint Stock Bank (MB) with VND35 billion, and LienVietPostBank with VND31 billion. Every year, the province sets aside more than VND2 trillion (US$89.6 million) to support consumption of litchi, including VND1.5 trillion for Luc Ngan District. Duong Van Thai, vice chairman of Bac Giang Province, said the litchi farming area in the province totals 30,000 hectares this year, down 1,000 hectares compared to last year. Total output is estimated at 130,000 tons, dropping 65,000 tons over 2015. Around 23,000 tons of the total has ripened earlier than usual and this litchi is sold at VND45,000-60,000 per kilo in HCMC. Luc Ngan District can produce 70,000 tons of litchi, Luc Nam District 28,000 tons, Tan Yen District 8,000 tons, Lang Giang District 6,500 tons, Yen The District 12,000 tons, and Son Dong District 5,700 tons. Representatives of Co.opmart and Big C supermarket chains said they will help sell litchi farmed in Bac Giang Province and other northern provinces. Private firms spend big on transport projects Around VND186.66 trillion out of VND444.04 trillion (US$19.9 billion) was mobilized from the private sector to finance transport infrastructure projects from 2011 to 2015, heard a meeting in Hanoi on Tuesday. The Ministry of Transport held the meeting to review investments in transport infrastructure projects under the build-transfer (BT) and build-operate-transfer (BOT) formats in 2011-2015. As reported by the ministry, 62 projects were implemented under the two investment formats, with most of them using BOT for road construction. Enterprises are allowed to collect tolls from the roads and bridges they have built to recover capital. Private investments have helped improve traffic infrastructure but have exposed transport enterprises and people to heavy toll burdens. A recent report of the Economic Committee of the National Assembly pointed out risks and problems with BOT projects. Over the years, many BOT infrastructure projects have been put into use across the country while the legal framework for them is still inadequate, putting both road users and investors at risk. One of the most pressing issues concerning BOT projects is toll collection. There are currently 88 tollgates on national highways, with 74 of them managed by the Ministry of Transport and the remainder by provincial authorities. Some tollgates do not abide by a rule that requires two tollgates on the same route must be at least 70 kilometers apart. Deputy Minister of Transport Nguyen Nhat said to make toll fees reasonable, the ministry has requested the Ministry of Finance to issue a circular regulating the setting up of tollgates and fee collections, and consult people to address existing problems and ensure fairness and transparency. The Ministry of Transport said more than VND1,039 trillion would be needed for traffic infrastructure projects in 2016-2020. But the State budget can cover a mere 11% of the total, so it is essential to continue raising capital from other sources, including the public-private partnership (PPP) format, said the ministry. The ministry said it has submitted proposals concerning PPP investment to the Government for consideration and approval. Jan-May sees 36 SOEs going public The Steering Committee for Enterprise Reform and Development said 36 State-owned enterprises (SOEs) and two public service organizations went public in the first five months of this year. They comprised six large corporations, such as Vietnam Forest Corp and Vietnam National Construction and Consultants Corp. Of the equitized SOEs, eight were under the Ministry of Industry and Trade, eight under the Ministry of Agriculture and Rural Development, four under the Ministry of Defense, and two under the Ministry of Construction. A number of provinces that had no SOEs equitized last year have made progress this year. For instance, each of Nam Dinh and Gia Lai provinces let two SOEs undergoing equitization in January-May. However, provinces like Tien Giang, Binh Duong and Daklak, and the ministries of natural resources-environment and information-communications reported no equitized SOEs in the first five months. The committee said 61 SOEs have established their own steering committees for equitization and 77 others are conducting corporate evaluations. At a conference on SOE restructuring in late 2015, the Ministry of Natural Resources and Environment said it was hard for some SOEs under the ministry to evaluate their assets since they were having land in different provinces. The committee said 174 SOEs are scheduled for equitization in 2016-2020. In the 2011-2015 period, 478 SOEs went public, meeting 93% of the target. The figure in 2014 and 2015 totaled 432. Da Nang property market continues growth in H1 The property market in the central city of Da Nang has seen growth in major segments such as condotel, condominium and hospitality markets in the first half of this year. According to the report on properties in Da Nang in the second quarter, CB Richard Ellis Viet Nam Ltd Company (CBRE Viet Nam), one of the foreign property service providers in the country, reported that Da Nang's condotel market in the first half of 2016 showed a strong increase in new supplies with 2,436 units from six projects. New supplies caused the average asking price of high-end projects to go down by 4.8 per cent and mid-end projects increased slightly by 0.4 per cent compared to Q4 2015 while prices at luxury projects kept unchanged. In terms of sale activities, as of end of May 2016, those projects that were launched in the beginning of the year recorded an average sale rate of 63 per cent, while projects that were just launched a month ago still have a low sale rate. "Overall, both the condotel and second home markets saw lively movement in sales activity in 2015 and the first half of 2016, especially in increasing sales at launched projects. In particular, vacation projects managed by well-known operators offering fixed annual returns are proving attractive to investment buyers," Marc Townsend, managing director of CBRE Vietnam, said. Meanwhile, the condominium market started in 2016 with a strong increase in new supply. In the first half of the year, there were 1,000 newly launched units, an increase of 44.6 per cent year-on-year (y-o-y). The asking price of the high-end segment remained unchanged at US$1,623 per sq.m. In the first five months of 2016, CBRE recorded an estimated 1,000 sold units in the condominium market, up by 74.6 per cent y-o-y. Regarding the outlook, Townsend said, "Asking prices are expected to remain stable in most projects in the next quarter. Developers will continue offering incentives to encourage prompt payments. Notably, the new housing law which came into force on July 1, 2015, will bring opportunities for foreigners who are allowed to enter Viet Nam are also able to own condominiums and are able to lease, mortgage, contribute as capital, gift, bequest, exchange, etc. However, at present, the number of successful transactions made by foreign buyers has not increased dramatically due to a need for clarification on the legal situation, though there is clear foreign interest in the vacation property market." CBRE Viet Nam also reported that in the hospitality market, in the first five months, Da Nang welcomed a total of 1,471 new rooms from one five-star hotel, four four-star hotels and six three-star hotels, increasing the accumulated three- to five-star supply to approximately 11,275 rooms, of which three-star hotels make up the largest proportion of 41 per cent. From 2016 to 2018, the market is expected to welcome more than 3,000 new rooms from 16 under-construction projects. Of these, over 90 per cent will be beachfront properties. Experts find opportunities, challenges for furniture industry The home furnishings industry in Vietnam is at a turning point in terms of its global competitiveness, according to speakers at a recent workshop in Ho Chi Minh City. Higher labour, production, raw-material and shipping costs in Vietnam and across Asia in general have created opportunities for foreign competitors in markets like the US and Latin America to become more price competitive. “Recent studies have shown there is an increasing willingness for US consumers to purchase Made-in-Vietnam furniture,” said Dr To Xuan Phuc, an analyst for the Forest Trade and Finance Program, based in Hanoi. But in order to fully capitalize on that, Vietnamese manufacturers have to find a way to attract talented young production workers as “an aging workforce is rapidly depleting the skilled worker pool,” said Dr Phuc. Company executives must now manage their operations amid increasing margin pressure while combatting the onslaught of an influx of imported wooden furniture products into the Vietnamese market. Most significantly, complex new regulations brought about by free trade agreements such as the imposing certificate of origin rules, make running a business that much more difficult— all while running short on talent. To navigate these challenges, it’s incumbent upon those aspiring to become industry leaders to turn their focus to their strengths in new product development while implementing unique strategies to attract and retain top staff. The tough new environmental standards brought about by the EU-Vietnam Free Trade Agreement and the proposed Trans Pacific Partnership (TPP) just means the industry is heading for more turbulent waters ahead. “In markets such as the EU and the US,” said Dr Phuc, major furniture brands, by default, become responsible for their suppliers’ performance. This means that if a Vietnamese manufacturer is in the supply chain of a major global brand; and the local company violates the strict environmental regulations of one of the respective free trade agreements, it could be disastrous. “The local company will most surely be booted right out of the supply chain, if that were to happen,” said Dr Phuc. “They are not going to let a small Vietnamese company trash their reputation.” So, said Dr Phuc, local company needs to understand that getting into the supply chain of major global brands brings with it certain expectations as it relates to sustainability and environmental practices. In short, the furniture industry needs bright young hands-on workers who have the savvy to learn the business from the ground up. These workers need to understand that environmental performance is of paramount importance, as it directly impacts supply chain reliability and financial stability. Lastly, he said, new technology is transforming the industry. “While technology often brings with it a reduction in the size of the workforce, it creates an even greater need for skilled workers who understand and know how to operate the technology, said Dr Phuc. He cautioned that rising Vietnamese production costs also are making Mexico and other Latin American countries a more viable sourcing alternative for global brands, as has been the case for EU and US automobile manufacturers. Some Latin American countries manufacturing costs, including labour and transportation, are now even lower than in China and comparable to the lowest costs in Southeast Asia. Iron, steel production enjoys stable growth in five months Iron and steel product manufacturing posted stable growth over the first five months of 2016 with an output of more than 5.8 million tonnes, rising by nearly 1 million tonnes or 19.3 percent year on year. The expansion is about 2.6 times faster than the growth of the general industrial production index during the reviewed period, data from the General Statistics Office show. It is also an auspicious start for the industry to achieve the record productivity of 14.9 million tonnes this year, compared to about 10.92 million tonnes in 2011 and 12.5 million tonnes in 2015. The production growth is partly attributable to an increase in domestic demand as 12.53 million tonnes of iron and steel products were consumed from January to May, or more than 2.5 million tonnes each month. Exports of those commodities also climbed to over 240,000 tonnes a month during the period, the highest ever volume. However, export prices dropped 26.3 percent from a year earlier following a 13.5 percent fall in 2015. Meanwhile, over 1.58 million tonnes of iron and steel products were imported into Vietnam each month between January and May, much higher than the monthly average in the previous years. Import prices in the five months sank 32.5 percent year on year, leading to a decline of 1.45 billion USD in iron and steel import turnover despite a 50.5 percent surge in import volume. The strong import is said to help Vietnamese businesses prepare for future economic recovery but also put pressure on domestic manufacturing. Major coastal property projects launched in Da Nang Property developers have started constructing coastal projects in the central city in response to the rising prices of coastal property following the stagnant period in 2013-15. Reputable property developers, including Novotel, Fusion Suite and Sheraton, and local groups Vinpearl, Sovico, Furama, Da Phuoc Urban and Muong Thanh have all started work on their projects in the city. A manager at Thien Kim Property Transaction Centre in the city said coastal projects were priced at VND35 million (nearly US$1,600) to VND100 million per square metre during an eight-month period starting in the second quarter of 2015. "Most of the major projects began construction in late 2015 and early 2016, and these will be put into operation in two to three years," the owner of Thien Kim Property company, Huynh Thi Thanh Thao, said. "The price of small real estate projects, including terrace houses, villas and apartments, along the coast from Da Nang to Hoi An City had increased by 8-10 per cent in late 2015," Thao said. She said the sale of coastal property projects covering an area of 17-20ha was booming among speculators from Ha Noi and HCM City at unofficial transaction centres. Thao said she had witnessed 20 hotel projects valued at VND400 billion ($18 million), which had been sold between June and October last year. Nguyen Thi Kim Nu, a property developer, said foreign investors could earn plenty of profit from local properties as they would benefit from the difference in bank loan rates. "Local investors and businesses have to take loans from banks, with a 9 per cent interest rate, so foreign direct investors could provide more competitive low-interest loans to the Vietnamese market," she said. She said this was one way that foreign investors could benefit from preferential and promotional policies from the Government of Viet Nam. Huynh Tran Quoc, a property broker, said both local and foreign investors flocked to start work on a series of condotel projects in Da Nang from late 2015, with a promise of 9 or 10 per cent interest. Nguyen Minh Tuan, a member of Da Nang Real Estate Association, said Muong Thanh Group had sparked a boom in the property market in Da Nang when they started construction of its coastal complex of luxury apartments and hotels, offering 1,000 flats for occupation by 2017. Tuan said the Furama Ariyana Condotel project, which was developed beside the five-star Furama Da Nang resort, built in 2005, had also offered its beachfront apartments at an annual 10 per cent interest for investors over 10 years, making different promises of incentives in the form of preferential policies. Le Minh Hiep from VNG Land, a distribution agent of Coco Ocean Resort project, said the project owner had even offered a 12 per cent sublease rate for its condotel project. "The condotel project, which includes the Empire's Coco Bay Da Nang Tourism Entertainment Complex, was launched for sale at VND29.5 million ($1,300) per square metre, with a guaranteed sublease rate of 12 per cent interest over eight years," Hiep said. He said the VND14-trillion ($622 million) complex on the beach of My Khe, linking Da Nang and Hoi An from its location between two golf courses - the Montgomerie Links Viet Nam and Da Nang Golf Club - was seen as a favourite destination and ideal recreational habitat in the central region. Da Nang City is generally seen as a favourite destination for foreign investment in Viet Nam, taking the top spot on the Provincial Competitive Index (PCI) for the past five years. The city also hosted 4.6 million tourists, of which 1.25 million were foreigners, in 2015. According to the city's Investment and Promotion Centre, there were 2,988 new businesses in the first 11 months of 2015, up 45.9 per cent year-on-year, with registered capital of approximately VND10 billion ($440,000). Da Nang is the most mature coastal market, catering to a range of visitors, including traditional and MICE guests. Apart from its beautiful beaches, it is also the economic hub of Viet Nam. Most of its upscale accommodation is found along the white sandy beaches of Ngu Hanh Son District. In 2015, occupancy of the five-star segment was 67 per cent, the highest among the three cities including Nha Trang, Phu Quoc and Da Nang. The city also offers top-priority policies to attract significant investment from Japan and some Japanese investors have moved their plants from China to Viet Nam. Authorities put a stop to Aim Star direct sales Vietnam Competition Authority (VCA) under the Ministry of Industry and Trade announced to stop the direct selling activities of Aim Star Network Vietnam Ltd. According to VCA, the company is completing the procedure to dissolve. Aim Star Network Vietnam Ltd. is headquartered at 239 Xuan Thuy street, Cau Giay district, Hanoi. The legal representative is Thai national Panint Jhonlerkieat, who holds the position of managing director. Aim Star Network sells cosmetics and personal care products. Besides Vietnam, it also operates in the US, Japan, Myanmar, Thailand, and Cambodia. Aim Star Network Vietnam received the license to conduct direct selling activities in November 2014. Thai cosmetics and personal care products are very popular in Vietnam due to their reasonable price and high quality. In March, another Thai direct selling company, Giffarine Skyline Unity, which also sells cosmetics and personal care products, said that it was investing in a joint venture in Vietnam that would start operation by the end of 2016. Talking to the Bangkok Post, Giffarine president Nalinee Paiboon said the company plans to hold 20 per cent of the joint venture, while the remaining 80 per cent will be owned by its partners, a group of Thai businessmen. In addition to Thai products’ popularity among Vietnamese consumers, Paiboon named the big population and the country’s high economic growth relative to other ASEAN countries as the reasons the company sees huge opportunities in direct sales in Vietnam. Prior to Giffarine Skyline Unity, another Thai firm directly selling cosmetics and personal care products, Kangzen, set foot in Vietnam in 2014. According to market research company Euromonitor, Amway Vietnam Ltd. was the leading player in direct selling in 2015 in Vietnam, with a 21 per cent market share. Amway has been preserving its superior position in the Vietnamese market since 2010. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR