BUSINESS IN BRIEF 18/6 MoIT and UNIDO launch industrial development initiative The Ministry of Industry and Trade (MoIT) in concert with the United Nations Industrial Development Organization (UNIDO) ceremoniously launched a three-year US$1 million project on June 17 in Hanoi. The Republic of Korea is also a stakeholder in the project and has agreed to provide US$980,000 of official development assistance for it, said Le Huu Phuc, director general of the MoIT’s International Cooperation Department at the launch. The overriding goal of the project, said Mr Phuc, is to advance responsible and sustainable business practices, and to bring greater coherence and integration to the nation’s industrial development. He said the collaboration marks the first initiative to address corporate sustainability in the context of specific segments of the economy in Vietnam in an overarching initiative to capture existing best practices and scale up sustainability while simultaneously addressing the UN broader goals of human rights, labour, environment and anti-corruption. By identifying and encouraging the adoption of international best practice in sustainable industrial development, the project is expected to boost investments in manufacturing, drive innovation and promote skills development in Vietnam. It will also promote global cooperation amongst national and international organizations through the adoption of inclusive and sustainable industrial strategies, said Mr Phuc, and contribute to the achievement of the Sustainable Development Goals. Most importantly, he said, it will enable international exchange of knowledge and technology, foster manufacturing capabilities development and promote global value chains across key manufacturing segments of the economy. VinaCapital and DEG enter into wood industry VinaCapital’s Vietnam Opportunity Fund (VOF) and DEG, a subsidiary of Germany’s KfW Group, have announced a $30 million investment in the An Cuong Wood Working Joint Stock Company, one of Vietnam’s leading wood-working and decorative materials companies. VOF will contribute 70 per cent of the investment capital and DEG 30 per cent with two phases involved. Disbursement of $18 million in the first phase will be implemented immediately, with disbursement in the second phase to be made according to the business plans of An Cuong. An Cuong has committed to revenue growth and to meeting European and especially German environmental standards. “We are delighted to welcome VinaCapital and DEG as strategic shareholders,” said Mr. Le Duc Nghia, CEO of An Cuong. “One of the reasons we have entered into this transaction is because these two organizations bring not only capital but also expertise and a track record of working with investees.” Mr. Don Lam, CEO of VinaCapital, said that An Cuong has been on its radar for some time. “We are pleased to be partnering with DEG to help An Cuong further build on its leading position in the industry and enter a new phase of growth,” he said. VinaCapital is a leading investment and asset management firm headquartered in Vietnam, with a diversified portfolio of $1.4 billion in assets under management. DEG finances investments in private companies in developing and transitional countries. It promotes private business structures to contribute to sustainable economic growth and improved living conditions. DEG’s current portfolio in Asia amounts to $2.9 billion. The An Cuong Wood Working Joint Stock Company has been a leading player in wood-working and decorative materials in Vietnam since 1994 with a range of well-known brands from the US, Germany, Italy, Spain and Australia in wood and plastic-based panels widely used in the interior decoration of houses, apartment buildings, schools, supermarkets, and offices. According to a report from the Vietnam Timber and Forest Product Association (Viforest) in coordination with Forest Trends Organizations, Vietnam imported 4.79 million cubic meters of timber worth $1.66 billion in 2015, to cater to the wood processing industry. The importation of raw wood plays an important role in Vietnam’s wood processing industry meeting growing demand in domestic and foreign markets. In 2015, wood and wood product exports earned $6.9 billion in revenue, an increase of 10.71 per cent year-on-year, according to Vietnam Customs. Exports of wood and wood products are expected to earn $7.2 billion to $7.3 billion this year, for growth of 8 to 10 per cent. Vietnam’s wood and wooden products are found in 37 countries around the world. The US was the largest export market in 2015, with turnover $2.6 billion, followed by Japan with $1 billion and China $982.6 million. Romanian trade misses expectations Bilateral trade relations between Viet Nam and Romania still falls short of potential, a business conference heard yesterday in the capital. Nguyen Quang Vinh, the deputy general secretary of the Viet Nam Chamber of Commerce and Industry (VCCI), blamed the unsatisfactory performance on inadequate information about each nation's enterprises, as well as on difficulties in customs and payment which firms from the two nations encounter. The two governments plan new practical measures to increase future two-way trade, Vinh told the Viet Nam-Romania Business Forum. Vlad Vasiliu, the Romanian State Secretary of the Ministry of Economy, Trade and Business Environment, said businesses from his country want investment opportunities in electronics, electrics, telecommunications, information technology, agriculture, gas and petroleum in Viet Nam. Romania wants more Vietnamese investments in multiple fields, according to Oana Bizgan, Counsellor for the Minister of Economy, Commerce and Business Environment Relations of Romania. Bizgan's commented at a similar business forum on Wednesday in HCM City. Romania welcomes domestic and foreign investments and encourages enterprises to shift towards high-tech industries, Bizgan said. As the Eastern gateway to Europe, Romania is an appealing destination for foreign investors. Its advantages over other EU countries include lower labour costs and preferential tariff policies, she said. Two-way trade between the countries reached US$170 million in 2015, with approximately $102 million from Vietnamese exports. Trade reached a modest $46 million over the past four months. Viet Nam shipped mainly coffee, seafood, clothing, footwear, electronics and computers to Romania and imported wheat flour, machines and chemicals from the partner. Bilateral trade has not yet reached its full potential, so business communities should hold more joint trade promotion events and co-operate to complement each other, suggested Vo Tan Thanh, director of VCCI's HCM City branch. Vietnam attends Saint-Petersburg economic forum Hoang Quoc Vuong, Deputy Minister of Industry and Trade, and other ministry officials attended the 20th Saint Petersburg International Economic Forum, which opened in the Russian city of Saint-Petersburg on June 16. Themed "Capitalising on the New Global Economic Reality”, the three-day forum attracted over 10,000 participants, including government leaders and business executives from 60 countries and territories worldwide. It saw the presence of UN Secretary General Ban Ki-moon, among distinguished guests. Discussions at the forum focus on the global economic reality and the discovery of new sources for growth. In over 100 sideline events, about 200 leading experts and business managers are expected to discuss energy cooperation, investment, banking and high technology, among others. The Saint Petersburg International Economic Forum first took place in 1997 and it has since 2006 been held under the auspices of the President of the Russian Federation. Over the past decade, the forum has become a leading international venue for interaction among representatives of the business community. Agricultural sector focuses on recovering growth The agricultural sector must seek all possible ways to recover its growth, not only for the second half of this year but for years to come, said Minister of Agriculture and Rural Development Cao Duc Phat at a meeting with the press on June 16. Between now and the year’s end, the sector will focus on overcoming the consequences of natural disasters and restoring production, while grasping market information and proposing solutions to maintain domestic and foreign markets, he said. He urged the Department of Crop Production to coordinate with local authorities to help farmers re-plant perennial trees, replacing those destroyed by drought and diseases. Meanwhile, the Department of Plant Protection must control diseases and recommend measures to ensure safe vegetables, tea and pepper in order to restore customers’ confidence in Vietnamese agricultural products, he stated. Minister Phat asked the animal husbandry should promote production in a sustainable manner while closely supervising the use of pesticides and antibiotics to prevent the abuse of chemicals in breeding. According to the ministry’s report, due to the impacts of El Nino and climate change, prolonged drought has damaged nearly 250,000 ha of rice, 18,960 ha of other crops, 30,500 ha of fruit trees, and 149,700 ha of industrial trees. As many as 1,355 cattle and poultry died and thousands others faced water shortages. By the middle of May, total losses caused by natural disasters amounted to over 6.7 trillion VND (433 million USD). More food transparency urged By voluntarily providing information about their products, food producers can win consumers' trust, thus enhancing their competitiveness, a seminar heard in HCM City yesterday. Speaking at the seminar on Aligning Efforts to Ensure Transparency and Traceability in National Food Supply Chains, Vu The Thanh, a food safety expert, said for most consumers transparent information about food from the input to the production stage is extremely important. The information should then be verified by Government management agencies, he said. He also suggested that food producers should provide warning labels (for example, the product could cause allergies to certain users) as is the case in many countries. Nguyen Thi Hong Minh, chairwoman of the advocacy committee for the establishment of Food Transparency Association, said unsafe food is still widespread in the market, directly affecting people's health. The use of plant protection chemicals in farming, antibiotics in animal breeding and preservatives in foodstuffs is still common, and authorised agencies seem unable to control it, she said. What is safe to eat and drink remains a concern for many people, she said. The ratio of producers meeting food safety and hygiene standards is low, she said. Many companies have invested in producing safe food products, but consumers do not trust them because the "inspection and certification system has problems," she said. "Achieving safe food certification is only half the work, and the other half consists of building trust, market education, PR and marketing, and all these responsibilities fall on the shoulders of food producers." Stand-alone farmers and producers do not have sufficient resources and even certified safe food producers cannot survive without support from the market, she said. Safe food producers need to collaborate to communicate, promote and market their products to win consumers' trust, she said. The Food Transparency Association would link up responsible players in the food production chain for the benefit of society and the environment, she said. Nguyen Phuoc Trung, director of the HCM City Department of Agriculture and Rural Development, said the Food Transparency Association is necessary to bring food producers and traders together for building a safe food industry and improving the competitiveness of Vietnamese products, especially at a time of deeper integration. The city would increase inspections and deal severely with violations related to food production, processing and trading, he said. ADB trade finance programme increases Việt Nam presence The trade finance programme (TFP) of the Asian Development Bank (ADB) will provide guarantees worth up to US$20 million a year to support trade in Viet Nam. The ADB said in a news release on Wednesday that it had signed an agreement on support with the Orient Commercial Joint Stock Bank (OCB), which means the TFP now has 12 bank partnerships in Viet Nam. "Under this agreement, ADB and OCB will support exporting and importing companies, including small- and medium-sized enterprises (SMEs)," Steven Beck, the head of trade finance at ADB, said. "This agreement will help create economic growth and jobs." ADB said Viet Nam has consistently been one of the top five most active among 20 developing markets where the TFP operates. The programme has conducted nearly 4,500 transactions, supporting over $6.9 billion in trade in Viet Nam. Of these, roughly 75 per cent were for trade financing for SMEs. Viet Nam's economic growth has been increasing since 2012, with the gross domestic product (GDP) expanding 6.7 per cent in 2015 – its strongest in seven years. The growth has been propelled by a surge in foreign direct investment and export-oriented manufacturing. However, at least 70 per cent of the country's GDP is generated in cities and serious development challenges remain to make growth more inclusive, according to ADB. For instant, SMEs' access to trade finance remains limited with Việt Nam's banking sector not yet as developed as in other regional markets such as Malaysia, the Philippines or Thailand. As such, international banks either have limited or no appetite to take risks on Vietnamese banks. Backed by ADB's AAA credit rating, the TFP provides guarantees and loans to over 200 partner banks to support trade, enabling more companies throughout Asia to engage in import and export activities. Since 2009, the TFP has supported more than 8,000 SMEs across the region, with about 11,500 transactions valued at over $23.2 billion, in sectors ranging from commodities to capital goods, to medical supplies and consumer goods. Credit growth surges 5.48% in first five months Credit in the first five months of 2016 grew 5.48 per cent compared to the end of 2015, the highest for the past few years, according to the State Bank of Viet Nam's Credit Department. Compared with the same period last year, the credit surged 17.59 per cent. Given this increase, experts expect the banking industry to meet the 18 per cent credit growth target this year. General director of Vietinbank, Le Duc Tho, said that lending growth in his bank, targeted at 18 per cent this year by the central bank, has been good so far, reaching 6 per cent by the end of May. Lending to small- and medium-sized enterprises (SMEs) was the best. Many new SMEs have been set up and the economy has improved, helping boost the firms' capital needs, he said. Tho believes Vietinbank could meet the lending quota set by the central bank as it often rises sharply in Q3 and Q4. However, Tho said, depending on market demands, the bank could adjust the target after making a proposal to the central bank. Tran Van Tan, head of the Agriculture and Rural Development Credit Division, said the credit growth was made possible by the robust health of SMEs and their access to credit. While still requiring commercial banks to support businesses, the central bank has recently directed that monetary policies give top priority to ensuring the safety of the banking system and controlling inflation. "Credit institutions must balance their capital mobilisation sources and lending to ensure liquidity. Credit growth rates must be controlled in accordance with capital mobilisation and lending quotas allocated by the central bank to ensure safe credit growth and to help businesses with easier access to credit," according to the central bank. The central bank also asked commercial banks to be more careful with lending to industries that have witnessed high growth and high potential risks, such as real estate, Build-Operate-Transfer (BOT) and Build-Transfer (BT) projects. State Bank of Viet Nam has ordered credit institutions and branches of foreign banks to report their lending, capital mobilisation and interest rates in Vietnamese dong every month going forward. The reports must be submitted to the central bank's Monetary Policy Department on the 20th of every month, starting from June and lasting until the end of this year. The move is aimed at cutting lending rates to support domestic businesses and production. Many banks, such as ACB, Sacombank, VP Bank and Eximbank, have also lowered their deposit rates by roughly 0.1-0.2 per cent per year for the first time this year since the end of May. This deposit interest rate reduction is expected to help banks further cut lending rates. State Bank of Viet Nam Governor Le Minh Hung recently pledged that the banking system would try to cut the lending rate by roughly 1 per cent this year. The central bank also affirmed it would regulate the inter-bank rates in accordance with the market interest rate. Chinese businesses attend China-ASEAN expo in Hanoi Nearly 200 top Chinese enterprises are showcasing their products at the 13 th China-ASEAN Expo 2016 (CAEXPO 2016), which opened in Hanoi on June 16. The event, jointly held by the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade and the People’s Government of China’s Guangxi Zhuang Autonomous Region, sees the display of high-quality machinery, from food packaging machines and energy equipment to automobiles. Enterprises of the two countries will have the chance to enhance cooperation and advanced technology exchanges, while taking the advantages of the ASEAN-China free trade deals, contributing to promote competitiveness and efficiency in production. According to Deputy Minister of Industry and Trade Do Thang Hai, CAEXPO, an annual event organised in Nanning city, Guangxi province, serves as a venue to promote trade, investment and tourism between ASEAN and China. Meanwhile, Chinese Ambassador to Vietnam Hong Xiaoyong said that the event is held as part of the multilateral cooperation activities between ASEAN and China, which plays the host. This year, Vietnam is named as the Country of Honour, which is a mechanism first introduced at the CAEXPO 2007 to make it easier for a country to popularise its images during the event. It is chosen alternately among the 10 ASEAN member countries, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. Vietnam will also co-host sideline activities to celebrate the 25th anniversary of China-ASEAN Dialogue Relations, which helps the country re-affirm its role in ASEAN-China relations. Around 200 Vietnamese enterprises will attend the same expo to be held in Guangxi in September. The annual CAEXPO was first held in 2004 under the Chinese government’s initiative, with the consensus of ASEAN member countries at the seventh ASEAN-China Summit. Conference gives insights into TPP impact on Vietnam A three-day conference on impact of the Trans-Pacific Partnership deal on Vietnam convened in the southern province of Ba Ria – Vung Tau’s Vung Tau city on June 16. The event gathers representatives from the National Assembly (NA)’s Council of Ethnic Affairs, Standing Committee and Committee for External Relations, deputies from the south recently elected to the 14 th NA, experts and businessmen. Participants will delve deeply into the content of the TPP agreement, including chapters related to labour, intellectual property, technical barriers to trade, sanitary and phytosanitary measures, as well as rules of origin. They will discuss the role of the NA in ratifying the pact and overseeing its implementation. Vietnam’s commitments, legal gaps, law amendment options and the preparation of domestic firms are also subjects to be discussed. The conference will lay the groundwork for further discussion and for the vote on the ratification of the TPP, that is slated to take place at the first NA’s session in July. The event was co-organised by the NA Committee for External Relations together with the US Agency for International Development’s (USAID) Governance for Inclusive Growth Programme. The two agencies will continue their work together until December 2018 in a bid to encourage the participation of the National Assembly, ministries, businesses and social organisations involved in the national reform. JICA helps Vietnam with SOEs, bank restructuring Deputy Prime Minister Vuong Dinh Hue and Vice President of the Japan International Cooperation Agency (JICA) Kenichi Tomiyoshi have discussed policies on the restructuring of State-own enterprises (SOEs) and the banking system in Vietnam during 2016-2020. The tabled issues are the two major research programmes the Japanese agency is working on to give advice to the Vietnamese Government. During the meeting in Hanoi on June 16, Tomiyoshi and other Japanese experts raised systematic, fundamental and breakthrough proposals for SOEs restructuring as well as the settlement of bad debts and commercial banks with poor performance in the next five years. JICA would provide Vietnam with technical assistance in building policies in order to complete a legal framework dealing with bad debts and weak credit institutions, and to improve the performance of large-scale SOEs by using loans granted by strategic investors or Japanese banks, they said. Deputy PM Vuong Dinh Hue affirmed that enhancing macro-economic stability, accelerating the transformation of the economic growth model in tandem with economic restructuring in major areas and concretising development targets in a more rapid and sustainable fashion are among goals set by Vietnam in the next five years. He described JICA’s research on Vietnam’s restructuring of SOEs and banks over the recent past as a significant policy aid and consultation helping the Vietnamese Government reach the set objectives. The Government will ask relevant ministries and agencies to closely coordinate with the agency to promptly complete policy recommendations, the official said. The Deputy PM noted his hope that the Japanese experts will base their recommendations on Vietnam’s reality when they assess the restructuring and compare it with solutions Japan had applied successfully in the past, especially to bad debts and bank restructuring. He displayed his belief that with strong political resolve, the endeavours of local ministries, agencies and localities and with the support of international friends like Japan, Vietnam will successfully fulfill its economic restructuring targets and make more rapid and sustainable developments, he said. The official also thanked the Japanese agency for its support to Vietnam in building infrastructure in service of the country’s industrialisation and modernisation, thus contributing to the extensive strategic partnership between the two countries. Vietnam to apply international financial reporting standards Vietnam will soon apply international financial reporting standards (IFRS), which will require businesses to be well prepared to adapt to, experts said in a workshop held in Ho Chi Minh City on June 16. The event was co-organised by the Ho Chi Minh Stock Exchange (HOSE) and the Institute of Chartered Accountants in England and Wales (ICAEW) to discuss challenges and experience in applying IFRS, which are employed by more than 100 countries. At the workshop, HOSE Deputy Director Tran Anh Dao said Vietnam’s economy is gaining momentum in its global integration, which has not only brought opportunities to domestic firms but also required them to comply with international standards. IFRS are now a challenge to Vietnamese enterprises, she said, adding that there have been only a small number of commercial banks and major companies listed on the stock market practicing the standards. Listed companies are the first groups required to apply IFRS by the Finance Ministry, in line with the body’s roadmap for IFRS application by 2020. According to Dang Thai Hung, head of the Finance Ministry’s Department of Accounting and Auditing Policies, the standards will help enhance comparability and transparency. The National Assembly has approved a new principle included in the amended Accounting Law draft to facilitate IFRS practice in Vietnam, Hung said. Great chance for Vietnam to enter next production revolution Vietnam is holding a big opportunity to enter the next production revolution, which is happening around the world, Deputy Foreign Minister Bui Thanh Son has said. At a workshop in Hanoi on June 16, he elaborated that a new space for development has been opened thanks to intensive international integration and a young and industrious population able to quickly adapt to new technologies. The next production revolution, or the fourth industrial revolution, began at the same time with the breakthrough development of smart technology. It has been strongly developing in recent years amid a growing need for a new, more effective, and more sustainable production mode to efficiently cope with financial crises, climate change and aging populations, he noted. Son stressed after finishing negotiations on or signing new-generation free trade agreements (FTAs) like the Trans-Pacific Partnership or the bilateral FTAs with the EU and the Eurasian Economic Union, Vietnam has advanced to a very important stage of development that requires strong mindset reforms and high resolve to accelerate national industrialisation and modernisation. Alessandro Goglio, head of the Southeast Asia Division of the Organisation for Economic Cooperation and Development (OECD), said the next production revolution is just in the initial phase at present but critical to all countries, especially developing nations like Vietnam. The OECD is enhancing cooperation with Southeast Asian countries to boost bilateral dialogue, support the region’s connectivity and integration, and assist their policy priorities. Therefore, thorough studies and sharing information to identify the nature and impacts of the next production revolution are necessary, he added. At the workshop, participants mulled over the revolution’s features and its challenges to development, mindset and policy changes in the world, how to optimise opportunities and minimise the revolution’s reverse influence, and what Vietnam should do to tap into its potential amidst the revolution. Cover warrant rules due to be published soon The State Securities Commission (SSC) will soon complete and issue guideline for trading covered warrants and the new product will be available next year, Nguyen Son, Director of the SSC’s Market Development Development Division, said at a meeting on June 14. Covered warrants allow holders to buy or sell a specific amount of equities, currency or other financial instruments, usually from or to a bank or a similar financial institution, at a specific price and time. The development of covered warrants is the first step to prepare investors and derivatives market for more complicated products, including options, he said, adding that securities companies have improved their finance and risk management during the past few years to provide customers with high-value and reliable products and services. Vietnamese investors are afraid of making big investments, so covered warrants would be suitable for investors who are not adventurous and have modest incomes, thus attracting more investors, Son said. There are now two types of covered warrants, he added. The US covered warrant allows holders to trade before and during the due date, while Europe’s covered warrant only allows holders to trade during the due date. If Vietnam satisfies the requirements of the trading systems, those two types of covered warrant may be traded, but the Europe-style product is still preferred to the US-style, he said. The trading of covered warrants will boost trading liquidity on the stock market as holders can trade a specific amount of underlying assets, including equity, with securities firms at a specific price on or before a specific date, said Tran Thi Anh Dao, Vice Director General of HCM Stock Exchange (HOSE). HOSE has developed a guideline for the market and investors, and the southern agency has also developed a training programme for securities firms, she said. The SSC should remove the regulation requiring securities firms to report and publish warrant trading activities within 24 hours that could have big impact on shareholders’ rights, because those activities should be announced by public companies, Sagon Securities Inc’s representative said. If public companies do not bring their trading activities to the public, securities firms will not publish the information about the trades as it could violate the code of information security, and securities firms will also not publish information already announced by public companies, he said. Covered warrants should be traded within the trading day to increase the market’s trading liquidity and draw more investors, suggested Trinh Hoai Giang, Vice Director General of HCM City Securities Corp. The price margin of the warrant could be much higher than that of other underlying assets, and the price step should be smaller than that in the trading of shares and ETF notes as the face value of warrants is smaller than that of shares, he said. Khanh Hoa: Composite vessels reinforce tuna industry Composite vessel building for off-shore fishing, built under Government Decree No 67 in the south central province of Khanh Hoa, is enjoying robust growth as local fishermen and enterprises have realised benefits from such vessels, especially in the tuna catching industry. According to Deputy Director of the Institute for Ship Research and Development under the University of Nha Trang (Uniship) Phan Tuan Long, the institute launched four composite vessels in the first six months of this year. Reasonable price, low-maintenance costs, good velocity and better storage, as well as more flexibility compared to wooden ships for long off-shore trips have helped the orders for composite vessels surge against last year, he added. The province has the largest off-shore composite vessel fleet in Vietnam, operating mainly in the tuna industry. The province’s tuna catch reaches 23,000 tonnes a year, of which ocean tuna accounts for 4,000 tonnes. Deputy Chairman of Vietnam Fisheries Society (VINAFIS) and Chairman of Khanh Hoa Fishery Association (KHAFA) Vo Thien Lang said investing in post-harvest preservation techniques for composite vessel fleets will help to increase the value of tuna production. Decree 67, which took effect in August 2014, stipulates policies in investment, credit, insurance and tax incentives in support of fishermen and ship owners, who wish to build new or upgrade their existing boats and buy fishing equipment. The decree in practice is earning fishermen higher incomes. CIC - A flagship for sustainable cocoa development in Vietnam Vietnam is sitting on a big opportunity to expand its high-quality cocoa production and export, with a big boost from Cacao International Corporation (CIC), the first integrated agricultural company in Vietnam that has advanced sustainable cocoa production and sourcing methods. Over the past few years, cocoa remained one of the more stable agricultural commodities with a stable selling price. Specifically, since late 2014, while the prices of coffee and rubber were slashed by about $1,000, cocoa has produced an increase of about $1,000 to date.     Cocoa prices climbed 25 per cent in 2013 and continued to rise in early 2014, reaching $3,355 per ton last July. Currently, the farm gate price of one kilogramme of cocoa is $3.0, far higher than the $1.5 charged for coffee. Vietnam produces 7,500 tonnes of cocoa annually, most of which is exported. Amid the rising global demand for cocoa products, Vietnam caters for a large segment of the market. The price of cocoa, therefore, is expected to increase stably in the future. Mr Dinh Hai Lam, former Cocoa Development Manager at Mars Incorporated possessing over a decade of experience with cocoa development in Vietnam, told VIR that being the major exporter of only fermented cocoa beans in Asia, Vietnam is well-situated to meet Asian chocolate manufacturers’ strategic need for high quality cocoa. By engaging in professional production, many Vietnamese farmers are now producing more than two tonnes of dried fermented beans per hectare every year. Tran Xuan Quang, a cocoa farmer from Ea Na commune, Krong Ana district, Dak Lak province has three hectares of cocoa. “Last year, the productivity was 2.5 tonnes per hectare and our total revenue from the trees reached VND400 million ($18,180), making a total profit of VND300 million ($13,636),” Quang told VIR. “Cocoa plantations are about 30-40 per cent more profitable than rubber or coffee, we prefer cocoa to coffee”, he said. Over the past decade, Vietnamese cocoa production remained modest. The country has yet to build up a sturdy cocoa industry as the opportunities have largely passed under government radars undetected and have yet to see a specific cocoa development incentive policy. Instead, most cocoa development projects in Vietnam are backed by non-governmental organizations. However, these projects aim to reduce poverty and benefit poor households, who can hardly engage in cocoa plantation due to their poor finances and limited experience. Additionally, firms are not interested in investing in cocoa plantations. Apart from several companies like Mars, Puratos Grand Place and Cargills making an effort to give farmers technical training, other companies only focus on purchasing beans from them. “Last but not least, cocoa has yet to become widely known as an economical crop by farmers and enterprises,” Lam shared. Research of other sectors, such as rubber, coffee, tea, sugar, etc., revealed that to sustainably develop a sector, it is critical to ensure the participation of businesses and institutional investors through the establishment of large-scale farming and developing close linkages with surrounding farmers. In this model, businesses play a leading role in technology transfer, provide planting inputs, and ensure sales outlets for small households. “I think that there is a significant opportunity to invest in cocoa production and processing in Vietnam by implementing modern agro-technologies and methods at both corporate farming and production linkages with small farmers. This can be done through business partnerships, training, and community development,” Lam shared. Building on his venerable experience in cocoa development in Vietnam, Mr Dinh Hai Lam, along with several partners, had set up CIC, the first integrated agricultural company with advanced sustainable cocoa production and sourcing methods in Vietnam. CIC aims to acquire concession over 2,000 hectare land area to establish cocoa corporate farms. It also plans to develop on an additional 10,000 hectare through contract growing with middle class farmers and cluster growing with smallholders. Corporate farms are the most essential part of CIC’s business strategy, which will be equipped with the best cocoa plantation technology. It is scheduled to have 250 hectares of cocoa planted in 2016 and target to have 2,000 hectares of corporate farms by 2022. For cocoa contract growing, CIC will create a unique system of production linkages with middle class farmers. In this system, farmers may receive credit from or arranged through CIC to buy planting materials, fertigation systems, inputs, and other technical services from CIC. The products of these contract growers will be off-taken and pre-processed at CIC’s concentrated fermenting centres. The above example well illustrates how CIC supports middle class farmers and it should serve as a model of long-term co-operation between enterprises and farmers in the future. Mr. Quang’s family had received such assistance from CIC in technical training, fertilizers, and building a modern irrigation system, making it more convenient to water and care for the trees properly. Meanwhile, other nearby households often had poor crops, while his family prospered. “All of this is thanks to CIC’s support, especially the drip irrigation. We save time, labour, and water. During the severe drought in the first months of this year, many families suffered great losses, but we remained safe by using the economic irrigation system”, he said. For cocoa cluster growing, CIC will promote cocoa to small household farmers through Cocoa Development Centre (CDC) and Cocoa Village Centre (CVC), following Mars Inc.’s CDC/CVC approach. CIC will also focus on developing advanced farming mechanisms for its own corporate farms and for service provision to contract growers. Notably, environmental and social responsibility will be a rule of thumb in every aspect of CIC’s operations.  “CIC aims to become a leading company in the Asian cocoa upstream sector. We are providing Vietnamese cocoa growers and buyers a total solution package to make Vietnam an important and sustainable producer of high quality cocoa,” Lam stressed. Made-in-Vietnam industrial power generators exported to Cambodia A locally made power generator system produced by Sang Ban Mai JSC. (SBM) was exported to Cambodia at a ceremony held in the My Phuoc 2 Industrial Park, Ben Cat town, Binh Duong province on June 15. The exported system’s capacity ranges from 1,100KVA to 2,500KVA, for a total capacity of 8,600KVA with three 2,500KVA generators. The US$1.2 million generators were produced and installed by SBM from imported equipment of Perkins and Deepsea from the UK, Leroysomer from France and Mitsubishi from Japan. The system meets requirements of European standards and follows a test process in accordance with the international standard of ISO 3046 and the UK standard of BS 8528. At the ceremony, SBM CEO Tran Thanh Trong said that his company overcame other world-famous power generator producers to supply the products for Primalis Corporation of Cambodia, a leading high-quality rice processor in the neighbouring country. This proved that high-capacity power generators with good quality produced locally have created an important imprint and are competitive in the ASEAN market, Trong added. SBM is a local business producing industrial power generators, supplying over 300 generators with the SBMPOWER® brand name and 10-2,500KVA capacity. The generators are produced with a high localisation rate under strict conformity with quality standards and sold at reasonable prices, making it compete effectively in the local and regional markets. Lawyers describe business conditions in circulars as illegal Lawyers attending a conference in Hanoi on June 14 said the business conditions provided by ministries and ministerial-level agencies in their circulars run counter to the prevailing laws and rules. At the conference on business conditions held by the Vietnam Chamber of Commerce and Industry (VCCI), lawyer Truong Thanh Duc said Clause 5, Article 7 of the 2005 Enterprise Law stipulates that ministries, ministerial-level agencies, people’s councils and people’s committees are not permitted to determine conditional business sectors and business conditions.   However, around 4,000 business conditions have been found in circulars and other documents issued over the past years. Duc said those business conditions contained in circulars are against law.    Lawyer Tran Vu Hai said the ministerial circulars containing business conditions would be converted into Government decrees from July 1 to make them compatible with the Enterprise Law. This is wrong as well, he said. Hai said that to ensure laws are respected, all business conditions in ministerial circulars must be eliminated. Ministries should discuss business conditions relating to national and social security and the final decision will rest with the Government.     Nguyen The Hung, director of auto importer Ky Lin Trade Company, said Circular 20, issued in 2011 by the Ministry of Industry and Trade, stipulates that firms must be authorized by car manufacturers to import autos. This circular has since caused many local auto importers to go bust. He said the country had 200 auto importers in 2011 but the number has fallen to 20 this year. However, these small- and micro-businesses mainly trade second-hand cars. Dau Anh Tuan, head of the Legal Department at VCCI, said the circulars containing business conditions would be converted into Government decrees but VCCI has found no draft decrees ready for this conversion. Meanwhile, ministries and ministerial-level agencies do not have to collect comments from businesses when converting circulars.     Lawyer Tran Huu Huynh from VCCI said Vietnam has the biggest number of business conditions in the world. The more businesses conditions there are, the fewer companies a country has. Gas traders bemoan business conditions Many gas trading firms in the northern region of Vietnam have complained that they have been hit by a slew of complicated administrative procedures and business conditions. Representatives of companies based in the northeastern and northwestern parts of the country claimed that the Government’s Decree 19 on gas trading and the Ministry of Industry and Trade’s Circular 03 detailing certain articles in the decree have pushed many firms active in the field to the verge of bankruptcy. Ha Thanh Tung from Ha Giang Province-based Dong Tung Production, Trading and Service Co Ltd is one of the representatives. Tung said companies would find it hard to obtain a license if they closely observe Circular 03. In particular, under Article 9 of the circular, the application dossier for a license to bottle liquefied petroleum gas (LPG) must include copies of certificates of eligibility for LPG imports and exports, or certificates of eligibility for LPG distribution. However, as stipulated in Article 8, with the application for certificates of eligibility for LPG distribution, LPG distributors have to provide additional documents specified in Clause 4, Article 7. Those additional documents are in fact copies of certificates of eligibility for LPG bottling or contracts for LPG bottling. “We are aware that with such requirements, companies like us cannot get a license,” Tung said. Besides, Article 43 of Decree 19 says the certificate of eligibility will be granted to the applicant within 30 working days from the date of all required documents being submitted. If so, agents must wait for up to 135 days to get licenses for gas distribution, bottling and a general agent if they meet all requirements. Meanwhile, a previous decree required only seven days for the licensing duration. In addition to conflicting regulations, Tung also complained about the conditions, which he said are unrealistic for storage tanks and total capacities of LPG bottles for gas distributors. He said such requirements are not suitable for mountainous areas where consumption demand is lower than in other parts of the country. Food safety authority proposed for HCMC The HCMC Department of Home Affairs has proposed establishing a food safety authority which would operate under the city government. The proposed authority is deemed as crucial for the city to better control food safety. With a population of over ten million people, the city consumes a large amount of food a day and is a consumption center of domestically-processed and imported food. Every year, local dwellers consume around 287,000 tons of meat, over one billion eggs, one million tons of vegetables and 170,000 tons of seafood. However, local supplies can meet only 15-20% of demand, prompting people to rely on other sources with many of them having unclear origins and low quality. In its proposal sent to the city government, the department pointed out weaknesses in food safety management, overlapping functions of relevant agencies, inconsistent regulations on food inspection and quarantine, and mild punitive sanctions against violators. Therefore, the department said it is urgent for the city to improve control of food safety and solve inconsistent issues caused by relevant agencies. Food safety in HCMC is currently managed by the departments of health, agriculture-rural development, and industry-trade and district authorities. The city is expected to draw up an establishment plan in the third quarter of this year for ministries and agencies to comment before it is submitted to the the Prime Minister for consideration. The authority would be headquartered at 18 Cach Mang Thang Tam Street in District 1. Apparel firms struggling to find new orders Apparel exports grew well in the first five months of this year but many local enterprises in the industry are grappling with woes to secure new orders due partly to falling world demand, says a recent report of the Ministry of Industry and Trade. According to the report on industries and commerce, garment shipments amounted to US$8.6 billion in January-May, up 6.1% over the same period in 2015. However, the growth was ascribed mainly to foreign-invested firms while local enterprises had difficulty finding importers, especially of shirts, trousers and jackets. Pham Xuan Hong, chairman of the HCMC Association of Garment-Textile-Embroidery-Knitting (AGTEK), confirmed a lack of new orders for Vietnamese garment companies but said the situation was not too serious. Last year, local apparel enterprises pinned high hopes that the Trans-Pacific Partnership (TPP) trade agreement, which Vietnam and 11 other Pacific Rim countries signed in February this year, would bring more opportunities to them. But the market has not been as rosy this year as expected. Hong told the Daily that demand for apparel products on global markets has slid as consumers are tightening spending due to persistent economic uncertainties. In addition, importers have shifted a large volume of orders for simple products to other countries, including Bangladesh and Cambodia, to enjoy lower prices. That is why the apparel export target of US$31 billion for this year has been revised down to US$29 billion. According to the Office of Textiles and Apparel (OTEXA) under the U.S. Department of Commerce (DOC), the U.S. imported over US$32.9 billion worth of apparel in the first four months of 2016, down 3.29% year-on-year. Of the 10 biggest apparel exporters of America, seven countries saw declines in export turnover from the U.S. in this period. For example, China, the largest apparel exporter to the U.S., shipped over US$11 billion worth of garments stateside in January-April, down 5.88% (equivalent to US$695 million) year-on-year. Meanwhile, imports from Vietnam, the second largest exporter to the U.S., stood at over US$3.5 billion, up 2.82% (equivalent to US$98 million) over the same period a year earlier. State capital divestments from major firms slow Divestments of State capital from major companies, particularly those making profits, have been woefully slow over the years. Last year, the Government told State Capital Investment Corporation (SCIC) to withdraw State capital from a number of big enterprises but the divestment process has been moving more slowly than expected. The 10 enterprises from which SCIC has been allowed to take back State capital are Vietnam Dairy Products Joint Stock Company (Vinamilk), Bao Minh Insurance Corporation, Vietnam National Reinsurance Corporation, Tien Phong Plastic JSC, Binh Minh Plastics JSC, Vietnam Infrastructure Investment and Development JSC, Ha Giang Mineral and Mechanics JSC, Sa Giang Import Export Corporation, FPT Corporation and FPT Telecom JSC. SCIC has not unveiled specific plans to pull out capital from Vinamilk and Bao Minh Insurance. SCIC now holds a 45.06% stake in Vinamilk. The dairy firm announced at its general meeting last month that it is conducting procedures to raise foreign ownership, possibly to 100%. Dang Quyet Tien, deputy head of the Enterprise Finance Department under the ministry, said special mechanisms are needed to boost divestments of State capital from the 10 enterprises. However, he noted the divestments from these firms should not be done simultaneously as this may cause share prices to slump and leave negative impacts on the stock market. Many others that are profitable like Saigon Beer-Alcohol-Beverage Corporation (Sabeco) and Hanoi Alcohol Beer and Beverage Company (Habeco) launched their initial public offerings (IPOs) years ago. The State stakes in these enterprises are managed by ministries and agencies but they have yet to announce detailed plans to transfer State stakes to SCIC or to continue divesting State capital as required. In mid-September, the Vietnam Association of Financial Investors (VAFI) wrote to the Ministry of Industry and Trade saying that Sabeco and Habeco were equitized over eight years ago but they have not transferred State holdings to SCIC. The association cited the Government’s Decision 51/2014/QD-CP dated September 15, 2014 as showing that regarding enterprises transformed into joint stock companies before the date, representatives of State stakes in those businesses must coordinate with firms to complete procedures to list on the stock market and trade shares within one year after the decision takes effect. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR