BUSINESS IN BRIEF 3/7 HN seeks higher business ranking   Ha Noi will give priority to improving its business climate and competitive capacity, aiming to be among the top 10 localities nationwide in the Provincial Competitiveness Index (PCI) by 2020. The information was made public at the fifth conference of the Ha Noi Party Committee (16th tenure) held on Monday. The conference turned the spotlight on the socio-economic development plan for the period 2016-20, targeting Gross Regional Domestic Product (GRDP) growth of 8.5-9 per cent and per income capita at VND140-145 million (US$6,268-6,492). Social investment mobilisation is expected to be VND2.5-2.6 quadrillion in the next four years. In the economic structure, the service and construction industry account for 67-67.5 per cent and 30-30.5 percent, respectively, while agriculture makes up 2.5-3 per cent. Regarding urban infrastructure development, the capital city is striving to become a green and modern urban area. Its target is to increase the rate of public transportation to 20-25 per cent, zone off 10-13 per cent of urban land for transportation and make the city greener by planting one million trees. The secretary of the municipal Party Committee, Hoang Trung Hai, highlighted the city's economic growth in the first half of this year, noting that concerted efforts needed to be made to realise an economic growth rate of 10-11 per cent in the remaining six months of the year. Priority should be given to investment attraction, simplifying administration procedures and developing a transparent administration system, Hai added. Concerning the city's socio-economic development plan, he stressed that attention should be paid to the balance of resources to effectively implement the strategic tasks set out. Malaysia to import chillies from Vietnam due to limited supply Malaysia’s Penang state authorities plan to import chillies from Vietnam to meet increasing demand during the upcoming Hari Raya Adilfitri festival. The New Straits Times on June 24 quoted Penang Director of the Federal Agricultural Marketing Authority Habibah Sulaiman as saying that chilli is an indispensable food ingredient of local residents, particularly during the festival. Chilli output in Malaysia plunged due to El Nino, leading to the shortage of supply, which provides a chance for Vietnamese chilli exporters. She also spoke highly of Vietnamese chilli quality. One kg of chilli currently retails at nearly 20 MRY (4.92 USD) in Malaysia. Vinacomin exerts greater efforts to ensure national energy security The Vietnam National Coal and Mineral Industries Holding Corporation (Vinacomin) on June 28 put into operation a coal sorting factory and a coal transporting system in the northern province of Quang Ninh. Construction of the Lep My coal sorting factory began in September 2014 with a total cost of 870.2 billion VND. Meanwhile, the 651 billion VND Lep My-Port 6 Km coal transporting system project started in November 2015. A Vinacomin representative said the factory is of significance as it helps realise the group’s development strategy, meet the demand for coal to fuel the national economy and ensure national energy security. The representative said that investments have been poured into mine construction, environmental protection, and effective and safe production. The projects have satisfied the country’s coal industry development planning to 2020 with a vision towards 2030 approved by the Prime Minister, the representative noted. According to Vinacomin, as of November 2015, the group produced 34.7 million tonnes of raw coal, equal to 93.1 percent of the yearly target and up 2 percent over the same period the previous year. It sold 32.4 million tonnes of coal, or 92.8 percent of the yearly target, up 3.5 percent year-on-year. In the period, the group’s revenues were estimated at nearly 98 trillion VND (4.3 billion USD), equivalent to 93.4 percent of the yearly target. Vinacomin, the country's largest mining firm, was established on October 10, 1994. Can Tho: work starts on Bun Xang lake project Work on the Bun Xang lake project in Ninh Kieu district, in the Mekong Delta city of Can Tho began on June 28, using the World Bank’s loans. With total investment of 222 billion VND (nearly 10 million USD) sourced from the World Bank’s official development assistance (ODA) sources and the locality’s counterpart capital, the p roject is scheduled to be completed after 20 months of construction. It will focus on dredging 12.6 ha of lake-bed, building 2,830 metres of road and 2,500 metres of embankment surrounding the lake, along with separate rain water and waste water drainage systems, and water and electricity supply systems, and green space, among others. This is the last project within the urban upgrading project in Mekong Delta region – Can Tho city subproject. It aims to improve environmental sanitation, increase water reserves and regulate water along the Bun Xang lake, towards preventing flooding in the city’s central areas and bettering living condition for the locals. The project is also expected to make the city greener, cleaner and more beautiful, thus attracting more visitors. Implemented from 2012 to 2017, the WB-funded subproject comprises of 30 construction package deals worth over 90 million USD. The districts of Cai Rang, Ninh Kieu, Binh Thuy, and O Mon are benefiting from the project.- Quality improvement key for farm produce exporters to EU Meeting the EU’s quality standards and demands in corporate social responsibility are key for Vietnamese exporters of agricultural products to succeed in the European market, heard a conference held by the Vietnam Chamber of Commerce and Industry (VCCI) in Hanoi on June 28. Many economists at the event agreed that so far, domestic firms have yet to make good preparation to tap all benefits from the EU-Vietnam free trade agreement (EVFTA), including advantages in tariff. According to Nguyen Tuan Hai, deputy head of the VCCI Department for International Relations, held that Finland and Northern Europe, with long winters and high demands for agricultural products and seafood, are promising markets for Vietnam . Furthermore, the governments of Finland and Northern European countries consider Vietnam as one of the few countries that should receive support and encouragement in exporting activities to their markets, said Hai, who is also director of a project to support businesses in Finnish and Northern European markets (Project FLC 14-04). Currently, the EU is one of the top markets of Vietnam ’s agricultural and fishery products, including coffee, cocoa, peppercorn, cashew and shrimp. Vietnam ’s export makes up nearly two thirds of the total trade between the two sides. The EU is also a potential market with high and stable consumption. However, many Vietnamese farm products are experiencing a drop in volume, price and market share. For instance, the percentage of Vietnamese tea exported to the EU fell to seven percent in 2014 from 20 percent in 2007, due to a lack of an origin certificate and high chemical residues. Participants at the event noted that many enterprises have stayed confused in expanding marketshare in the EU. Many firms are still exporting raw products, thus decreasing added value as well as job opportunities for Vietnamese labourers. Cao Thanh Diep, deputy head of the ASEAN Desk under the Ministry of Industry and Trade’s Multilateral Trade Policy Department, emphasised that Vietnamese farm produce exporters should build trademarks for their products to raise competitiveness. Also, they need to study the EU market carefully, as it requires high product quality as well as corporate social responsibility, she added. Vietnamese youth win Canadian business plan competition A competition for students or recent graduates to resemble the real-world process of starting a business venture has just concluded for Vietnamese students at colleges and universities in Canada’s Greater Toronto Area. “Our goal was for students to gain real-world experience while developing and growing a new business based either on their own ideas and technologies or those developed by others, said a rep from the Canada-Vietnam Society, one of the organizers.   The goal of the competition was to actually see the students get the business presented up and running. There were three competition tracks, said the rep. Entries were made in the innovative venture category if they incorporated new technologies, products and processes that generally involve intellectual property. Alternatively, the entrepreneurial venture track focused more on traditional retail, manufacturing, or service ventures including new or expanded operations. Or lastly, the new product development class was for start-ups that pursued innovative solutions to social problems and adopted a mission of creating and sustaining social value. These ventures could be set up as a non-profit organization or as a profit-oriented business with a social mission. The return on investment (ROI) for the projects was measured by an impact analysis and/or a financial ROI. The competition garnered a lot of participation from a large number of students said the rep, noting that Nguyen Tran Tuan from Queen’s University developed an inspirational business forum to help Vietnamese students connect to graduates from universities in foreign nations. The overriding objective was to provide accurate and complete information to prospective students on advantages and disadvantages of studying abroad. Another student, Nguyen Thu Huong presented a fascinating plan on teaching the language and culture of foreign countries in association with other subjects to young children prior to their departure for studies overseas. Huong though this would help parents feel at ease knowing their children would be safe while studying in Canada. Tran Vinh An and Phan Thanh Tung won the first place prize of US$400 for their best business plan while Nguyen Tran Tuan and Nguyen Thu Huong also received an award of US$150 each. Catfish exporters trash nation’s image abroad Catfish exporters continue to display a disdainful attitude towards foreign customs procedures that is ruining the Made-in-Vietnam label in foreign markets, said Nguyen Viet Thang, president of the Vietnam Fisheries Association (VFA). In the latest development, US Cato Holdings Inc., just recalled 12 metric tons of Sea Queen brand Swai fillets from Vietnam because they had not been inspected for antibiotic and other chemical residue. The large recall is clearly a blow to the Vietnam catfish industry who would like to see the USDA – continuous inspection – program discontinued, a move the US congress has taken under consideration. If discontinued the recently implemented catfish inspections, which effectively serve as a non-tariff trade barrier to trade, would be dismantled and responsibility for inspections returned to the US Food and Drug Administration, as has been the long-established protocol. News that the catfish is being recalled because the Vietnamese company dodged inspections for banned antibiotics has the US House of Representatives, Senate and American citizens in an uproar. The Vietnamese company in question has broken US food safety laws multiple times, and this is a practice that can’t continue, said US Representative Rosa DeLauro from Connecticut. She added that the US cannot allow Vietnamese to ship catfish to US supermarkets and put American health at risk. But it gets worse, because the US representative went on to say this fact is outrageous and a practice that must be stopped— and we can discourage the practice directly by not approving the Trans-Pacific Partnership (TPP). The US does not need toxic catfish in its food supply, said the US congresswoman, any more than it needs the TPP. When foreign food companies a half a world away are trying to skirt our rules, we need a robust food safety system — which includes keeping USDA in charge of catfish inspections — as well as trade agreements that protect American consumers. The USDA warned consumers who have purchased the recalled Vietnamese Swai from Sea Queen to not consume it, and to return the product or throw it in the trash. The US Senate narrowly voted to end the USDA catfish inspection program last month, sending the measure to the House of Representatives, which will now decide whether to end or continue the inspection program. Statistics of the Ministry of Agriculture and Rural Development show that catfish exports spiralled downwards 7% year-on-year to 358,508 metric tons in the five months leading up to June of 2016. Meanwhile the total value of exports for the January-May period jumped 4% year-on-year to US$435 million, with the US market accounting for a 22% market share. However, last year exports were off by 11.5% in value from 2014, said Mr Thang, so for the two-year period exports are still overall down 4.5% in value and an even more staggering figure in volume. This is truly a discouraging number that does not bode well for sustainability of the industry, said Mr Thang. It’s time to take decisive actions to thwart actions by Vietnamese exporters that trash the reputation of the Made-in-Vietnam label in foreign markets, said Mr Thang, adding that the VFA has asked MARD to widely publicise names of companies that do so. Confidence in economy rise Vietnam’s economy continued to recuperate in this year’s first half, spurred on by a recovery in production and enterprises’ growing confidence. Mai Tien Dung, Minister and Chairman of the Government Office, has told VIR that in this year’s second quarter, the economy was expected to grow more than in the same period last year (6,44%), and higher than the 5.6% recorded in this year’s first quarter. Although the exact figures have yet to be released, it is forecast that in this year’s first half, the economy will grow over 6% year-on-year. ‘Local production is bouncing back, with firms’ confidence significantly improving’, Dung said. ‘The prime minister is determined to boost economic growth by removing all obstacles to enterprises’ operation. He wants to build a more business-friendly government so that the economy can grow 6.7% this year and 6.8% next year’, he added. ‘For example, all sub-licensing must not be enacted, and any violator will be strictly punished’. Nguyen Van Diep, sales engineering manager of Japan’s Fujikura Fibre Optics Vietnam in the southern province of Binh Duong, told VIR that he felt ‘quite optimistic about the economy’s prospects thanks to the government’s strong will’. In this year’s first six months, the firm grew 40%, a two-fold increase from 20% in last year’s corresponding period. ‘The local Internet equipment market is showing strong expansion. We are expecting a 50% growth revenue rate for 2016’, Dep said. During his June 16-17 visit to Vietnam, the Asian Development Bank’s (ADB) president Takehiko Nakao told Vietnam’s leaders that the ADB was upbeat about Vietnam’s economic prospects. The ADB expects an economic growth rate of 6.7% in 2016, equal to 2015’s growth rate. The bank predicts that growth will remain robust at 6.5% in 2017. Ponpimon Petcharakul, the minister counselor (commercial) from the Thai Embassy to Vietnam, told VIR that ‘Vietnam’s economy is convalescing strongly and we are seeing big potential from Vietnam’s economic prospects. Thousands of Thai firms are planning to do business in Vietnam across many sectors.’ For example, Komol Wongthongsri, a representative from a major Thai group, said the group was considering an investment of about US$100 million in Vietnam’s agricultural and waste treatment projects. ‘Vietnam’s macro-economic situation is quite stable. Thailand and Vietnam are close in geographical proximity, which can help us save a lot in costs’, he said. Also optimistic about Vietnam’s economic outlook, HSBC expects the economy’s year-on-year growth rates will be 6.1%, 6.6%, and 6.7% in the second, third and fourth quarters, respectively, rising from just 5.6% in the first quarter. HSBC’s forecast is at 6.3% year-on-year for full year 2016, and 6.6% for 2017. According to HSBC, the manufacturing purchasing managers’ index marked a ten-month high in May, rising to 52.7. The improvement was led by a strong rise in new orders, which suggests that the pick-up in manufacturing activity can be sustained in June. Both industrial production and exports ate tracking higher sequential growth in 2016’s second quarter. Credit rating agency Fitch recently confirmed Vietnam’s stable outlook and BB-rating. Fitch based their decision on Vietnam’s strong macro-economic performance, supported by a steady inflow of foreign direct investment, favourable political developments that demonstrate a state-wide willingness to prioritise market-friendly reforms, and positive spillover from the potential ratification of the Trans-Pacific Partnership. Startups number 54,500 in Jan-Jun More than 54,500 new firms have been set up with total registered capital of VND427.76 trillion (US$19.14 billion) in the first half of this year, increasing 20% and 51.5% year-on-year respectively, showed data of the Ministry of Planning and Investment. More than 14,900 companies have resumed operation in the period, leaping 75.2% over the same period last year. Newly registered capital in the economy in the January-June period would amount to about VND1,202 trillion (US$53.8 billion) if the additional capital registered by operational firms is included. Startups in almost all sectors have increased in the period. There are 1,354 startups in the real estate sector, a year-on-year increase of 111%. The healthcare and social support sector comes second with an 80% rise, followed by education and training with 40%. New firms in science and technology, consulting services, design, advertising and other sectors have grown 32.8%. However, only 691 enterprises have been set up in the arts, entertainment and recreation sector, down 32.2% from the same period last year. Registered capital of property startups in January-June has totaled VND107.9 trillion (US$4.83 billion), surging 359.1% from a year ago. The mining sector has got freshly registered capital of VND19.26 trillion (US$866 million), up 290% year-on-year. The respective figures are VND15.78 trillion (US$710 million) and 276.6% in the information and communication sector; VND26.12 trillion (US$1.17 billion) and 145.8% in science and technology, consulting services, design, advertising and other sectors; VND20.2 trillion (US$909 million) and 123.8% in production and distribution of electricity, water and gas; and VND8.44 trillion (US$379.8 million) and 111.1% in the financial, banking and insurance sector. Some sectors have seen newly registered capital lower at new firms in the period, including the arts, entertainment and recreation sector with registered capital falling 28.4% year-on-year. The drops are 19.9% for the construction sector; 17.8% for job placement, travel, machinery and equipment rental and other support services; 17.5% for transport and logistics, and 7.2% for wholesale, retail, auto and motorcycle repair. Startups plan to recruit a total of 645,100 employees, down 0.97% year-on-year. More than 12,200 enterprises have suspended operation and over 18,900 firms have stopped operation without registration or waited for dissolution, up 37.1% and 4.2% year-on-year respectively. Shopping website financed to expand operation Leflair Vietnam, which is a shopping website for top brands, has announced an investment from global venture capital fund 500 Startups to expand business in Southeast Asian markets. Edward Thai, a venture partner with 500 Startups, confirmed the investment with the Daily via email, saying that the two sides have almost finished related investment procedures. Leflair Vietnam did not disclose the investment but said the financing would help the firm expand operation in the Southeast Asia region as well as diversify products and brands offered for sale to local customers. The e-commerce business was cofounded in March 2015 by Loic Gautier and Pierre-Antoine Brun, a former senior executive at online shopping platform Lazada, to meet Vietnam’s growing demand for luxury brands. Leflair Vietnam said in a statement that after more than three years of working in Vietnam the cofounders had decided to open the business via the website www.leflair.vn to bank on rapid growth in Vietnam’s middle class people and their increasing spending on luxury brands. Gautier said Leflair Vietnam provides luxury brand lovers with a trustworthy shopping site, which has served almost 160,000 shoppers since it was launched last December. Expert: 2016 GDP unlikely to grow 6.7% Former Trade Minister Truong Dinh Tuyen has said it is difficult to achieve this year’s gross domestic product (GDP) growth target of 6.7% as set by the National Assembly (NA). Speaking at a conference on Vietnam’s economy this year and next held by PTI Education Group on Sunday, the economic expert said the nation is grappling with a number of problems such as soaring budget deficit and public debt. Despite efforts of the Government, ministries and agencies, the effort to settle bad debt has not produced as good results as expected since the country lacks resources and legal grounds to deal with mortgaged assets and does not have a full-fledged debt trading market. Therefore, most bad debts have been sold to Vietnam Asset Management Company (VAMC).   Deposit interest rates for all tenors are on the rise, making it hard for banks to keep the same lending rates as in 2015. This will hit local enterprises, especially medium and small ones, Tuyen said.   Moreover, drought and saltwater intrusion in the Central Highlands, south-central and Mekong Delta regions have dealt a blow to farming this year and their impact on crops is forecast to linger until next year. GDP of the agricultural sector in the first quarter fell by 1.23% year-on-year while industrial expansion stood at 6.72% in January-March, well below 8.74% in the same period last year. Vietnam’s GDP expanded by a mere 5.46% in quarter one, down 0.66 percentage point from a year earlier. Tran Dinh Thien, director of the Vietnam Institute of Economics, told the conference that economic instability in Vietnam has resulted from the nation’s heavy reliance on imports, especially from China. It is risky for Vietnam to buy a large volume of materials from a single nation. Thien added the industry sector concentrates on assembly and mining rather than manufacturing, which is another major challenge. Many Vietnamese firms have underperformed and foreign direct investment (FDI) businesses have been the major driver for economic growth. At a cabinet meeting in Hanoi in early May, Prime Minister Nguyen Xuan Phuc urged ministries and agencies to do whatever it takes to obtain GDP growth of 6.7% and control inflation this year despite fresh problems arising. However, Tuyen said, this year Vietnam should spare no effort to stabilize the macro economy and should not achieve the GDP growth target at any costs, and that even GDP growth of 6.5% for 2016 would be fine. Tuyen called for the country to continue economic restructuring though it may hurt economic growth in the short term. GDP growth depends on the business environment. At present, firms’ transaction costs total a hefty US$20 billion per annum, equivalent to 1% of GDP, Tuyen noted. Binh Phu wins big deal to supply furniture for Bangkok hotel Local furniture company Binh Phu has secured its biggest order ever to supply US$1.2 million worth of in-room furniture for Thai retailer and property developer Central Group’s forthcoming six-star hotel in Bangkok. Under the deal, Binh Phu will deliver desks, sofas, mirrors, TV cabinets and chairs produced at its factory in the southern province of Binh Duong next month for the hotel which is slated to open late this year. Binh Phu’s general director Nguyen Thuy Trang said in a statement that Central Group’s new Park Hyatt hotel had given the local firm an opportunity to showcase its products to guests at the high-end hotel featuring an innovative architectural design. Spokesperson of Central Group Jariya Chirathivat said that while looking for a supplier of products meeting the standards for the six-star Park Hyatt, the group found Vietnam’s furniture meeting its requirements. “We have been a sustained investor in Vietnam in the past, and this deal reflects our desire to continue to work with partners in Vietnam to showcase their products and develop their businesses both locally and around the world with our network of businesses in Thailand and around the globe,” the spokesperson said. She added the group will work with Vietnam’s Ministry of Industry and Trade to set up an exhibition inside Central World to showcase Vietnamese products, cuisine and Binh Phu’s fine furniture. Park Hyatt Bangkok commissions Vietnam’s wooden furniture Thai Central Group has signed a contract with Phu Binh Company to buy luxury furniture worth US$1.2 million for six-star hotel Park Hyatt to be inaugurated in Bangkok soon. A batch of goods including tables, sofas, mirrors, television cabinets, and chairs made at a factory in Binh Duong will be shipped to Bangkok in July. Nguyen Thuy Trang, Director General of Binh Phu Company, said this is a good opportunity for the company to introduce its goods to Thai customers. Jariya Chirathivat, a Central Group representative, said Central Group has looked for a potential supplier of high quality products around the world and Binh Phu is a good choice. Vietnamese furniture can conquer the world market. Central Group is involved in merchandising, real estate, retailing, hospitality and restaurants. In Vietnam, It holds 49% of shares at Nguyen Kim Group and owns Big C Vietnam. It also has a chain of Robin stores in Hanoi and Ho Chi Minh City. Binh Phu Company has exported its products to many countries in the world. Vietnam becoming a magnet for technology firms, but problems persist Apple may invest $1 billion in Vietnam to build a research and development center, most likely to be located in Hanoi, to serve the entire Asian region. Government agencies are suggesting locations and assisting with administrative procedures. The move closely follows the incorporation of Apple Vietnam LLC last October. With a capital of VND15 billion, or more than US$667,000, Apple Vietnam LLC is licensed to export, import and distribute Apple products and services. Apple’s investment plan comes in the context that other electronics giants like Samsung, LG, Microsoft, Intel, Canon, Panasonic, and Toshiba, helped by new free trade pacts and cheaper wages than China, are expanding their investment in Vietnam. Last month, LG Display Group, the screen-making subsidiary of South Korea's LG Electronics, started work on a US$1.5-billion factory in the northern city of Hai Phong. The factory is slated to begin operations next year, producing digital displays using the company’s latest organic light-emitting diode, or OLED, technology. The 40-hectare plant in Trang Due Industrial Park is expected to provide around 6,000 jobs. In March last year LG Electronics opened a $1.5-billion factory to produce digital devices and electronics such as TVs, cell phones and washing machines in Hai Phong. “Getting investment from multinational companies like Apple, Samsung, and LG means that capital inflows have shifted from low value-added industries to higher ones. This is what we have wished for for many years,” Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises, said. Until lately Vietnam has mainly seen foreign direct investment in labor-intensive industries like garment and footwear. The government has in recent years prioritized FDI in technology, which would create greater value for the country. It has approved a $300-million research and development project in Hanoi by Samsung Electronics Vietnam, the country's single biggest investor. Samsung secured approval late last year to increase its investment in another electronics facility to $2 billion. Its operations around the country include assembly of smartphones and televisions. Tech behemoths like Microsoft and Intel have also already made the move to Vietnam from China, where labor costs have shot up. This shows that Vietnam is a good destination for foreign high-technology companies, Mai said. Exports of technology products, mostly by foreign investors, are also increasing. Shipments of electronic products, computers and their components saw a year-on-year rise of 5.4% to US$6.34 billion in the first five months of this year, while those of cell phones and parts rose 20.6 percent to US$14.4 billion, according to the General Statistics Office. Vietnam faces fierce competition from other ASEAN members like Indonesia, Thailand and Malaysia in attracting FDI in technology, creating pressure on the government to encourage investors. Mai said: “Over the past decade our policies to attract FDI have not changed much. In fact, we still place priority on labor-intensive projects. Our incentives for hi-tech projects have not met investors’ demands.” Investors in the technology sector have different requirements compared to those in such fields as textiles and garments and footwear. Most hi-tech investors are from developed economies like the US, EU, and members of the Organization for Economic Cooperation and Development, who have stringent requirements with regard to legal transparency and the guarantee of intellectual property rights, he said. Weak supporting industries are also a barrier to foreign investors in the high-tech sector. Yutaka Watanabe, general director of Towa Industrial Vietnam, a Japanese producer of precision machines parts used in vehicles, recently said that manufacturers have been facing many troubles looking for materials in Vietnam. The company, which started operating in Vietnam in 1995, has to import most of what it needs from Thailand. This causes costs to surge by 18%, but Watanabe said local suppliers in Vietnam cannot meet the high technical demands of the precision industry. Vietnamese suppliers need more money and the government should provide funding to help them upgrade production capability, he said, adding that Japan has helped its own businesses that way. Yasuzumi Hirotaka, a representative of Japan’s trade promotion agency JETRO in Ho Chi Minh City, said Japanese firms in Vietnam only have local content of 14-odd percent, which means more than 85 percent of the materials and parts they need have to be imported. Neighboring countries like Thailand and Indonesia have seen local content surpass 20 percent. Vietnam would be able to pull in more foreign investment if the government offers better support to supporting industries, Hirotaka said. Mai said supporting industries, despite being a major concern for foreign investors, have not developed for many years. He said Vietnam's has been stuck in mostly assembling work for more than 30 years. He said the problem has been that the government does not have specific policies to support them. Another barrier to FDI in Vietnam is red tape. Many foreign firms have complained about the vague and complicated laws that require them to spend a lot of time working directly with officials. They also want tax and customs regulations to be simplified. Foreign investors have ploughed an estimated US$7.25 billion in the first half of this year, up 15.1 percent from a year ago, according to the Planning and Investment Ministry. FDI pledges in the period surged 105.4 percent from a year ago to US$11.3 billion, with most of them going into manufacturing, processing and property, the ministry said. Challenges faced by garment and textile industry ahead of TPP Vietnam’s garment and textile industry is targeting to earn an export revenue of US$31 billion in 2016, up 10% against the previous year. The figure is expected to be met in the near future, with motivation stemming from the recently-signed Trans-Pacific Partnership (TPP) and European Union-Vietnam Free Trade Agreement (EVFTA). However, many leading businesses in the sector are facing declines in the number of orders and export prices, which makes it very difficult for them to achieve the envisaged goals. Vietnam’s garment and textile exports only reached nearly US$8.5 billion in the first five months of the year, registering a year-on-year surge of 6.1%. As reported by a number of enterprises, export orders tended not to increase, which was accompanied by a decline in export prices and increase in production costs (comprising labour cost, electricity and water, insurance), resulting in a lot of drawbacks in manufacturing and distributing products. Similar circumstances are taking place more severely among small and medium-sized enterprises, which are facing fierce competition with regional opponents from Laos, Cambodia, Myanmar and Bangladesh. This indicates that Vietnam’s garments and textile industry is being confronted with numerous challenges as consumers have been switching part of their orders to several other countries such as Cambodia, Myanmar and Laos due to export tax incentives to Europe and the US – the two largest export markets of Vietnam’s garment and textile sector. Meanwhile, Vietnam’s garment and textile exports to the US and EU are subject to an average taxation of 17% and nearly 10% respectively. If nothing changes, it is not until mid-2018 that the roadmap of tax reduction under TPP and EVFTA will take effect, which will therefore bring about a lot of disadvantages for Vietnamese enterprises in the process of competition with international opponents. Furthermore, China, India and Bangladesh, who are on the “upper floor” compared to Vietnam in the global supply chain, are also implementing a number of active measures aiming to compensate for the downsides caused by their TPP non-membership, driving competition to new heights. Unless effective solutions are taken soon, Vietnam will surely become an “underdog” on the world market. Several FTAs have already been negotiated but are yet to define their validity date, so export activities will see fewer considerable fluctuations. Importers have been looking to manufacturers located in countries with tax and cost advantages. Therefore, Vietnam’s garment and textile exports revenues are expected to reach only US$29.5-30 billion in 2016, lower than the country’s envisaged goal for the year. In order to overcome difficulties, local enterprises must not stand still but take drastic measures to change the situation as well as be well-prepared to seize opportunities as soon as the TPP comes into effect. It is necessary for Vietnamese businesses to strengthen venture, links and investment in a chain; apply modern equipment and machines; and improve the quality of labourers aiming to diversify products to meet the demand for new products and enhance productivity. Besides, state management agencies should also make relevant and timely policy adjustments in terms of transportation costs, unofficial customs costs, tax and administrative procedures, as well as favourable conditions regarding capital, planning and transport infrastructure, aiming to facilitate enterprises to grow and firmly move towards the “larger sea”. Shrimp exports down in volume, up in value 5.9% Through May 2016, shrimp exports were down in volume compared to last year’s corresponding period but still managed a modest 5.9% overall improvement in value due to higher export sales prices. China, with a 34.3% market share, remained the largest buyer of Vietnamese wild caught and farm raised shrimp and prawns for the January-May period, according to statistics released by the Vietnam Association of Seafood Exporters and Processors (Vasep). The US was the second largest importer of black tiger shrimp from Vietnam, with a proportion of 17.4%. Black tiger sales to the US reported a good result, with raw material supply on par with competitors. Vietnam shrimp exporters have shifted production in favor of black tiger shrimp, a move expected to counter dwindling raw materials of other shrimp and prawn species in hopes of keeping the industry afloat. The third and fourth largest export markets were the EU and Japan with market shares of 18.9% and 17%, respectively. Law making aims at promoting social equality and progress The National Assembly Committee for Social Affairs convened a workshop in Hanoi this week to discuss laws and policies on social equality and progress. The workshop highlighted the Committee’s important contributions to Vietnam’s legislations. Thu Hoa reports. Since it was established at the first session of the 6th National Assembly, the Committee for Health Care and Social Affairs, now the Committee for Social Affairs, has contributed considerably to building laws concerning labor, employment, social security, health care, population, gender equality, and preferential policies for social beneficiaries. Vietnam’s social policies have always aimed at promoting social development and bringing a happy life for everyone. The Committee for Social Affairs and the National Assembly have developed a legal system to comprehensively manage social affairs.   Laws concerning labor, employment, health care, population, gender equality, social evil prevention and control have been fine-tuned. Preferential policies for national contributors, social insurance, health care insurance, poverty reduction, and social protection have been expanded with increasing support levels. Since it embarked on national renewal, Vietnam has paid attention to addressing social problems. National Assembly Chairwoman Nguyen Thi Kim Ngan said: “The Committee has appraised several laws and submitted to the National Assembly and the National Assembly Standing Committee reports and recommendations regarding preferences for revolutionary contributors, labor, employment, social insurance, health insurance, population, poverty reduction, religion, gender equality and social evil prevention and control. The Committee’s Female Parliamentarians’ Group has operated effectively”. During the 13th National Assembly, the Committee for Social Affairs contributed to improving the performance of the National Assembly. It reviewed the integration of gender equality in the Constitution and 40 laws, discussed draft laws and ordinances on labor, employment, wages, immigrant workers, revolutionary contributors, and social protection. The Committee has helped the NA and the NA Standing Committee in monitoring the enforcement of laws on social affairs. The Committee has participated in building laws and policies on preferential credits on job generation, labor exports, social insurance, unemployment insurance, health insurance, and gender equality. The NA Committee for Social Affairs has contributed to national renovation and promoting democracy at the NA. It has played a vanguard role in public consultation activities, organizing hearings and activities on integrating gender equality in laws, and expanding international cooperation. Over the past 40 years, the National Assembly Committee for Social Affairs has been promoting social progress and equality through law making. By doing so, the Committee has contributed to national industrialization and modernization and international integration. Safe food is fertile soil for financiers There are enormous opportunities for investment in agriculture in Vietnam, but through mergers and acquisitions, success has only come to a few investors, particularly the more experienced financiers. The trend for organic and safer foods has led to improved food handling practices The domestic agricultural sector has recently witnessed scores of investors pursuing the relatively new investment trend of organic food production. Many experts forecast the rise of a wave of business startups engaged in organic agricultural production and the application of technological advancements in agricultural produce and seafood processing. This investment trend is being greeted by domestic and foreign investors and has proven to be a life-buoy to Vietnamese agriculture, which is facing multiple challenges arising from new-generation free trade agreements (FTAs) that Vietnam has signed with other countries, such as the landmark Trans-Pacific Partnership agreement (TPP). South Korea’s food conglomerate CJ Cheil Jedang recently announced its plan to pour an additional $500 million into Vietnam, either directly or through a merger and acquisition (M&A) path. The aim is turning Vietnam into its second-largest offshore production base after China. The group currently operates a farm, four processing plants, and one retail unit in Vietnam. PAN Group is a local business also relying on M&As to enter into the agricultural and organic food production sector. Nguyen Duy Hung, chairman of Saigon Securities Incorporation – a leading financial institution in Vietnam – and PAN Group shared that together they are considering buying “bad assets” and currently less-effective businesses at low prices, empowering them, then adding these companies to their enclosed safe food chain model, which pursues the 3F (feed-farm-food) principle. “We pay attention to firms with long-term and sustainable development strategies. PAN focuses on under-developed companies, buying them at below par value. We then help them refit with much better growth indexes to become effective players in their fields,” said Hung. To date, PAN Group has completed five M&A deals: with National Seed JSC (NSC), Long An Food Processing Export JSC (LAF), Ben Tre Aquaproduct Import and Export JSC (ABT), Bien Hoa Confectionery JSC (Bibica), and Southern Seed JSC (SSC). A project planting daisies is the group’s first step in flower and vegetable investment through its subsidiary PAN-Salad Bowl, with capital contribution coming from a Japanese partner. PAN Group held a dominant share in the joint venture firm. In this field, PAN-Salad  Bowl will engage in producing high-quality products that are still badly needed in this market. This month, PAN Food, a member unit under PAN Group, bought a 20 per cent stake in 584 Nha Trang Seafood JSC, turning the latter into one of its affiliates. This affiliate currently possesses 584 Nha Trang – a leading fish sauce brand. The total investment value PAN Group has put into these firms has surpassed VND1.93 trillion ($88.5 million). Most of the acquired companies have reported upbeat business results in the post M&A period. For instance, LAF, one year after its team-up with PAN Group, has escaped its loss-running status and has begun to count its profits. Meanwhile, Vingroup, a leading property developer, will not miss out when it comes to investment into organic agriculture. Vingroup’s three core targets with its agricultural investment plans are the production of safe fruit and vegetables to feed the market, promotion of hi-tech applications in large-scale fields to save in production costs, and turning out agricultural produce with a high export value. Last year, Vingroup spent VND2 trillion ($91.3 million) forming VinEco, specialising in safe vegetable production for supply to locations across the country, such as Quang Ninh, Thanh Hoa, and Dong Nai. The group retains a 70 per cent stake valued at VND1.4 trillion ($63.9 million) in the new company. In another case, Thong Nhat Production and Investment JSC (GTN) have made strong forays into the agricultural field by capitalising on the ongoing state-owned enterprises equitisation wave. GTN has become a strategic partner of Vietnam Tea Corporation (Vinatea) holding a 75 per cent stake, and retaining a 12 per cent stake in Vietnam Livestock Corporation (Vilico), as well as a 35.4 per cent stake in Saigon Forest Products Import-Export JSC (Forimex). According to industry experts, any investor can avail of the agricultural sector potential through M&As. However, when looking into M&A deals over the past few years, it is apparent that there have been three main methods for effective agricultural investment. Firstly, we have seen success with M&As. Secondly, through expansive investment with the deployment of large-scale fields. For a group of businesses wishing to develop a production chain, they need to form allied firms and develop stable material sources. In the third option, firms need to have financial strength. Even with sound finance, agricultural investment does not always bring success, as has been seen in the case of leading steel maker, Hoa Phat Group. In their 20-year plus development this group has ventured into many new fields, from the manufacture of construction equipment to real estate investment, and even electro-cryogenic products. In the field of agriculture and animal feed, Hoa Phat has faced growing competition from multinationals on the Vietnamese market. Consequently, by the end of 2016’s first quarter, when most of its businesses reported upbeat outcomes, the agricultural investment generated nearly VND14 billion ($639,250) in losses. Vietnamese enterprises struggling to promote businesses supply chains Vietnamese businesses have not developed business supply chains yet, according to a recent survey by the Centre for Vietnam Science and Technology Internationalisation Promotion. The survey on supply chains by the research centre under the Ministry of Science and Technology was carried out in several sectors, including agro-forestry and fisheries; industry and construction; information technology; and the medical and pharmaceutical industry and services. Accordingly, up to 53.1% of companies surveyed do not participate in any supply chain, while 43% of them have contracts with local partners, and only 12% have contracts with foreign partners. Most businesses only collaborate with their peers in the same sector or producing similar products. According to the Vietnam Chamber of Commerce and Industry (VCCI), only 36% of Vietnamese enterprises are involved in a production network, including both direct and indirect exports, while the figure in Malaysia and Thailand is 60%. Businesses only provide spare parts and do not participate in manufacturing the main products. According to the Department of Livestock Production under the Ministry of Agriculture and Rural Development, the country has only four pork chains, eight links for poultry, four mixed chains for pork and poultry, a dairy chain and several links for plants. Overall, most Vietnam enterprises stand outside the global value chains that FDI businesses are operating in Vietnam, due to lack of information, vision and competitive strategies, as well as inadequate funding, lack of qualified human resources, technological backwardness, insufficient machinery and equipment, and a shortage of promotional activities and governance experiences. They are only present at the lowest stage - assembling and processing - with less benefit from spillover of support industry development, technology transfers and improved productivity in the supply chain. In the context of international integration and globalisation, tough competition is taking place not only between companies themselves, but also between the chain links. The construction and development of the supply chain in manufacturing, business, sales and international trade has become increasingly common and has important implications to help reduce the imbalance of information, decrease transaction costs, and meet the preferences and tastes of consumers to maximise profit. In fact, the chain links should be developed both vertically and horizontally. However, in the long term the priority should be given to vertical development by promoting links between businesses in the same industry, with geographical proximity and market support for each other. To promote such links, businesses need to actively identify advantages and their position in the chain, while renovating technologies, improving the quality of human resources and management capacity, restructuring their organisation and developing new production models. At the same time, the State should develop programmes that promote public-private partnerships, improve service efficiency and quality, offer funding and simplify administrative procedures for businesses. Tax relief, supporting enterprises to expand markets and find partners, organising trade promotion, technology transfer, and technology import are also among the musts. In particular, businesses need to determine the formation and development of typical value chains for products, in addition to promoting product and brand development for businesses in the value chain. Insurance services for the participants in the value chains should also be developed. Practices have showed that there are many new issues that need to be further studied to enhance the capacity and efficiency of businesses joining value chains in Vietnam. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR