BUSINESS IN BRIEF 1/9 Rice industry urged to change production custom The European Union (EU) will offer Vietnamese rice exports duty-free tariff rate quotas when the EU-Vietnam Free Trade Agreement (EVFTA) comes into effect. Therefore, the rice industry has been urged to change production practices to fully take advantage of these quotas. According to the Guide to EVFTA issued by Delegation of the European Union to Vietnam, the EU will allow the import of 80,000 tonnes of Vietnamese rice -- 30,000 tonnes of milled rice, 20,000 tonnes of husked rice and 30,000 tonnes of fragrant rice -- every year at zero per cent duty. The EU will also offer a 50 per cent duty cut at entry and then linear reduction over five years for broken rice. Insiders said the preferential tax rate would help Vietnamese enterprises to save 17 million euros (US$20 million) in taxes each year. Dang Hoang Hai, head of the industry and trade ministry’s European Market Department, said though Vietnam had been hailed as the world’s third largest rice exporter, its rice shipments to the EU market remained modest. He said in recent years, Vietnamese rice exports even fell because the country still focused on planting high-yield rice. Meanwhile, other countries are accelerating high-quality rice production. The Vietnam Food Association said rice exports to the EU market dropped from an annual average of 24,000 tonnes to 20,000 tonnes in 2014 and 18,000 tonnes in 2015. The association attributed the slump to the loss in market share of Vietnamese rice. The EU was a demanding market with strict requirements in factors ranging from product quality to environmental standards, enterprise’s prestige and production process, Hai said. In addition, though not being regular rice eaters, the EU customers prefer rice of higher quality than that of Vietnamese rice. That’s why Vietnam has become less competitive against other rice exporting nations. It was undeniable that European consumers were familiar with Thailand’s fragrant rice, while Vietnamese rice was just starting to promote its image, Hai said. Professor  Vo Tong Xuan, a leading rice expert, said it was hard for Vietnam to share the same rank as Thailand, but the country could learn from the experience of Cambodia, which has been emerging thanks to its rice winning the world’s ‘best rice’ title for three consecutive years. He said if Vietnamese people insisted on growing high-yield and short-term rice varieties -- for example, varieties that can yield four to six tonnes per hectare and allow harvest after 95 days-- the production practices could not help create savoury varieties. Therefore, to compete with its rivals, Vietnam should speedily shift from high-yield to high-quality rice varieties, Xuan said. According to the Ministry of Agriculture and Rural Development, the country exported 432,000 tonnes of rice for $191 million in August, bringing the total volume and value in the first eight months of this year to 3.37 million tonnes and $1.51 billion. The figures represented decreases of 16.6 per cent in volume and 13.1 per cent in value compared with the same period last year. Last year, rice worth $2.68 billion was exported, an almost 4 per cent fall from 2014. VN targets $3.5b worth rice exports by 2020 The Ministry of Industry and Trade has unveiled a strategy for developing rice exports in 2016-20 that  targets reversing a declining trend over the last two years and increasing earnings to US$3 billion next year. It also targets a gradual shift towards export of high-quality, high-value, organic, nutritional, speciality, and Vietnam brands of rice and rice-based products. The export of low-quality white rice is expected to fall to 15 per cent of total shipments by 2020 and 10 per cent by 2025. In the latter year medium-quality white rice will account for 20 per cent and high-quality white rice, fragrant rice, and glutinous rice for 60 per cent. The ministry will make efforts to diversify export markets, with a focus on markets with demand for high-quality rice. The ministry has sent the draft strategy to relevant ministries and industries to solicit their opinions. VN to develop corporate governance code in 2017 Vietnam is developing a corporate governance code for listed firms in order to help local firms attract more capital and make them more competitive in an environment of increasing regional economic integration. With the aim to improve corporate governance in Vietnam, IFC, a member of the World Bank Group, is helping the State Securities Commission of Vietnam (SSC) to develop such code, said the two sides in a workshop on August 29 in Hanoi, to kick off the development process. Participants included representatives from SSC, the two stock exchanges HNX and HOSE, and other stakeholders. The workshop provided an update on corporate governance codes from around the world and facilitated discussion on the relevant approach for Vietnam. Pham Hong Son, SSC deputy chairman said "the corporate governance code will help strengthen competitiveness of Vietnamese listed firms through adoption of internationally recognized corporate governance practices." Son also said the code would guide listed firms on how to adopt best corporate governance practices that go beyond regulatory compliance for better capital-market integration with Association of Southeast Asian Nations (ASEAN) countries and globally. Participants heard experiences of code development from Organization for Economic Cooperation and Development (OECD) countries and regional nations such as China, Indonesia, Thailand, the Philippines, and Malaysia. Chris Razook, IFC Regional Head for Corporate Governance Advisor, East Asia and the Pacific said though some firms in Vietnam were doing really well, compared to the region, the market’s corporate governance was still lagging behind in scorecard rankings in areas such as disclosure practices, board structure and functioning, and controlling and risk practices. According to the ASEAN corporate governance scorecard, Vietnam ranked the lowest among six regional countries of Indonesia, Malaysia, Philippines, Singapore and Thailand between 2012 and 2014. To the local firms, the code would provide them with a benchmark, said Chris, adding that good governance standard was the attraction that eye investors, boost their confidence to invest in the firm, especially when they want to have more international business partners, who would watch the change closely for their investment. "We will work with the SSC to set up the code as well as to educate about it to the market," said Chris, who thought more than just setting the code, it was more important to encourage firms to apply the code for their better future, and to "make it really work in a company" The code is expected to be launched by mid-2017. IFC’s support for the development of a corporate governance code is part of its overall efforts to promote corporate governance in Vietnam in partnership with the State Secretariat for Economic Affairs of Switzerland (SECO). IFC has contributed to the adoption of 95 corporate governance codes, laws, and regulations in more than 30 countries worldwide. Sai Gon Silicon City Centre construction kicks off The Sai Gon Silicon Park JSC yesterday began construction of the VND480 billion (US$21.6 million) SàiGòn Silicon City Centre. Spreading over a total area of over 11,000sq.m in the Sai Gon Hi-Tech Park, the centre forms part of the 52ha Sai Gon Silicon City project worth some $40 million. Nguyễn Minh Hiếu, chairman of the Sai Gon Silicon Park JSC, said the centre aims to promote technological research and development and connect overseas Vietnamese companies specialising in the high-tech and parts-supply industries and international groups specialising in the research and application of technological transfer, while creating a healthy and friendly investment climate following the model of the US’s Silicon Valley. The Sai Gon Silicon City project, when it comes into full operation, is expected to draw investments worth $1.5 billion and make HCM City a smart city, meeting international standards and attracting many high-tech investors. It will also enable the city and the country, in general, narrow the scientific-technological development gap with other countries in the region and the world. Le Thanh Liem, vice chairman of the municipal People’s Committee, said the Sai Gon Silicon City Centre project is significant and meaningful as it will promote high-tech development in the southern metropolis and encourage Vietnamese living abroad to invest in their country, thus contributing to national development. General economic census across VN to be conducted from March 2017: PM Prime Minister Nguyen Xuan Phuc has signed a decision to conduct a general economic census across the country in March 2017. The census will include information about economic establishments, labourers’ income, production and business activities, enterprises’ technological application and their access to loans. It will be carried out in two phases. The first phase, implemented from March 1 to May 30, 2017, will survey production and business establishments in the business sector, administrative offices, branches and representative offices of foreign enterprises, and foreign non-governmental organisations. The second phase will take place July 1-30 to collect information about religious and belief establishments, and individual non-agricultural, fishery and forestry business and production establishments. Preliminary data will be released in December 2017, while the official results will be announced in the third quarter of 2018. The census’s objectives are to help assess the country’s socio-economic development, and to help the Party and State build development policies. The Ministry of Planning and Investment is assigned to establish a Steering Committee on the census, develop questionnaires, propose estimated funds for the census and conduct a pilot survey to gain insight and fix possible shortcomings. Other ministries, including defence, public security, information and communications, plus relevant agencies and localities, are asked to co-operate. According to the General Statistics Office, by the end of last year, more than 941,000 enterprises were established in Vietnam, 57 per cent of which were operating at that time. Another 16,673 enterprises suspended their operations, more than 271,200 stopped operations without registering to relevant authorities and 117,000 enterprises dissolved. In the first seven months of this year, about 64,000 enterprises were created with a total registered capital of nearly VND497 trillion (US$22.36 billion). Newly-established firms rose by 23.3 per cent in number and 54.7 per cent in capital value year-on-year. The adjusted capital in the reviewed period posted VND894.9 trillion, raising the total registered and adjusted capital to VND1.4 quadrillion. More than 16,700 enterprises, which suspended their activities due to difficulties, have resumed operations, up 67.5 per cent from the same period last year. In July, the number of new firms exceeded 9,600 with a total registered capital of VND69.2 trillion, a slight decrease from June. In mid-May, Vietnam’s Government issued a resolution to support and develop Vietnamese enterprises with a goal of having about one million enterprises by 2020. Up to 35 per cent of the enterprises are expected to hold innovation activities yearly. Cuba, VN eye more investment Cuba and Vietnam are seeking to boost investments, which are still at a modest level despite the two countries’ long-standing friendship. Speaking at the investment forum held yesterday in Hanoi, ĐặngXuânQuang, deputy director of the Foreign Investment Agency under the Ministry of Planning and Investment, said Vietnam had only one project worth VND9.5 billion (US$424,000) in Cuba, while the Caribbean island nation had two investment projects in Vietnam, till date. “There is large untapped potential,” Quang said. The modest investments are due to the limited access to market information and investment policies of enterprises from both sides. Quang said he hoped the investment cooperation between Vietnam and Cuba would be leveraged to a new high. At the conference, Cuban Ambassador to Vietnam Herminio Lopez Diaz called for investments from Vietnam. Although firms would encounter initial difficulties when investing in Cuba, as the country was embarking on the implementation of a privatisation model, the long-standing relationship between Vietnam and Cuba would help overcomes difficulties, he said. A representative from the Special Economic Development Zone of Mariel said the zone was seeking investments in high and clean technologies from major industries, such as logistics, biotechnology, pharmaceutical and food industry. He said tax incentives were provided for wholly foreign-invested firms in the zone. Vu Quoc Huy from the ministry’s Economic Zone Management Department shared the opportunities to invest in Vietnam with Cuban firms. Huy said Vietnam was striving to improve the investment climate by simplifying administrative measures and introducing tax incentives and land fee reductions to promote investments. Vietnam’s economic zones have attracted 329 foreign direct investment projects, so far, worth $40 billion and another VND784 trillion from local investors has been put into nearly 1,000 projects. Cuba and Vietnam celebrated the 55th anniversary of their diplomatic relationship last year. SBV aims to bolster payment security The State Bank of Vietnam (SBV) on Monday directed agencies to enhance security measures against risks and payment fraud, following the execution of several scams recently. Under a circular, the central bank asked payment service providers to scrutinise and reassess all their process related payments to ensure the central bank’s regulations on safety and security of banking services are adhered to. The providers have been ordered to report any problem to the central bank. For card and online payments, the providers are required to research and implement solutions to enhance security of their online payment systems. Monitoring, supervision, evaluation and upgrading of information technology system related payments must be checked regularly. Besides finding solutions for early detection of phishing sites to recommend to their customers, the providers must also increase training on safety and security awareness for their staff and customers. The providers should give timely warnings, instructions and complete information to customers so that the latter can understand the risks and tricks associated with fraud and they can make payments securely. When a fraud does take place, the providers must report it to SBV and collaborate with customers, law-enforcement agencies and other relevant units to deal with the situation quickly and accurately in accordance with the law and ensuring customers’ best interests. Relevant information must be reported to customers in a timely manner. Under the circular, SBV also requires the Vietnam Banks Association to research and regularly make public new frauds and tricks related to payment, especially regarding cards and e-payment, so that payment service providers and customers can proactively take measures to ensure safety and minimise the risk of fraud. The association must also organise workshops with the participation of foreign and domestic experts to introduce new frauds and tricks and identify solutions to improve safety and security in payment. Bank supervisory agencies and SBV’s branches in provinces and cities need to add the inspection of information technology-related payments to their periodic inspection programme to strengthen inspection and supervision. SBV is also due to organise an online conference on payment and information technology early next month to enhance State management in the field. The move was made following the perpetration of several frauds recently. Notably, earlier this month, VND500 million (US$22,500) was stolen from the bank account of a Vietcombank customer in Hanoi. The theft came as a shock to bank account owners in Vietnam, where annual average income was some $2,100 last year, according to the World Bank. Heineken Vietnam takes over Carlsberg brewery Heineken Vietnam Brewery Limited Company has completed the acquisition of CarlsbergVietnam brewery in Vung Tau City in the southern province of Ba Ria-Vung Tau. A communications executive of Heineken Vietnam told the Daily on August 29 that the acquisition deal was done earlier this year when Vietnam Brewery Limited (VBL) was renamed as Heineken Vietnam Brewery Limited Company. The value of the deal is unknown. Developed by a joint venture involving Denmark’s Carlsberg Group and State-run Hanoi Beer and Beverage Corporation (Habeco), the Carlsberg brewery in Vung Tau came on stream in 2008. The joint venture was renamed as Carlsberg Vietnam Brewery Company in 2014. According to Carlsberg, the sale of the brewery facility in Vung Tau will allow the Danish group to focus on the central and northern parts of Vietnam, where Carlsberg has two breweries in Hue and Hanoi. The foreign firm bought these facilities from local companies. Carlsberg chief executive officer Cees’t Hart said Vietnam is one of the group’s key markets in Asia. Heineken Vietnam Brewery Limited Company is a 40:60 joint venture between Saigon Trading Corporation (Satra) under the HCMC government and Heineken Asia Pacific. The joint venture’s beer brands include Heineken, Tiger, Larue, BGI, Bivina, Desperados and Affligem. Inter-bank rates hit record low Following the continuous decline over the past weeks, inter-bank rates across all tenors hit a record low, staying at below 1 per cent per year. This was disclosed in Bao Viet Securities Co (BVSC)’s report. According to the BVSC weekly bond news report between August 22 and 26, thanks to abundant liquidity, the inter-bank rates for all tenors last week reduced by roughly 0.5 per cent to 0.59 per cent per year for overnight loans, 0.59 per cent for one-week loans and 0.92 per cent for two-week loans. Early this year, the inter-bank rate averaged at 5 per cent per year. The State Bank of Vietnam (SBV) last week also maintained the net withdrawal status of VND26 trillion (US$1.16 million) on the Open Market Operation (OMO) through the issue of treasury bonds. According to BVSC, it was the 13th consecutive week that the SBV managed the dong supply and demand through the issue of short-term T-bonds. BVSC noted that the interest rate of T-bonds also dropped sharply by roughly 0.3 per cent each week during the past month. Currently, the rate of 14-day T-bonds has hit the lowest level of 0.59 per cent per year against the 2.75 per cent reported in June.   “Together with the net withdrawal status on the OMO, the low record of the inter-bank rates showed that the abundant liquidity in credit institutions has not only been maintained, but is also rising further in the past week,” BVSC analysts said. BVSC also forecast that the central bank is still continuously buying a relatively significant amount of foreign currencies to increase foreign exchange reserves. “With the abundant liquidity, we expect inter-bank rates will stay at the low level of around 1-2 per cent per year across all tenors in the next few weeks,” analysts said. IPI rises 6.9% in eight months Vietnam’s industrial production index (IPI) in August grew 7.3 per cent month-on-month and posted a 6.9 per cent rise in the first eight months of 2016. This is lower than the 9.8 per cent rate recorded in the same period last year due to a continuous downturn of production in the mining, processing and manufacturing industries. According to the General Statistics Office (GSO), in the January-August period, the IPI of the mining industry fell 3.8 per cent, while the production of crude oil and natural gas dropped 5.5 per cent. At the same time, the IPI of the pharmaceuticals, pharmaceutical chemistry, leather and chemical industries rose modestly between 2.6-5.4 per cent. Meanwhile, a surge of 16.9 per cent was seen in the IPI of the heavy metals industry, followed by the textile industry with 15.5 per cent, engined vehicle production with 15.3 per cent, and electronic, computer and optical products with 14.1 per cent. In the reviewed period, the production of some industrial products soared compared to the same period last year, with the highest rises seen in television at 83.2 per cent, steel sheet at 22.3 per cent, iron and crude steel at 15.9 per cent, and cement at 15.2 per cent. Crude oil exploitation was down 7.9 per cent, while decreases of 9.1 per cent and 9.6 per cent were recorded in the production of NPK fertiliser and mobile phones, respectively. The GSO also reported that the central province of Quang Nam posted the highest IPI rise at 32.2 per cent, followed by the northern province of Thai Nguyen with 31.1 per cent; Hai Phong, 16.3 per cent; Da Nang, 11.5 per cent; and Can Tho, 11.4 per cent. The IPI of Binh Duong, Dong Nai, Bac Ninh and Hai Duong provinces as well as HCM City was up between 6.8 and 8.9 per cent. The office also revealed that as of August 1, the inventory index of the processing and manufacturing sectors expanded 8.9 per cent year-on-year. Low inventory was seen in textiles, metals, chemistry and chemical products, pharmaceuticals and pharmaceutical chemistry, and leather. However, the index escalated 130 per cent in electronic products, computers and optical products, 30.9 per cent in engined vehicles, 26.4 per cent in paper and paper products, 24.4 per cent in rubber and plastic products, and 20.7 per cent in other nonmetallic minerals, reported the office. SMEs struggle to access credit While support to enable firms to engage in global value chains as become pressing amid rapid international integration, businesses are still struggling to access credit, especially small- and medium-sized enterprises (SMEs), according to the Ministry of Industry and Trade. The ministry estimated that just a modest 30 per cent of SMEs could access banking loans, adding that the majority of businesses lacked experience and did not have adequate assets for a mortgage or transparent enough financial reports. Capital, human resources and technology were the three major barriers for Vietnamese enterprises when entering global value chains, the ministry said. Improving their financial capacity was necessary to promote their participation in global value chains while SMEs were still in the dark about international integration, the ministry said. Quyen Anh Ngoc, Director of the ministry’s Multilateral Trade Policy Department said at yesterday’s conference jointly held by the Vietnam Chamber of Commerce and Industry (VCCI) and VPBank in Hanoi that businesses should be active in working with banks in sectors of their advantage to gain financial resources. Ngoc also urged businesses to develop appropriate medium and long term business strategies, which would be helpful in asking for credit. In addition, SMEs should improve their awareness of the commitments of free trade deals, cut inefficient investments to focus finances on their core values and improve competitiveness, he said. Those factors were important in building trust with credit institutions for the development of SMEs to get funding, according to Ngọc. Experts at the conference said that improving the business climate together with the national competitiveness were needed to enable Vietnamese firms to participate in global value chains. There were around 600,000 businesses in Vietnam, 96 per cent of which were of small and medium size. Sun Life becomes sole owner of firm Canada’s Sun Life Assurance Company has bought out PVI Holdings’ 25 per cent stake in PVI Sun Life Insurance Company Limited to increase its ownership to 100 per cent. But the companies will maintain their close relationship with PVI continuing as a Sun Life distribution partner. The transaction is expected to be wrapped up in the fourth quarter of this year, subject to required regulatory approvals and customary closing conditions. “We have enjoyed a successful partnership with PVI since establishing the business together and look forward to continuing a close working relationship with them as our distribution partner,” Kevin Strain, president of Sun Life Financial Asia, said. “We have great momentum in Vietnam and remain committed to helping our Vietnamese clients achieve lifetime financial security by offering a strong suite of insurance and wealth management products.” Vietnam has been one of the fastest growing economies in Asia in recent years and the life insurance and pensions industry is expected to continue experiencing strong growth. Since its launch in 2013 PVI Sun Life has established itself as the country’s sixth largest life insurance provider and a market leader and industry pioneer in pensions. VNS, VNA, VIR