BUSINESS IN BRIEF 12/12 ICAEW: Bright growth prospect for Vietnam in next two years   Despite a slowdown in the first half of this year, Vietnam will have positive economic growth in 2017 and 2018 thanks to high foreign direct investment (FDI) and strong domestic fundamentals, the Institute of Chartered Accountants in England and Wales (ICAEW) said in an Economic Insight – Southeast Asia report. According to the report, the fundamental macroeconomic outlook for the ASEAN region remains reasonably positive in the context of global economic and political uncertainty. Recent data point towards a pickup in trade for several economies such as Vietnam and Singapore, and ASEAN central banks may be able to adopt easing policy to support growth. ASEAN economies are also vulnerable to a more generalized slowdown in globalization or an erosion of the broad consensus in favor of free trade. However, many economies in the region, including Vietnam, have been highly successful in moving up the global value chain as a result of the opportunities presented by free trade and investment flows. Low oil prices and prolonged drought that affected agricultural production contributed to a slowdown in activity in Vietnam during the first half of 2016, said the report. But the slowdown is limited thanks to strong industrial growth that continues to be boosted by FDI and a better business environment. Indeed, FDI is on track for another record year in 2016 – attracted by low costs, improving infrastructure and skills and a deregulated business environment increasingly open to 100% foreign ownership, ICAEW said. The report also said growth prospects for 2017 and 2018 are brightest in the Philippines and Vietnam. “We expect growth to moderate to a more sustainable rate of 6% a year in 2017 and 2018,” Priyanka Kishore, ICAEW economic advisor and Oxford Economics lead economist, was quoted as saying in a press release of ICAEW. She however added that although the Government has set out a number of projects aimed at promoting growth in short term, Vietnam still sees little fiscal stimulus possibility and significant increase in budget deficit. What is going on shows that the success of Vietnam’s economy depends heavily on whether the country can continue to have more trade opportunities with economies having higher incomes, and access to financial resources and technological investments or not, she said. Mark Billington, Regional Director of ICAEW South East Asia, said that in recent years, huge FDI flows have spurred the country’s economic growth. Trade agreements play a key role as they are not only capable of directly promoting trade and investment flows, but also help bring good business practices to signatory countries. Therefore, if the economic growth rate through those cooperation agreements shows signs of slowing down, the Government and businesses should look for alternative ways to improve the business environment, he said. Construction permit issuance time to fall to 42 days The director of the HCMC Department of Construction said a single-window system for issuance of construction permits would be soon deployed with this process to be shortened from the current 75 to 42 days. Director Tran Trong Tuan was speaking at a question and answer session during the ongoing sitting of the HCMC People’s Council on December 8. Deputy To Thi Bich Chau wondered how the issuance of construction permits would be done with the construction department as the only agency in charge. Other deputies raised questions on the licensing of high-rise building and housing projects affecting city traffic. In response, Tuan said all high-rise building and housing projects must have their technical designs evaluated before construction permits are granted. One of the conditions for these projects is they must be consistent with planning, and meet technical infrastructure requirements such as water supply and drainage, and green space. In reality, many housing projects have already been developed while technical and social infrastructure projects remain on paper, Tuan noted. The city leaders are aware of the discrepancy between housing and infrastructure development planning. To remedy this situation, all housing projects will be appraised to see if they are connected to technical and social infrastructure or not. The construction department is drawing up a program for housing development in five years and ten years. And to ensure infrastructure connectivity, the city government in mid-2017 will submit a report to the municipal people’s council on the requirement for a link between housing and technical infrastructure in each area and in the city as a whole. On the complaints about the lengthy construction licensing process, Tuan said the total length of time is 75 days at present, excluding the time for investors to prepare necessary documents. “A shorter time will help investors and citizens reduce waste, so we are finalizing a draft for the single-window system for issuance of construction permits so that the pilot scheme may start in January 2017, with an aim of slashing the time from 75 to 42 days. It will last until September 2017, then a review will be done to submit a report to the Ministry of Construction before the program is deployed citywide,” Tuan explained. Deputy To Thi Bich Chau suggested the construction department should immediately handle personnel responsible for the time-consuming construction licensing process. She added the high density of construction works in certain areas was making traffic congestion worsen, especially in District 1. Tuan admitted cross-checks and transfers of records were extending the time of licensing. On the situation of construction works causing traffic jams, he said his department will examine and evaluate all the existing projects and the progress of the surrounding roads, such as Le Loi Boulevard in District 1 and the area near the Tan Son Nhat International Airport, to take measures against traffic congestion. HCM City seeks road investor The HCM City People’s Committee has asked permission from Prime Minister Nguy?n Xuân Phúc to hire an investor for the elevated road No. 1 project. The 9.5-km elevated road No. 1, extending from the Lang Cha C? junction to Phú An Bridge in Bình Th?nh District, is expected to ease traffic jams near Tân Son Nh?t International Airport. The road, 17.5 metres wide with four lanes, would cost more than VNÐ15 trillion (US$681 million) and pass through the districts of Tân Bình, Phú Nhu?n and Bình Th?nh. Under a Government decision, the city plans to build five elevated roads with a total length of 70km. The elevated road No.1 would be the key road linking the four other elevated roads. The network of elevated roads is expected to hasten the pace of traffic from the city’s inner areas to outer ring roads and city gateways. Previously, the city People’s Committee had appointed South Korea’s GS Engineering and Construction Corp. (GS E & C) to research and invest in the elevated road under the Build – Operate – Transfer (BOT) mode. However, GS E & C said in 2009 that it could not conduct the project. Another investor, Châu Th?i Concrete Corporation No. 620, had also proposed investing in elevated road No.1, but withdrew later. According to the city’s Department of Transport, construction of elevated road No. 5 linking Hà N?i Highway in Th? Ð?c District with the Tân T?o-Ch? Ð?m junction in Bình Tân District will kick off early next year. HD Bank inks loan deal for Da Nang condotel project The HCM City Development joint-stock bank (HD Bank) has agreed a VND1.7 trillion (US$75 million) loan to investors in the Ariyana beach resort and suite Da Nang projects for a 30-year term. General Director of Ariyana joint-stock company, Nguyen Canh Son said the deal, which was signed in early December, will help investors access capital at a favourable interest rate. He said the Ariyana Beach Resort and Suite Condotel project started construction from 2015 with total investment of VND4 trillion ($178 million) on a coastal area of 4ha of Non Nuoc Beach in Da Nang city. He said the 27-storey project, which includes the Ariyana International Urban and Tourism Complex, will provide 4,000 rooms by the second quarter of 2018. He said the company has been building a 3,000-seat conference and exhibition centre in the project for the 2017 Asia-Pacific Economic Co-operation Summit to be held in Da Nang next year. According to Da Nang city’s investment promotion board, tourism real estate remains a popular investment in the central city, attracting 25 foreign direct investment projects worth US$1.8 billion. The city has so far developed 16 tourist property projects consisting of 749 villas, 609 of which are for sale and 140 for lease. Deposits rise in Dong Nai’s banks     Credit organisations in Dong Nai Province have mobilised VND153 trillion (US$6.8 billion) in deposits from early this year till date, which is 23 per cent higher than at end-2015. Of this, Vietnamese d?ng deposits touched VND143 trillion, the State Bank of Viet Nam’s (SBV) branch in Dong Nai said. The branch also said that total outstanding loans from the early this year to now is VND133 trillion, 21 per cent higher than that at the end of 2015. This is also the first time in the past four years that credit organisations in the province have gained a year-on-year growth of 20 per cent in deposits and loans. Loans related to construction and industrial sectors accounted for 43 per cent of the outstanding loans, amounting to around VND55 trillion, while loans of the agro, forestry and fishery sector stood at VND20.5 trillion. Following the central bank’s preferential credit policy for priority economic sectors, banks in Dong Nai have lent tens of trillions of Vietnamese dong to 40,000 customers at a preferential interest rate of 7 per cent per year between early 2016 to date. The priority economic sectors include agriculture, rural areas, exports, small- and medium-sized enterprises, and the supply and technology industries. Tran Quoc Tuan, director of SBV’s Dong Nai branch attributed the increase in deposits to the stability in deposit interest rates. During the same period, the lending interest rates was between 6 per cent and 11 per cent, so many organisations and individuals took money to expand production and business. Banks in the province have operated efficiently and have good liquidity, he said. Many banks in Dong Nai have given short-term loans with interest rates of 4 per cent per year to customers whose financial affairs are healthy and transparent. The push on inspection and supervision as well as correction of mistakes at some banks have reduced bad debts in Dong Nai’s banks. Bad debts account for 1.4 per cent of the total outstanding loans, a drop of 0.27 per cent compared to the end of 2015. Bad debts have been higher in the industrial, construction, trading and service sectors than in the agro, forestry and fishery sector. Vina Mazda recalls Mazda3 for airbag fault     Vina Mazda, a member of the local Truong Hai Automobile Company (THACO), has recalled over 16,000 Mazda3 1.5L and 2.0L Sedans and Hatchbacks using SkyActiv technology engine for side air-bag control faults. Thaco said in a statement that all Mazda3 cars produced in the Quang Nam-based Vina Mazda plant between December 9th, 2014 and November 1st, 2016 will receive free software updates to fix incorrect operations over past two years. Experts from Mazda Japan company confirmed that the side air-bag control fault does not affect the car’s operation. Earlier, Vina Mazda had informed the Viet Nam Register for the Mazda3 recall programme. The local car maker said it needs only 10 minutes to complete the software correction. Vina Mazda also reconfirmed that it has not recorded any accidents or incidents related to the Mazda3’s incorrect operation of the side air-bag control system. Last year, Vina Mazda also recalled 170 Mazda3 1.5L car models--out of 4,000 vehicles in the country--for repairs to the Check-Engine signal appearing on the car’s warning light. Last month, Vina Mazda also recalled 4,809 Mazda2 (produced from August 24, 2015 to September 26, 2016) cars to fix a fault related to the check-engine light. In June, VinaMazda recalled more than 10,000 Mazda3 cars for a similar fault. Thaco plans to produce over 112,000 cars in 2016, with expected revenue of US$3 billion. Earlier this year, Thaco began operation of a new production line of trailers and special purpose vehicles in the Truong Hai-Chu Lai Mechanical Automobile Industrial Zone, and start construction of a new Mazda plant, two new truck and bus plants and other supportive industries for several car models. Thaco, the largest automobile maker in Viet Nam, has produced and distributed vehicles for three manufacturers including Kia from South Korea, Mazda from Japan and French giant Peugeot. ADB to assist a local troubled bank A solution to deal with troubled commercial banks has been decided upon, Prime Minister Nguyen Xuan Phuc revealed. The regional development bank is planning to assist the Vietnamese government to solve the problem. “The Asian Development Bank (ADB) along with a Vietnamese private partner is planning to acquire a troubled commercial bank”, the Vietnamese leader said at the Vietnam Development Forum (VDF) in Hanoi on December 9. Furthermore, ADB may also introduce partners who are capable of helping Vietnam to settle bad debts and safeguard fragile commercial banks, according to PM Phuc. Mr. Jonathan Dunn, Resident Representative of the International Monetary Fund (IMF) in Vietnam believes the acceleration of bad debt settlement will help the credit institution system better support competitive private enterprises, and this would bolster growth prospects. This idea comes just in time. In late October, Deputy Prime Minister Vuong Dinh Hue told a National Assembly (NA) meeting that the government will consider the possibility of letting poor performing commercial banks go bankrupt, instead of assisting them as it did in the past. The government is determined to restructure the banking system with top priorities being protecting the interests of depositors and preventing the "domino" effect, which happens when one bank stops operation, and others follow, said Deputy Prime Minister Hue. Since this troubled commercial bank is likely to be rescued, things will look brighter for the settlement of bad debts, a problem which has not yet been successfully resolved. Overhanging bad debts have been a burden on Vietnam’s economic growth since 2012 when total toxic debts, mostly in the real estate sector, reached VND280 trillion ($12.5 billion), equivalent to 11 per cent of the GDP. Last year, in an attempt to consolidate the country's fragmented banking sector, the State Bank of Vietnam (SBV) took over troubled lenders Global Petro Bank (GP Bank), Vietnam Construction Bank (VNCB) and Ocean Commercial Bank. The buy-out of these troubled banks aimed at helping SBV become fully proactive in reforming them, ensuring safety and stability in the banking system and maintaining political security and the social order, the central bank said in a statement. The Vietnamese government started tackling non-performing loans (NPLs) in the banking system in 2013 when it officially set up the bad-debt bank the Vietnam Asset Management Corporation (VAMC). According to a report of the National Financial Supervision Commission (NFSC) on the country's economic situation in the first nine months of the years, bad debts of 19 credit institutions accounted for 55.1 per cent of the total NPLs of the system. As of the end of August this year, the banking system had reportedly tackled VND548 trillion ($24.1 billion) worth of bad debts, said the central bank, of which almost 42.8 per cent was housed at the central bank-run VAMC. The government is trying to develop a debt trading market, and complete legal frameworks to deal with mortgages and enhance capacity of the VAMC. Last month, the NA has passed the Law on Property Auctions, which will facilitate bad debt resolution where it involves property assets. Of which, analysts believe that VAMC will be empowered by the Law to auction bad debts and collateral assets belonging to financial institutions. PJ's Coffee expanding in Vietnam PJ’s Coffee of New Orleans (PJ’s) has announced its second location to be opened in Ho Chi Minh City’s Sala Project in Nguyen Co Thach Street, District 2 on December 16. Ballard Brands LLC., the parent company that operates PJ’s, appointed TRG International - represented by Rick Yvanovich - as Vietnam’s Master Franchisee, overseeing all Vietnamese store locations, operations and support. The new shop features PJ’s full menu with a wide selection of iced, frozen and hot coffee drinks, teas, freshly baked pastries and more. “We are honored to provide PJ’s coffee and tea products to customers not only across the US, but now across the world,” says David Mesa, Chief Development Officer of Ballard Brands. Mr. Yvanovich plans to open at least 10 additional locations in the next five years. The first store was opened in Vincom B Center Shopping Mall in Ho Chi Minh City in August this year. To-date, PJ’s currently operates 85 locations in seven states and has plans for tremendous growth with its Vietnamese and future international locations. “PJ’s Coffee exudes quality,” says Mr. Yvanovich. “Our customers in Vietnam will appreciate not only PJ’s high-end coffee and tea products, but the experience offered each time a customer visits a location.” Similar to New Orleans, Vietnam - the second largest producer of coffee in the world - shares a strong love for coffee and incorporates the beverage into its everyday culture. Because Vietnam’s climate is hot and humid year-round, Vietnamese tend to favor chilled coffee beverages and flock to cafés as a place to delight in specialty coffees and socialize throughout the day.   PJ’s Coffee of New Orleans was founded in 1978 by Phyllis Jordan, a pioneer in the coffee industry that demonstrated that better beans, superior roasting techniques, and pure passion for the art of coffee-making mattered. Many coffeehouses today make iced coffee by pouring hot coffee over ice, resulting in an inferior beverage. PJ’s Original Cold Brew Ice Coffee is brewed daily using a special cold-drip process that protects the flavor and strength of the beans, while producing a coffee that is 2/3 less acidic – a process and technique pioneered by the founder and used for more than 30 years at all PJ’s locations. PJ’s coffee bean buyers travel the world to hand select the finest beans – from Brazil to Costa Rica, from Columbia to Kona (Hawaii) – everywhere the best coffee grows. Founded in 2012 by Paul, Scott and Steve Ballard, Ballard Brands is a multi-branded restaurant and coffee company headquartered in New Orleans, Louisiana in the US. The company’s restaurant portfolio includes retail brands PJ’s Coffee of New Orleans, WOW Café: American Grill & Wingery, The Original City Diner, and Boardhouse Serious Sandwiches. Modern aquaculture developments will improve profits A high demand, increased incomes and improved fish farming methods will increase the consumption of seafood in Vietnam and export abroad. by Linh San Vietnam's aquaculture market will grow at a compound annual growth rate of 5.73 per cent during the period 2016-2020, according to latest forecast by Research and Markets. The aquaculture market in Vietnam is one of the biggest aquaculture in the world, according to the Research and Markets' forecasts with annual domestic consumption of seafood per capita in the country is about 78 lbs. (35.4 kilos) per capita. This consumption figure is expected to increase by 5.37 per cent on average per year for the period of 2015-2020. The total consumption of seafood in the domestic market in Vietnam was over 710 thousand metric tons in 2015 and is expected to reach 940 thousand metric tons by 2020. Key vendors in the Vietnamese market include: Camau Seafood Processing and Service Joint Stock Corporation, Dongnam Seafood, Phuong Dong Seafood, Food Joint Stock Company Ca Mau Seafood Exports, Hung Vuong Mekong, Minh Phu, Ngoc Sinh Seafood, Oriental Seafood, to name just a few. With the improvements in freshwater aquaculture technology, the steps in the production of seed production have changed from intensive water use land-based systems to water-saving and water productivity-enhancing interventions. Irrigation systems and irrigated agriculture are integrated with fish seed production. Optimizing the use of irrigated agricultural land can be further explored for its expansion and commercialization potential. For fry to fingerling rearing, the use of cages and net enclosures is becoming increasingly popular in Vietnam. Such initiatives contribute to the enhancement of productivity of irrigated water bodies. Vietnam is one of the most suitable places for seafood and fish farming because of its long and rich coast line. Infrastructure development, growing consumption of fish, high disposable income of consumers, and export of farmed fish and seafood are some of the key drivers, which enable Vietnam to contribute significant revenue to the aquaculture industry in Asia Pacific. The need for aquaculture in Vietnam stems from the high demand from wholesalers, retailers, restaurants, and individual consumers. VnSteel lowering ownership at KMT Vietnam Steel Corporation (VnSteel) has registered to sell over 4.7 million KMT shares of Central Vietnam Metal Corporation (Cevimetal). After the sales, VnSteel will lower its ownership rate from 82.95 per cent to 36 per cent. Expected trading will happen from December 12, 2016 to January 4, 2017 through order matching and agreements. “The target of selling KMT shares is to divest”, said Mr. Doan Phong, member of Finance Department at VnSteel told VET. KTM shares are traded at about VND 10,000 ($0.44) per share on the stock market. VnSteel will receive about VND47 billion ($2.06 million) based on this price. This share increased significantly in November. Currently VnSteel holds nearly 8.2 million KMT shares (the rate of 82.95 per cent). After successfully divests, VnSteel will reduce its ownership rate to about 36 per cent of KMT chartered capital. Cevimetal is a subsidiary of VnSteel. Their main business is supplying different kinds of steel to various projects and importing-exporting metal, steel billets. During the first nine months of 2016, the net sale of Cevimetal reached VND1.3 trillion ($57.22 million). After-tax profit was VND4.8 billion ($211,340) which was twice the amount the same time in 2015. In the third quarter off 2016, the net sales of Cevimetal reached VND 342.3 billion ($15.05 million). After-tax-profit was VND793 million ($34,907) which was higher than their profit after tax in the second quarter 2016. The total assets of Cevimetal were worth about VND504 ($22.2 million) in the third quarter 2016. The company equitized and officially went into operation in the form of a joint stock company in January 1, 2006.  Cevimetal has a nationwide network of units; it supplies various kinds of steel with an attractive sales policy. VnSteel was established by merging Metal Corporation and Steel Corporation. The birth of VnSteel is associated with the history and development of the country's metallurgical industry. It has set a solid foundation for the development of the domestic steel industry. VnSteel operates as a joint stock company with over 50 subordinate units, subsidiaries and associated companies. The main sectors of VnSteel are steel manufacturing and business and the materials and equipment related to the steel industry. In addition, VnSteel also enhances business areas such as finance investment, port operators, logistics services, warehousing, offices, investment and trading infrastructure of industrial zones and real estate, and labor export. Along with market development in Vietnam steel, VnSteel also pays attention to sustainably develop the environment, protect it and use national resources reasonably. Moreover, this company takes care of social benefits. FLC Faros 'abnormal' share move is normal The share move of FLC Faros Construction Corp. is nothing but normal, the company's top leader strongly affirmed on December 8. "The price of ROS shares which have been increasing over the past year is normal," FLC Chairman Mr. Trinh Van Quyet replied to VET on the sidelines of the Bloomberg ASEAN Business Summit in Hanoi on December 8 when being asked whether there were any abnormal moves to ROS share price. "Good products have a higher price, and their increase depends on the market's demand." The market value of FLC Faros, nearly 70 per cent-owned by Mr. Quyet - now Vietnam’s richest man in the nation's stock market in terms of US dollar value - has shot from $170 million at the time of its September IPO to $2.2 billion now, becoming the country’s seventh-biggest listed company. FLC Faros lists few projects on its website that weren’t commissioned by FLC, and its brand name was largely unrecognized before its IPO. No other construction company in Vietnam has a market valuation anywhere near that of FLC Faros. Nor have any enjoyed similar recent price gains. Coteccons Construction JSC, the second largest after FLC Faros, is valued at $510 million. ‘One step to heaven’ is what the entire market believes FLC Faros’ share move has experienced. An article published last month by the Wall Street Journal (WSJ) has highlighted the surge in FLC Faros’ stock, claiming this as a reminder of the odd situations investors can find in frontier markets, those a notch less developed than emerging markets. FLC Faros’ net profit was up 170 per cent in the first nine months of this year to VND232.1 billion ($10.4 million). The company bought a large stock of land at low prices throughout Vietnam during a property-market downturn. Still, analysts say its performance doesn’t justify the company’s stock now being valued at more than 120 times FLC Faros’ forecast earnings for this year. Local institutional fund managers are believed to be anxious that a small group of investors could be pushing up the value of FLC Faros. The aim could be to ensure that large exchange-traded funds, which investors use to passively invest in Vietnamese stocks, automatically buy shares in the company, further supporting its market price. Mr. Kevin Snowball, Chief Executive of PXP Vietnam Asset Management in Ho Chi Minh City, was reported by WSJ as saying that if FLC Faros’ stock price falls as fast as it has risen, the losses could hurt Vietnam’s reputation. “We would sincerely hope that the relevant authorities take firm action to protect the reputation and integrity of the market,” Mr. Snowball said. In a response, “I have received the reconciliation request from the Ho Chi Minh Stock Exchange (HoSE) in regard to the share move of FLC Faros”, said Mr. Quyet. For the ‘abnormal’ share move of Faros, he affirmed that “the higher the share price, the better the quality”. The company’s main business is building projects run by property developer FLC Group JSC, controlled by the same individual, Mr. Quyet. The sharp rise in FLC Faros’ share price means it is now valued at about $2 billion more than FLC Group itself and has raised concerns that any fall could trigger a widespread selloff in Vietnamese shares. “There is no way there will be a selloff in FLC Faros,” said Mr. Quyet. “Rather than selling out, I am planning to buy in more shares.” With nearly 70 per cent ownership rate in FLC Faros, Mr. Quyet is currently the company's biggest shareholder. Because of that, “I will have to make an announcement if I want to sell off,” he said. In regard to the growth of FLC Faros’ stock price in the future, Mr. Quyet said "the share price will depend on the supply and demand of the market". On the other hand, Mr. Le Thanh Vinh, FLC Faros’ Chairman said in a letter to shareholders last month that he expected FLC Faros’ stock price to rise another 50 per cent from the closing price of VND108,700 ($4.81), adding that the company is seeking shareholder approval to expand into other business areas, including retailing, transport, power and telecommunications, and to issue more shares. Economists predict Vietnam will be among the world’s fastest-growing economies in 2016, expanding about 6 per cent, as it benefits from a manufacturing industry that has grown in importance over the years. That and increased foreign-direct investment helped push the VN-Index to an eight-year high of 688.89 on October 19. FLC Faros increased more than 780 per cent since its September 1 debut, and is leading gains on the gauge. The index, up 13 per cent this year, has topped a 2.7 per cent decline in the MSCI Frontier Markets Index and 4.2 per cent advance in MSCI South East Asia Index. That has made Vietnamese shares expensive relative to their peers, with a 12-month price-to-earnings ratio of 13.2, more than 10.6 for the frontier measure. Labor export exceeds target As of late November, 108,530 workers were sent to work abroad, surpassing the preset goal by 8.5%, according to the Viet Nam Labor Export Association. In November, labor exporters provided 10,120 guest workers, representing a year-on-year increase of 2.88%. In the January-November period, the northeast Asian nations and territories remained among the biggest employers of Vietnamese workers by recruiting 99,780 people and accounting 91.95% of the market. In the first 11 months, up to 58,659 people were employed in Taiwan (China), accounting for 58.78% of total laborers to the northeast Asian region. Viet Nam sent 33,593 guest workers to Japan, up 36% against the same period last year. Over 7,200 others found jobs in the Republic of Korea, representing a year-on-year surge of 14%. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR