BUSINESS IN BRIEF 16/12 Industry ministry eliminates, simplifies 123 procedures The Ministry of Industry and Trade has announced to eliminate 15 administrative procedures and simplify 108 others out of 443 in 19 fields under its management, marking an unprecedented reform drive. The ministry’s move is as part of the Government’s resolve to improve the country’s business and investment environment. In the field of international trade, foreign direct investment (FDI) enterprises will not have to apply for export-import permits while licensing procedures for other aspects involving FDI firms will be simplified. The ministry also extends the material trading rights to FDI firms. The distribution rights for FDI companies are only restricted in a couple of sectors on the list issued by the ministry. The license application dossier will be reduced. In the field of gas trading, the ministry allows firms to summit dossiers online and modifies the validity of LPG container certification from two years into five years. Regarding import-export activities, the ministry abolishes the requirement for the original copies of contracts on renting rice storage and producing facilities to meet export and trading requirements. The ministry was ranked 12th in 2014 and 18th in 2015 out of 19 ministries in the Public Administration Reform (PAR) Index. Drug prices still left unchecked Authorities in HCMC have not been able to manage drug wholesale and retail prices, according to the city’s Department of Health. In a draft plan for the city’s pharmaceutical sector development in 2017-2025, which has been passed to the city government, the department ascribed the situation to the lack of legal restrictions on intermediary trading and drug pricing by retailers. Data of the department shows the city has nearly 1,090 drug wholesalers, including State-owned, joint-stock and limited liability companies, which can meet 80% of the city’s demand for pharmaceutical products and make up 30% of the country’s total. The city now has around 5,830 drugstores, with 5,240 of them privately-held, 110 belonging to hospitals and the remainder owned by enterprises. According to the department, certain physicians are found to give drug prescriptions in favor of the drugstores which offer them high commissions. Drugs provided by wholesalers come from different sources, either from producers or authorized dealers, making it difficult for authorities to manage prices and quality. There are too many drug distribution companies and multiple intermediary levels, causing drug prices to surge and making it impossible for authorities to determine real prices. Vietnamese fruit export turnover forecast to be a major commodity   The Ministry of Agriculture and Rural Development yesterday reported that Vietnamese fruit export reached US$186 million in November, bringing total export value of the commodity in 11 months to US$2.178 billion. Major markets for Vietnamese exports are China with 70.4 percent, South Korea with 3.6 percent, the US with 3.4 percent and Japan with 3.1 percent. Turnover of fruit export is expected to  exceed that of rice rice to become the nation’s major commodity for export - an impressive achievement for the fruit and vegetable sector. The Ministry asserted that fruit export has the fastest growth rate amongst agricultural produces and ranks the third in the nine agriculture-forestry-fishery produce list with high value.  Meantime, amongst 29 Vietnamese-grown tropical fruits for export, dragon fruit tops the list with export turnover of US$700 million, accounting for 50 percent of total export value. Longan and watermelon also have impressive growth rate for exports. In the last months of the year, fruit export sector receives a good new that mangosteen and litchi have been accepted to enter the US and Australia markets respectively. In the future, shipments of fruits like dragon fruit, rambutan, longan, litchi, and mangosteen have since increased on an annual basis into potential markets such as the US, Japan, South Korea, head of the Plant Protection Department under the Ministry of Agriculture and Rural Development Hoang Trung said. Currently, Vietnamese fruits have won over consumers in many countries. Next time, Vietnamese mango and star apple will be sold in the US market meanwhile lychee was allowed to enter Australia and next mango and dragon fruit will enter this market. Japanese consumers now can eat Vietnamese mango and dragon fruits. Director of Chanh Thu Exporter in the Mekong delta province of Ben Tre Ms. Nguyen Thi Hong Thu said that there have been positive signs for the Vietnamese fruit export market. Yet fruits must achieve GlobalGap or VietGap to be able to enter the US, or EU markets. In its planning for fruit export growth, the Ministry concentrates on 12 major fruits including dragon fruit, mango, rambutan, durian, star apple, grape fruit, longan, banana, pineapple, orange, custard-apple, and tangerine. Total orchards with the vision to 2020 will be 257,000 hectare, accounting for 52 percent total areas for planting fruits in the southern provinces; the Mekong delta will have 185,000 hectare orchards and the South East will have 72,000 hectare orchards. To achieve the target, experts said that the government should offer favorable condition for enterprises and proper policies to benefit farmers. For past time, many areas in the Mekong delta specializing in specific fruits include Hoa Loc mango grown in Tien Giang Province and Can Tho City, Chu mango in Dong Thap Province; pomelo Nam Roi in Vinh Long, Hau Giang, Soc Trang provinces; dark blue skin pomelo in Ben Tre; mandarin in Lai Vung District in Dong Thap Province; dragon fruit in Tien Giang, Long An; star apples grown in Lo Ren-Vinh Kim in Tien Giang Province. Additionally, quality and productivity were improved thanks to application of technology. However, Vietnamese fruit export faced difficulties including quarantine and food safety regulation. Le Van Banh, head of the Department of Processing and Trade for Agro-Forestry-Fisheries Products and Salt Production under the agriculture ministry, said that it needs to perform radiation treatment and growing fruits as per international standards such as GlobalGap. In addition, it should plan cultivation areas for each market and farm address according to regulation as well as form domestic consumption chains and meet export demand, said Banh. IPO on horizon for Benthanh Group Benthanh Group, a diversified investment corporation, has announced the date of its company valuation for equitization as June 30, 2016 according to the latest decision issued by the Ho Chi Minh City People’s Committee on the company’s equitization plan. “If the equitization roadmap takes place on schedule, the group can complete its first public offering of shares within 2017,” a representative from Benthanh Group told VET. She did not give any further information about its plan. On the appraisal date, Benthanh Group’s equity reached nearly $110 million - including the charter capital of around $86 million, over the total assets of $148 million, equivalent to 73.4 per cent. In other words, the firm operates mainly based on its equity so the operation status is assessed to be relatively safe. With its balance in cash and cash equivalents of over $40 million, Benthanh Group can afford to directly finance projects’ implementation as well as increase the percentage of ownership in its member companies once in a favorable condition. Furthermore, Benthanh Group is also limiting loans to the minimum amount. Specifically, the loan balance at June 30 was more than $4 million and has been maintained quite stably at around $4.4 million or under from 2013 until the present. Therefore, the company’s interest costs at $146,000 for the first half of 2016 have not put it under pressure. The main source of stable income from dividends helped Benthanh Group’s profits from  2013 to 2015 to remain constant from about $6.6 million to $9 million per year. The company’s net income for the first half of 2016 was around $7.1 million, equivalent to the total profit of the previous year. It is noticeable that revenue of the first 6 months amounted to $10.5 million, up sharply compared to $1.6 million in the same period in 2015. Of which, sales revenue reached $6 million but only returned less than $44,000 in gross profit. These statistics were not explained in detail. At the end of June, Benthanh Group made long-term investments of about $57 million in its member enterprises under the form of joint ventures and association. The parent company is contributing capital, along with foreign partners, in six joint ventures to manage and operate some renowned 4 and 5-star hotels including Renaissance Riverside Hotel Saigon, Sofitel Plaza Saigon and Norfolk. Among associated companies, there are some notable names such as Saigon General Service Corporation (Savico), Ben Thanh Trading & Service JSC and Ben Thanh Tourist. Benthanh Group is the largest shareholder of those companies with the ownership ratio of over 40 per cent. The quality of the companies’ operations associated with Benthanh Group as equal or only listed companies is still not able to be accurately evaluated. However, the Group’s regular dividends received annually show the business situation of the member firms are relatively stable. Specific information on the Group’s IPO roadmap has not been published in detail, but the IPO of large corporations with relatively healthy financial situations and possessing good companies will definitely attract investors’ attention. Ben Thanh Corporation, a diversified investment corporation that focuses on tourism, trading service and real estate, was established in late 1997 according to the General Corporation 90 model, including nine member enterprises, 10 enterprises invested in by the parent company and 4 dependent accounting units. After nearly 20 years of development, the group is managing investment capital in 28 member companies operating in the four sectors consisting of tourism, trade, real estate and industrial production with the whole system’s revenue in 2015 achieving more than $630 million. Milton building a luxury Pullman resort Milton Vietnam JSC has announced its new project, a European ecotourism village and resort, at Truong Beach in Phu Quoc Island and kicked-off construction on the Pullman Phu Quoc Resort, as part of the project, on December 6. In an area spanning 82.2 hectares, the village will be located in the centre of Truong Beach, and will include hotels, trade centers and entertainment venues. The project will feature 4,000 three, four and five star rooms. Total investment in the project is VND10 trillion ($448.3 million). Pullman Phu Quoc Resort covers 6.65 hectares and features 332 five-star accommodations, with 291 rooms and 41 villas. The project's completion is estimated by August 2018 and will be operated and managed by the prestigious Accor Hotels. In September Milton and BIDV Mien Tay Insurance Company (BIC Western branch) signed an insurance contract amounting to VND1 trillion ($44.8 million) for the construction of the Pullman Phu Quoc Resort. Milton is the investor of the project and BIDV, (The Bank for Investment Development of Vietnam) Phu Quoc branch is the credit sponsor. Milton Vietnam JSC has its headquarters in Phu Quoc Island with a representative office in Ho Chi Minh City. Milton is a subsidiary of the Russian-based Milton Group, which was founded by Vietnamese living overseas. Established 20 years ago, Milton Group operates in various industries including footwear and textiles production, international trade, finance investment, real estate, hotels and resorts. According to the Phu Quoc Economic Zone management board, Phu Quoc attracted 250 registered projects as of September 2016, but only 30 projects have been launched with a total capital of VND30 trillion ($1.34 billion). Vingroup has taken the lead with VND9 trillion ($400 million) in investments. Sun Group came next with more than VND8.62 trillion ($383.4 million), followed by Milton with VND5 trillion ($222 million), BIM Group with VND1.26 trillion ($56.3 million) and CEO Group with VND1.25 trillion ($55.91 million). The island has been offering investors incentives on corporate tax and personal income tax. It has also exempted value-added tax for tourists at the Phu Quoc International Airport while providing them with a 30-day visa exemption. In a master development plan approved by the Prime Minister, the island will be designated a special economic zone, a centre for high-quality eco-tourism, a trade and luxury services area, and a high-tech area. VietJet IPO set to raise US$170 mln, value airline at US$1.2 bln Budget airline VietJet is set to raise about US$170 million in an initial public offering (IPO) that will value Vietnam's only private airline at US$1.2 billion, people close to the deal said on December 14, in the latest in a string of Vietnamese share sales. VietJet Aviation JSC, founded in 2007 by Nguyen Thi Phuong Thao - now Vietnam's first female billionaire - will add its name to a list of coming and completed sales that includes Vietnam Airlines, brewer Sabeco and dairy Vinamilk. VietJet will sell 44.7 million shares priced just below the middle of their 75,900 to 98,400 dong ($3.34 to $4.33) marketed range, four people said. The price for institutional buyers will be 84,400 dong each, the people said. One of them told Reuters that the price for retail investors would be 86,500 dong. An overallotment option would not be exercised, the people told IFR, a Thomson Reuters publication. One of the people told Reuters that the offer was oversubscribed. BNP Paribas, Deutsche Bank, JP Morgan and VietCapital are the IPO's joint global coordinators, IFR reported. VietJet shares will be listed on the Ho Chi Minh Stock Exchange on Feb. 23, it said. The people declined to be identified as the information had not yet been formally announced. VietJet declined to comment when contacted by Reuters. Expanding, VietJet has placed the country's biggest-ever aircraft order - for 20 Airbus Group SE A321 planes worth $2.4 billion and 100 Boeing Co 737 MAX 200 jets worth US$11.3 billion at list prices. The airline commanded around 40 percent of the domestic market, and is likely to surpass flag carrier Vietnam Airlines this year as the country's biggest domestic airline, market analyst CAPA Centre for Aviation said in January. For its part, the one-time government-owned Vietnam Airlines JSC on Monday said it has asked shareholders to register their ownership by late last month as it too prepares to list at the Hanoi Stock Exchange. The government next plans to sell its nearly 90 percent stake in Saigon Beer Alcohol Beverage Corp (Sabeco) by 2017, capitalizing on increasing interest in Vietnamese companies. On December 12, Singapore-listed beverage maker Fraser and Neave Ltd said it paid about US$500 million for around 5.4% of Vietnam Dairy Products JSC (Vinamilk). "VietJet's IPO and the other share sales will attract more foreign cash to Vietnam's stock market and help raise market capital, which may help the country upgrade to emerging-market status," said Saigon Securities' Deputy Director of Retail Research Nguyen The Minh. "Market liquidity will be improved as well." ($1 = 22,710 dong).  Russian firms showcase products       Executives from more than 20 Russian companies introduced their products to supermarkets, distributors and leading import and export companies at a meeting in HCM City yesterday. The visitors’ companies specialise in food, mineral water, alcoholic beverages, children’s food, fruits, cooking oil, meat and meat-based products, confectionery and other consumer products. Robert Kurilo, chief representative of Russian Export Centre in Viet Nam, said Viet Nam and Russia have had very good relations in many fields for many years, but bilateral trade remains modest. The centre has stepped up promotion activities to acquaint Vietnamese companies and consumers with high-quality Russian products. Doan Thi My Linh of the Saigon Trading Group said SATRA needs to import foreign food products to diversify goods in its supermarket. Russian food products produced using green technologies and without using GM organisms would be popular with Vietnamese consumers, she said. But participants at the meeting agreed that Russian food and beverage products would face fierce competition against products from other countries that are already available in Viet Nam. According to the Russia-ASEAN Trading House, a trading mechanism between Russian exporters and potential business partners in Southeast Asia, the Viet Nam- Eurasian Economic Union (EAEU) free trade agreement that took effect on October 5 will offer a great advantage for Russian products in Viet Nam since import duties on more than 59 per cent of items are gone. They include meat products, flour, alcohol, mechanical equipment and others. According to the Ministry of Industry and Trade, Russia is the largest and most promising market of the five EAEU member countries – the others being Belarus, Kazakhstan, Armenia, and Kyrgyzstan -- accounting for 80 per cent of the bloc’s total trade. Viet Nam is Russia’s largest trading partner in Southeast Asia, but the numbers remain modest compared to the potential, accounting for around 1 per cent of their respective trade. The FTA is expected to boost bilateral trade from nearly US$4 billion last year to $10 billion by 2020, it said.  Firms must invest in tech: experts      Many Vietnamese small-and-medium sized enterprises (SMEs) have not applied technology to their business and 45 per cent of the country’s firms have low or medium technology, while only two per cent of Vietnamese companies have high level technology. “The limit in applying technology in local businesses has made the country’s competitiveness lower,” said Pham Tat Thang, senior advisor of the Viet Nam Institute for Trade under the Ministry of Industry and Trade. Thang told a conference on developing Viet Nam’s trade in 2016-20 held in Ha Noi yesterday that amidst fierce competition, several SMEs had not paid attention to technology application and renewal. Meanwhile, domestic firms have faced challenges from foreign companies in the past few years. “There will be more dissolved and bankrupt companies soon if local businesses do not change. With deeper integration into the world economy, SMEs should change their thoughts about doing businesses,” he added. He said enterprises should establish co-operation with partners, local businesses and Vietnamese overseas and pay attention to human resources to improve their ability in international trading. He also said that whether the Trans-Pacific Partnership (TPP) was signed or not, the TPP would still be a model for Vietnamese businesses to improve their competitiveness. Phan To Uyen from the National Economics University said the small scale, weak management and technology and low competitiveness have been common among Vietnamese businesses. Uyen provided figures from the Viet Nam Chamber of Commerce and Industry showing that only two per cent of the country’s firms were large while two per cent was medium and 96 per cent were SMEs. “With limited resources and a shortage of management experience, vision and competitiveness strategies, Vietnamese companies have seen difficulties in joining global supply chains,” she said. She suggested the Government create a favourable business environment to support businesses in lending, application of science and technology and participating in global supply chains. Viet Nam has seen a remarkable increase in its exports while expanding markets and co-operation with many countries such as the US, Japan and EU. Tran Thanh Hai, deputy head of the ministry’s Import-Export Department said in 2006-15, average export turnover was 17.5 per cent a year. The export turnover increased four times from US$39.8 billion in 2006 to $162 billion in 2015. The export structure has changed by increasing the portion of processing products to account for 78 per cent of total export turnover while reducing that of fuel and minerals. However, he said, the country’s exports have seen shortcomings as key products have been outsourced. Its agricultural products – one of Viet Nam’s strengths in exports have mostly been exported in raw materials with low added value. Nghe An lures nearly VND31 trillion in investment The central province of Nghe An has attracted 120 projects with total investment of nearly VND31 trillion (US$1.36 billion) so far this year, according to the provincial People’s Committee. Since 2013, the locality has lured 372 investment projects worth over VND161 trillion (US$7.3 billion), including many large projects such as Vietnam-Singapore Industrial Park and TH True Milk factory. However, the committee assessed that the province is facing difficulties in attracting foreign investment as the potential of many promising sectors has yet been fully tapped, including high technology industry, animal breeding, forestry, agro-forestry and fishery product processing, and tourism. Meanwhile, asynchronous administrative reform and slow implementation of the one-stop-shop model in some agencies are affecting the local investment environment and hindering investors’ access. In 2017, the province will improve its investment environment to attract more domestic and foreign investors in 2017, the provincial People’s Committee said. It will prioritise luring investment to a number of areas with high technological content and added value while paying more attention to the quality of investment projects.  Nghe An is drastically inspecting projects with slow progress. Since early this year, 85 such projects have been inspected, 13 of them were revoked and 10 others are likely to be cancelled. Phoenix Golf Resort hotbed of violations Numerous violations have been detected during the implementation of the land lease contract of Vietnam Hanoi Phoenix Golf Resort (Phoenix Golf Resort), which was invested by Charmvit Group from the Republic of Korea. The project’s construction was kicked off in 2005, with the total investment capital of $38 million. Starting operation in 2009 with 54 holes, it was listed in the Vietnam Book of Records as the biggest and most beautiful golf resort in 2012. However, behind the sparkling appearance, numerous violations have been detected during the implementation of the contract signed by the investor and the provincial leadership.   Notably, according to the conclusions of the Government Inspectorate of Vietnam, the investor built three-storey hotels on an area of 6,000 square metres without securing the adequate license. The area to build the hotel was not included in the project’s detailed plans previous submitted for approval. These hotels are still operating and the Hoa Binh People’s Committee has yet to charge for additional land lease fees causing a loss for the state budget. In addition, the investor and the provincial leaders arbitrarily discussed the land lease fees. Notably, in May 2004, the two parties signed an agreement for developing the project. Accordingly, the investor is allowed to rent the land for 50 years to operate the project, completely exempt of land lease fees for at least 11 years. The land lease fee was $0.01 per square metre per year and the investor would pay of the amount in a sum once and for all.  In January 2009, Bui Quang Khanh, director of the Hoa Binh Department of Natural Resources and Environment, and representatives of the investor signed a land lease contract over a 318,889-hectare area with the duration of 49.5 years, effective from February 2005 to August 2054. However, due to the province’s previous commitments on land lease fee exemption, the investor would only have to pay for 38.5 years. According to the Government Inspectorate of Vietnam’s report, an arbitrary agreement in land lease fees between the two parties is not compliant with regulations. Besides, paying the fees in a one-time sum did not match the clauses of the investment certificate, as it stipulated that the fees would be collected every year and would be adjusted every five years by no more than 15 per cent each time. The contract was signed in January 2009, however, until 2010 the investor paid the land lease fees without recalculation, which is also not compliant with the regulation.  The province was also found in violation when it allowed the investor to develop a project falling outside the parameters of the province’s land use planning approved by the prime minister as well as the national sports development strategy until 2020. Vietnam Food Association proposes rice export volume cut The Vietnam Food Association (VFA) suggested exporting 2-3 million tonnes of rice per year through 2020 instead of 7-8 million tonnes at present. At a workshop in Ho Chi Minh City on December 13, the VFA said nearly 70 percent of Vietnamese rice is sold in Asia each year with China the biggest importer, followed by the Philippines, Indonesia and Malaysia. However, Vietnam’s rice exports to these markets are sluggish. VFA Chairman Huynh The Nang said in previous years, the three ASEAN nations imported around 2-3 million tonnes of rice from Vietnam.  However, currently, rice export volume to the markets has reduced due to their governments’ policies of balancing domestic food and reducing dependence on rice imports. Meanwhile, China has put forth new quarantine regulations, and signed a protocol with Vietnam setting stricter sterilisation inspections on Vietnamese rice and rice bran imports. Nang said it is necessary to improve quality and ensure food safety by building safe material areas which trace the origin of products. He advised making use of potential rice production regions, including Dong Thap Muoi (the Plain of Reeds) and Tu Giac Long Xuyen (Long Xuyen Quadrangle) and the rice-shrimp rotational crops region between the Tien and Hau rivers in the Mekong Delta. Luong Hoang Thai, head of the Ministry of Industry and Trade’s Multilateral Trade Policy Department, said 90 percent of Vietnamese rice exports come from the Mekong Delta. Over 1 million tonne of rice was lost due to drought and saltwater intrusion in the 2015-2016 winter-spring crops, he said, adding that rice production in the delta will face more difficulties from climate change and rising sea levels. This requires the country to build large-scale paddy fields and stable material areas to create high-quality and competitive products, the panel suggested. Can Tho strives to become Mekong Delta’s startup hub The Mekong Delta city of Can Tho, an economic hub of the Mekong Delta, is expected to become a startup valley in the Mekong Delta region by 2020. The goal was made at a workshop on “Vietnam Startup Index 2015/2016” held on December 13 by the Vietnam Chamber of Commerce andIndustry (VCCI) Can Tho branch and the municipal of Department of Planning and Investment in the city.  The workshop focused on measures for startup development in Can Tho based on the startup situation in Vietnam in 2015 - 2016. Can Tho had 67,000 enterprises and business households as well as 221 cooperatives in 2016, contributing 4 trillion VND to the local budget and providing over 125,000 jobs, said Nguyen Thanh Dung, Vice Chairman of the municipal People’s Committee, adding that the city’s economy steadily grew at 5.88 percent per year, ranking 14th among 63 cities and provinces in competitiveness. However, a lack of a comprehensive legal framework and stable government investment has posed challenges to local startups. They also lack confidence, experience and creativity. To tackle these problems, the city is advised to create a creative environment while promoting training programmes for startups and businessmen, said Truong Quoc Trang, Deputy Director of the municipal Department of Planning and Investment. He added that a training course themed “Your startups” will be held by the department and the VCCI Can Tho chapter in 2017. The course is expected to provide basic skills and knowledge on startups for youths. Meanwhile, the municipal Department of Science and Technology will coordinate with the city’s VCCI to create and expand a working space network and suggest business directions for startups, said Tran Hoai Phuong, the department’s Deputy Director. Startup competitions will be held to encourage enterprises to exchange their experience, he added. A support foundation will be founded by the VCCI with a targeted budget of 10 billion VND in 2017 – 2020 to support infrastructure construction and training programmes, according to Vo Hung Dung, Director of VCCI Can Tho chapter. The foundation will call for government financial support and investment of big businesses to professionalise startups. Russian food businesses seek market entry in Vietnam   Representatives of more than 20 Russian food and drink businesses joined an exchange with leading Vietnam distributors and importers on December 14 in Ho Chi Minh City. Robert Kurilo of the Russian Export Centre in Hanoi said the Centre hopes that diverse trade promotion activities in Vietnam will help Russian products gain market entry and get fast grocery store shelf space. Russian businesses have introduced a variety of food and drink products to local business partners including instant cereals, confectionary, fruit juices and processed meat products. Klimova Elena, general director of the Znamensky Company, said Russian products are of high quality because they are made on hi-tech production lines. Besides, local customers are interested in discovering new flavours, which bodes well for Russian food to find a niche in the market. Doan Thi My Linh from SATRA noted the company currently needs to import foreign food to diversify their goods at its supermarkets. She hopes that high quality Russian products will be chosen by local customers. At the exchange, businesses from two countries identified some difficulties in transporting products to Vietnam, noting in particular the vast geographic distance results in high freight charges. Russian autos gain free access to ASEAN via Vietnam Vietnam-Russia commercial trade remains relatively insignificant, said Hoang Quang Phong, vice chair of the Vietnam Chamber of Commerce and Industry at a recent business forum in Hanoi. Official statistics for 2015, said Mr Phong, showed that the combined exports and imports of Vietnam to and from Russia was roughly US$4 billion, which is only a small fraction of the trade figure of other trade partners. For comparison purposes, the country’s commercial trade with its five largest trading partners for 2015 was – China (US$66 billion), ASEAN (US$42.1 billion), the US ($41.5 billion), the EU ($41.2 billion) and the Republic of Korea ($36.7 billion). With total foreign direct investment estimated at just US$2 billion, Russia ranks No. 17 among other economies currently doing business in Vietnam, noted Mr Phong. While on the reverses side, he added, that Vietnamese companies have foreign investment of approximately US$3 billion in Russia, substantially all of which is in the oil and gas segment. However, despite the relatively weak economic ties, the two countries have strong cultural and political links dating back to the Soviet Union era, Mr Phong observed. Notably, a study by the Pew Research Centre, a think tank based in Washington DC, the US, conducted in 2015 showed that 75% of Vietnamese people viewed Russia positively. Of all the people surveyed in some 40 countries, only 30% saw Russia favourably. Russia became Vietnam’s first strategic partner in 2001 even before its major Asian neighbours like Japan (2006), India (2007) and China (2008). Alongside China, Russia is currently one of the two countries with which Vietnam has established a comprehensive strategic partnership. In May 2015, following six years and eight rounds of negotiations, Vietnam signed a free trade agreement with the Russia-led Eurasian Union (EAEU), comprised of Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia. That Agreement and the new free trade region it created came into force this past October 2016, noted Mr Phong, adding that it holds great promise for eliminating both tariff (previously at 5.63%) and non-tariff barriers to trade of Vietnam with the EAEU.  Pursuant to the Agreement, the EAEU eliminates import duties on 88% of goods imported from Vietnam either immediately when the Agreement came into force or with a phase-out transit period of five to 10 years. Thus, Vietnamese producers have already gotten significant preferential access to many consumer goods markets of the EAEU including clothes, shoes, fish, rice, fruits, vegetables and consumer electronics. In return, the average level of Vietnam duties imposed on EAEU goods will drop from 10 to 1%. Vietnam has agreed to eliminate its import duties on 91% of its goods' nomenclature, which means that zero duties will apply to EAEU beef, dairy products, tinned fish, flour, cereals as well as to rolled steel, pipes, asbestos, ships, petroleum products and many other categories of goods. The duty on petrol will be reduced from 19 to 0% with a transition period; on cables, from 20 to 0% over a period of 10 years; for large goods vehicles, from 17 to 0%. Vietnam has also agreed to partially liberalize access to its market for EAEU tobacco products, while the EAEU automobile industry companies will be given exclusive access to the Vietnamese market. Vietnam has signed an investment agreement for the industrial assembly of cars and trucks with companies from Russia and Belarus. Assembled vehicles will be considered as manufactured in Vietnam and will thus have free access to the markets of ASEAN member states. We hope that the growth in trade resulting from the newly created free trade EAEU region will increase to US$10 billion by 2020 as agreed upon by the two governments, noted Mr Phong. However, the challenges such as high shipping costs due to the geographical distances, along with differences in business culture and languages may prove to be too formidable obstacles for Vietnamese companies. HCMC begins forcing business offices out of condo buildings The HCMC Department of Planning and Investment has urged those businesses having offices in condo buildings in the city to move out within 15 days. They will have to stop operation inside condo buildings and register for new office addresses. If they fail to do so, the department will coordinate with the Construction Department and district authorities to deal with them in accordance with law. According to Government Decree 99/2015, which guides the implementation of the Housing Law, business offices are disallowed inside condo buildings. Those having business registration licenses and using apartments as transaction offices are required to move to other places within six months starting from December 10 last year, which means the June 10 deadline is over. But many businesses are still operating in many condo buildings around the city. Data of the Department of Planning and Investment shows the city now has around 2,000 enterprises whose head offices are based in such residential buildings. More than 30 condo units at 42 Nguyen Hue Boulevard in District 1 are used for doing business. Seven to eight households still live at this place while the rest have moved to other places and leased their homes to others, said Tran Quoc Thang, member of the condo’s management board. “We cannot manage those doing business in these condo units. It is the right of the owners to lease their properties to anybody as wished. It is the responsibility of authorities to order those businesses to move out or stop operation,” he said. A representative of a business at this condo said it is a difficult for enterprises to relocate their offices within 15 days. “It will take a lot of time looking for a new location with a reasonable rental. When relocating elsewhere, enterprises will have to inform banks, tax authorities, partners and customers of their new addresses.” Cu Thanh Duc, deputy head of the business registration office at the Department of Planning and Investment, said many enterprises are using condo units as their offices as the business registration rules do not require them to declare where they are headquartered. Lawyer Tran Duc Phuong, member of the HCMC Bar Association, said Decree 99 bans enterprises from using condos as business locations but the decree does not clearly define “business location.” “The Enterprise Law describes a business location as a place where enterprises carry out specific business activities. In line with the law, Decree 99 only prohibits enterprises from using condo units as transaction locations, but not head, branch, or representative offices,” said Phuong. However, authorities can still order enterprises operating in condo buildings to move out based on the regulation that specifies condos must be used for the right purpose, which is living. The lawyer suggested authorities provide specific sanctions against those violating the rule, instead of simply banning. Each province to sue 10-50 businesses in premium debts this month Each province in Vietnam will file lawsuits against 10-50 businesses for not paying social, health and unemployment insurances more than six months and big debtor names will be publicized on the media by December 31. The announcement was made by Mr. Nguyen Tri Dai, head of Premium Collection Division under the Vietnam Social Insurance Agency, at a conference in Hanoi on December 13. According to Mr. Dai, the agency has implemented many measures to collect premium arrears including coordination with provincial and municipal labor unions to sue the debtors. They are now preparing documents to start proceedings by the end of the month. The agency has set target to reduce the ratio of businesses’ social and health insurance debts to 2.9 percent this year. Last month, the arrears were down 1.25 percent against the previous month but still accounted for 5.6 percent of the total premium, he said. Social, health and unemployment insurance arrears hit VND13,135 billion (US$578 million) in the country. Deputy director of the Vietnam Social Insurance Agency Tran Dinh Lieu said that the agency would work with provinces and cities natiowide to unexpectedly inspect businesses over their insurance payment in December. Each province will inspect 15 businesses in premium arrears for more than three months and issue fines. The agency will transfer documents to police agencies for investigation to those deliberate not to pay the fines. Rice industry should reduce output, increase quality: deputy minister Deputy Minister of Industry and Trade Tran Quoc Khanh said that four million ton rice export a year with high prices would be better than low price export of 6-7 million tons, at a workshop in HCMC on December 13. He said that rice production thought need be changed by improving quality instead of running after quantity. Farmers just cultivate two instead of 3-4 crops a year. Formerly, chairman of the Vietnam Food Association Huynh The Nang said that the world market has been on the trend of high quality rice and competitive prices as the number of supply countries has been increasing. Meantime, import countries such as the Philippines, Malaysia and China have trended towards developing domestic production and cutting import output. Vietnam’s rice export value has reduced for five years in a row since 2012 although volume saw year on year increase in 2012 and 2015. Therefore, output should reduce to 3-4 million tons a year by 2020 and 2-3 million tons after 2020. Slow disbursement of capital raised from G-bond sales The State Treasury has met the Government bond sale target for this year but the disbursement of capital raised from the debt sales has been slow, affecting the country’s economic growth. As of December 7, VND280.8 trillion (US$12.4 billion) worth of G-bonds had been sold, meeting 100% of this year’s target, while just 46.6% of the capital raised had been disbursed at the end of November. Prime Minister Nguyen Xuan Phuc has recently written to ministries and local authorities urging them to speed up the disbursement of public investment capital. By end-November, the State capital disbursement ratio had reached 70.2%, with G-bond capital disbursements meeting 46.6% of the full-year estimate. G-bond sales have the most successful year this year on the primary market with volume jumping 45% compared to 2015. Data of the Hanoi Stock Exchange show that in 24 G-bond auctions held in November, more than VND9 trillion was raised, down 59.6% against the previous month. The winning coupons of five-year bonds were 5.2% to 5.5%, 10-year bonds 6% to 10%, 15-year bonds 7.2%, 20-year bonds 7.71% and 30-year bonds 7.98% a year. The figures suggested disbursements of G-bond capital are slow. The stagnation of public investment activity has also hit the nation’s economic development as the Government is facing a hefty challenge for obtaining GDP growth of 6.3-6.5% this year. State budget collections had totaled VND911.2 trillion by the end of November, representing 89.8% of this year’s estimate and rising 6.3% from the same period last year, while budget spending had hit nearly VND1,100 trillion, meeting 84.7% of this year’s goal and up 6.2% year-on-year, said the General Statistics Office. Spending on development investment was VND173.4 trillion, up 14.1% year-on-year, and basic construction capital disbursement was VND171.5 trillion, or 68% of this year’s estimate. Budget deficit was put at VND167 trillion in end-November. Can Tho City imports 2,000 cows from Australia The Mekong Delta city of Can Tho has imported 2,000 Australian cows which will be slaughtered for meat. Local firm Dong Ha last Saturday inaugurated a store to sell fresh and frozen Australian beef at 143 Tran Van Kheo Street, Ninh Kieu District, Can Tho City. At the store opening ceremony, Le Thi Kim Thu, director of the company, said the Mekong Delta for the first modern slaughterhouse and distribution outlet. Thu said the company’s beef meets Australia’s Exporter Supply Chain Assurance System (ESCAS) standards and Vietnam’s food safety and hygiene standards. Dong Ha plans to open more outlets in other parts of the city this month. Beef products are expected to be available on supermarkets, markets, restaurants and hotels in HCMC and the Mekong Delta provinces in early February next year.   Fresh Australian beef at the store costs VND200,000 to VND320,000 a kilo. The store offers a discount of 10-20% for wholesalers in the first ten days of its inauguration. Much room left for PPP projects HCMC in the past two years has attracted hundreds of urban infrastructure projects in the form of public-private partnership (PPP) and still has enormous room for more of such projects in the coming time. Le Quynh Dai, vice chairman of District 8, told the Daily on the sidelines of the HCMC People’s Council’s session here last week that at least three investors had shown interest in the relocation and renovation of households along Doi Canal in the form of PPP in the district. They are Saigon Housing and Infrastructure Investment JSC, Vingroup and the Ministry of Defense’s Lung Lo Company. Saigon Housing and Infrastructure Investment JSC has officially applied to get involved in this project, while the other two are gathering information in District 8. It is reported that this project may cost nearly VND10 trillion, or US$440 million. Investors are also interested in developing many projects in other fields such as wastewater treatment, environment, transport infrastructure, seaport, healthcare, education, culture and sports under PPP. There are now 92 PPP projects in the city with total capital of nearly VND327 trillion, said Phan Thi Thang, director of the HCMC Department of Finance. Also, 95 other projects worth a total of VND121.43 trillion are calling for PPP investment, Thang told the council’s meeting. Among the 92 PPP projects under development are 65 projects in the form of BT (build-transfer), 16 in BOT (build-operate-transfer) or BTO (build-transfer-operate), seven BLT (build-lease-transfer) or BTL (build-transfer-lease) projects, and four BOO (build-own-operate) undertakings. In 2009, the legal corridor of Vietnam only allowed for three PPP forms: BOT, BTO and BT. Last year, the Government issued Decree 15/2015/ND-CP raising the number to seven with the additional ones being BLT, BTL, BOO and O&M agreement (operation and maintenance agreement). The additional formats are aimed at helping investors at home and abroad access and carry out a greater diversity of PPP projects, meeting the actual needs and international practices. Although the number of PPP projects is quite impressive with the boost given by Government Decree 15, a couple of obstacles should be removed. In a report to the Ministry of Planning and Investment in mid-2016, the HCMC government said some difficulties with the implementation of PPP projects were related to preferential tax and land rent policies, and the selection of no-bid contractors for PPP projects with direct impact on the lives and the security of citizens that need to be done quickly. The municipal government said periodic payments to developers of PPP projects should have inflation factored in. Since investors are unable to control inflation risks, such risks should not be passed onto them. Investors believe there should be a more specific and clearer legal framework to ensure the interests of investors and the State. Saigon-Khanh Hoi port here to stay The HCMC departments of tourism and transport have agreed to maintain Saigon-Khanh Hoi port to develop waterway tourism. Saigon-Khanh Hoi port, which is adjacent to the Ho Chi Minh Museum, has long been one of the city’s popular destinations. Therefore, the port should be upgraded into a central wharf to develop inland waterways and river travel links with Cambodia. After nearly two years of relocating from Bach Dang wharf to Saigon-Khanh Hoi, owners of cruise ships and restaurant boats have expressed concern over the lack of berths, saying they might pull out of business in end-2016. When Bach Dang wharf was closed early last year to make room for a project to develop a tourism wharf, some tour boats moved to Tan Cang port and some cruise ships relocated to Saigon-Khanh Hoi. The remaining ships ceased operations or dropped anchor near the Saigon Pearl residential complex. Ship owners have repeatedly asked city authorities for assistance but in vain. The Department of Tourism has proposed the Department of Transport and the HCMC Port Authority boost work on an international cruise port project in Mui Den Do Park, District 7. Pending this cruise port project, Saigon Port Joint Stock Company is building a passenger lounge at Tan Thuan 2 Port to serve big cruise ships. VSI aims to cut social insurance debt Vietnam Social Insurance (VSI) looks to reduce social insurance debt to 2.9% of its estimate this year, heard a conference on VSI operations in Hanoi on December 13. By end-November, unpaid social insurance premiums had surpassed VND13.13 trillion (US$589 million), accounting for 5.6% of the full-year collection plan. Though the sum is smaller than a month earlier, it is still huge, said VSI.   Nguyen Tri Dai, head of the collection department at VSI, said that of VND13.13 trillion, social insurance debt made up VND10.13 trillion, unemployment insurance debt VND572 billion and medical insurance debt roughly VND2.43 trillion. Notably, provinces owed over VND2 trillion in social insurance premiums that should be paid on behalf of privileged people and the remainder is owed by enterprises. VSI has taken a number of measures to cut social insurance debt owed by businesses to slash the social insurance debt ratio to 2.9% of the plan. Social insurance agencies in provinces have coordinated with law enforcement agencies to inspect enterprises with social insurance arrears. Inspection teams worked with businesses that have owed social insurance premiums for over three months. VSI expects to impose administrative fines on at least 15 corporate debtors in each province or city that have not made social insurance payments for over three months. According to a VSI report, as of November 30, provincial social insurance agencies had conducted more than 200 inspections based on the lists of social insurance debtors announced by VSI.   VSI made lists of enterprises that have deliberately delayed social insurance payments. By end-November, over 200 documents had been sent to provincial labor federations, so that the latter will take legal actions against such debtors.   Dai of VSI said there are more than 1,000 bankrupt companies at present. VSI records social insurance payments until the last payment by firms that went bankrupt or were dissolved. Regarding the period between the last payment and the date of bankruptcy or dissolution, VSI will petition the Government to issue a decree settling social insurance debt to protect the interests of laborers. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR