Private residences accommodate tourists after shortage of hotel rooms in Da Lat
Many tourists from Ho Chi Minh City and nearby provinces had to find accommodation in private homes in the Central Highland City of Da Lat even after the Tet season was over on February 15, as there were not enough rooms available in hotels.
Some visitors said they had to come back to Lien Nghia Town in Duc Trong District, 30 kilometers from Da Lat City to stay in hotels there. One family who could not find accommodation decided to return to HCMC after just enjoying a special coffee of the central highland city.
On the same day, authorities in the central highland province of Lam Dong said hotels in the city were overfull with visitors; as a result they had to stay in private homes and students’ boarding houses–especially opened to holidaymakers.
Initial statistics showed that the beautiful central highland city welcomed around 212,000 visitors from December 29 to the fourth day of January of Lunar Year and the figure rose to 370,000 by the eighth day.
Consequently, hotel prices increased by 50-150 percent and 30 percent of holidaymakers hired rooms in private residences and boarding houses.
On Tet this year, there was a leap in the number of tourists to view Gong Culture in Lang Bian Plateau in Lac Duong District. Pang Ting Sin group performed Gong from the second to the sixth day for more than 1,000 visitors, an increase of 10 percent compared to normal days.
On February 15, managers of Sa Ky Harbor in the central province of Quang Ngai said they deployed more express boats from Ly Son Island to transport visitors to the mainland and from Ly Son Island.
Dang Quang Son, director of Sa Ky Harbor, said express boats only stopped operations for Tet holidays from December 29 to January 3 and worked on the fourth day (February 13) when nearly 1,000 holidaymakers used the express boats, a record figure to the harbor so far.
Pham Thi Huong, deputy chairwoman of People’s Committee in Ly Son Island, said five express boats were deployed and authorities had to ask residents on the island to provide shelters for visitors if hotels could not meet the requirements.
Power of simplicity and resolute action
Mai Kieu Lien, chairwoman cum director general of Vietnam Diary Products Joint Stock Company (Vinamilk), attributes her strength to simplicity in words and resolution in action.
While several businesses are making great fuss of the hardships in the present economic crisis, Lien led Vinamilk to enter the list of largest businesses in the Asia-Pacific region with turnover of US$1 billion.
Lien says that she had anticipated the crisis and prepared measures to cope with bad times. Businesses must build a long term plan to take new initiatives in any circumstance. Every year the plan should be revised and reviewed to adapt to prevailing market conditions.
In 2012, she made an impressive decision to import material for the entire year. In order to choose the time to do that, the company’s leader needed good forecast ability, experience of the market and production and trade strategies. This indispensable factor is called resolution.
That was only one of several decisions of nerves that she made in her leadership position over the last tens of years. For instance, she invited a boss of a multinational group to undertake marketing for Vinamilk because their own marketing activities were weak at that time.
To reach the current position, Vinamilk has faced strong competition from foreign milk which has been preferred over domestic products. As a result, Lien never accepts producing items that other companies have yielded much success in, but encourages new products.
She said that all products born at the company have raked in good profits. The company introduced yoghurt and ice cream for the first time in 1993, when people lined up to purchase them. They reclaimed their investment within three months.
Vinamilk inaugurated Dielac– the first powder milk plant in Vietnam in 1987. In the beginning, their staff had to travel everywhere but still failed to sell their product because consumers just believed in foreign milk.
At present, powder milk of the company occupies 30 percent of the domestic market share and now Lien is targeting 50 percent.
Vinamilk is currently exporting its products to 23 countries in the world with turnover from Dielac powder milk alone reaching millions of US dollars a year.
Lien always demands unceasing creativity in her company in order to produce new products for the market.
At present, she pays great attention to training confidential and talented staff and managers for the company. She said that the company does not depend on any individual.
After working hours, Lien returns home to her husband and children and does housework which she said she finds relaxing. She goes swimming and practices yoga in her free time.
Vietnam – an emerging tourist destination
Vietnam has overtaken Thailand in travel agency Hayes Jarvis’ rankings of the ten most popular destinations for UK tourists.
The agency’s list of the top ten long-haul locations favoured by UK travelers include Mauritius, Mexico, Kenya, New York, Hawaii, Egypt, Vietnam, Tanzania, Thailand, and the Dominican Republic. Vietnam placed seventh ahead of Thailand’s ninth.
Hayes Jarvis explained African countries topped the list thanks to UK naturalist and broadcaster Sir David Attenborough’s TV series.
New York is still recovering from the impact of Hurricane Sandy, ranking fourth.
Brazil, Costa Rica, China, and the Caribbean’s Tobago Island were also popular with UK tourists.
Hanoi business incubator developed
Hanoi has been developing a business incubator project with financial assistance from the European Union (EU).
The incubator, started five years ago, aims to assist newly-established businesses operating in food processing and packaging.
Beneficiary enterprises are entitled to rent production and research facilities in the incubator for a period of two or three year. During this time, they will also receive advice on business matters. At the end of the period, they will leave the incubator to make place for up-and-coming enterprises.
In the last five years the project has assisted 200 businesses, many of which have continued successfully after leaving the incubator.
At a recent meeting to review the project, representatives from the EU and the Vietnamese Government affirmed that the incubator is the best model to support small and medium-sized businesses, especially at the start of their operations. This has been proved in many countries. Therefore, Vietnam will use this model to assist businesses in other fields.
Tran Thi Chau, Chief Executive Officer of the Hanoi Business Incubator, said a similar model is being considered to support businesses in the technology sector.
Over the past five years, the EU has provided 875,000 EUR and other support in the form of software as well as experts to the incubator.
As Vietnam continues the project, businesses are also expected to contribute to the incubator’s operation budget.
Can Tho targets becoming largest Mekong Delta trade centre
Can Tho City has initiated a range of construction projects with the aim of transforming itself into the Mekong Delta region’s largest trade centre.
The city is focusing on major port construction and upgrade projects including Cai Cui, Can Tho, and Tra Noc. It is also developing wholesales markets in Thot Not and Cai Rang districts, building the Tay Nguyen Plaza in Nam Hung Phu urban area, and erecting a 25-storey building in Cai Khe.
Can Tho is cooperating with both local and international economic groups and businesses on information, commercial, and international convention centres in Ninh Kieu district. The city’s rural market and mini-supermarket chain projects are continuing.
Can Tho City currently prioritises developing industrial ports, advanced technology facilities, and ecological urban areas.
It has also set the goal of recording an annual US$3 billion export turnover by 2015, with much of the growth planned for rice, seafood, handicrafts, footwear, and garment and textile products.
Finding ways to develop mechanical industry
Improper investment, capital, and technology policies have prevented the mechanical industry from reaching its set targets over the past ten years.
Mechanical industry development would be a step towards improving the socio-economic infrastructure that serves national industrialisation and modernisation. Ten years after implementing the Prime Minister’s resolution No 186 on the mechanical industry development strategy (throughout 2010 with a vision for 2020), support mechanisms for key mechanical products has failed to meet the set targets.
Over the past ten years, the mechanical industry has only made some modest achievements. The shipbuilding industry manufactured 6,500–53,000 tonne ships of international standard, car-carrying ships with a capacity of 4,900 vehicles, and floating crude oil 150,000 tonnage container depots.
Some mechanical businesses have become engineering, procurement, and construction (EPC) contractors in 300–750 MW thermal electric power projects.
The domestic car industry has produced and assembled 80-seat buses, trucks of all types, and other specialized vehicles, while the oil and gas industry has manufactured and successfully launched a 90m-deep self-lifting oil rig.
In terms of mechanical engineering, Vietnam has manufactured 500 KV transformers and mechanical products bearing Vietnamese trademarks are equal to those from other developing countries.
But looking back over the mechanical industry development strategy until 2010, only 34 percent of the country’s mechanical product demands were met, undershooting the 40–50 percent set target. Complete equipment production satisfied approximately 10 percent of demand. Export value growth totalled just 23.4 percent, below the set target of 30 percent.
The average mechanical product localisation rate reached 30 percent while three out of 9 key mechanical engineering projects with PM approval received State development and investment capital. The six remaining projects have not yet been carried out so far.
The Ministry of Industry and Trade’s (MoIT) Heavy Industry Department Head Nguyen Manh Quan, attributes difficulties facing mechanical businesses to limited investment in advanced technology and higher quality human resources.
The MoIT’s Industry Policy and Strategy Research Institute Deputy Head Pham Van Liem identifies the difficulties restricting the automobile industry as a small car market, poor competitive capacity, and limited foreign technology transfer.
Vietnam Steel Association Chairman Pham Chi Cuong says the steel sector needs more input material investment as construction steel supplies are sufficient but dire shortages exist in steel for shipbuilding, automobile, and motorbike manufacturing.
According to experts, developing 8 key groups of mechanical products is infeasible in the context of limited capital resources. Only some projects were thereby approved after ten years of strategy implementation.
Vietnam Association of Mechanical Industry (VAMI) Chairman Nguyen Van Thu says the mechanical industry has failed to meet 50–60 percent of domestic demand and 30 percent of export demand.
MoIT Heavy Industry Department Head Nguyen Manh Quan, mechanical industry development requires a focus on meeting domestic demand and reducing imports. Export opportunities should be seized in automobile, agricultural, electric, and mechanical manufacturing, as well as in the complete manufacturing of thermal-electric and hydro-industrial equipment for both kinds of power plants.
It is imperative to focus on three major aspects of mechanical industry development – State policies and mechanisms, technological renovation, and domestic consumer support.
Addressing the issues businesses face in regards to capital is another priority considering the current economic situation,
MoIT Mechanical Research Institute Head Nguyen Chi Sang says if mechanical businesses strengthen their links and are more active in negotiations for EPC contractors, localisation rates will be higher, leading to a reduction in import surplus.
If the mechanical industry implements 3–5 projects, its future localisation rates are estimated at 40-50 percent, Sang notes.
Experts also underline the need for clear regulations on investment in mechanical projects sourced from the State budget. Consumers must be encouraged to use domestic mechanical products.
Positive signs for exports in New Year
Many businesses have already resumed production in the early days of the lunar New Year to meet foreign partners’ goods delivery deadline.
According to Tu Bon Lacquerware Co. Ltd representative Le Ba Linh, the company based in southern Binh Duong province has exported batches of lacquer products to the European and Middle Eastern markets. It is expected to export products worth more than US$100,000 in the first few months of the year, an increase of 10 percent against the later months of 2012.
Thien Phu Rattan and Bamboo Company in Cu Chi district has also sped up material imports for February goods deliveries to its Taiwanese partner. The company’s director is expecting export orders to increase by 10 percent against the previous year.
Nguyen Huu Viet, Head of Marketing for Cadivi, said the company has plans for the US export of four cable variety containers worth US$500,000. This is the company’s first US market order and is part of a US$5 million export strategy for this market this year, up 25 percent compared to last year.
Ly Quoc Hung, head of the Ministry of Industry and Trade’s Department for the African, West Asian, and South Asian Markets, noted many timber and seafood companies have exported goods to the African market since the beginning of the year. Last year, export turnover to Africa exceeded US$2.6 billion, up more than 20 percent against the same period in 2011.
The General Statistics Office estimates January export turnover to hit US$10.1 billion, up 43.2 percent compared to the figure a year ago. Key export commodities include mobile handsets and components (up 105 percent), electronics, and computers and components (up 95 percent). Agricultural and seafood product export turnover is expected to reach US$1.63 billion, up 39.6 percent.
Energy prices to follow market trends
A lot of work remains to be done in 2013 before energy prices can be fixed properly in line with the development of market economy.
Vietnam’s energy sector has made certain progress in meeting the demands for daily consumption and economic development. As electricity, petroleum, coal, oil, and gas have a direct impact on many other sectors, it is urgent to keep a good balance between supply and demand, imports and exports, consumption needs and reserves for national security.
Last year, the Prime Minister approved a plan to develop Vietnam’s coal sector with a vision to 2020 and even 2030. Nguyen Manh Thang, Director of the Ministry of Industry and Trade’s General Department of Energy says under the plan, synchronized measures will be taken to improve coal transport in northern and southern regions to ensure stable production and supply of electricity across the country.
At the fourth session of the 13th NA, the amended Electricity Law was officially approved with the immediate launch of a competitive power generation market on July 1, 2012 to improve operational and pricing transparency and attracting investment.
The PM also agreed on restructuring energy groups to accelerate the implementation of the National Energy Efficiency Target Programme in the 2012–2015 period.
The energy sector, in fact, has yet to overcome a number of shortcomings. Coal prices in adjusting and preventing violations of oil and gas trading regulations.
Therefore, Electricity of Vietnam (EVN) managed to make a huge profit last year while other power companies suffered losses.
Vinacomin General Director Ngo Tri Thinh, says his company’s thermal power plants could operate at just 30 percent of capacity and many turbines had to sit idle, causing a loss of several billion dongs.
Dinh Tien Dung, director of the Ministry of Industry and Trade’s Energy Institute says domestic coal production is already beyond limit and it will not last long. The eventual import of coal is being considered as something of a paradox, Dung adds.
To help the sector iron out snags, the Government has demanded that all energy products follow market trends under state management, economist Nguyen Minh Phong says.
From 2013 to 2015, retail energy prices will be based on actual production costs to keep pace with market competition in the world. Energy price in Vietnam cannot be aberrant in international terms.
2013 is a pivotal year for the implementation of 2011–2015 socioeconomic tasks. Keeping the consumer price index at around 6 percent while increasing the GDP growth rate will require greater efforts on the part of energy managers.
At a conference on the energy sector’s 2013 outlook, Deputy Prime Minister Hoang Trung Hai emphasized the need to put market price mechanisms in place for the virtue of sustainable growth in a competitive manner.
As a point of fact, imported coal costs at least US$150 per tonne, double the export price of domestic coal. And it’s impossible for the electricity sector to import up to 30 million tonnes of coal by 2020 when the average price of electricity still hovers around 7 cents per kWh. There is a plan afoot for the production of liquefied petroleum gas (LPG) at the price of 16 cent per kWh to help ensure energy security in the long run.
Vietnam, San Marino ink tax agreement
Vietnam and San Marino signed an agreement on double tax avoidance between the two governments in Rome, Italy, on February 14.
The agreement aims to prevent tax evasion of taxes on income and assets, helping boost bilateral economic cooperation.
With its clear and transparent tax regulations, the agreement will create a sound legal environment for both sides to conduct business and investment activity, said Truong Chi Trung, Deputy Finance Minister of Vietnam.
It will also help facilitate economic, investment and trade cooperation between the two countries, contributing to tax incentives for foreign investors in Vietnam and opening up economic and investment cooperation between Vietnam and other countries in Europe.
Trung voiced his ministry’s resolve to work closely together with its San Marino counterpart to effectively implement this agreement, thereby facilitating bilateral economic and trade exchanges.
For his part, San Marino Minister for Finance and Budget Claudio Felici stressed that the agreement is of great importance to a small country like San Marino given the current global economic recession.
Despite limited trade exchanges between San Marino and Vietnam, the signing of the document will add fresh impetus to the two countries’ cooperation and development, and help San Marino businesses explore Vietnam’s legal system.
Covering 61.5sq.km and with a population of 30,000, San Marino is one of the smallest countries in the world. This republic has joined the United Nations and developed relations with many countries around the globe.
Vietnam and San Marino established diplomatic ties in 2007.
Latin American-Vietnamese trade shows drastic upturn
Two-way trade turnover between Vietnam and Latin America grew by an annual 20-30 percent over recent years to exceed US$5 billion in 2011.
This was announced by the Mexican Foreign Ministry.
Prime Minister Nguyen Tan Dung’s decision to attend the first Vietnam-Latin America Trade and Investment Forum demonstrated Vietnam’s readiness to become an important economic partner of Latin American countries.
Vietnam has become one of Mexico’s most important Asian partners. During the last decade, bilateral trade revenue has jumped from US$37 million to US$1.037 billion.
The Mexican Foreign Ministry press release quoted Mexican representative Nathan Wolf’s speech addressing the Forum that stressed free trade is the correct path towards development.
Wolf thanked Vietnam for supporting Mexico during the latter’s Trans-Pacific Partnership (TPP) negotiations, citing it as a driving forcebehind strengthening bilateral commercial and economic cooperation.
The semi-official Mexican news agency NOTIME was also covering the Forum in Hanoi, attracting representatives from 15 Latin American countries.
Vietnam tops foreign investors in Laos
Vietnam has become Laos’ biggest foreign investor during the period since the Lao Government first adopted foreign investment incentive policies (1989–2012).
Vietnam has so far poured US$4.9 billion into 429 projects in Laos. It is followed by Thailand with 742 projects worth US$4 billion and China with 801 projects valued at US$3.9 billion.
The remaining ten biggest foreign investors in Laos include the Republic of Korea (RoK) with a total capitalization of US$748 million, France (US$490 million), Malaysia (US$430 million), Japan (US$428 million), the US (US$150 million), Singapore (US$134 million), and India (US$61 million).
The most popular fields for foreign investors are the mining industry (accounting for 27 percent), electricity production (25 percent), agriculture, services, processing, hotels, restaurants, telecommunications, construction, industry, and banking.
The Lao Government offers preferential policies including tax relief to encourage foreign investors to operate in disadvantaged rural areas, generating employment and increasing incomes.
From 2011 to 2015, Laos aims to attract approximately US$15 billion in direct foreign investment (FDI) as a means of maintaining annual GDP growth rates above 8 percent.
Promoting agricultural exports
Overviews of the national economy’s 2012 performance necessarily include a number of impressive achievements in aquaculture, forestry, and fishery exports. But a closer analysis of general agricultural exports—contrasting volume and value fluctuations in recent years— reveals some cause for concern.
According to the Ministry of Agriculture and Rural Development’s (MARD) statistics, Vietnam’s aquaculture, forestry, and fishery exports earned US$27.54 billion in 2012—up 9.7 percent against 2011.
In 2012, the agricultural sector’s trade surplus totaled US$10.6 billion. Its main products for export are rice, coffee, rubber, tea, cashew nuts, pepper, wood, seafood, and cassava.
In January this year, aquaculture, forestry, and fishery exports were estimated at US$2.17 billion, up 39.7 percent compared to the same month of last year. Agricultural exports earned US$1.17 billion, a year-on-year increase of 46.6 percent.
The General Statistics Office of Vietnam says the national economy grew by 5.03 percent in 2012 with the aquaculture, forestry, and fishery sector accounting for 0.44 percent of the total.
Domestic Market Department Director General Dr Vo Van Quyen, says agricultural exports picked up in both volume and value at on average rate of 22–23 percent.
Vietnam is a leading exporter of some key commodities to place 2nd in rice, 1st in pepper, and 2nd in cashew nuts.
A huge volume of agricultural products is shipped to over 100 countries and territories, not only to China, ASEAN, and Russia as traditional markets but also to the Middle East, the European Union (EU), the US, and Africa.
Dr Quyen cites some agricultural commodities which are sold at lower prices than expected due to poor processing quality.
Deputy Agricultural and Rural Development Minister Vu Van Tam says the export price of tra fish has remained low because of unhealthy competition between domestic traders under the pressure of price gauging from foreign importers.
Since April last year, rice has also gone down in price, for instance, from US$450 to US$410 per tonne for 5 percent broken rice.
The price of coffee has also fallen by 29.4 percent over the past year.
Former Trade Research Institute Chief Dr Vo Van Nam says it’s possible to improve the processing of agricultural products for exports, but the input cost is too high for many domestic businesses.
The best solution is they should closely cooperate to ensure long-term benefits.
The National Economics University’s Dr Do Duc Binh insists that investment should be better focused on farmers involved in the agricultural export sector. The Government and its ministries and departments should help them improve farming techniques in the first place.
Farmers themselves, Binh adds, should learn more about international regulations to avoid risks in both production and export business.
Director General Dang Kim Son of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) says the Government should concentrate on improving agricultural infrastructure, investing in science and technology, attracting or training skilled labourers, and increasing management capacity.
Dr Quyen recommends having close contacts with those countries which are committed to importing agricultural products from Vietnam in order to develop brand names or trade marks which meet international quality standards.
Quang Ninh welcomes first shipments in New Year
Cai Lan Port in northern Quang Ninh province on February 13 welcomed the first two Panamanian cargo ships, Taio Frontier and Forest Harmony, to load goods in the Lunar New Year.
Following a traditional Vietnamese docking ceremony, the ships were loaded with 75,000 tonnes of wood chips destined for Japan and China.
On the day, Cai Lan Port is scheduled to receive another vessel, Acx Marguerite, which will take on 250 TEUs containers.
In 2013, Quang Ninh Port Company aims to load 7 million tonnes of cargoes and make revenues of more than VND 270 billion.
Last year, over 7 million tonnes of goods left Cai Lan Port. Turnover was VND270 billion with VND10 billion in profit.
Helping businesses through difficulties
Thousands of businesses suspended operations or declared bankruptcy in 2012, 10 percent of Vietnam’s total business population.
Le Quang Manh, Head of the Ministry of Planning and Investment’s (MPI) Business Registration Management Agency, says about 69,870 businesses were established last year, raising the total number of operating businesses to 475,700 in the country.
Dr. Do Thi Thanh Vinh from the Nha Trang University, however, says about 100,000 businesses are on the brink of bankruptcy.
The General Statistics Office (GSO) reveals that inventory levels in January already increased by 21.5 percent compared to the same month of last year, as reported by businesses in the communications, fertilisers, cement, electric cables, garments and textiles, automobile assembling, beer, tobacco, paper, sugar, steel, and seafood sectors.
Many economists attribute January’s high inventory levels to weak demand and slow real estate growth.
Dr. Truong Dinh Chien, head of the National Economics University’s Marketing Faculty, says many domestic enterprises have failed to compete with foreign rivals in the face of illegally imported goods.
Dr. Le Quoc Phuong, deputy head of the Ministry of Industry and Trade’s (MoIT) Centre for Trade and Industry Information, is concerned about the rate of newly-established businesses when many are unable to stand firm on home turf.
Economists recommend businesses sharpen their competitive edge to gain growth and corner the domestic market.
Dr. Phuong says this no easy task for them unless they get stronger support from the Government for tax reduction, market expansion, and better customer services.
He emphasises the need to encourage those business operating with efficiency to solve their own difficulties when need be.
Dr. Vo Tri Thanh, Deputy Head of Central Institute for Economic Management (CIEM), says businesses should learn to adapt to market fluctuations, deal with outside shocks, increase capital access through the financial and banking system, integrate into the regional and global economies, and brainstorm new development ideas.
They should also get involved in promoting the financial sector’s development, protecting the investment environment, and implementing social welfare initiatives.
Sharing this view, Dr. Truong Dinh Chien, suggests businesses should develop new products and improve customer services.
Deloitte Vietnam Deputy General Director Thai Thanh Hai says businesses should have good planning to avoid risks and deal with emerging issues.
Risks, of course, she says, in business operations are sometimes unavoidable when the market is fluctuating wildly and inflation going to rear its ugly head.
Hai explains that as benefits and risks often go together it is important to use human resources to full advantage in long-term operations. “Staff reduction is not always an optimal solution for businesses in need of capital,” Hai says.
Can Tho plans new industrial zones
The Mekong Delta city of Can Tho is implementing plans to build three industrial zones totaling an area of 1,400 hectares.
The industrial zones are designated O Mon (600ha), O Mon Bac (400ha), and Thot Not (400ha).
The city is also clearing land to expand the Hung Phu I and II industrial zones, as well as two other zones in O Mon district.
The city has allocated investment for communications infrastructure, a water drainage system, electricity supplies, and accommodation facilities for resettled residents.
Can Tho City’s current industrial zones have attracted 206 projects, including 184 domestic projects and 22 projects with foreign invested capital.
In 2012, businesses in the city’s industrial zones grossed US$1.87 billion in turnover. Industrial production value was up 3.9 percent on 2011, hitting US$1.365 billion.
The industrial zones employ 34,000 local labourers.
Hope for Vietnam’s steady growth in 2013
In 2012, Vietnam’s GDP growth rate was 5.03 percent, an impressive figure compared to the economic decline in many countries. The Vietnamese people are hoping for further economic growth in 2013.
Vietnam is facing a tough challenge in economic development: maintaining GDP growth at a reasonable level, controlling inflation, stabilizing macro-economy and ensuring social welfare. In his New Year address, Prime Minister Nguyen Tan Dung outlined 6 tasks including holding inflation to below 8 percent and achieving economic growth of 5.5 percent.
This difficult goal will require flexible policies, particularly a flexible monetary policy. Doctor Nguyen Quang Thai, Vice President and Secretary General of the Vietnam Economic Association, said “We reduced inflation to 6.8 percent in 2012 and are now reducing it more, while coordinating inflation and economic growth to stimulate the economy. The combination between monetary and fiscal issues requires tight supervision and management by the State”.
Vietnam will focus on improving regulations and policy reaction capabilities, and creating trust in the market, a factor that will create a more favorable business environment and a more competitive economy. This factor will make economic restructuring and shifting the growth model successful. The economic restructuring will be carried out more aggressively by restructuring credit organizations and settling bad debts to free capital flow. In addition, removing business obstacles and supporting markets will continue in 2013.
Doctor Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management said, “We are paying more attention to demands and generating purchasing power for the market. A series of new measures are needed to accelerate to a certain level public investment, which will affect state-owned enterprises, especially small and medium-sized enterprises.”
Vietnam will seek to ensure social welfare and reduce poverty by assisting areas inhabited by ethnic minority groups, and near-poverty groups. Vietnam gives priority to socio-economic development projects in poor areas. Doctor Ngo Tri Long, former Director of the Institute for Price and Market Studies, suggests measures to address this issue, “Besides the state budget, all resources need to be fully tapped to improve social welfare. This is clearly stated in the government’s address. I propose that we implement plans strictly and this process should be closely inspected.”
The tumultuous year 2012 has passed and Vietnam managed to improve its macro-economy and social welfare, rein in inflation and earn high export revenues. These results are a foundation for better performance in 2013. As Prime Minister Nguyen Tan Dung puts it “In difficulty, our achievements mean our potentials, advantages, new models and good measures should be upheld to successfully fulfill tasks for 2013.”
The path to growth continues to be rough. The Vietnamese people must strive to maintain their momentum toward a better future.
FDI pours into northern localities
Foreign direct investment (FDI) capital in northern provinces and cities has increased considerably in recent times, hitting nearly half of the country’s 2012 total.
The Foreign Investment Agency (FIA) reports that six northern localities (Hanoi, Haiphong, Bac Ninh, Bac Giang, Quang Ninh, and Hung Yen) were among the country’s top ten FDI attractors last year.
These six localities alone received a total of US$5.036 billion in FDI committed by foreign businesses, according to the agency under the Ministry of Planning and Investment.
Other provinces including Ninh Binh, Vinh Phuc, Hai Duong, Ha Nam, Hoa Binh, Yen Bai, Thanh Hoa, Nam Dinh, Nghe An, Ha Tinh, Phu Tho, Thai Nguyen, Cao Bang, Lao Cai, Lang Son, Thai Binh and Tuyen Quang welcomed US$1 billion in registered and added FDI.
Taken together, their FDI reached US$6 billion, only under half of Vietnam’s US$13 billion total.
Vinh Phuc was the most successful locality in calling for FDI in the northern region. Among its foreign-invested projects, those in the agricultural sector were valued at US$49 million.
Ninh Binh province is also lobbying for foreign investment in agriculture. Dinh Quoc Tri, Vice Chairman of the provincial People’s Committee, said priority is given to advanced agricultural technology development, research and development, high-yield varieties, and post-harvest processing.
Haiphong is rolling out the red carpet for wholly-owned foreign investment or joint venture projects in the fields of cultivation technology application, seafood processing for export, and caged fish farming.
In 2013 Quang Ninh plans to woo foreign businesses to invest US$500 million in seven projects. Two are already under way – the Hai Ha seaport upgrade (US$150 million) and a rare earth refining plant (US$35.5 million).
Contractors will work o other major FDI projects this year, including the Ha Long-Mong Cai expressway, Bac Luan II bridge, Van Don international air terminal, and Big C trade plaza.
The province is seeking FDI for its projects using environmentally friendly technology, especially from Japan, in Viet Hung and Dong Mai industrial parks.
Deloitte upbeat about Vietnam’s competitiveness
Vietnam will be one of the 10 most competitive nations in the world in the next five years, according to a study by Deloitte Touche Tohmatsu Limited and the US Council on Competitiveness.
US-based Deloitte Touche Tohmatsu Limited which specialises in audit, consulting, financial advisory, risk management and tax, and the US Council on Competitiveness jointly conducted a study gathering data from more than 550 CEOs and senior manufacturing leaders in 2012.
In their 2013 Global Manufacturing Competitiveness Index, the study says in the next five years emerging economies will surge to occupy the top three spots, with China retaining top position, and India and Brazil moving up to claim second and third rankings, respectively.
Vietnam is forecast to move into the top 10 as the tenth most competitive nation behind Singapore and ahead of Indonesia, Malaysia and Thailand. It currently ranks 18th behind Singapore, Thailand, Malaysia and Indonesia.
According to the report, developed economies such as the US, Japan and Germany will have to enter into fierce competitions with emerging economies like China, Brazil and India to retain their competitive levels.
In five years, China is predicted to top the list of competitive nations, followed by India that will replace Germany, while Brazil will replace the US’s position.
In the next decade, 10 Asian economies will be among the 15 most competitive nations in the world.
Pepper production – something of a paradox
While most of agricultural products went down in price last year, pepper exports continued paying off well with net turnover increasing by nearly 10 percent and market prices rising by roughly 16 percent. However, the pepper sector is facing a steady decline in output.
According to the Ministry of Agriculture and Rural Development (MARD), Vietnam exported 118,000 tonnes of pepper and earned US$802 million, down 4.3 percent in volume but up 9.6 percent in value with the average export price in 2012 rising 15.8 percent to US$6,792 per tonne against the previous year. Of the total volume, the US accounted for 14.7 percent, Germany (10.1 percent) and United Arab Emirates (8.48 percent).
As the world’s largest supplier, Vietnam accounts for more than 50 percent of pepper transactions with more than 80 nations and territories, most notably with Singapore (up 105.68 percent), Kuwait (up 78.67 percent), Canada (up 76.9 percent), Australia (up 71.5 percent) and Italy (up 67.17 percent).
The Vietnam Pepper Association (VPA) said over the past six years, the pepper price has kept increasing from VND30,000 per kilo in 2009 to VND130,000 per kilo in 2012.
VPA President Do Ha Nam said the pepper cultivation covers only 2.5 percent of the total 2 million hectares reserved for the growing of five industrial plants in the country, but it accounts for over 8 percent of their total export earnings. Its economic value hovers around US$6,800 per hectare per year, 4 times higher than rubber, 8 times higher than cashew nuts, 2.6 times higher than coffee and 6 times higher than tea. Each hectare of pepper can make a profit of around VND200-250 million per year.
Vietnam harvested 125,000 tonnes of pepper in 2011and only 115,000 tonnes in 2012, showing a paradoxical result of larger cultivation acreage but lower output.
The MARD’s Cultivation Department said the pepper growing acreage increased from 7,000 hectares in 1995 to 50,000 ha in 2010, then from 55,400ha in 2011 to 57,500ha in 2012. The main reason was that farmers wanted to make a quick profit despite warnings about the spread of diseases from the growing of pepper with unclear origin.
A recent survey by the Cultivation Department shows that the average pepper yield dropped to just 2.4 tonnes per hectare in 2012 compared to 3-3.5 tonnes per hectare two years earlier. Dong Nai province, for instance, has expanded its pepper growing acreage to 1,000 hectares, but it has seen a decline in yield from 2 tonnes per hectare in 2011 to just 1.4 tonnes per hectare in 2012. In Ba Ria Vung Tau province, the average pepper yield is down by 0.14 tonne per hectare. Only in Binh Phuoc province, it is up from 2.85 tonnes to 3.07 tonnes per hectare.
According to the International Pepper Community (IPC), the global pepper output in 2013 will drop to 319,000 tonnes from 327,000 tonnes last year and Vietnam will reap only 100,000 tonnes compared to last year’s figure of 115,000 tonnes. To help the pepper sector maintain its sustainable growth and raise its export earnings to over US$1 billion in the coming years, the MARD should map out a long-term strategy for pepper production, establish an institute for research and technical upgrade, and invest in infrastructure facilities for pepper growers and other farmers in the target areas mentioned above.
Masan Consumer expanding FMCG empire in VN
In a July 2012 bulletin sent to Masan Group employees, titled “From darkness to dawn”, the company CEO, Madhur Maini, said the firm is eyeing a bigger share in the Vietnamese retail and consumer product sector.
With the coming partial acquisition of bottled beverage producer Vinh Hao, Masan Consumer Joint Stock Co, an arm of Masan Group, is preparing to upgrade into Masan Consumption and expand its local fast-moving consumer goods (FMCG) empire.
Masan Consumption will also focus on the food and beverage business, and entering the medical, retail and agricultural segments associated with consumer products.
The goal for Masan Consumption is to “lead the local market in the sector of consumer goods, in addition to its food and drinks business.”
Currently, Masan Consumer is financially capable of realizing its future plans in expanding its FMCG empire after the cash-rich firm received a $200 million investment from American firm Kohlberg Kravis Roberts (KKR) earlier this year.
KKR has so far poured $359 million into Masan Consumer.
Masan Consumer’s board of directors early this month authorized chairman Nguyen Dang Quang or general director Truong Cong Thang to decide on the conditions and terms for future investment in companies operating in the FMCG sector in Vietnam with a maximum investment value of VND200 billion ($9.6 million) in each firm.
According to a report Masan Consumer released late last year, as of the end of 2011, the firm had the biggest local market shares in fish sauce (76 per cent), soy sauce (78 per cent) and instant coffee (44 per cent), and the second biggest ones in chili sauce (37 per cent) and instant noodles (16 per cent ).
Holding more than VND3.39 trillion in cash and cash equivalents as of the end of September 2012, plus more than VND4 trillion in new investment by KKR, the question is, which firm will be the next target of Masan Consumer in its plan to expand its FMCG empire?
The main reason for Masan to redirect its investment into FMCG is that Vietnam is a promising market with a growing young population and rising incomes.
According to a recent market research report from AC Nielsen, as of Q3/ 2012, Vietnam was the fastest-growing FMCG market in the 13 surveyed regional countries, with 15.8 per cent and 7.2 percent growth in volume and value year on year.
In particular, the report also said that, of the 6 main FMCG groups, beverages saw the highest growth, with 15 per cent and 28 per cent increases in volume and value, respectively, higher than dairy products, food, and cigarettes.
In addition, the increase in the price of bottled water is also the largest of the 37 items that ACNielsen surveyed, up to about 40 per cent, compared with an average of 5-10 per cent.
After acquiring a 53.2 per cent stake in Vinacafé Bien Hoa Corp (VCF), a leading instant coffee maker in Vietnam, Masan Consumer caught onto the trend and invested in another bottled water firm.
Accordingly, Masan Consumer will acquire a 24.9 per cent stake in Vinh Hao Mineral Water Co for VND170 billion. It has announced that it will buy stock in the firm at VND85,000 per share.
There are four major brands in the bottled water market in Vietnam, including Aquafina of Pepsi Co, La Vie of Nestlé, Dasani of Coca-Cola and Vinh Hao.
However, the real strength of Vinh Hao is the rising consumption of large-sized purified water bottles for households and businesses.
This may be partly due to the prices, as a 20-liter bottle of Vinh Hao ranges from VND35,000 to VND48,000 each, while one 19-liter La Vie is VND48,000. Aquafina and Dasani do not sell 19 or 20-liter bottles.
Vinh Hao also has a longer history than any of the other brands here. It was the first local mineral water brand to appear in Vietnam, with initial investment from a French firm.
Since 1930, Vinh Hao Mineral Water products have been exported to other regional countries and France.
Minister talks measures to solve financial issues
Finance Minister Vuong Dinh Hue has affirmed that the concerted combination of fiscal and monetary policies will help remove difficulties for businesses and accelerate corporate restructuring and the implementation of the 2013 budget goals.
In his New Year interview granted to the Vietnam News Agency, the minister said that over the past time, in addition to tax measures, his ministry has put forth other financial solutions, including promoting the effective implementation of public investment activities and the use of official development assistance (ODA), increasing foreign direct investment (FDI) attraction, developing the domestic bond market, restructuring the stock market, and closely managing prices.
The ministry will continue to keep a close watch on the situation and make timely assessments on the effectiveness of the above-mentioned measures in order to propose appropriate solutions to the Government, he said.
According to Hue, a project was built by the ministry on the restructuring of State-owned enterprises (SOEs) with a focus on State economic groups and corporations in the 2011-2015 period, which was approved by the Prime Minister last July.
Although the acceleration of SOE reforms is facing severe challenges in the context of the country’s deep international economic integration, the restructuring will create conditions for SOEs to improve their competitiveness and increase GDP growth, directly serving the tasks of economic restructuring and growth model changing.
Regarding the mobilisation and allocation of resources, the minister said that the allocation of resources for economic development and ensuring social security, for savings and consumption, for key economic regions and difficult mountainous and ethnic minority people-inhabited areas remains a difficult problem that requires flexible adjustments in each period.
To improve the efficiency of public investment and ensure social welfare, Hue emphasised the need to continue restructuring State budget spending in the direction of gradually reducing development investment and increasing spending for human development.
“We also need to strengthen the mobilisation of investment resources from local economic sectors and foreign investors,” he noted.
On the financial sector’s major orientations in 2013, the minister stressed the continued restructuring of the State budget; the strict and effective management of national financial resources; and the guarantee of financial security, actively contributing to strengthening macro economic stability, preventing high inflation and ensuring social welfare, defence, security and foreign relations in the new situation.
In order to fulfill the set targets, the financial sector must take synchronous measures and keep consistent macroeconomic policies, combining fiscal and monetary policies with priority given to increasing the efficiency of tax collection management measures, and strictly managing State budget spending, he said.
Minister Hue said he believes that the economy will continue to see positive developments with gradually recovered growth and more stable and sustainable macro balances, especially when the economic restructuring and growth model renovation will be carried out synchronously in the coming time.