Fixes key to boosting FDI
Intensified efforts to reform banking sector, state-owned enterprises and the business environment will be the key for Vietnam to sustain foreign direct investment inflows.
That advice for Vietnam was highlighted in the Asian Development Bank’s (ADB) Asian Development Outlook 2013 report released last week.
Tomoyuki Kimura, ADB country director for Vietnam, said Vietnam continued to grapple with banking sector problems, which were eroding foreign investors’ confidence.
Banks reported in October 2012 that non-performing loans (NPLs) were about 4.8 per cent of the total loans. However, based on closer surveillance of the banking system, the State Bank estimated that the ratio of bad debts was 8.8 per cent at mid-year. It trimmed that estimate to 6 per cent in February 2013.
But, the report noted: “Independent analysts estimate that NPLs could be in double digits using international accounting standards. NPLs have proliferated due to rapid growth in lending over several years followed by the squeeze on credit in 2011, the downturn in the economy and property market, and poor performances by some highly leveraged state-owned enterprises (SOEs).”
Kimura cited key issues: “One of the major obstructions for Vietnam to coax more foreign direct investment (FDI) is the snail-paced reformation of SOEs. We have many times raised this issue, but equitisation has continued slowing in the recent years. One goal is to divest SOEs’ noncore businesses by 2015, as many SOEs have accrued debts by investing in areas unrelated to their core businesses.”
The National Steering Committee for Enterprise Renovation and Development reported that Vietnam’s nine state-owned groups and corporations’ total debt within 2012 mounted to over $64.18 billion, equivalent to 47 per cent of Vietnam’s gross domestic product (GDP) last year. Meanwhile, their total profits last year reached VND127.51 trillion ($6.13 billion) only, down 5 per cent on-year.
“Ineffective SOEs have distorted the Vietnamese government’s allocation of resources and further affected effective enterprises. They prevent foreign investors from investing more in Vietnam,” Kimura said.
Last year saw 21 large SOEs restructured. Vietnam currently has nine state-run economic groups and 94 state-owned corporations which have yet to be streamlined. Restructuring plans have been approved for 24 large SOEs.
“A more open economy means all companies can compete equally without any state intervention in companies’ performance. Foreign enterprises are waiting for the Vietnamese government to open the door of its economy wider,” said ADB’s country economist Dominic Mellor.
He said as ASEAN integration in 2015 approached, the country faced increased competition for FDI from Indonesia, Myanmar, Thailand and the Philippines, which are offering attractive investment incentives. For example, as for projects in economic zones, Vietnam offers corporate income tax (CIT) exemption for four years and 50 per cent reduction of payable tax amounts for nine subsequent years.
But in Thailand, CIT exemption lasts up to eight years plus a 15 per cent CIT incentive for another five years. Besides, Thailand also offers double deduction of transportation, power and water supply costs for investors, and an additional 25 per cent deduction of infrastructure construction and installation costs.
In the Philippines, the CIT exemption lasts six years, with free import tax for raw materials, capital equipment, machineries and spare parts, and exemption from payment of any and all local government imposts, fees, licences or taxes.
ADB cited Vietnam’s ranking in the World Economic Forum’s Global Competitiveness Index falling by 16 places in the past two years to 75th of 144 countries. That puts it below other larger Southeast Asian economies. Vietnam scored poorly on several index components, including infrastructure (95), business sophistication (100), respect for property rights (113), irregular payments and bribes (118), and soundness of banks (125).
The ADB report also put Vietnam’s GDP growth in 2013 at 5.2 per cent, down from the 5.7 per cent the bank previously forecast, then picking up to 5.6 per cent in 2014 if progress is made in strengthening the banking sector and recovery in major industrial economies gathers momentum in 2014.
Meanwhile, inflation is seen easing to 7.5 per cent on average this year before quickening to 8.2 per cent in 2014. This view assumes reasonable weather for food production, a broadly stable dong exchange rate, and restrained policy stimulation. The trade surplus is expected to climb to a record $12.5 billion in 2013 and the current account surplus to increase further this year before easing in 2014 as imports accelerate in tandem with GDP growth.
Nation still a tasty target
Singaporean investors are still expressing optimism about opportunities to invest in Vietnam, despite global economic woes and the local real estate downturn.
Danny Dao, director of valuation, consulting and research at Singapore’s real estate consultant firm DTZ Debenham Tie Leung, said it was the right time for Singaporean investors to consider acquisitions when the property values “have declined significantly”.
“Each property purchase decision is subject to the project’s feasibility rather than just to follow the market trend,” Dao said.
Graham Black, Vietnam country manager for The Ascott Limited, believed that the current time offered good opportunities for foreign investors to pick up distressed assets and expand their presence in Vietnam.
“The country’s real estate market is supported by good GDP growth, which increased by about 5 per cent in the first quarter of 2013 compared with the same period last year. Foreign ownership of real estate projects will also bring in more foreign funds, create a healthy real estate market in the long-term and further spur the country’s economic development,” he said.
In 2012, Back noted, real estate ranked the second amongst sectors, bringing in $1.85 billion or 14.2 per cent of total foreign direct investment in Vietnam.
“Vietnam continues to be an attractive destination for Singapore investors as the two nations foster greater economic ties and increase bilateral trade. Within the real estate sector, serviced residences will stand to gain from the increased business as more multinational corporations set up offices in Vietnam, and more expatriates travel into Vietnam for business,” Black said.
Yip Hoong Mun, deputy CEO of CapitaLand Vietnam, said that Vietnam presented a value proposition for CapitaLand given its young population, rising income levels and rapid urbanisation. “There is great potential in the real estate space, particularly in the affordable to mid end homes at competitive prices to the local residents,” he said.
Singaporean investors, according to Danny Dao from DTZ Debenham Tie Leung, had proven their financial strength amid market downturn and uncertainties.
“Domestic investors have been hit over the past few years by high interest rates and the limited supply of credit from banks which has placed foreign investors in an enviable position as a result,” he said.
Keppel Land Vietnam is one of the real estate investors not put off by the current gloomy market. Linson Lim, president of Keppel Land Vietnam, said that established developers with financial strength and a good track record should continue to see positive results in Vietnam in the longer term.
While Keppel Land continues to be on the lookout for new opportunities, the developer is also committed to ensuring progress with its current projects in Vietnam.
Currently, Keppel Land has 18 licenced projects with total investment capital of $2 billion and about 22,000 homes in the pipeline in Vietnam.
Green Lotus, a subsidiary of Singapore’s Accura International, is planning to unveil its first holiday villas at the planned $20 million Van Son Resort project in Do Son, Haiphong this year.
William Ang, general director of Green Lotus, said the project would target Vietnamese customers, especially those coming from Hanoi, Haiphong and Quang Ninh.
Some Singaporean industrial and township developers have also started to invest in residential properties, after succeeding in industrial properties.
The $165 million residential project, named Gateway, was the first residential project that Sembcorp Development and Vietnam Singapore Industrial Park (VSIP) joint venture joined to develop.
Located in southern Binh Duong province, about 40 kilometres from Ho Chi Minh City, Gateway is part of a larger mixed-use development within the 500 hectare VSIP in Thuan An district, which has been operational since 1996.
The project sits on a 4.1ha land plot which will be developed into a mid-market residential project of about 163,807 square metres gross floor area, comprising 1,380 apartment units and amenities.
A VSIP official said that the venture decided to expand its portfolio to residential real estate, because it realised that the demand for accommodation in Vietnam was very high, especially in areas located around industrial zones.
VSIP, Sembcorp, Ascott and DTZ are some names only. Many others are on the boat, such as Low Keng Huat Limited Company, CapitaLand, Mapletree and Keppel Land.
Singapore is currently the biggest foreign investor in the real estate field of Vietnam. According to the International Enterprise Singapore, as of March 2013, Singapore has 59 property projects with total registered capital of $8.98 billion in Vietnam.
Land clearance slows power line project
Discontented households are holding up transmission lines for four 500-kV power-line from the Central and Central Highlands regions to southern Viet Nam.
The householders are disgruntled because they claim compensation money being offered for their land and homes is far too low.
Deputy chairman of southern Binh Duong Province’s People’s Committee Tran Van Nam, one of the authorities involved in the erection of the power lines, has warned of drastic measures if people intentionally hindered the projects.
The projects were planned to be completed in December this year, ensuring power supplies as far as HCM City.
Power lines to the industrial hubs of Dong Nai, Binh Duong and Ba Ria-Vung Tau were scheduled for completion in the next two years.
Supplies would have also been connected to the neighbouring countries of Laos and Cambodia.
However, until now, most of the projects are behind schedule because land transfers have not been completed.
For example, according to the Management Board of Power Projects in the central region, until this month, land clearance had not been completed on the line from Plei Ku and My Phuoc to Cau May because only 815 positions of the necessary 926 sites were ready for construction of poles’ foundation.
The project, worth more than VND 9.2 trillion (US$440.7 million) runs through the provinces of Gia Lai, Dak Lak, Dak Nong, Binh Phuoc, Binh Duong and HCM City.
Deputy head of the management board’s compensation division Pham Xuan Viet said that they had been planning to erect the pylons since 2010– and had offered compensation three times. However, householders dug in their heels and demanded more before they moved.
Under the current compensation policy, Dak Nong Province has offered to pay VND17,000 ($0.8) per square metre and VND230,000 ($11) for a seven-year-old coffee tree in affected areas in the province’s Krong No District.
However, some householders demanded up to VND50,000 ($2.3) a square metre and VND1 million ($47) for a tree.
In the communes of Binh Minh and Minh Hung in Binh Phuoc Province, people asked for compensation rates three to four times higher than the offered rates.
“The board has asked local authorities to speed up land acquisition, but (so far) has received little response,” Viet said.
Tran Van Nam, deputy chairman of the Binh Duong Province People’s Committee, another province involved in the project, said that local authorities had been asked to review residents’ complaints and address them as soon as possible.
He said that if affected households intentionally hindered the project, drastic measures were needed to ensure the scheme.
The other three projects involved are the 500-kV Song May –Tan Dinh Project launched in 2009 in Dong Nai Province.
In another 500-kV line project, Vinh Tan-Song May in southern Dong Nai Province, authorities in Ham Tan District are reported to be planning to force householders to transfer land to ensure the success of the scheme.
Market heats up for domestic pepper exports
Viet Nam, the world’s largest pepper exporter, saw shipments of the spice increase by almost a quarter in the first three months, according to the Ministry of Industry and Trade.
The country shipped 39,000 tonnes of pepper worth US$261 million for a year-on-year increase of 27 per cent in volume and 23.6 per cent in value.
The average export price was down by 2.7 per cent to $6,644 per tonne.
The US remained the biggest buyer followed by Germany, Singapore, and United Arab Emirates.
Speaking at a meeting in HCM City last week, Tran Duc Tung, office manager of the Viet Nam Pepper Association, said the International Pepper Community estimates global supply to fall this year because of unfavourable weather in pepper-producing countries.
It therefore expects prices to increase internationally during the rest of the year, he said.
“The industry will find it hard to meet the export target of 120,000 tonnes this year.”
Pepper output in southern and Central Highlands provinces is expected to fall by 20 per cent this year.
“The output will be around 90,000 tonnes, a year-on-year decline of 20,000 tonnes due to unfavourable weather, epidemic, and old and stunted trees,” Tung said.
He called on the Government to help farmers access cheap loans to improve their pepper plantations as well as hold on to their harvests stock to wait for higher price before selling.
To sustain growth the sector needs to focus more on developing brand names and invest more in technologies to diversify products and improve quality, he said.
Viet Nam exports pepper to 80 countries and territories.
It has more than 50,000ha under the spice, mainly in the six provinces of Gia Lai, Dac Lac, Dac Nong, Binh Phuoc, Dong Nai, and Ba Ria-Vung Tau.
Thanh Hoa attracts investment from South Korea
The central province of Thanh Hoa pledges to create favourable conditions for investment by South Korean enterprises.
Chairman of the provincial People’s Committee Trinh Van Chien made the commitment at a conference in Thanh Hoa City on Tuesday to promote investment and trade with Korean businesses.
The province will continue improving its investment environment and infrastructure system, strengthening human resources training and developing support industry, he said.
At the conference, the Thanh Hoa Institute of Planning and Architecture and the Hong Duc Education Equipment Joint Stock Company signed a memorandum of understanding (MoU) on investment and business activities with South Korea’s Heerim Architects Planners and Cloz Companies.
On the same day, the Thanh Hoa provincial People’s Committee and authorities from Korea’s Seongnam city also inked an MoU on co-operation. Under the deal, the two sides will boost co-operation in the fields of economics, ecology, culture, health, sports, education, tourism, technology and infrastructure.
In 2013, the South Korean city will send a delegation of planning experts to help Thanh Hoa build the Lam Son – Sao Vang Hi-tech Park in Tho Xuan District.
The two sides will speed up the signing of co-operation agreements between their small and medium-sized enterprises, universities and cultural and educational organisations.
Thanh Hoa ranks sixth in the country in attracting foreign direct investment with a total capital of $16 billion. At present, South Korea has eight foreign investment and three ODA projects in the province.
Singapore’s firms seek long-term partnerships
Singaporean businesses want long-term co-operation with Vietnamese partners, the head of the island nation’s main business group has said.
Ho Meng Kit, chairman of the Singapore Business Federation, told the Viet Nam – Singapore Business Forum 2013 in HCM City yesterday, “This year Viet Nam is the second country after Myanmar where SBF members are keen to venture into.
“It is a testament to the continuing Singapore business interest in and engagement with the Vietnamese market.”
He said Vietnamese businesses should expand investment and trading ties with their Singaporean counterparts and explore business opportunities in third countries through Singapore.
Minister of Planning and Investment Bui Quang Vinh said Singaporean businesses should be positive about the future of Viet Nam despite the current challenges.
The policies and regulations put in place by the Government last year, have stabilised and improved the economy, he pointed out.
“We see a stable exchange rate, economic growth of about 5 per cent and inflation of about 7 per cent (February 2012), down from 18.13 per cent for the previous year.
“The Government is continuing to take bold steps to reform the economy and restructure the banking sector.” He was confident that, “Viet Nam would be an investment destination for multinational corporations, including Singaporean” since it has a population of 90 million, 51.8 million of them aged between 18 and 31.
“Viet Nam is also committed to consistent policies for foreign investors, and the Government seeks to simplify administrative procedures to facilitate investment and business.”
Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry, said the two countries are working towards signing a Strategic Partnership Agreement this year.
It would set out a broad framework for the two countries to strengthen trade and investment relations, and enter into closer co-operation in various fields, he said.
“Singaporean investors should continue to invest in industrial parks, logistics, tourism, healthcare, education, services, foods, consumer goods, and urban development.
“These are the strengths of Singaporean companies and also what Viet Nam wants to develop.”
Through co-operation with Singaporean businesses, Vietnamese firms can access not only modern technologies but also global distribution systems and learn business management. “Building Economic Linkages: The way forward,” the forum, will go on until tomorrow.
It is jointly hosted by the Viet Nam Chamber of Commerce and Industry and the Singapore Business Federation, and is among the early activities to commemorate the 40th year of the establishment of diplomatic relations between the two countries.
It seeks to encourage exchanges between leading Vietnamese and Singapore companies.
It is being attended by industry experts, policymakers, and government officials from Singapore and Viet Nam to provide insights into business opportunities in both countries.
It will focus on four panel discussions centered on the key industries of real estate financing; healthcare services; tourism; and agriculture production and processing and logistics.
There will be business matching sessions, exhibition booths, and the option of making visits to industrial parks and hospitals.
A recent survey by the SBF found 43 per cent of respondents having a business presence in Viet Nam as of 2012.
Trade between two countries has grown steadily over the last decade, rising to US$12.7 billion last year, making Viet Nam Singapore’s 18th largest trading partner.
Singapore has invested $27 billion in 1,139 projects in Viet Nam.
Experts call for better management of military goods
Viet Nam has been advised to set up a control management system on strategic goods to promote exports and increase investment.
Strategic goods are military goods and so-called “dual-use” items that may have both civilian and military use.
The message was delivered at a conference on strategic goods management in Ha Noi on Tuesday.
The export of strategic goods is subject to controls. Deputy Minister of Industry and Trade Nguyen Cam Tu said that in the context of global integration, the management system would ensure security and sustainable development.
Tu said Viet Nam had had high export growth rates with an export turnover of US$29.69 billion in the first quarter of the year, increasing 19.7 per cent over the same period last year.
In addition, several foreign businesses had chosen Viet Nam for their production and for export to other countries. Tu said the country has promulgated policies to facilitate exports while ensuring defence and security.
Sharing the ideas, the US Embassy’s Deputy Chief of Mission Claire Pierangelo said Viet Nam had made efforts to ensure global commercial security.
She said the country should build a complete legal framework which would prevent illegal transactions. George Tan from Bryan Cave Sin Consultancy Firm said Vietnamese exporters should build their own inside control procedures to prevent illegal actions.
He said the annual market value of “dual-use” items in the world was $800 billion to $1 trillion.
He gave an example of smart phones which had intelligent chips being used to launch a rocket.
Representatives from Singapore and Malaysia said Viet Nam could establish its system based on four international common mechanisms.
In addition, ASEAN had been striving to set up an economic community by 2015, creating a common market, allowing goods of member countries transferred to each other.
They said Viet Nam should quickly complete its management system to meet ASEAN common standards.
HCM City sees a leap in pledged FDI
Foreign direct investment pledged for Ho Chi Minh City in t he first quarter of the year surged by 109 percent year on year, according to the city’s Department of Planning and Investment.
This shows foreign investors have regained their confidence in the local economy, which made positive result in stabilising the macroeconomic situation.
Regarding new investment, some 78 FDI projects with a total investment of about 160 million USD were licensed during the first quarter.
Specifically, the municipal People’s Committee in late March gave the green light to Sanofi Vietnam Co Ltd, a subsidiary of Sanofi Aventis Group, to set up its third plant worth 75 million USD in the city’s Hi-Tech Park in district 9.
In addition, 26 operational FDI projects in the city were approved of adding 175.3 million USD more capital for their expansion.
HCM City ’s EPZs and IZs in the first quarter of 2013 lured a total 144.5 million USD worth of new investment, up by 21.4 percent over the same period last year, according to HCMC Export Processing Zone and Industrial Zone Authority (HEPZA).
The new investment included 122.65 million USD and 21.83 million USD worth of FDI and local investment, a 57.35 percent year-on-year rise but a 57.35 percent year-on-year drop, respectively.
The city’s trade authorities, including the HCM City Trade and Investment Promotion Center, the Department of Planning and Investment, and the IP and EPZ Infrastructure Development Co, will jointly launch fresh investment promotion campaigns in Japan, the Republic of Korea, Singapore, Taiwan, the US and Canada this year to attract more FDI to local IPs.
FDI businesses urged to create high value added products
Vietnam’s export turnover increased sharply in recent years, thanks to the great contributions from foreign direct investment (FDI), however, foreign-invested enterprises do not create high value added products.
In the first quarter of this year, Vietnam’s export turnover reached US$29.76 billion, up 19.7 percent on last year’s period. Of that figure, FDI enterprises earned US$17.25 billion, accounting for 58.5 percent of the country’s total exports (excluding crude oil).
Key exports include telephones and spare parts, electronics, computers, footwear, garments and textiles. However, to produce US$17.25 billion worth of exports, FDI enterprises have to import US$16.60 billion in input components while their export turnover was actually only US$1.19 billion.
Le Thi Minh Thuy, Deputy Head of the Department of Statistics, Trade and Services under the General Statistics Office (GSO) says despite great contributions to national income from the foreign invested sector, its real profits come mainly from outsourcing.
Samsung Vietnam raked in US$6 billion from exporting telephones and components in 2011 and US$12.6 billion in 2012. During the above mentioned period, these types of goods were Vietnam’s biggest export turnover for the first time, with total earnings of nearly US$4.5 billion, 90 percent higher than the same period last year.
The US$3.2 billion project complex in Thai Nguyen province is forecast to record an annual US$20 billion in exports to Samsung.
Vice President of the Vietnam Association of Foreign Investment Enterprises, Nguyen Van Toan says that it is not necessary to export huge volumes; the most important thing is to export hi-tech and high value added products.
In the past, industrial projects by Intel and Foxcon have imported almost all input components from foreign nations, with support from the Vietnamese Government. Although these projects have enormous amounts of investment capital and generate many jobs, they have failed to create value added products and reduce import surpluses to make a positive impact on domestic businesses.
Most FDI businesses choose to invest in Vietnam to take advantage of the low-cost labour force and the government’s preferential land lease and corporate income tax policies, which has resulted in the production of low value added products.
Kyshiro Ichikawa, leader of the Support Industry Task Force under the Japan-Vietnam Joint Initiative, says that weak support industries and a low rate of localization are the main reasons FDI enterprises have not added value to the national economy.
According to statistics from the Japan Business Association in Vietnam, the localization rate in Vietnam was only 22.4 percent, much lower than other nations in the region.
Ichikawa states that support industries play an important role in developing the national economy. In the future, Vietnam should amend its policies to develop essential support industries and implement strict requirements for foreign investors in order to promote the nation’s industrialization and modernization.
The country’s export growth has been primarily attributed to foreign investors, which has reduced local businesses’ share of the export market.
According to economists, Vietnam must develop its own support industries, improve the localization rate to replace imported goods, and enhance the status of local support industries, enabling them to become the main suppliers of components for FDI businesses operating in the country.
Act before it’s too late
Although the national economy managed to weather last year’s storm, most small and medium-sized enterprises (SMEs) are still threatened by capital shortages and high inventories.
Newly registered businesses fell in terms of both numbers and capital, and the number of dissolved or suspended businesses, mostly SMEs, increased considerably.
Vu Quoc Tuan, former President of the Vietnam Craft Village Association, says a large proportion of 2012’s approximately 100,000 dissolved or suspended businesses were small and medium-sized. Production stagnation resulted in a low purchasing power, excess inventories, and oversupplies of money in banks.
“SMEs are running short of capital for production, and the implementation of the credit guarantee fund is slow going,” says Tuan. “Tax-related issues are causing a headache for these businesses. Many wonder when they will enjoy corporate income tax cuts as they remain in a tight spot.”
Experts say Vietnam has yet to create an equitable business environment for all economic sectors, resulting in last year’s spate of business dissolutions or suspensions that was primarily borne by private SMEs.
Bui Quang Tuan, Deputy Director of the Vietnam Institute of Economics, points to the domestic business environment’s inadequate and unreasonable pressure on private businesses. He says many private businesses that normally operate efficiently declared bankruptcy while State-owned businesses stayed healthy.
“We are debating the Government’s VND30 trillion rescue package for the property market. But the real estate market only accounted for 0.1 percent of the country’s total GDP between 2008 and 2012. Several other economic sectors—such as production, manufacturing, and exports—that contributed significantly to last year’s growth did not receive any assistance,” he complains.
SMEs make up 95 percent of the total number of businesses, and they are expected to develop into the mainstay of the economy in the near future. They are currently forced to survive independently without State assistance.
SMEs have insufficient workshop space, pay high bank interest rates, and must deal with excess stock levels. Tuan thinks banks need to offer extremely low interest rates to these businesses lest they cease to exist.
According to him, SMEs cannot wait any longer for State assistance. Consequently, the Government cannot expect their considerable contributions to economic growth.
“We need to rescue the markets that directly contribute to economic growth,” says Tuan. “The property market’s results are expected to continue to underwhelm over the next three or four years, taking into account the huge amount of money needed for its rescue and a low demand for housing.”
He suggests that the government revise policies for SMEs, especially in settling administrative issues, and help craft associations expand their assistance for SMEs, including the Vietnam Chamber of Commerce and Industry (VCCI).
Tuan says craft associations need to examine the difficulties SMEs face and recommend solutions to the National Assembly and Government.
VCCI President Nguyen Tien Loc confirms SMEs form the backbone of the national economy and need legal and regulatory support for their operations. In addition, SMEs should receive preferential tax policies and specific support programmes to help improve their operational efficiency.
The Prime Minister recently signed a decision establishing an SME development fund that is designed to support businesses as they develop feasible projects and implementation plans, improve their competitive capacity, and generate jobs for local people.
Cambodia consumes more Vietnamese goods
Cambodia is an attractive emerging market for Vietnamese businesses thanks to their similar consumer tastes.
Cambodia’s economy is forecast to grow by 7 percent in 2013, offering a golden chance for Vietnamese businesses to reinforce long-term investment and improving their position in this important neighbouring market.
Over the years, Vietnam and Cambodia have treasured the long-standing trade relationship which has flourished vigorously. Prospects for bilateral trade cooperation between the two countries are a focus of both governments.
Cambodia and Vietnam have an established history of mutually beneficial trade relations.
Efficient transport systems and infrastructure facilitate the circulation of goods between the two countries, spurring import-export turnover on to reliable growth.
In 2012, two-way trade turnover between Vietnam and Cambodia rose by 17 percent to US$3.3 billion. Vietnam became Cambodia’s second largest trade partner.
There are ideal conditions for Vietnamese commodities to penetrate Cambodia. The Vietnam-Cambodia border is adjacent to 10 Vietnamese and 9 Cambodian provinces. There are 10 international border gates as well as many more major and subsidiary border crossings. The distance from Ho Chi Minh City to Phnom Penh is only 230 km.
Cambodian consumers are increasingly turning to Vietnamese goods instead of Thai products because of the similar quality at lower prices. Vietnamese goods are also more trusted than their Chinese equivalents.
To be successful in Cambodia, Vietnamese businesses are advised to sound out this market thoroughly, increase adverts, diversify product patterns and designs, and establish distribution networks across the country.
Challenges for exports to Africa
Vietnamese exports to major African markets slowed down in the first quarter of the year due to fierce competition.
South Africa, Algeria, Nigeria and Angola experienced slight growth while Egypt, Ghana, Ivory Coast and Senegal saw a sharp decline in Vietnamese imports, according to the Vietnam General Department of Customs.
Major exports include rice, coffee, computers, electronics and appliances, mobile phones, vehicles and spare parts, equipment, garments and footwear.
Hoang Duc Nhuan, an official of the Ministry of Industry and Trade, says Vietnamese commodities to Africa encountered difficulty in the first quarter, especially due to fierce competition from India’s low cost rice which is now available in Ghana, Senegal and Ivory Coast.
In addition, many African nations are pursuing their food self-sufficiency programmes by developing wet rice cultivation.
Seafood exports to Egypt also fell because of its economic and political instability. The Egyptian government recently introduced a draft document to impose high import tariffs on 100 commodities, including high-quality frozen seafood, in order to ease foreign currency pressure and develop the domestic industry.
More capital poured into projects abroad
The Ministry of Planning and Investment’s (MoPI) Foreign Investment Department has reported that since early this year, 22 projects have been licensed to operate overseas with a total capitalization of US$720.7 million.
In the first quarter of 2013, the additional increased capital for five Vietnamese projects totaled US$1.9 billion, including US$1.4 billion for a project run by the Vietnam Oil and Gas Group’s (PVN) joint venture company Rusvietpetro, and US$518.9 million for the Vietnam Chemical Company’s salt mine project in Laos.
The reviewed period’s total newly registered and additionally increased capitalization hit US$2.65 billion.
Vietnam’s projects primarily focus on mining, services, and information and communications
Vietnamese businesses have registered to invest in 12 of the world’s countries and territories. The US$1.4 billion poured into Russia—the highest—accounts for 52.7 percent of total overseas capitalization, followed by Laos (20.1 percent) and Myanmar (11.3 percent).
Most of the total investment capital from overseas projects is invested in purchases, goods expenses, machinery and equipment, and services—all of which help increase Vietnam’s export value and its services abroad.
Heineken launches new ‘tactile’ packaging
Leading beer producer Heineken said it is launching “breakthrough” packaging in Viet Nam with its new 330ml “tactile” can and bottle.
The recipe and taste of the beer in the new bottle and can remain unchanged, the company said, adding that the innovative packaging is being launched in 170 markets worldwide.
The new can design with its unique tactile ink feature is being introduced in Viet Nam for the first time.
As part of the new launch, the company said it plans to “surprise” its Vietnamese consumers with the first-ever Heineken Cruise Party, a Heineken Digital Light-up-the-bottle experience, Heineken Iconic Music Festival and a Heineken Quality Experience Brewery tour. Details of these events will be announced later, it said.
Heineken has been produced in Viet Nam since 1993 by Viet Nam Brewery Ltd., which also produces Tiger and other popular beer brands.
The company’s Hoc Mon Brewery in District 12 can produce 420 million litres of beer per year. Its packaging facility turns out 50,000 bottles and 90,000 cans of Heineken beer per hour.
Lao Cai chases high-tech projects
The northern mountainous province of Lao Cai is trying to attract investment into more hi-tech and sustainable development projects, officials have said.
This is a switch from investment in small hydro-power plants, mineral exploitation or intensive agriculture and tourism projects that use up forests and forest land. Le Ngoc Hung, director of the Lao Cai Trade Department, said the province was giving priority to processing minerals, tea export, medicine and using biotechnology to produce high-quality crops.
The province has attracted more than 30 FDI projects so far, with registered capital of nearly US$500 million.
The focus is mostly put on Lao Cai city and the districts of Sa Pa, Va Ban, Bao Thang and Bac Ha.
In 2012, these projects generated revenues of nearly $40, an 18 per cent increase compared with 2010. The province estimates that it needs at least VND1 trillion ($47.8 million) for socio-economic development targets in 2013-20.
Nguyen Van Vinh, chairman of the Lao Cai People’s Committee, said the province needed to take advantages of its natural resources, forest and climate but must focus more on high-tech projects that recruit more local labor, use less land and are more environmentally friendly.
Lower bond yield helps boost credit
The rates of return received from investing in government bonds (G-bonds) declined in the past two months. However, market insiders believe this will help boost credit growth.
The G-bond interest rates have declined dramatically on the secondary market in the past three months, but slowed down on several terms in April.
In the first half of this month, the interest rate on three-year bonds fell just 10 basic points, from 7.9 per cent on April 3 to 7.8 per cent on April 16.
Although the rate of two-year bonds dropped by a more substantial 40 basic points during the period, interest rates of the one-year, five-year and 10-year bonds were unchanged due to the lack of transactions.
Demand for G-bonds on the primary market also fell. The State Treasury last week raised just VND4.11 trillion (US$195.7 million) out of total VND7 trillion ($333.3 million), a strong decline compared to the success in selling all bonds in previous sessions.
According to market insiders, bond yields have reduced continuously since the State Bank of Viet Nam cut down the benchmark interest rate to 7.5 per cent per annum.
“The bond yield still declined, but the speed slowed, primarily because the yield is approaching the expected annual inflation rate for this year,” Trinh Quang Dung, analyst of Vietcombank Securities Co was quoted as saying in the newspaper Dau tu chung khoan (Securities Investment).
On the other hand, credit expansion showed sign of rising again, which helped reduce the bond interest rate, Dung said, noting credit growth in March increased 0.1 per cent after two consecutive months of declines (1.23 per cent in January and 0.28 per cent in February). According to a bank executive, banks will not pour much money in G-bonds as in the past given the strong reduction.
Ten export staples join $1bn club
As many as 10 commodities recorded an export turnover of over US$1 billion in the first quarter of this year, according to the Ministry of Industry and Trade.
They included seafood, coffee, crude oil, wood and wooden products, and garments and footwear.
It is expected that the number of export sectors passing the $1 billion mark will increase in the coming time.
Viet Nam’s exports totaled $29.68 billion in the first three months, up 19.7 per cent from the same period last year.
Da Nang’s GDP rises 7.1%
The central city of Da Nang’s gross domestic product (GDP) rose 7.1 per cent year-on-year in the first quarter of this year, according to the municipal Department of Planning and Investment.
During the period, the service sector was up 11.9 per cent, industry and construction, 0.6 per cent, and fisheries, agriculture and forestry, 4.7 per cent.
Mobilised capital in the city was estimated at VND50.2 trillion (U$2.39billion) by the end of the first quarter, a 2.58 per cent rise from the end of 2012. The outstanding loan balance reached more than VND51.5 trillion, up 1.5 per cent.
During the January to March period, Da Nang welcomed more than 590,400 tourists, a year-on-year rise of 0.4 per cent. Of these, 211,800 were foreign tourists and 378,600 were domestic.
Total social turnover from tourism posted more than VND1.4 trillion ($66.67 million), a year-on-year surge of 15.4 per cent.-
Doosan Vina to build evaporators
Doosan Heavy Industries Viet Nam (Doosan Vina) on Tuesday provided four 4,400 tonne multistage flash desalination evaporators, which will be part of a multibillion dollar power and water project near the Saudi Arabian city of Yanbu.
The evaporators would be built in Viet Nam and the four “plug-and-play” units as large as a football pitch each would produce enough water to meet the needs of some 1.2 million people.
They would be shipped intact from the company’s factory in Dung Quat Economic Zone in 2014 to Yanbu, said the company.
Earlier this year Doosan Vina completed and shipped three similar evaporation plants to the Ras Al Khair desalination project in Eastern Saudi Arabia.
US need for furniture helps Vietnamese exports soar
Exports of Vietnamese wood products to the US in the first quarter of this year have surged 8.4 per cent compared to the same period in 2012, with figures hitting US$394 million.
The amount accounts for one third of the country’s total furniture exports all over the world, according to the General Administration of Customs.
Viet Nam’s total furniture exports have also increased significantly in 2012, reaching $1.78 billion, up 24 per cent year-on-year.
In 2011 the sector experienced only a modest growth of 3 per cent.
The vice chairman of HCM City’s Handicraft and Wood Industry Association, Dang Quoc Hung, attributed the good results to the fact that US consumers are now replacing furniture after two years of curbing their spending.
In addition, he said US companies had sold out their inventories and so needed to import more to meet consumers’ demand for this year.
American businesses used to mainly import wood products from China. However, now they have started to receive resources from a range of countries in Southeast Asia, including Viet Nam, a representative from the US-based TigerTrade – which specialises in export promotion – told Saigon Times Online. Far-sighted Vietnamese enterprises have spotted the trend and taken advantage.
The deputy general director of Truong Thanh Wood Processing Company, Ngo Thi Hong Thu, said that some businesses are struggling to fulfil all of their orders due to their restricted financial capacity.
Despite the introduction of lower interest rates, these firms have still encountered difficulties in accessing bank loans, he added.
Nguyen Thanh Binh, Director of Nguyen Thanh Furniture Company agreed. He said many wood processing companies, especially domestic ones, were now facing capital shortages meaning that they were unable to utilise the huge opportunities presented by the US market.
VN firms step up foreign investments
Domestic companies have increased their overseas investments in the agro-forestry and aquaculture sectors, with about 150 ongoing projects valued at nearly US$2.5 billion.
According to the Ministry of Agriculture and Rural Development, this figure accounts for more than 20 per cent of the total investment made by Vietnamese companies in foreign countries and territories.
It said that 28 per cent of the total investments are in Laos and 54 per cent in Cambodia, mostly for rubber cultivation and wood-processing plants.
Vietnamese companies are also investing in China, ASEAN-member countries and Africa, where Mozambique, Tanzania, Sudan, Mali and South Africa are developing the cultivation of seafood.
The Viet Nam Rubber Group, one of many investors pouring money into other countries, targets US$1 billion in overseas investment by 2015.
To date, the group has eight projects in Laos and 21 in Cambodia.
Companies in the agro-forestry and aquaculture sectors said it was profitable to invest overseas because of lower costs for land, taxes and human resources.
However, because many of the countries remain undeveloped, Vietnamese companies often encounter problems, such as weak legal systems and an insufficient number of skilled workers.
In addition, Viet Nam faces competition as many other countries like Thailand and China are exploiting these markets for the same advantages.
Despite these shortcomings, local companies said their investments abroad had brought profits that had allowed them to re-invest domesticcally.
Trade with India on the rise
Bilateral trade between Viet Nam and India surpassed US$1.3 billion during the first quarter this year, representing a 40.2 per cent rise over the same period last year, according to the Vietnamese trade counsellor in India.
Out of the total figure, Viet Nam’s exports earned $533 million, recording a surge of 59.3 per cent, while the country’s imports from India were at $774 million, increasing by 29.5 per cent, said trade counsellor Nguyen Son Ha.
The country’s trade deficit with India fell 8.3 per cent. Vietnamese export items to record high growth included phones and phone components ($238.5 million, up 174.6 per cent), computers, electronic products and components ($51.7 million, up 104.4 per cent), and coffee ($25.8 million, a rise of 118.3 per cent).
In addition, chemical products, fibre and timber products also saw increases of 42 per cent, 84 per cent and 82 per cent respectively.
Several categories of Vietnamese products saw declining exports, such as machinery and equipment ($40.7 million, down 32 per cent), natural rubber ($22.2 million, down 23 per cent) and pepper ($12.6 million, down 18.6 per cent).
India imports Vietnamese agro-forestry products such as coffee, pepper, cinnamon, fennel, tea and cashew nuts, which are processed and sold on to other countries. Each year, the country imports more than 500,000 tonnes of spices worth over $1.7 billion.
Meanwhile, Viet Nam imports materials for production, such as cotton, corn, medicines, steel, and textile and garment materials from India. Most of these imported products are used for processing, production and everyday consumption.
The prices of Indian products are relatively competitive compared to those from other markets, such as the US or Europe, largely due to the country’s geographical proximity to Viet Nam and lower labour costs.
Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR