Thu. Apr 18th, 2024

Social fund seeks investment methods

Using the social insurance fund to buy bonds is the safest investment, said Deputy Prime Minister Vu Van Ninh at an NA discussion about social fund lending activities on May 25.

As of late 2012, the social insurance fund had a surplus of VND200 trillion (USD9.6 million), with most of its loans going to the government and 24% to banks.

NA deputy, Bui Sy Loi, said the fund would face grave consequences if they lend money to banks or invest in the stock market.

“In 2010 and 2011, we gave loans to four banks and the debt of one Agribank member company has turned bad, creating possible losses of nearly VND1 trillion. Of course banks always give collateral for loans, but in reality it is difficult to recover from the banks,” he said.

According to Loi, the government should revise the social insurance law to deal with stagnant debts. The number of insured people is about 15 million but only 10.5 million are actually contributing to the fund.

Answering the question whether it is a violation of the law for social insurance to loan funds to the government, Ninh said, “The law on social insurance states that to ensure the fund’s safety, it is prohibited from making investment in ‘risky industries’. In order to increase the fund, the money can be deposited into state-owned banks. The other method is to buy bonds or give loans at market interest rates.”

NA deputy Vo Thi Dung, from HCM City, also raised question about an increase of 24.8% in the public debt between 2010 and 2011, most of which was from borrowing social insurance fund and issuing bonds.

Ninh said public, government and national debts are still under control. “The ratio of public debt to GDP is limited at 65% and we haven’t reached this cap yet. The government will submit a detailed report about public debts to the NA soon.” he said.

The report about public and foreign debts in 2011 showed that public debt is at 54.9% of GDP, and foreign debts equaled over VND1,000 trillion. The debts from issuing bonds accounted for 47.2% of total domestic debt.

Lao media praises Vietnamese company accused of criminal land grabbing

In an attempt to cleanse their image, Hoang Anh Gia Lai Group (HAGL), a Vietnamese company, accused by the British NGO Global Witness of illegal land grabbing in Laos and Cambodia, has turned to the print media to win their case in the court of public opinion.

According to a recent report by Global Witness, a London-based non-governmental organisation, HAGL Group and state-owned Vietnam Rubber Group acquired more than 200,000 hectares of land through a series of deals with the Lao and Cambodian governments that lacked transparency. The report also said that the deal was backed by several international financiers, resulting in widespread devastation to the environment and livelihoods of locals.

Land was often sold without residents’ consent or even their knowledge and without compensation. Families were forced off their land or expected to work for the rubber plantation, although jobs were few and far between, the report alleged.

In response HAGL Group held a meeting with its strategic partners and representatives from local and international newspapers, denying the accusations on May 17. The chairman of HAGL claimed that they had adhered to all laws and that the deals were approved by the respective governments.

Lao News Agency then published an article on May 22 praising the group’s “contributions”, and Lao Phatthana Newspaper said that HAGL has initiated positive changes in Attapeu Province.

The article cited Party Secretary of Attapeu Province Khanphan Phommathat as saying that the area previously had backwards production methods and that the residents there faced many difficulties.

The Lao News Agency and Lao Phatthana Newspaper also claimed that HAGL invested in the poor provinces of Sekong and Attapeu and provided a loan of USD35 million for social services in these localities, including a hospital and residential areas.

Despite the praises of official news outlets and government spokespeople, however, Global Witness continues to stand by their report, which says these land deals were illegal and lacked transparency. They also claim to have documents to prove it.

Higher legal capital likely at realty firms

Real estate companies might be forced to raise their legal capital if proposed amendments to the Property Trading Law were passed.

The HCMC Department of Construction has thrown support behind this proposed capital requirement, saying higher equity of investors in each particular property project should be also prescribed to ensure their financial viability.

The current legal capital requirement for property firms is VND6 billion and that for equity is 15-20% of the total investment cost of a project. These prescribed levels are deemed too low, as they do not guarantee the financial capability of investors, said the department.

Over 70% of the active realty trading firms are small, having capital below VND10 billion each, according to statistics of the HCMC Department of Planning and Investment.

Up to 80% of funding for property investment and trading operations is sourced from bank loans, according to the construction department. This explains why many property enterprises have failed to guarantee a clean balance sheet.

Realty indices are nowhere to be found

Property indices are intended to serve as a tool for both regulators and enterprises to monitor market movements but the Ministry of Construction has still been struggling to collect enough data to publish the indices.

Deputy Minister of Construction Nguyen Tran Nam, speaking at an event marking the tenth birthday of the Vietnam Real Estate Association in HCMC last Friday, said his ministry had made effort but still been unable to release the figures. Related information is not enough while companies in the industry haven’t provided data, he explained.

Setting the indices for the realty market’s assessment has been piloted by the construction ministry in the country’s big cities like Hanoi, HCMC, Danang and Can Tho. Subsequently, property products including products for sale and transfer, apartments, separate homes, land lots and products for lease are selected as the targets for the indices.

If the pilot proved successful, the indices would be a helpful tool for authorities and companies to keep track of the performance of the market and introduce policies and business development strategies accordingly.

Local media has long depended on research projects or surveys conducted by foreign property service firms to report on the real estate market. Only Savills Vietnam announced its own indices last year.

Nguyen Van Dang, deputy director of the city’s Department of Construction, said that without a database, State agencies were not able to collect statistics about housing projects, office space for lease and commercial centers available on the market or to be constructed in future. Volatile transactions and prices make it hard to release exact figures.

Due to lack of information and data, State management agencies have turned out different assessments and forecasts on market changes, meaning they have failed to help the market grow in a sustainable way.

Meanwhile, there are no sanctions forcing project owners and property exchanges to make reports on their transactions and send them to relevant authorities.

Savills Vietnam has announced the indices of real estate prices for the first quarter, with the housing price index staying at 89.2 points, three points lower than the same period in 2012. Price falls are mainly seen at the projects that have found it difficult to sell products well.

Despite a considerable increase in supply during this quarter, the successful rate of transactions stays stable thanks to higher sale volumes. Total transaction volumes in the second quarter surged 2% against the last quarter and 25% year-on-year.

Price falls hit chicken farmers

Many chicken farms are on the verge of bankruptcy given heavy losses and are finding it difficult to resume farming as chicken prices have fallen sharply in recent weeks.

Speaking with the Daily last week, Le Van Dinh, a chicken farmer in Tan Phu District in the southern province of Dong Nai, said this was the first time chicken prices had taken such a sharp nosedive.

Chicken prices set by poultry farming areas at present are still not enough for offsetting production costs. The price of color fur chickens has tumbled to only VND39,000 a kilo, dipping over VND10,000 against earlier this year. Similarly, the price of industrial chickens has also stayed low in the market, at a mere VND19,500 a kilo, shrinking more than 50% versus the start of the year.

With such huge losses, Dinh has had no other choice but to sell his chickens on the cheap to reduce feed expenses in the context that chicken prices are slipping while animal feed prices remain high. The gap between slackened chicken demand and oversupply has led to a strong decline in chicken prices as seen at present.

At this time in previous years, many farms were also vulnerable to the bird flu epidemic but weakened demand as recorded this year is unprecedented, Dinh noted. Recent information on H5N1 and H7N9 bird flu has made consumers shy away from chicken meat consumption, he said, adding local farmers are incurring a loss of up to over VND10,000 per kilo with the current selling prices.

Southeastern provinces are home to as much as 15,000 chicken farming areas with one farm worth VND2 billion. Farmers in these localities are estimated to have invested more than VND3 trillion in poultry farming but they have still been unable to find outlets for around one million chickens weighing from 3.5 kilos to 4 kilos each.

Five-month FDI totals US$8.5 billion

New foreign direct investment (FDI) approvals have been very modest this month, but total FDI in Vietnam in the year to date has reached over US$8.5 billion, higher than the same period last year, said the Foreign Investment Agency (FIA).

FIA’s latest report shows that FDI has dropped sharply this May with registered capital of only some US$300 million, down 85% from April and a hefty 94% from March.

However, thanks to the strong increase in new FDI commitments in the previous months, five-month FDI has grown 8.9% year-on-year.

In the year to date, nearly 400 new projects have been granted investment certificates with total pledged capital of more than US$5.09 billion, up 5.8% over the same period in 2012. Meanwhile, 160 ongoing projects have raised their capital by an additional US$3.4 billion, up 14% year-on-year, said FIA.

Foreign investors have poured money into 18 sectors. Industrial processing and manufacturing is the strongest magnet, luring 191 fresh and existing projects worth nearly US$7.6 billion, accounting for 89.2% of total FDI in January-May.

The second place goes to the troubled real estate market with total capital of US$387.37 million, or 4.5% of the nation’s total. Wholesale, retail and repair come in third when attracting 57 projects worth US$141 million.

Although FDI has fallen considerably this month, FDI disbursement has amounted to US$830 million. Overall, FDI disbursement in January-May is estimated at US$4.58 billion, a rise of 1.6% against the same period last year, said FIA.

Foreign-invested enterprises (FIEs) in the year to date have achieved good export growth. Since the year’s beginning, they have exported over US$32.7 billion worth of goods, including crude oil, up 23.3% year-on-year, accounting for 65.56% of Vietnam’s total exports.

Excluding crude oil, their export turnover is more than US$29.7 billion, up 25.8% and representing 60% of the nation’s total.

Meanwhile, FIEs have imported some US$28.6 billion worth of goods, an increase of 25.4% over the same period in 2012, making up 55.29% of total imports of the country.

In the year to date, 40 nations and territories have invested in Vietnam. Japan is the largest investor with nearly US$3.7 billion of newly-pledged and additional FDI, making up 43.4% of the total in Vietnam.

Singapore takes the second place with nearly US$2.36 billion, or 27.7% of the total in the first five months, followed by Russia with some US$1.01 billion, 11.9%.

Foreign investors have invested in 44 cities and provinces. The US$2.8-billion capital increase of the Nghi Son oil refinery project has brought Thanh Hoa to the top place in terms of FDI attraction, accounting for 32.9% of total capital investment.

Thai Nguyen with the US$2-billion project of Samsung ranks second, followed by Binh Dinh with over US$1 billion.

Opportunities in hard times

An economic slowdown definitely creates tremendous challenges for companies. There are exceptions, however. Companies in Quang Trung Software City (QTSC) have seen tough times as a chance to demonstrate their flexible adaptation that fits clients’ needs and offer low-cost outsourcing solutions.

Frank  Schellenberg, CEO of Germany-based GHP Far East, says that the economic turmoil may prompt companies to start thinking how to lower cost and that one of the options they would consider is outsourcing. “We’ve learnt that those economic fluctuations are not a disaster, it is another opportunity for outsourcing companies to improve business, re-build processes and so achieve a new balance,” Schellberg said. The current economic woes have made GHP Far East focus more on making its production processes efficient.

“In our case, it is a combination of European standards and Vietnamese prices. We even set up a slogan for our company, following our competencies: German Quality – Made in Vietnam,” he said. According to Schellberg, improving speed, increasing automatization, emphasizing on software development and motivating people to improve operations are what the company has done to make customers tolerate increases in service fees.

Europe is GHP Far East’s main market. A member of the Swiss Post Solutions Group since 2008, the company has constantly expanded its market topography. At the moment, GHP Far East’s major end-customers come from Germany, Switzerland, France, Belgium, Russia and Japan.

Another European market’s partner, Luxoft, has also worked very hard and has spent a lot of extra efforts during the economic turbulence. According to La Manh Cuong, CEO of Luxoft, the Russian-based company has carried out several initiatives and measures, from exercising a new engagement model with clients to widening the range of offerings and reaching to a higher level of customers’ satisfaction, aiming to help customers “get more for less.” “Those measures have helped Luxoft maintain, and even expand, business relationship with major clients, which in turn has allowed us to sustain operations at a time of economic hardship,” Cuong said.

Aside from Europe, the U.S. is a large market for Vietnamese software companies, especially in the current difficult time, when IT giants require more benefits with less spending and they seek firms in Asia, including those in Vietnam. Do Thanh Nhon, BTM Vietnam’s operation director, said that his company has neat and streamlined management systems, and agile and effective methodologies so it can provide clients with a wide range of options to fit their business needs. “We have invested our resources to complete the work at any cost and those clients have become our invaluable references,” Nhon said. “Because of those established relationships and commitments, clients see the benefit of investing in BTM, and some of them set long-term plans with us, even in this difficult period.”

Nhon added that to assure commitments to clients, BTM has mapped out a strategy for investing in and developing the talent pool. A reasonable compensation model is built around management by work and objectives. Moreover, BTM has invested in internship programs to prepare human resources in the early stages.

Meanwhile, at GHP Far East, business process outsourcing (BPO) is a new and potential industry for the Vietnamese workforce. Among its staff, there are several ones who have not obtained a high level of education, said Frank Schellberg, But after joining GHP Far East, employees would be given specific training courses on computer and language skills besides advanced training or communication classes.

To Luxoft’s La Manh Cuong, the company’s business strategies for years are to get deep into a few specific industries and to diversify services. Yet all have relied on one critical factor: people. “We must have the people who have real outstanding capability and are always able to deliver on promises with clients,” Cuong said. “Attracting talents are always interesting yet challenging tasks of any organization, while keeping talents is even a more demanding task and no single measure would be sufficient.”

GHP Far East, Luxoft and BTM as well as other members in QTSC have realistic plans for 2013 and the years to come. Some want to focus on BPO contracts from the two giants, the U.S. and the EU. Others seek new strategic markets. They share the same thought, however: People are the key in all plans.

TrustBank renamed Vietnam Construction Bank

TrustBank last Friday adopted a new name of Vietnam Construction Bank whose priority is to offer unique banking services to corporate clients active in the field of production and trading of building materials and low-cost housing development.

The bank’s charter capital is VND3 trillion and its total assets over VND28 trillion. The bank wants to hike the respective figures to VND7.5 trillion and VND42 trillion.

The bank wants to expand its network to 115 transaction points by end-2013.

On its debut, Vietnam Construction Bank signed cooperation deals with BIDV and Agribank to provide credit support for low-cost housing development programs.

“The name Vietnam Construction Bank clearly indicates the major focus of the bank, consistent with the latest guidelines given by the Government in resolutions 01 and 02, calling for support for property and construction firms to overcome difficulties, reduce inventory and prop up the market,” said Phan Thanh Mai, permanent board member of the bank.

The change of name and priority follows the change in the bank’s ownership structure, providing the institution with strategic partners having connections with multiple building material producers and traders, and low-cost condo developers, says a statement of Vietnam Construction Bank.

The debut of Vietnam Construction Bank took place on the occasion of the tenth anniversary of the Vietnam Real Estate Association.

TrustBank has sold an 84.04% stake to a new group of shareholders consisting of Thien Thanh Corporation with a 9.67% stake. At the extraordinary general meeting in February, all board members of TrustBank were replaced by mostly representatives from Thien Thanh Corporation.

Earlier, when talking about its restructuring, TrustBank said that in the short term, it would maintain operations with traditional services for the Mekong Delta and economic zones. In addition, it would start offering services to clients active in the building material industry and low-cost housing development.

Since 2011, TrustBank has been experiencing hardship because of the nation’s economic woes such as high inflation, fiscal and monetary tightening, and the frozen real estate market.

The bank lent heavily to the property sector. By end-February 2012, outstanding property loans had reached 53% of its total assets. This explains why its bad debt ratio has risen sharply since the realty market began running into trouble.

Moreover, shortcomings in risk management and internal audit have spelled much trouble for TrustBank. It is on the list of nine weak banks forced by the central bank to undergo restructuring.

TrustBank was established in 1989 with its headquarters in Long An. By the end of 2011, its total assets had reached VND28 trillion and its charter capital VND3 trillion. Its pre-tax profit in 2011 was VND550 billion.

Thien Thanh Corporation with charter capital of VND1 trillion is active in real estate, building materials, trade and automobile sectors.

Jan-May credit growth put at 2.29%

Vietnamese banks as of May 22 had recorded credit growth of 2.29% compared to the end of last year, according to the central bank’s Monetary Policy Department.

Credits in Vietnam dong grew by 4.57% while those in foreign currency declined 8.07%. Speaking to the Daily, a representative of this agency said that the government bonds banks bought early this year were not taken into account in this growth rate.

As credit growth usually speeds up in the final days of month, the banking system’s credit growth may reach 2.5% to 3% by the end of this month, said a leader of this agency. This is a positive sign as credit fell 1.71% in the first four months of 2012 and saw no improvement in the following month.

Many credit institutions have offered dong deposit rates for tenors from one month to less than 12 months lower than the ceiling rate regulated by the central bank. Shot-term deposit rates hover in the range of 5-7.5% per annum while those for terms from 12 months are from 8-10.5%.

Some enterprises in a healthy and transparent financial state and effective business projects have got bank loans in dong with lending rates of just 7-8% per year.

Liquidity of credit institutions was sufficient for compulsory reserve in the first 22 days of May, the central bank said.

Mercedes-Benz launches diesel-fueled GLK

Mercedes-Benz Vietnam last Friday launched the diesel-fueled version of the GLK 220 CDI car on the local market.

The Common-Rail Direct Injection (CDI) is applied to the new GLK vehicle equipped with the fourth generation CDI engine meeting EURO IV emission criteria.

A new feature of the GLK 220 CDI is the ECO Start/Stop which helps temporarily shut down the engine when the vehicle is idle.

It also owns Blue Efficiency package equipped with low-friction drive systems, wheel rolling resistance limit, chassis and aerodynamic design and energy-saving steering system.

GLK 220 CDI consumes around six liters of diesel for 100 kilometers, according to Mercedes-Benz Vietnam. After three years of usage, equivalent to a distance of nearly 60,000 kilometers, the car can save more than 1,000 liters of fuel compared to other gasoline-fueled automobiles.

GLK 220 CDI comes with black, grey, white, silver and red colors and sells for around VND1.52 billion each. Meanwhile, the GLK CDI Sport version has a price tag of some VND1.69 billion a unit.

Quang Ngai zaps indolent power plans

Central Quang Ngai province has axed four small-scaled power plants due to concerns about negative environmental impacts and long delays.

One of the revoked projects is 5 megawatt Ly Son thermal power plant invested by the state-run Vinacomin with the total investment of nearly VND300 billion ($14.4 million).

Initially, expectations were for the Ly Son island’s power plant to be completed by 2011 to help address the electricity shortage and kick off the socio-economic-tourism development on the island – a place famous for garlic farming and historical cultural relics. However, little progress has been made at the project site since the construction started in 2009.

A tourist route was opened on the island many years ago, but few tourists came to the island as local hotels lacked electricity, computer and internet access.

Ly Son is located in the northeastern area of Quang Ngai, which is about 20 nautical miles from the mainland and 90 nautical miles from the international maritime route, making it an important point on the baseline representing the maritime border of Vietnam. In particular, the ecological environment around the island of Ly Son is very favourable for the development of marine tourism and fishing.

Quang Ngai’s authorities have recently sent a proposal to the Ministry of Industry and Trade (MoIT) for a project of supplying electricity from the mainland to Ly Son by submarine cables.

With the total investment capital estimated at $50 million, the proposed submarine power cable system will run 10 kilometres on the mainland, 30km in the sea and 3km on the island. The system was projected to complete and put into operation in 2014.

Meanwhile, three other small-scaled hydropower projects in Quang Ngai – Tam Rao-Tam Linh hydropower complex with the combined capital of 9.5MW, 12MW Po E hydropower plant and 12.6MW Son Tra 2 hydro- power were halted due to long delays and negative environmental concerns. All of them are invested by local investors.

In the provincial plan, Quang Ngai will have a total of 22 hydropower plants with the designed capital of 415MW. However, only four projects have been completed and other two projects are now under construction.

Many other small-scaled hydropower plants in the province are also facing licence withdrawals such as 4.9MW Tam Rao hydropower plant, 4.5MW Tam Linh hydropower plant, 12.6 Son Ha hydropower plant, and 10MW Tra Giang-Tra Bong hydropower plant.

MoIT’s Minister Vu Huy Hoang stressed that the ministry would continue combining with local relevant agencies to revise Vietnam’s hydropower development planning strategy, with a sharp scrutiny on small-scaled projects.

Under the nation’s power development plan until 2020, hydropower plants still remain a key power supply source for Vietnam.

During 1994-2010, 23 medium and big-scaled hydropower plants were put into operation with the total designed capacity of 6,200MW. Currently, the river system in Vietnam is accommodating 500 hydropower plants, big and small, according to the MoIT.

Bridging gap for financial centre

Property developer Dai Quang Minh has been named the investor for a pedestrian bridge over the Saigon River linking Ho Chi Minh City’s business district and Thu Thiem New Urban Area, which has been designed to house Vietnam’s emerging financial centre.

The city administration has selected the Vietnamese firm as the project owner for the bridge to Thu Thiem peninsula under the Build-Transfer (BT) format.

The pedestrian bridge plan had been part of a bigger Thu Thiem project that included the new urban area’s central square and the riverside park. However, the Thu Thiem Investment and Construction Authority had separated it because the bigger project as a whole was not appealing to investors, said Trang Bao Son, deputy chief of the authority.

Tran Ba Duong, the chief executive officer of Dai Quang Minh, said his company was just seeking ideas for design of the bridge via a competition, so a clear image was still unknown. Further details for this investment were not revealed by Duong, who is also chairman of Vietnamese automaker Thaco – French automaker Peugeot’s new partner in an alliance set up this April to assemble and distribute Peugeot cars in Vietnam.

One edge of the bridge will be located at Bach Dang Wharf in the business district, according to the Thu Thiem authority.

The Thu Thiem New Urban Area, now under construction, is seeking investors for various projects. In late April, a consortium between Dai Quang Minh and Vietnam Infrastructure Development and Finance Investment Co. (VIDIFI) started the construction of the four main roads on the peninsula under build-transfer contracts and “land in exchange for infrastructure” formats. Also that time, Dai Quang Minh broke ground for a low-rise housing project in Thu Thiem.

The Thu Thiem New Urban Area, designed by the US’ Sasaki Associates, covers 657 hectares and is intended to replace District 1 as the city’s financial centre. It is already connected with the current business district by the six-lane Thu Thiem Tunnel under the Saigon River and several bridges, including Thu Thiem Bridge.

Vietnamese group Vinaconex planned to start construction of Thu Thiem 2 Bridge in May or June 2014, said Thu Thiem Authority chief Nguyen Anh Tuan.

No short cuts for mega Nhon Hoi oil refinery plan

Thai petroleum conglomerate PTT Public Company must play by the rules to get its giant oil refinery and petrochemical complex in Vietnam off the ground

Deputy Prime Minister Hoang Trung Hai has asked Binh Dinh Provincial People’s Committee to guide the investor to proceed with detailed investment plans in line with the prime ministerial Decree 108/2006/ND-CP providing guidance on the implementation of Vietnam’s Investment Law 2005.

In an official letter sent to the Ministry of Industry and Trade and the Binh Dinh Provincial People’s Committee, Hai emphasised that the plans must address the concerns of relevant governmental agencies about the feasibility of this mega project.

The MoIT was also assigned to work closely with Binh Dinh Provincial People’s Committee and other relevant agencies to carefully appraise the feasibility of this project.

The ministry would also be reviewing the implementation of already-approved oil and gas projects in line with the nation’s oil and gas development master plan until 2015 with the vision towards 2025.

And then, based on the comprehensive review, the MoIT would consider asking the prime minister for adding PTT Public Company’s proposed project to the master plan.

Three years ago, PTT Public Company unveiled its plan to develop a mega oil refinery and petrochemical complex project in Vietnam. Last year, it officially proposed the ambitious project to the Vietnamese government with the planned investment capital of $28 billion.

According to Binh Dinh Provincial People’s Committee, the complex would have the total refining capacity of 660,000 barrels per day, or 33.6 million tonnes of crude oil per year.

If the project is approved, it would be one of the largest oil refinery and petrochemical complexes in Asia and its capacity will be five times higher than Vietnam’s existing Dung Quat oil refinery in central Quang Ngai province.

However, industry experts have expressed doubts about the scale of this project due to its huge investment capital. State-run PetroVietnam also sent a document to the MoIT expressing concerns about this project.

Vietnam now has only one oil refinery, with the annual refining capacity of 6.5 million tonnes of crude oil. PetroVietnam, Dung Quat’s developer, planned to expand the oil refinery’s capacity.

Other oil refinery projects in the country such as Nghi Son in central Thanh Hoa province, Vung Ro in central Phu Yen province and Long Son in southern Ba Ria-Vung Tau province are still on the development stage.

Road to drive regional economic growth

A private infrastructure developer this week began construction of an expanded road project and Co Ma tunnel, a part of important Deo Ca tunnel project, for the nation’s arterial route.

The National Road 1A, the most important highway in Vietnam, is overloaded and in disrepair. The construction of these projects, stretching central Khanh Hoa and Phu Yen provinces, will improve transport conditions not only for these provinces, but for the nation as a whole.

“These are very important projects for driving up economic development in provinces and the country as well,” Tran Anh Tuan, general director of the developer Deo Ca Company. He stressed that the infrastructure projects would also help prevent traffic accidents on the National Road 1A.

“We appreciate the developer’s strong commitment in executing the tunnel project in the context the world’s and Vietnam’s economy remain in difficulties,” said Tran Quang Nhat, Vice Chairman of Phu Yen Provincial People’s Committee, adding that those were among the nation’s most important infrastructure projects.

Both Deo Ca and the expanded National Road 1A project are invested under tge build-operate-transfer investment form.

According to Deo Ca Company, the 37.5 kilometre-expanded road project will comprise six lanes designed for a maximum speed at 80 kilometres per hour, stretching to Van Ninh district of Khanh Hoa province. This project costs around $125 million and will be funded by Vietinbank.

The 500-metre Co Ma tunnel is a part of the $750 million Deo Ca tunnel project on the National Road 1A which also connects with the expanded road project. The entire project spans over 13.4km, including 3.9km Deo Ca tunnel, 500m Co Ma tunnel and 9km approach road and bridges. The project is slated for finalisation by 2016 and the estimated time for capital recouping will be 28 years from 2016 to 2044.

Once opening to traffic Deo Ca tunnel could halve travelling distance for transport vehicles running on the National Road 1A, session crossing Ca pass and the needed time for travel would only be one fourth of that previously.

The Deo Ca tunnel project is the second tunnel built on the route. The first one is Hai Van tunnel through well-known Hai Van pass situated between central Thua Thien-Hue province and Danang city. Since operating in 2005, Hai Van tunnel has played an important role in improving transportation in the region.

And now, leaders of both Phu Yen and Khanh Hoa provinces expect Deo Ca tunnel and the expanded road projects will play a similar significant role as Hai Van tunnel does.

Logistics firms buoyed by export spike

Vietnam’s robust export growth has encouraged foreign logistics service providers to target manufacturers’ supply chains.

Global logistics group DHL underlined the trend recently when it announced an additional $13 million for developing its Vietnam supply chain arm through 2015 to ramp up business. The new investment will create 1,400 new jobs, increasing the Vietnam operation’s total staff to 2,200 in the next two years.

In addition, DHL Supply Chain will aim building its second distribution centre, covering 10,000 square metres in the northern Bac Ninh province to serve customers in technology, retail and consumption goods. The new facility is scheduled to be opened in third quarter this year.

Other logistics providers are also quickly expanding business in Vietnam.

Singapore-based Neptune Oriented Lines, a global leading shipping lines, is planning to expand its warehouse footprint in Vietnam from 70,000 to 100,000sqm by focusing on inbound logistics, especially in retail and raw material, and providing distribution centres close to big cities and industrial parks.

Through two core business segments in Vietnam – APL and APL Logistics – Neptune Orient Lines provides local and multinational clients across a range of business sectors with premium container transportation and supply chain management solutions.

APL, among the top three shipping lines in Vietnam, handles 300,000, 20-foot equivalent units annually in this market. Meanwhile, APL Logistics handles 2.4 million cubic metres of cargo every year, with a compound annual growth rate of 14 per cent over the last five years.

“Vietnam is an important market and represents a significant part of our regional activities, and we remain optimistic about opportunities in the country,” said a Neptune Oriented Lines spokesman.

Vietnam’s export turnover last year grew 18.3 per cent year-on-year, despite the local economy was in slowdown, led by foreign export-oriented manufacturers, according to General Statistics Office. In the first four months this year, the nation’s export turnover rose 16.9 per cent from one year earlier, while the import turnover rose 18 per cent.

Two months ago, the US-headquartered UPS gained an investment certificate for becoming the first foreign wholly-owned company to provide deliver express services in Vietnam.

“We have seen the transformation of the country to the dynamic export-oriented economy and UPS has grown in parallel with the market,” said Jeff McLean, general director of UPS Vietnam.

Cargolux, the largest all-cargo airline in Europe, increased its air cargo services to Hanoi to three weekly rotations beginning on March 1.

“The added third flight, as well as the subsequent introduction of the advanced 747-8F with higher payload and improved economics, underlines the commercial importance of Vietnam for us,” said Martine Scheuren, director of Corporate Communications at Cargolux Airlines International S.A.

He added the 747-8F was providing buffer capacity to cater for the garments, textiles, and footwear while electronics shipments are creating certain steady demand in Hanoi.

Sembcorp powers up plant proposal

Singapore’s Sembcorp Utilities has received a big boost with its proposed 1,200 megawatt coal-fired power plant to be added to the Vietnam’s power development strategy until 2020.

According to Quang Ngai Provincial People’s Committee, Deputy Prime Minister Hoang Trung Hai in a document released early this month approved Sembcorp Utilities’ project to be added in the strategy and allowed the firm to develop the power plant under the build-operate-transfer (BOT) investment form.

A Dung Quat Economic Zone Management Authority source said the provincial authorities would cooperate with relevant ministries for guiding Sembcorp Utilities to complete necessary administrative steps.

“This is an important milestone for this project. Sembcorp Utilities cannot develop this power project unless the Vietnamese government adds it into the nation’s power development strategy,” said the source.

Sembcorp Utilities, a subsidiary of Sembcorp Industries, announced its plans to study the feasibility of this project in September 2011. In January 2012, the investor signed a memorandum of understanding with Quang Ngai authorities for conducting the study.

The 1,200MW power plant, to be located in central Quang Ngai province’s Dung Quat Economic Zone, will significantly enhance the central region’s power supply.

But to secure an investment certificate for this project, Sembcorp Utilities must finish negotiations with Electricity of Vietnam (EVN) and the Ministry of Industry and Trade (MoIT) for power purchase agreements and a BOT contract that could take several years.

This is the second Sembcorp power project in Vietnam. Ten years ago, the Singaporean investor, in a partnership with Kyushu Electricity, Sojitz Corporation and BP, invested in the 749MW Phu My 3 power plant in southern Ba Ria-Vung Tau province.

So far, only four BOT power projects have been licenced to foreign investors in Vietnam – Phu My 3, Phu My 2.2, Hai Duong and Mong Duong. Some other foreign investors are in negotiations with the MoIT and ENV for building BOT power projects in Vietnam, such as Sojitz, Mitsubishi, Sumitomo and South China Grid Corporation.

$1.15bn steel project comes online in style

A $1.15 billion integrated steel factory in southern Ba Ria-Vung Tau province, backed by a joint venture led by Taiwan’s China Steel Corporation, went into commercial operation last week.

It officially opened its representative office late last week after completing the factory construction and run test according to a source from the Vietnam Steel Association.

Located in Ba Ria-Vung Tau’s My Xuan A2 Industrial Park, China Steel Sumikin’s project will be among the largest steel factories in Vietnam, capable of producing 1.6 million tonnes of steel each year.

This is a joint venture led by Taiwan’s largest steel-maker, China Steel Corporation, which holds a 51 per cent stake and other shareholders include Japan’s largest steel-maker Nippon Steel Sumitomo Metal Group, Chun Yuan Steel Corporation, Hsin Kuang Steel Corporation and Formosa Ha Tinh Steel Corporation.

The project was initially licenced in 2009, and construction began in September 2011.

Its products include hot rolled steel plate, pickled and oiled steel sheet, cold rolled steel sheet, hot-dip galvanised steel sheet, and electrical steel sheet for shipping industry, automobile, motorcycle, electric and electronics that Vietnam has to depend on for imports.

Once operating, China Steel Sumikin will also support for the manufacturing industry of Vietnam. Even though Vietnam is facing a glut of construction steel, the nation still has have to import a large volume of steel serving for manufacturing industry, including automotive industry, shipbuilding and electronics.

Pham Chi Cuong, chairman of the Vietnam Steel Association, said the operation of integrated steel factories like China Steel Sumikin would be important for Vietnam’s steel industry because it could ensure the special steel supply while reducing steel imports into the country.

DatVietVAC enjoys global profile with WEF choice

DatVietVAC Group Holdings has been picked as the only Vietnamese company among the 25 Global Growth Companies in 2012 and 2013 by the World Economic Forum.

This WEF choice has been made after “careful consideration and internal selection across various industries and regions in the year of 2012 and 2013,” Masao Takahashi, a WEF head of business engagement, wrote to DatVietVAC chairman and CEO Dinh Ba Thanh.

The 25 Global Growth Companies are included in a profile book that demonstrates how they have exerted their impact on the global agenda by showcasing their compelling stories.

These profile companies are role models either in innovative technologies, new business models, or sustainable growth and social responsibilities, which are the key attributes shaping the future global business leaders.

DatVietVAC was the first privately-owned media and entertainment agency in Vietnam. It has been ranked number one in the country in national media market share for the past 19 years.

“As our strategy is to go global and catch up with the fastest growing opportunities in the new social and digital world, we would like to be recognised as the media, entertainment and communication ambassador of Vietnam that can help shape the ‘Vietnam Image’ for the next decade,” Thanh said.

The WEF Community of Global Growth Companies brings together and connects the most dynamic, high-growth companies from around the world, said David Aikman, senior director of the WEF.

Lack of retailers’ buy-in

Dark clouds of uncertainty still linger over the opening of Vietnam’s retail and distribution markets to foreign firms.

The Ministry of Industry and Trade has just released the Circular 08/2013/TT-BCT providing guidelines on the import, export, and distribution of goods by foreign-invested enterprises (FIEs) in Vietnam.

The new circular revises the Economic Needs Test (ENT) criteria used to determine whether an additional retail outlet is permissible. The rules were initially outlined in the ministry’s Circular 09/2007/TT-BTM dated July 17, 2007, stating that foreign retailers who wanted to set up more than one retail outlet would be required to pass the ENT, which would involve applying for a licence.

However, the Circular 08 narrows the geographic scope of ENT analysis to the district, in which the additional outlet will be located, rather than the city or province. Previously the ENT in the Circular 09 required a case-by-case analysis of the number of retail outlets, market stability and population density in the province or city where the retail outlet was to be located. The other factors of the test outlined in Circular 09 remain unchanged.

This is one of the new regulations given in the Circular 08 that will come into force on June 7.

“The prescriptive requirements and processes described in the Circular 08 can be seen as onerous but are likely to be regarded as a positive development by many foreign investors and stakeholders familiar with the Vietnamese legal system,” explained Bui Khanh Linh, senior associate of international law firm Allens, with offices throughout Australia and Asia. “This is because the lack of details in the Circular 09 often resulted in practical difficulties in obtaining the necessary regulatory approvals and licences for investments in this industry, as the process was not transparent to foreign investors.”

Under the Circular 08, an Economic Needs Assessment Committee (ENAC) will be established by the licencing body to determine whether the additional outlet meets the ENT criteria.

“The main concern arising from the above process is that there is no indication of timing for the recommendation by the ENAC and preliminary approval at the municipal and provincial people’s committee level,” said Chi Ha, Allens’ lawyer.

The Circular 08 also incorporates an exemption from the ENT criteria. The additional retail outlet will not be subject to ENT analysis if it satisfies the following conditions: The area of the retail outlet is less than 500 square metres, the retail outlet is situated in a location planned for retail by the city or province and the construction of the infrastructure of the location planned for retail has been completed.

Once implemented, this exemption is likely to stir up foreign investments in the retail sector, as foreign invested enterprises may be able to embrace a more aggressive expansion or market penetration plan. Foreign investors are advised to remain vigilant and monitor any development in relation to the actual application of this provision by the regulators in the coming period.

However, foreign retailers said specific criteria for the ENT was to prevent local authorities from making arbitrary decisions when considering the application for a new retail outlet.

A BigC representative pointed out the vagueness of the reference to the “suitability of the project within the cities planning.” Data regarding total supply and demand and population density should be available.

“How can investors prove that their projects are in accordance with municipal and provincial planning if the city or province does not have a retail planning system in place?” the Big C representative added.

Some business entities have suggested the Vietnamese government should give more specific and transparent guidelines on the ENT, including definition, scope of application, criteria for the ENT and procedure and duration for each criterion.

Despite the poor demand in the context of the current economic difficulties, Vietnam’s retail and distribution market last year witnessed the vigorous growth of existing foreign retailers and newcomers such as Big C, Lotte, E-Mart and Aeon in the country.

Thousands of mangroves planted in Nha Trang

More than 10,000 mangrove trees were planted around Nha Trang Bay in central Khanh Hoa province on May 25.

The planning was done by more than 100 volunteers as part of the province’s activities supporting the national Sea and Island Weeks, which runs from June 1-8 in Ha Tinh province.

Nguyen Thi Nguyet Ha, Deputy Director of the province’s Sea and Island Department, said the activity aimed at raising community awareness on protecting the sea and island environment from climate change effects.

Nha Trang Bay currently has more than 10 hectares of mangroves. Seven hectares were replanted by different organisations and individuals from 2002.


By vivian