Foreign investor decree clarified
The Government has recently launched various measures to strengthen weak credit institutions. One of these measures is a draft decree regulating how many shares foreign investors can purchase in Vietnamese credit institutions, listed and non-listed shareholding banks, financial companies and financial leasing companies (collectively VCIs). The new decree replaces Decree 69/2007/ND-CP.
The decree makes it appear that the Government is allowing foreign investors to own a greater percentage of VCIs. But there are a few issues that must be clarified.
For instance, the decree lacks a provision distinguishing indirect ownership from direct investment. There is also no detailed definition of “affiliate”, though the foreign ownership limitation applies to both foreign investors and their affiliates. This lack of clarification may cause confusion for both the buyers and sellers in an acquisition deal.
While the current regulation requires all transactions involving foreign investors to be approved by relevant authorities, the draft decree proposes that only a few share transactions be required to obtain the relevant authority’s approval. The list of transactions requiring state approval includes:
(i) The purchase of shares resulting in ownership of 10 per cent or more of a VCI’s charter capital;
(ii) A purchase in which the foreign investor becomes a strategic investor of a VCI; and
(iii) The purchase of shares resulting in ownership of 5 per cent or more of the charter capital of a VCI and the purchase of additional shares when the foreign investor already owns five per cent of the charter capital of a VCI.
The current regulations only allow Vietnamese banks to have foreign elements after meeting certain requirements, including having charter capital of at least VND1 trillion (US$47.62 million) and having a “healthy” financial status. In contrast, the draft decree proposes the removal of all such requirements and allows all VCIs to have foreign investors whenever they deem it necessary.
The draft decree also sets out a greater number of requirements that foreign investors must meet to be eligible to purchase shares in VCIs. Specifically, to be allowed to acquire 10 per cent or more of the charter capital of a VCI, a foreign investor must:
(i) Have a stable rating or a higher equivalent rating provided by a reputable international credit rating agency;
(ii) Have sufficient financial resources for the acquisition;
(iii) Be in a position so that the acquisition of shares does not affect the safety and stability of credit institutions in Viet Nam or result in a monopoly or restraint on competition;
(iv) Not have committed any serious breach of law in its home country or in Viet Nam in the past 12 months; and
(v) Have total assets of at least $10 billion (if a foreign credit institution), or charter capital of at least $1 billion (if another type of foreign organisation).
If the foreign investor wishes to become a strategic investor in a VCI, apart from the basic requirements for share purchase listed above, they must meet the following requirements:
(i) Be a credit institution;
(ii) Have at least five years of international experience in the banking or finance sector;
(iii) Have total assets of at least $20 billion in the year prior to the purchase of shares in the VCI;
(iv) Give a clear plan of how it will support the VCI;
(v) Undertake to own or prove that it already owns at least 10 per cent of the charter capital in the relevant VCI; and
(vi) Not own 10 per cent or more of the charter capital in any other credit institution in Viet Nam.
Fuel hike to drive up fares
Many taxi firms in Ha Noi are expected to raise taxi fares by VND600 -1,000 per km in the next fortnight responding to the recent petrol price hike.—Photo Ha Noi Taxi Association
Transport firms will soon raise fares to cover the losses they will likely incur from the recent 16 per cent increase in petrol prices.
In Ha Noi, taxi fares are expected to go up by VND600 -1,000 per kilometre in the next fortnight, according to Ha Noi Taxi Association chairman Do Quoc Binh.
“In the past, transport firms –including taxi companies –have struggled to deal with increased petrol prices by raising fares. But this means they risk decreased passenger numbers and reduced revenue,” Binh said.
The retail petrol price jumped to VND24,580 (US$1.17) per litre last Thursday – the highest increase recorded after the Government’s efforts to ensure prices remain stable.
But a representative from Taxi 52, a taxi firm in the capital, said the firm could not cover operation costs if it did not raise fares.
Taxi drivers currently operate under a contract mechanism, under which they have to pay a fixed amount to their companies.
As the petrol price goes up, they have to spend an additional VND30,000 – 50,000 ($1.4 -2.4) each day, causing their income to fall 30 per cent to VND900,000 -1.5 million ($43-71.7).
While Binh said firms had “no choice” but to increase fares, he pointed out that companies should also reduce other costs as much as possible and offer a support policy for drivers.
In HCM City, major taxi firms have also considered raising fares, said Chairman of Viet Nam Automobile Transport Association Nguyen Manh Hung.
Coaches were mainly diesel-powered, so they did not need to raise fares based on the fuel price increase, as the diesel price went up by only VND362 per litre or about three per cent.
However, they also faced higher costs for labour and road use as well as fuel, he said.
Nguyen Huyen Trang, a resident in Ha Noi’s Hoan Kiem District, said that there was no question that transport fares would increase. Even motorbike taxi drivers and market vendors were increasing prices of their products and services, citing the raised petrol price, Trang said.
Hung from the transport association said the increase was beyond expectations for both the public and enterprises because Viet Nam mostly imported petrol and the global petrol price was falling.
“The Government should have reduced the import tax on petrol instead of raising retail petrol prices, which would relieve the burden for both the general population and enterprises,” he said, noting that the current import tax for petrol was 12 per cent and the tax for diesel stood at 8 per cent.
The ministries of Finance and Industry and Trade announced that over a month ago, the world oil prices fluctuated at high levels while domestic retail prices were VND1,000 -3,000 per litre below base price.
To stabilise the market and curb inflation, the Government did not allow prices to increase and used the Petrol Price Stabilisation Fund to cover losses.
However, last Thursday the fund ran out – leading the ministries to approve the petrol increase.
Nguyen Anh Tuan, vice head of the Price Management Department of the Finance Ministry, said that without the price stabilisation fund, the petrol price would have gone up four times since the beginning of this year.
Currently, the fund is managed by enterprises who must ask for the ministries’ approval to use the fund in cases where world oil prices go up but the Government doesn’t want to increase the domestic price.
Tuan said the funding process needed to be transparent, so the ministry would make monthly announcements about the fund rather than quarterly announcements in order to inform the public and other authorities in a timely manner.
Businesses turn to black market for capital
Businessmen have resorted to illegally borrowing capital at extremely high interest rates, often known as “black credit”, leaving them to sink deeper into difficulty.
Tran Minh Toan, who is involved in a mining business in Tuyen Quang Province, had to seek out a local lender to borrow money when his mining licence expired. He said, “It takes some money to get a new licence and I still have daily business expenditures to deal with. I’ve been in debt for half a year now.”
People have turned to the black market because the procedure is simple, they do not even need to offer collateral and can receive the money immediately. However, if the swinging interest cannot be paid in time, they will face serious trouble.
Toan said his interest rates was raised once so he borrowed VND3 billion (USD144,000) from several lenders to ease the interest deadlines. “This is the last resort. Not only do I have to find partners to improve the business situation and pay staff wages, but I also have debts to worry about,” Toan said.
Nguyen Manh Thang, an owner of a steel company in Vinh Phuc Province said when the economy was in recession, he was willing to let his full payment be prolonged until after the construction completed. However, Thang is in debt to others.
“I have to pay the suppliers before the final deadlines and I have nothing else to be used as security for loans so I came to the black market,” Thang said. He said sometimes he wanted to shut down operations but he still has loans.
An employee of a company in Hanoi said, “Borrowing money from local lenders is quite common since the banks tightened their lending activities. Borrowing money on black market has its perks but it’s dangerous. Firms are ignoring the danger now because of the slump.”
Crimes related to black credit have surged in the last two years. Since 2010 until late 2012, Vietnam had over 100 cases of insolvencies totalling nearly VND4.5 trillion. People often borrow money from many lenders and use such money to give loans. Taking advantages of the loop holes, the lenders can apply rates of 30% per month or more without issuing a legally binding contract. The General Police Department for Crime Prevention and Suppression said they did not have strict enough sanctions to deal with such crimes.
Explaining about the wide spread of black credit in the past two years with Vietnamnet, lawyer Truong Quoc Hoe said firms came to the black market to pay debts to partners and especially banks loans. “Because most contracts are legal, if lenders can’t use gangsters to recoup the loans, they can sue the borrowers in court,” he said.
Many business owners have had to sell their belongings at cheap prices after being threatened. Nguyen Van Dai, owner of a company in Hanoi had to divorce and escape to South Korea because he could not pay his debts. However, his family is still harassed daily.
Meanwhile, VnEconomy reported that since early 2013, many banks cannot give out loans and suffer from weak liquidity. Some banks such as Vietcombank decided to lower deposit rates from 8% to 7.5% in the hope that depositors would withdraw the money.
“Banks want to make loans but they can’t because many firms are in bad financial situations, and firms that have healthy credit are reluctant to borrow despite the lower interest rates.” said Nghiem Xuan Thanh, Director General of the State Bank of Vietnam Office.
Corruption becoming more complex, harder to detect: WB
According to Tran Thi Lan Huong of the World Bank, just because fewer corruption cases are being detected does not mean that there is less corruption; it does however mean that corruption has become more sophisticated and harder to detect.
This was reported via a social survey on corruption conducted by the World Bank, the Government Inspectorate of Vietnam and the Vietnam Chamber of Commerce and Industry.
The survey was carried out across 10 provinces and cities in Vietnam with 5,460 respondents, including about 2,600 locals, more than 1,000 businesspeople and almost 1,800 civil servants that included 90 staff from the Ministries of Transport, Construction, Industry and Trade, Finance, Natural Resources and Environment.
Hanoi, the northern provinces of Hai Phong, Son La, Hai Duong, the central city of Da Nang, the central provinces of Nghe An, Thua Thien-Hue, Ho Chi Minh City, Can Tho City, and the Mekong Delta province of Dong Thap were selected because of strong socio-economic activities that can cause high levels of corruption.
Results showed that 45 percent of staff was involved in corrupt acts; around 44 percent admitted to making unofficial payments; about 59 percent said they sometimes reacted to difficulties by giving gifts or money; more than 75 percent admitted that they had paid up without being asked to do so.
Businessmen said corruption is worsening day by day and has become more complex than it was in 2005. Firms are contributing to this vicious cycle, but also have the capacity to break it.
Up to 63 percent enterprises said employees of state departments or ministries are intentionally delaying work; 22 percent of state employees are used to seeing their colleagues delay the work to ask for money; and 29 percent of residents have to give unofficial payments to push the work up.
James Anderson from WB said corruption has a negative impact like making the country less competitive and less attractive to investors. How to decrease corruption? James suggested the solution was to break the cycle at the administrative level in the country, increase transparency and publicity, continue with administrative reforms, and eliminate contradiction in handling corrupt cases.
According to the survey, 80 percent enterprises and state employees said media discovered corruption before anti-corruption agencies and more than 85 percent said pressure from media helped effectively deal with fighting corruption.
The survey showed that people had to pay under-the-table while dealing with traffic police officers, tax officers, bank officials, customs officers, construction agencies, health service providers and others.
HCM City authorities uncover illicit diesel from waste motor oil
Ho Chi Minh City Department of Market Management on April 1 announced that they have uncovered an illicit production unit that produces diesel from waste motor oil in Tan Thong Hoi Commune in Cu Chi District.
Earlier, on March 20, market management officials coordinated with local police and the Department of Natural Resources and Environment in Cu Chi District to inspect the diesel production unit.
They found that the unit did not have a business license and their product did not have any label. The unit manager admitted that they have sold 200 diesel liters so far.
The inspectorate has seized 80,600 liters of diesel, 39 pumps, one generator and chemicals to make diesel.
HCM City bus fleet needs immediate upgrading
Thousands of buses currently operating on Ho Chi Minh City streets have been running for the last ten years and are now badly in need of being replaced.
According to the City Department of Transport, there are about 1,700-1,800 such downgraded buses which need replacement, however, economic difficulties have made this impossible for now.
Several buses have paint peeled off, torn seats, broken glass panes, malfunctioning air conditioners, and exhaust that gives off black fumes while plying the City streets.
The worst downgraded buses can be seen on routes like Mien Dong-Mien Tay, Cho Lon-Mien Dong, Saigon-Thoi An, Saigon-Nha Be and Binh Khanh-Can Gio and in District 8.
Le Hai Phong, director of the HCMC Center for Public Passenger Transport Management and Operation, said that most companies do not have funds to even maintain their buses periodically.
The buses should be fully overhauled every 3-4 years at a cost of about VND380-500 million (US$18,000-24,000) each for safe operations, but actually most of them are only repaired when any damage is detected.
On the other hand, the City now has more than 3,000 buses running on 600 routes but only three bus stations, leading to severe shortage of parking space.
Since 2007, the Prime Minister has asked HCMC to build 30 bus stations across 1,146 hectares of land. However, the City has organized only 28 hectares for bus stations.
The HCMC Department of Transport had asked City authorities to plan 22 bus stations since 2002, but districts have used the land allocated for this purpose for other works. For instance, the Van Thanh Station in Binh Thanh District was cleared for construction of a commercial center.
Socio-economic picture in first quarter
The country’s economic performance in Q1/2013 has sent out messages related to economic growth, export, state budget collection and spending, inflation, and investment capital.
Regarding economic growth: Though priority was given to stabilizing the macro-economy and curbing inflation, a positive GDP growth rate of 4.89% was recorded. This first-quarter remarkable GDP rate was higher than the figures posted in Q1/2009 (3.14% – considered as the “bottom” quarterly rate for years) and in Q1/2012 (4.75%) – 2012 was described as the “bottom” year in over the past 13 years.
Growths were achieved by the agriculture, forestry – fishery, industry – construction, services sectors, of which the industry – construction and services had their growth rates higher than the average.
These sent a good signal for the nation’s economic growth in 2013, with expectations for a higher rate than the 2012 figure.
On export, the preset target value for the whole year 2013 was US$126 billion, which showed an increase of 10% from 2012. Although export turnover in Q1 reached US$29.7 billion only, it increased by 19.7% over the same period last year. In the quarter, monthly export value exceeded US$11 billion in January and March, making the hoped-for exceeding-plan value in 2013 feasible.
About state budget collection and expenditure, as by March 15, total state budget collection reached only 16.7% of the year’s estimate. Domestic revenue reached 17.1% and crude oil, 21%, and import-export, 13.1% of their estimates. Of the domestic revenue, budget collected from state-owned enterprises accounted for 17%; foreign-invested enterprises (excluding crude oil), 18,7%; tax from non-state industrial, commercial and service sectors, 17,4%; personal income tax, 18,2%, environment protection tax, 15,8%, fees and charges, 17,5%.
Total state budget expenditure as by March 15 reached 17.6% of the yearly estimate, of which expenditure for development investment reached 15.4%, expenditure for socio-economic development, national defense, security, and state management, 18.9%, debt and ODA payment: 19.6%.
These figures showed the first-quarter performance against the year’s estimate remained low in comparison with the same period last year. Total budget collection was lower than total budget expenditure in the reviewed period; debt and ODA payment was higher than both budget collection and expenditure (equaling 12% of expenditure and 15.1% of budget revenue).
Curbing inflation (CPI), CPI set for the entire year 2013 is 6 – 6.5%. In Q1, the index edged up by 2.39%, positively lower than the 2.54% rate of the corresponding period in 2012. Therefore, how to manage a monthly average rate at 0.39 – 0.44% in the remaining nine months of the year to meet the set yearly target is not easy.
On social investment capital, the sum, if based on the actual price, rose by 5.5% but decreased sharply if price rise was left. The ratio of social investment capital to GDP in Q1 was 29.6%, a far cry from the same period last year when it was recorded at 36.2%. This is a good result in line with the economic restructuring and economic growth model renovation, reducing the dependence on investment capital. This year, the social investment capital/GDP ratio is set at 30% and a GDP growth rate is 5.5%, leading to an estimated drop in ICOR—5.5 times against 6.7 times in 2012, which would demonstrate higher investment efficiency than in 2012.
However, the progress in Q1 failed to perform as estimated (ICOR was warned to near 6.1 times, however, regarding investment efficiency long-term ICOR should be accountable). Together with decreasing the ratio of social investment capital to GDP (especially capital from the public sector), special attention needs to be given to investment efficiency. To make the GDP growth rate of 5.5% realistic, higher social investment capital /GDP ratio must be ensured, to prevent both inflation and public debt from rising.
Apart from easing difficulties being faced by businesses and producers, supporting the markets, and clearing bottlenecks, speeding up the restructuring (especially in the banking sector), and accelerating the implementation of three strategic breakthroughs requires a substantial investment. It means what we need for realizing those works could likely expand while still sticking on the prioritized tasks of stabilizing the macro economy and curbing inflation as planned.
The most important thing now is to raise investment efficiency and labor productivity given it is the root reason and implicit element behind inflation.
Price management and stabilization strengthened
The Ministry of Finance has released Directive No. 3847/BTC-QlG to ask relevant municipal and provincial departments to strengthen price management and stabilisation.
The move came as part of efforts to prevent dealers from pushing up the prices of essential commodities improperly on the back of rising retail petrol price, which rose by VND1,430 to VND24,580 per litre from March 28.
Relevant agencies were requested to constantly monitor prices of key commodities such as food, foodstuff, medicines, milk, and gas, as well as transport services.
The agencies have to keep a close eye on price registration and declaration, reduce price hike registrations which are not directly affected by the fuel cost adjustment and monitor prices of products and services imposed by the State.
Those engaged in production with intensive consumption of petroleum and oil are also encouraged to innovate technology and apply fuel-saving solutions in a bid to raise output and lower selling prices.
Gov’t asks for comprehensive measures to raise ODA efficiency
PM Nguyen Tan Dung has tasked the Ministry of Planning and Investment to work with relevant agencies to take comprehensive measures to improve the efficiency of ODA attraction and use in 2013.
Inferior levels were asked to review and evaluate the implementation of ODA programs and projects for timely solutions.
The Ministry of Planning and Investment was assigned to submit an overall report which screens the attraction, management and use of ODA during the past 20 years.
Earlier, the Government chief had approved the Project on orientations for attraction, management and use of ODA and other preferential loans.
Under the project, in the 2011-2015 period, Viet Nam prioritizes luring ODA and preferential loans into areas like infrastructure development, human resource and knowledge economy development, agriculture and rural development, legal and institutional building, environmental protection, trade and investment promotion.
It is estimated the volume of ODA and preferential loans for Viet Nam would reach US$32-34 billion between 2011 and 2015. The disbursed value would be around US$14 – 16 billion.
Vietnam turns sci-tech into key driving force
Vietnam will turn science-technology into the most important driving force to develop modern productive forces and the knowledge-based economy, thus making its economic competitiveness sharper while protecting the environment and ensuring national security and defence.
The aim was set in the Government’s action programme to carry out the Party Central Committee’s Resolution No. 20 on science-technology development issued on November 1, 2012.
Under the programme, dissemination work will be increased to raise relevant agencies’ and people’s awareness of science-technology development in service of national industrialisation and modernisation in the context of socialism-oriented market economy and global integration.
Besides, the Law on Science and Technology will be amended toward increasing inspection and supervision, plus conducting independent assessments on scientific and technological activities.
Individuals are encouraged to establish, by themselves or in partnership with the State, venture funds to support the creation of new and advanced technologies.
Social and foreign investment capital will be mobilised for and State-owned enterprises are required to contribute to the science-technology development foundations in localities.
Investment, particularly, will focus on modernising the Vietnam Academy of Science and Technology and the Vietnam Academy of Social Science, along with key universities and research institutes up to Asian standards.
Research centres will be set up in key economic areas to help them bring into full play their advantages and potentials.
The Hoa Lac, Ho Chi Minh City and Da Nang hi-tech parks will receive all possible favourable conditions to work effectively.
Master plans for hi-tech agricultural zones and information technology parks will be devised, regarding the socio-economic development plan of each region and each locality.
National technology trading floors will be opened in Hanoi, HCM City and Da Nang and linked with regional and global floors as well as provincial and municipal technology transfer hubs.
Imports of outdated products and technologies will be banned and policies to get domestic and foreign scientists involved in science-technology activities in Vietnam will be issued.
Efforts to stabilise prices strengthened
The Ministry of Finance has issued Directive No. 3847/BTC-QlG ordering relevant municipal and provincial departments to enhance price management and stabilisation.
The move came as part of efforts to prevent dealers from pushing up the prices of essential commodities improperly on the back of rising retail petrol price, which rose by 1,430 VND to 24,580 VND per litre from March 28.
Relevant agencies were requested to constantly monitor prices of key commodities like food, foodstuff, medicines, milk, and gas, as well as transport services.
At the same time, they must keep a close eye on price registration and declaration, clamp down on price hike registrations which are not directly affected by the fuel cost adjustment, as well as supervise prices of products and services imposed by the State.
Those engaged in production with intensive use of petroleum and oil are also encouraged to innovate technology and apply fuel-saving solutions, thus helping increase output and lower selling prices.
Hanoi invests 508 bln VND in new rural development
The Hanoi People’s Committee has planned to pour more than 508 billion VND (over 24 million USD) into a national target programme on building new-style rural areas in 2013.
Accordingly, the people’ committees of districts and towns will actively allocate money withdrawn from the city’s budget to their communes, particularly those with difficulties in sources of income, so that they can build infrastructure and develop agriculture.
They will direct, examine and supervise the communes’ management and use of the capital in order to ensure it is used for right persons and purposes, and in an effective and economical way.
Tax changes to offer safety net
Firms and the banking system’s financial stability are to be guaranteed by new tax changes.
The draft Corporate Income Tax Law (CIT), to be tabled at the National Assembly’s fifth session in May, envisages adding a new regulation that interest expenses paid for a loan amount surpassing enterprise’s equity capital by more than four times will not be considered an allowable cost for deduction when calculating taxable incomes. For a credit institution, the interest expense control level is set at 10 times of its equity capital.
Deputy minister of Finance (MoF) Vu Thi Mai argued the proposed move was because there were many firms who have resorted to loans to maintain operations with loan amounts several times higher than their equity capital. This could threaten the financial stability of themselves and their creditors, while causing losses to state budget since the bigger the loan amount is, the higher their interest expense will be, casting a dent in firms’ revenue and profits.
“Averting taxing through capitalising on ‘thin capital’ is commonplace not only in Vietnam, but all over the world,” said Mai.
A MoF survey showed that many countries also set out a regulation that part of the interest expenses of a loan exceeding a certain regulated rate will not be regarded as allowable cost for reduction when calculation CIT.
For instance, in New Zealand, Germany, Australia, Japan and Russia such loan/equity capital control rate is set at three times, meaning that the interest expense for the loan amount more than triple firm’s equity capital will not be taken as allowable cost for reduction in CIT taxing. In some other countries like the US, France and Canada the control rate is even set at one to two times of (a firm’s equity capital.
In China, the control rate for firms is two times and for credit institutions five times for equity capital.
“To ensure financial security for firms and the economy generally, the amended CIT Law should consider controlling the allowable cost towards the amount of interest expense exceeding the regulation,” said Mai.
“However, the MoF proposes the regulation shall be applicable from January 1, 2016 only to support firms in current context of economic hardships, to enable capital thirsty firms to take initiative in business restructuring and balance their capital sources,” Mai added.
Vietnam Tax Consultant Association chairwoman Nguyen Thi Cuc agreed with the MoF proposal saying that the new move could put firms whose operations are mainly based on loans in a pickle in the initial period. But, in the long-term it would help ensure firms’ financial stability, abate risks associated with banks’ bad debts and enhance efficiency of the anti-transfer pricing fight.
“However, further study would be necessary to set out a suitable control rate, may be from four to five times of firms’ equity capital,” Cuc said.
Norway seeks closer trade ties with Vietnam
Norway always supports Vietnam’s negotiations on the signing of a free trade agreement (FTA) with the EFTA bloc, said Norwegian Minister of Trade and Industry Trond Giske.
During his meeting with Vietnamese counterpart Vu Huy Hoang in Hanoi on April 1, Minister Trond Giske said that the bilateral FTA will create new cooperation opportunities for both countries thanks to tariff reduction and removal of trade barriers.
Minister Hoang thanked the Norwegian Government for its constant assistance to Vietnam’s development process, both in the past and at present. He said Vietnam always treasures its cooperation with Norway – one of its key trade and economic partners in Europe.
According to the General Department of Vietnam Customs’ statistics, the two-way trade turnover between Vietnam and Norway in 2012 reached $257 million, up 0.5 percent compared to the previous year. Vietnam’s export earnings from the Norwegian market in 2012 were estimated at $125 million, a year-on-year increase of 40 percent.
However, the two ministers agreed that such results were far from meeting bilateral expectations.
The European Free Trade Association (EFTA), being comprised of Norway, Switzerland, Iceland and Liechtenstein, has recognized Vietnam’s market economy status and is in the process of FTA negotiations.
The fourth round of negotiations between Vietnam and EFTA will be held in Oslo, Norway, in June, in the hope of creating a legal framework for both sides to increase business cooperation and investment.
Vung Tau recognized as first-grade city
The assessment council of the Ministry of Construction has agreed to recognize Vung Tau as a first-grade city of the southern coastal province of Ba Ria Vung Tau, as proposed by the local government.
The construction ministry last Saturday convened a council to assess the project to recognize Vung Tau as the level-one city, said Phan Hoa Binh, chairman of Vung Tau City. After considering and referring to the current criteria on standards and targets, council members agreed to name Vung Tau as the first-grade city with an average score of 89.86 points, higher than the minimum requirement of 70 points.
The council’s appraisal shows that Vung Tau has up to 39 out of 40 targets equivalent or higher compared to the criteria. Nine targets of the city reach the minimum level while it has only one target failing to reach the allowable level.
For instance, the city’s data on population density (10,161 persons a square kilometer), per-capita-income (over US$6,000 a person), poverty rate (5.3%), housing floor space in the city center (19.94 square meters per capita) or clean water (150 liters a person a day) among others are all qualified.
Vung Tau is known as a hub of economy, culture, science-technology, education-training, and tourism-services. At the same time, it is one of the most developed areas of the HCMC Region. The council therefore deems it necessary to upgrade Vung Tau into a level-1 city.
To turn Vung Tau into a sustainable city, members of the council proposed solutions and development orientation for the city in the near future. The solutions focus on responding to climate change, developing technical infrastructure, applying proper waste treatment technology and improving drainage systems.
With the recognition of Vung Tau City as a first-grade city, Vietnam has currently ten first-grade cities under provincial management, namely Vung Tau, Hue, Vinh, Dalat, Nha Trang, Quy Nhon, Buon Me Thuot, Thai Nguyen, Nam Dinh and Viet Tri. Besides, there are also three centrally-governed cities namely Haiphong, Danang and Can Tho.
Steel maker cuts deal to build plant in Thailand
Hoa Sen Group (HSG) will be the first Vietnam enterprise to construct a plant producing steel sheets in Thailand with cooperation of two Thailand-based enterprises, Assava Metal Ltd., Co. and BK Metal Sheet Ltd., Part.
A memorandum of understanding on constructing the plant between HSG and the two Thai partners was signed in Ba Ria-Vung Tau Province last Saturday.
“We are doing procedures to establish a joint venture and seeking both countries’ approval to carry out the project. It may take time to finish legal procedures, and we are trying to speed up the process,” said Le Phuoc Vu, chairman of HSG.
Together with the memorandum, HSG has also signed with Assava Metal an authorization contract to use the brand of Ton Hoa Sen in Thailand.
“The cooperation will supply to Thai consumers products of high quality and reasonable prices as well as boost the presence of the brand in this country. This is also the first step of HSG in a strategy of promoting the brand of Ton Hoa Sen regionally and globally,” said Vu.
Assava Metal, a company under SinSiam Group, is a producer and distributor of metal sheets and steel with various products such as stainless steel sheets, aluminum sheets, pre-painted aluzinc, electro-galvanized steel sheets, cold-rolled steel sheets and copper busbar. Meanwhile, BK Metal Sheet is a retailer of galvanized steel sheets in Thailand with 96 retail branches and over 2,000 employees.
Another notable event of HSG last Saturday was the launch of a steel sheet production line with an annual output of 120,000 tons at Hoa Sen Phu My steel sheet plant in Ba Ria-Vung Tau Province. This is the fourth production line of HSG that uses the non oxidizing furnace (N.O.F) technology.
The new production line also strengthens the position of Hoa Sen Phu My as the plant with the largest capacity in Southeast Asia. Put into operation on March 15, the line has produced 7,300 tons of products.
Production line No. 4 will help ensure the business targets of HSG in the fiscal year 2012-2013 with an expected sale volume of 541,800 tons, revenue of VND11 trillion and after-tax profit of VND400 billion. Besides, HSG targets to sell one million tons, earn US$1 billion in revenue and VND0.5-1 trillion in after-tax profit in the next three to five years.
In the first five months of its fiscal year (October 1, 2012-February 28, 2013), HSG sold 230,880 tons of products and exported 118,978 tons. Revenue and after-tax profit obtained in this five month-period is VND4.37 trillion and VND247 billion, equivalent to 39.7% and 61.8% of the year’s targets respectively.
On this occasion, HSG donated VND500 million for a heart surgery program of Ba Ria-Vung Tau Province.
Manufacturing PMI hits 23-month high
The Purchasing Managers’ Index (PMI) of Vietnam’s manufacturing sector rose back above the neutral 50.0 mark in March, posting a 23-month high of 50.8, says a report of HSBC Vietnam released on Monday.
Though the rate of expansion signaled by March PMI is only moderate, it is the second-highest in the two-year series history. The reading above 50.0 indicates improvement in operating conditions in the local manufacturing sector, while that below 50.0 signals slump.
“March data pointed to modest recoveries in the levels of both manufacturing production and new orders, following contractions in the prior month. Companies benefited from an improving domestic market, increased promotional activity and a slight expansion in the level of incoming new export orders,” says HSBC Vietnam.
New export orders rose for the first time in 11 months during March. Manufacturers linked the latest increase in new export sales to improved demand from clients in China, Japan and Thailand.
Growth of new orders and production filtered through to the labor market, with March seeing employment rise for the fifth time in the past six months.
However, evidence of spare capacity remained present during the latest survey period, as highlighted by a further decline in backlogs of work. Outstanding business fell for the twelfth straight month, albeit to the least marked extent during the current sequence of decline.
Input cost inflation surged higher during March, reflected in reports of higher prices on international commodity markets. Vietnam manufacturers reported the steepest increase in their purchasing costs since last September, with the rate of inflation rising back above the survey average.
Part of the increase in input prices was passed on to clients in the form of higher selling prices. Output charges rose for the second successive month and at the fastest pace since April 2012.
However, the rate of increase in selling prices remained well below that of input costs. A number of companies attributed this to ongoing subdued market conditions and strong competition.
Local manufacturers maintained a preference for reduced inventory holdings in March, leading to further depletion of both raw material and finished goods stocks. In contrast, purchasing activity was raised for the second time in the past three months, reflecting increased production.
“March’s expansion of manufacturing output is consistent with our view of a gradual recovery in Vietnam. The process is likely to be bumpy, however,” said Trinh Nguyen, Asia Economist at HSBC.
“What’s most positive moving forward is a rebound of external demand, which should help counterbalance weak internal demand in the coming months,” she remarked.
VietJetAir sets date for HCMC-Buon Ma Thuot service
VietJetAir has ticked May 20 for launching its new domestic route connecting HCMC with Buon Ma Thuot City as this time is considered as the start of summer for busy air travel in Vietnam. The private carrier is offering fares for this new service from VND390,000 (US$19).
Passengers can find fares on www.vietjetair.com and other sales channels for VietJetAir’s HCMC-Buon Ma Thuot route, with its daily flight taking off Tan Son Nhat Airport at 6.30 p.m. and landing in the Central Highlands city 55 minutes later. The return flight sets off at 7:50 p.m.
Desmond Lin, director of business development at VietJetAir, said the carrier was delighted to introduce its flights to Buon Me Thuot, which is also known as the “coffee capital” of Vietnam.
“Renowned for its coffee plantations and as a gateway into the Central Highlands of Vietnam, this city is set to become a tourist destination for those who wish to discover the heart of Vietnam’s highlands,” Lin said.
Lin added that the new route would also facilitate business and trade between Buon Me Thuot and the country’s economic hub HCMC as well as further promoting Vietnam tourism to the world.
VietJetAir is one of Vietnam’s two no-frills airlines serving Buon Ma Thuot, and the other is Jetstar Pacific, which started to fly to this Central Highlands city just last week. Private carrier Air Mekong used to conduct flights to Buon Ma Thuot but had to suspend all domestic services from March this year to restructure operations.
With the HCMC-Buon Ma Thuot service, VietJetAir will cover 10 destinations, including HCMC, Hanoi, Dalat, Danang, Phu Quoc, Vinh and Haiphong. The airline began its first international service between HCMC and Bangkok in February 2013 and now plans more outbound flights connecting HCMC and Hanoi with other major cities around Asia later this year.
Nguyen Duc Tam, deputy general director of VietJetAir, said the airline experienced an encouraging 2012 when it surpassed initial targets, with seat occupancy rate averaging 87% in that year.
Vietcombank says 2013 target hard to obtain
Bank for Foreign Trade of Vietnam, or Vietcombank, finds it hard to obtain this year’s after-tax profit target of VND5.8 trillion given many difficulties ahead.
Nguyen Phuoc Thanh, general director of Vietcombank, said that the lender might fail to liquidate mortgaged assets to recover debts while it is almost impossible for many enterprises to pay debts by themselves.
However, as most of its bad debts, which are worth around VND10 trillion, were invested in offices for lease, hotels and apartments, Thanh hoped that Vietcombank would find bad debt recovery easier than loans that were used to buy land use rights.
The bank expects to gain around VND1.4 trillion in pre-tax profits in the first quarter, a slight rise compared to 2012. Mobilization rose around 2.4% against the end of 2012 while credit growth reported a minus 1%.
Vietcombank will not increase charter capital within this year as foreign ownership at the bank has yet to rise. The bank obtained over VND4.4 trillion in after-tax profits in 2012.
Vietcombank on Sunday introduced a new logo on the occasion of its 50th anniversary.
One more apartment project launched in Danang
Vietnam Sotheby’s International Realty will launch onto the market the high-end resort apartment project Fusion Suites Danang Beach in the central coastal city of Danang this month.
The realty distributor said the 19-floor project in Son Tra District will provide some 124 condos measuring 38-67 square meters a unit worth from VND1.2 billion.
The project owner KTG Land, which specializes in developing resort property schemes in Vietnam, has cooperated with Serenity Holdings to construct the Fusion Suites Danang Beach. The scheme is set for completion in the second quarter next year.
Homebuyers of the project are able to join the leasing program under the administration of the Fusion Resorts system. They will enjoy benefits from leasing their own homes, said Marco Van Aggele, managing director of Serenity Holdings.
Huge seaport in Haiphong to get off ground this month
The colossal Lach Huyen International Port project in the northern province of Haiphong is finishing final procedures to get off the ground this month.
Speaking to the Daily, Nguyen Nhat, director of Vietnam Maritime Administration, said that important procedures such as environmental impact assessments and site clearance have been completed. Some other procedures will be soon finished so that the mammoth project can be kicked off this month, he added.
The project is divided into two components. Component A consisting of breakwater, sandbar and the external road will be financed by Japan’s official development assistance (ODA) loans and Vietnam’s reciprocal capital with a total of nearly US$900 million under the public-private partnership (PPP) model.
Meanwhile, component B invested by Saigon Newport Corporation and Japanese investors consists of two piers and a 22-hectare container yard system having an investment of US$321 million.
According to forecasts of Vietnam Maritime Administration, the goods transport volume by sea in the northern region may amount to 60 million tons in 2015 and 100 million tons in 2020, higher than the capacities of existing ports.
Therefore, Lach Huyen port will help untie the knot in goods shipping between the northern region and other countries.
The two piers are expected to be completed in 2016, allowing for an annual goods throughput of six million tons. The port will be upgraded to become an international port in 2020 with eight piers and can handle 30 million tons of goods per year.
Previously, the project was scheduled to be kicked off last July. However, due to mixed opinions of experts, the Ministry of Transport has had to reevaluate the investment plan.
Vietnam shows symptoms of Dutch disease
Vietnam has not contracted the Dutch disease but has developed its symptoms, said Pham Quang Tu, vice president of Consultancy on Development Institute (CODE).
The term “Dutch disease” is coined to describe the decline in a country’s manufacturing sector due to the adverse impacts exerted by the relentless export of natural resources.
The mining sector played an important role in Vietnam’s economic growth in the last few decades. During that period, the country accepted to sell part of its mineral resources to create a momentum for development.
However, the way of thinking about management and use of natural resources should be changed now, said the expert.
“Vietnam has reached the threshold of a middle-income nation. If keeping overexploiting its natural resources for development, the country might get caught in the middle-income trap,” Tu stressed.
He remarked the Government had identified this problem and introduced many policies to tackle it, but they had not been put into practice.
It is no longer appropriate to consider exploitation and export of natural resources as a lifeline for the economy. The country should focus on raising the added value of minerals and using them to serve domestic industries, he suggested.
Those countries that heavily depend on mining and neglect other sectors may struggle with economic growth slowdown and interest groups, he stated.
In Vietnam, minerals (including crude oil) only make a 10-11% contribution to GDP growth, so the country has not caught the Dutch disease yet.
However, symptoms of this disease have appeared. At the national level, the symptoms are mild, but they are very severe in some localities.
In their socio-economic development plans, local authorities select their own spearhead industries, with several of them choosing natural resource exploitation. When resources are used up, such localities will fall into distress and be unable to balance their budget revenue and spending.
A number of localities in the central region prefer titanium mining to tourism in order to quickly earn profits. This results in rampant mining, especially exploitation and sale of crude products, said Tu.
It seems many people still confuse potentials with reserves.
“If not awake, we will fall into the trap set by mining enterprises and get under illusion about resources,” he said.
For example, there are two types of titanium: titanium in the black sand layer (with a reserve of 20 million tons) and titanium in red sand (over 600 million tons), which are completely different, but their reserves are often aggregated. While black sand titanium is easy to extract, the red sand one is very difficult to do.