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The Government BUSINESS IN BRIEF 15-2was urged to implement policies limiting imports and accelerating consumption of domestic building materials.

It is a measure recommended by the Viet Nam Association for Building Materials to reduce inventories and support struggling enterprises.

State-invested projects and those under engineering – procurement – construction practices should be required to use domestic building materials while infrastructure projects (including roads and grounds of industrial zones) using cement should be hastened nationwide, the association said.

According to Ministry of Construction statistics, by the end of 2012, basic building material inventories were valued at VND6.753 trillion (US$321.57 million).

According to the Ministry of Industry and Trade’s report, the high inventories were attributed to the impact of cuts to public investment, a weaker export market and tough competition from imports.

Many factories have had to halt operations due to high inventories. In regard to cement production alone, a number of factories incurred losses such as Dong Bnh, Thi Nguyn and Cam Pha plants.

Due to the economic crisis, domestic cement demand was estimated to fall by 14-15 million tonnes during the 2011-13 period to reach just 60-62 million tonnes by 2015, a long way off the planned figure of 75–76 million tonnes.

If consumption plans are not adjusted, by 2015 the total capacity of cement plants will reach more than 94 million tonnes, far outstripping demand.

According to L Van Toi, director of the Building Material Department under the construction ministry, the ministry will continue to review master planning for the building material industry towards 2020 with a focus on developing clean technology and new materials.

Regarding cement industry development, he said adjustments would aim to ensure the balance of supply and demand in the short and longer term.

Management of building material imports will also be tightened to prevent unhealthy competition from damaging domestic production, he added.

Minister Trinh Dinh Dung urged enterprises to play an active role in the restructuring process, by renovating technology, enhancing management capacities and overall efficiency to weather the difficult period.

Free chat software market heats up with competition

Competition in the free chat software market has become stronger than ever with the participation of a lot of large technology groups, both foreign and domestic.

South Korea’s Kakao software firm last month officially joined the Vietnamese market. Kakao Talk software allows free SMS messaging in all smart phone operation systems including Android, iOS, BlackBerry, Windows Phone and Bada.

Kakao Talk is available in 13 languages and has 75 million users from 230 countries all over the world.

The free chat software market has become even more crowded since China’s Tencent launched its international version of WeChat in Viet Nam last April.

Other foreign giants such as Line Facebook Messenger, Viber, Whatsapp and Yahoo Messenger are also present in the Vietnamese market.

Kakao director Hwang Sung Hwan said the Vietnamese free chat software market had real potential in Viet Nam due to the growing number of smartphone users.

The senior executive said he could see competition in the market increasing, and in order to compete in Viet Nam, Kakao Talk would have to pay more attention to the “localisation” of utilities to compete with its rivals.

Vietnamese groups jump on the bandwagon

Having realised the attractiveness of the free messaging software market, domestic internet providers are trying to get involved.

VNG is one of them. Le Hong Minh, general director of VNG, said he could feel the market heating up in mid 2011, and decided to invest before it was too late.

Vietnamese technology groups understand that the market has been controlled by foreign giants. However, VNG still “joined the game” by launching Zalo in mid 2012. To date, Zalo has launched on iOS, Android and Nokia S40.

As a newcomer to the market, Zalo has made a giant leap to conquer the domestic market. It has reached an agreement with Nokia to integrate the Zalo app into Nokia’s Asha 305, 306, 308, 309 and Asha 311 that launch this month.

Zalo is also available at the Nokia Store for S40, S60 users to download.

Minh revealed that in 2013, VNG would continue to invest in Zalo and integrate the software into other mobile devices.

The free messaging software market has also attracted start up firms as well as IT giants.

In late 2012, Wala released the Wala Chat app. Wto become the eighth service provider in the domestic free messaging software market.

Nguyen Thanh Hoa, the founder of Wala, said they were following an ambitious plan to develop the app into a platform for the mobile environment, which would become an ecosystem for valuable content services for enterprises and the Wala-using community to exploit.

According to Hoa, competition among service providers was strong, and only really useful apps would be able to survive.

“At present, the services are free of charge, but in the future, if just two percent of users paid a fee it would be a great success,” Hoa said.

Viet Nam becomes largest investor in Laos

The Lao Ministry of Development and Planning has reported that Vietnam has become the largest foreign investor in Laos in the 1989-2012.

Since the Lao Government adopted a foreign investment promotion policy in 1989, Vietnamese investors have funded 429 projects with a total value of 4.9 billion USD.

The second and third largest investors are Thailand (US$4 billion) and China ($3.9 billion).

The mining industry and electricity sector attract the most foreign investment, with 27 percent and 25 percent of total investment intended for Laos , respectively.

The Lao Government has implemented several preferential policies for foreign investors to encourage investment in rural areas.

Laos expects its policies to help create jobs and increase the income for people living in the countryside.

It strives to attract $15 billion of foreign investment and maintain a GDP growth rate of at least 8 percent per year in the 2011-15 period.

Da Nang hails over 1,500 foreigners during New Year

The central city of Da Nang welcomed over 1,500 foreign tourists during the first five days of the Lunar New Year, signalling a promising outlook for its tourism sector.

The cruise ship Gemini was the first tourist vessel to dock at Tien Sa port in the Lunar New Year. Its 1,400 passengers, mainly from China toured Da Nang and Hoi An.

According to the Saigontourist travel service company, as many as 47 cruise ships with 42,000 tourists aboard will dock at Tien Sa port in the first quarter of this year, up 31 percent from last year.

Earlier on February 10, the first day of the Lunar New Year, aircraft A320 of Air Asia with 152 passengers on board safely landed at Da Nang international airport, the first flight into the city in the Year of the Snake.

The airport welcomed over 4,000 visitors on 40 domestic and international flights during the first five days. The number of foreign tourists is expected to grow by nearly 20 percent this year thanks to more direct flights linking the city with Russia , Macao and China .

Last year, around 157,000 tourists flew to Da Nang , a year-on-year rise of 236 percent.

More passenger buses travelling between Da Nang and Laos as well as cities and provinces nationwide resumed operations on February 11, the second day of the Lunar New Year.

Bach Dang Spring Flower Street , which will remain open until February 16, has also attracted hordes of domestic and foreign travellers.

Listed companies make bad investment decisions

Listed companies made serious errors last year that only came to light following the economic downturn. The three main mistakes were investments in real estate, financial sectors and business expansion.

In recent years, most listed firms have invested in the financial sector. Commercial banks and securities companies operated as investment banks, while enterprises set up specific departments or subsidiaries for financial investment.

Financial investments brought quick profits, so many businesses took out high-interest loans to buy shares while capital for core production was insufficient. The consequences were huge losses.

A typical example was Kinh Bac Urban Development Co (KBC). As of September 30 last year, the company had invested VND505 billion (US$24 million) in six affiliates and over VND1 trillion ($47.6 million) in 17 companies from different sectors. By that point Kinh Bac had accrued long-term debt of VND3.8 trillion ($180.9 million), reports Thoi báo Kinh te Viet Nam (Vietnam Economic Times).

Financial income in the third quarter of last year dropped 87 per cent over the same period in 2011, causing a loss of VND138 billion. The total loss in the first nine months was VND233 billion ($11 million) and inventories reached VND1.2 trillion ($57.1 million), an increase of VND255 billion ($12.1 million).

Also in the third quarter, Kinh Bac divested 26.5 million shares in Western Bank and 30 million shares in Nam Viet Infrastructure Development and Financial Investment Company.

Another major loss was the massive expansion of branches with a desire to achieve growth. Coffee processor Thai Hoa Group (THV) established subsidiaries and invested in many projects regardless of their effectiveness. The group then sank into debt and its chairman Nguyen Van An even had to mortgage his own house.

Thai Hoa currently has 10 subsidiaries, including two in Laos, with total charter capital of VND575 billion ($27.3 million), of which it contributed 62.6 per cent.

The group is facing the risk of delisting.

Haphazard investment also appeared in real estate companies such as Hoang Quan (HQC), Van Phat Hung (VPH), Quoc Cuong Gia Lai (QCG) and PetroVietnam Premier Recreation (PVR).

There is no denying the real estate sector was in trouble last year. Real estate shares usually had high returns, but listed property companies had to cope with many difficulties as inventories piled up.

“Challenges in the real estate sector remain, and property stocks are unlikely to rebound,” commented Maybank KimEng Securities Co analyst Thien Kim Quang.

Viet Nam attends IFAD Annual meeting

A Vietnamese delegation attended the 36 th session of the Annual Governing Council of the International Fund for Agricultural Development (IFAD) in Rome from February 13 to 14.

The three-member delegation, led by Deputy Minister of Finance Truong Chi Trung, joined representatives from 166 other member countries and international organisations, including Chinese Vice Premier Hui Liangyu.

Seventy-nine member countries pledged the 9 th contribution of a total of US$1.38 billion to International Fund for Agricultural Development, IFAD9. This year, Viet Nam increased its contribution to $600,000, $100,000 more than its previous contribution.

During the opening ceremony on February 13, IFAD President Kanayo F. Nwanze, who has been re-elected as IFAD President for the 2013-2016 tenure, appealed for solidarity to help reduce poverty worldwide. He stressed the necessity for sustainable and comprehensive development of rural areas to ensure food security.

He encouraged countries to produce biomass energy, which is already successfully generated in Viet Nam, China, Gambia, Kenya and Pakistan.

Viet Nam has a more dynamic role in IFAD activities since becoming a middle income nation. In the past, IFAD supported Viet Nam in development projects for its rural and remote areas.

IFAD is a specialised agency of the United Nations. It was founded as an international financial institution in 1977, and has provided 13.7 billion dollars in aid and low interest loans to projects in developing countries, helping 405 million people escape poverty.

Vietnam prepares to raise sovereign credit rating

As part of a scheme to improve the country’s sovereign credit rating by 2020, the government has set a target of achieving a GDP per capita level of USD3,000.

Foreign debts could be restrained to below 50% of GDP

The scheme, which has been approved by Prime Minister Nguyen Tan Dung, aims to achieve Moody’s investment grade of BAA3, and Standard and Poor’s or Fitch’s BBB- rating.

To realise this goal, annual GDP growth must remain at around 7-8% from 2011-2020. In the meantime, policies to encourage investment and consumption and the incremental capital output ratio (ICOR) must also be lowered.

Specific priorities have been set, such as achieving 11-12% annual export growth by 2020, and reducing trade deficit and lowering export surplus to less than 10% by 2015. A consumer price index target has been set at 5-7%.

The government will try to increase the foreign exchange deficit equivalent to about 12 weeks of imports and meet international standards.

They will also reduce the budget deficit to 4% and keep public debt below 65% of GDP in which government debt is expected to be less than 55% and foreign debt below 50% of GDP.

State agencies were asked to be careful but flexible in managing and issuing policies.

Outstanding loans for sectors that are discouraged from investing will be controlled to prevent bad debts. At the same time, human resources will receive more attention in order to improve the usage of the state budget and curb ineffective investments.

Better provision of social security and welfare will receive more focus in the future.

Energy prices to follow market trends

A lot of work remains to be done in 2013 before energy prices can be fixed properly in line with the development of market economy.
Vietnam’s energy sector has made certain progress in meeting the demands for daily consumption and economic development. As electricity, petroleum, coal, oil, and gas have a direct impact on many other sectors, it is urgent to keep a good balance between supply and demand, imports and exports, consumption needs and reserves for national security.

Last year, the Prime Minister approved a plan to develop Vietnam’s coal sector with a vision to 2020 and even 2030. Nguyen Manh Thang, Director of the Ministry of Industry and Trade’s General Department of Energy says under the plan, synchronized measures will be taken to improve coal transport in northern and southern regions to ensure stable production and supply of electricity across the country.

At the fourth session of the 13th NA, the amended Electricity Law was officially approved with the immediate launch of a competitive power generation market on July 1, 2012 to improve operational and pricing transparency and attracting investment.

The PM also agreed on restructuring energy groups to accelerate the implementation of the National Energy Efficiency Target Programme in the 2012–2015 period.

The energy sector, in fact, has yet to overcome a number of shortcomings. Coal prices in adjusting and preventing violations of oil and gas trading regulations.

Therefore, Electricity of Vietnam (EVN) managed to make a huge profit last year while other power companies suffered losses.

Vinacomin General Director Ngo Tri Thinh, says his company’s thermal power plants could operate at just 30 percent of capacity and many turbines had to sit idle, causing a loss of several billion dongs.

Dinh Tien Dung, director of the Ministry of Industry and Trade’s Energy Institute says domestic coal production is already beyond limit and it will not last long. The eventual import of coal is being considered as something of a paradox, Dung adds.

To help the sector iron out snags, the Government has demanded that all energy products follow market trends under state management, economist Nguyen Minh Phong says.

From 2013 to 2015, retail energy prices will be based on actual production costs to keep pace with market competition in the world. Energy price in Vietnam cannot be aberrant in international terms.

2013 is a pivotal year for the implementation of 2011–2015 socioeconomic tasks. Keeping the consumer price index at around 6 percent while increasing the GDP growth rate will require greater efforts on the part of energy managers.

At a conference on the energy sector’s 2013 outlook, Deputy Prime Minister Hoang Trung Hai emphasized the need to put market price mechanisms in place for the virtue of sustainable growth in a competitive manner.

As a point of fact, imported coal costs at least US$150 per tonne, double the export price of domestic coal. And it’s impossible for the electricity sector to import up to 30 million tonnes of coal by 2020 when the average price of electricity still hovers around 7 cents per kWh. There is a plan afoot for the production of liquefied petroleum gas (LPG) at the price of 16 cent per kWh to help ensure energy security in the long run.

Latin American-Vietnamese trade shows drastic upturn

Two-way trade turnover between Vietnam and Latin America grew by an annual 20-30 per cent over recent years to exceed $5 billion in 2011.

This was announced by the Mexican Foreign Ministry.

Prime Minister Nguyen Tan Dung’s decision to attend the first Vietnam-Latin America Trade and Investment Forum demonstrated Vietnam’s readiness to become an important economic partner of Latin American countries.

Vietnam has become one of Mexico’s most important Asian partners. During the last decade, bilateral trade revenue has jumped from $37 million to $1.037 billion.

The Mexican Foreign Ministry press release quoted Mexican representative Nathan Wolf’s speech addressing the Forum that stressed free trade is the correct path towards development.

Wolf thanked Vietnam for supporting Mexico during the latter’s Trans-Pacific Partnership (TPP) negotiations, citing it as a driving force behind strengthening bilateral commercial and economic cooperation.

The semi-official Mexican news agency NOTIME was also covering the Forum in Hanoi, attracting representatives from 15 Latin American countries.

Source: dtinews, VNS, VOV, SGGP, VIR

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