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BUSINESS IN BRIEF 16-3HCM City needs US$66 million for Tan Thuan sluice

HCMC has to borrow around US$66 million from Thailand’s Neighboring Countries Economic Development Cooperation Agency (NEDA) to develop Tan Thuan tidal sluice in District 7.

The loan will have an interest rate of 2.5% with a ten-year maturity and grace period of five years.

To obtain the loan, the city has to ensure at least 50% of the equipment and services for the sluice project will be provided by Thailand. The contractors and consultant must also be from Thai companies.

In addition, NEDA will only provide the loan when the city gives the nod to development of two other tidal sluices, Ben Nghe and Phu Xuan, says a report by the HCMC Department of Planning and Investment which was sent to the municipal government on Monday.

Nguyen Ngoc Cong, deputy director of the HCMC Center for Urban Flood Control Programs, told the Daily that if approved by the HCMC government and funded by NEDA, the Tan Thuan sluice project would get off the ground in the second quarter.

The requirements that at least 50% of equipment and services are bought from Thailand and that contractor and consultant are Thai firms are acceptable. The Bidding Law of Vietnam enables limited bidding at the request of the foreign lender, the city’s planning department explained.

However, capacity of contractors and technical features and prices of equipment must be carefully evaluated.

Meanwhile, the requirement for construction of Ben Nghe and Phu Xuan sluices is hard to fulfill because the Prime Minister when approving an ODA project does not lay down requirements for accompanying projects, said the planning department.

ADB helps Vietnam enhance low-carbon agriculture

The Asian Development Bank (ADB) on Thursday signed with the State Bank of Vietnam two loan agreements totaling US$111.88 million to help Vietnam enhance low-carbon agriculture development and strengthen the Government’s capacity to better implement ADB-financed projects.

“With the adoption of the Green Growth Strategy, Vietnam is beginning to move onto a path of low carbon climate-resilient development,” said Tomoyuki Kimura, ADB’s country director for Vietnam.

“The ADB is ready to support the country to realize the vision of low-carbon and inclusive growth, and accelerate its efforts to transform Vietnam’s agriculture production into a more environmentally-friendly and sustainable system,” he said after signing the agreements with the central bank’s Governor Nguyen Van Binh.

Agriculture is responsible for 50% of the national green house gas emissions, out of which livestock raising contributes 35%. Livestock production contributes to poverty reduction and economic prosperity in the rural areas. However, the growing number of farmers and medium- to large-scale enterprises raising livestock is increasingly putting stress on the environment.

The US$74 million loan from Asian Development Fund (ADF) will finance the low-carbon agricultural support project, which will focus on supporting the waste management infrastructure, providing credit lines for biogas value chains, and facilitating transfer and deployment of technologies for waste management.

The project will reduce pollution from agricultural waste and create a healthier environment and livelihood in 10 provinces in Vietnam.

Meanwhile, the US$37.88-million ADF loan was for the Project Preparation and Startup Support Facility which will enable the Government to better startup, prepare and implement ADB-financed projects to ensure effective aid utilization.

“We strongly believe that with the facility, the Government together with ADB and other development partners will adequately address the technical, institutional and financial shortcomings to start up ODA-funded projects,” Kimura added. The ADB is co-chair of the Vietnam Aid Effectiveness Forum 2013.

Vingroup to start work on Binh Dinh tourism complex soon

Hai Giang Joint-Stock Co., an affiliate of Vingroup, will start construction of Hai Giang tourism complex in the central province of Binh Dinh at the end of this month, the provincial Investment Promotion Center said.

The 656-hectare project which is located on the mainland and mountainside area will be developed in five years into an eco-tourism complex in line with international criteria with a cost of an estimated VND3.42 trillion, or some US$165 million, the center said.

As per the zoning plan, Hai Giang tourism area, located in the south of Nhon Hoi Economic Zone in Binh Dinh, is bordered by the non-tariff area to the north, Phuong Mai Mountain to the west and the east and the East Sea to the south.

The tourism facility features four main areas including a golf course and resort villas, an administration center, cultural works and hotels and apartments, an entertainment park, and other auxiliary facilities.

Binh Dinh Province’s government expects the scheme to be constructed on schedule, creating a tourism landmark for the locality and the whole central region. This is the most capital-intensive tourism project by a local investor in the province.

Besides, Vingroup also plans to construct a tourism cable system in Quy Nhon City with a total length of some one kilometer running from Mui Tan to Tran Hung Dao statue in Phuong Mai Peninsula.

Doosan completes world’s largest desalination project

Doosan Heavy Industries Vietnam (Doosan Vina) said on Thursday that it has completed an order for three massive multi-stage desalination plants for Ras Al Khair in Saudi Arabia, which is the world’s largest desalination project to date with a total designed output of 728 million liters of fresh water per day.

The entire US$1.46 billion project entailed the design and manufacture of eight gigantic desalination units. Three of the units were built at Doosan Heavy Industries Vietnam while the other five were built at Doosan Korea.

Each of the eight desalination units can produce 91 million liters of fresh water per day, stands three stories tall, has a footprint nearly the size of a football pitch and weighs almost 3,500 tons, according to a statement of the company.

With these three “Made-in-Vietnam” evaporator shipments, one in early January and two more in late February, the company’s Water Division has shipped over 12,000 tons so far this year, setting a new record for the division.

As this shipment completes, Doosan Vina’s Water Division has already begun preparation for their next project which is for Yanbu, Saudi Arabia.

Vingroup decides to sell Vincom A trade center

Chairman of Vingroup Pham Nhat Vuong has signed a decision to sell Vincom Center A located in HCMC’s District 1 five months after its opening.

It is not known whether Vingroup has found a buyer or not, but in a report sent to the HCMC Stock Exchange (HOSE) last week, the firm stated it would sell its subsidiary Future Company as operator of the luxury commercial building to partners.

One day earlier, Vingroup had also announced to transfer all facilities and services of Vincom Center A to Future Company. The transfer is a form of contributing capital in terms of the value of the land use right and properties on this land site, helping raise Future Company’s charter capital from VND6 billion to VND4.05 trillion.

Officially opened on October 10, Vincom Center A consists of six basements and nine floors with the floor space for commercial center covering 38,000 square meters.

With a prime location surrounded by Le Loi, Dong Khoi, Le Thanh Ton and Nguyen Hue streets, Vincom Center A is appraised at around VND6.573 trillion, or US$316 million by an independent appraisal company. Meanwhile, a source from Vingroup said that Vincom Center A was appraised at VND8.5 trillion.

Supposing that the total investment and site clearance costs for Vincom Center A are equivalent to the charter capital of Future Company, and the selling price is equivalent to the value appraised by the independent appraisal company, Vingroup will earn a profit of over VND2.5 trillion. However, the profit may amount to VND4.5 trillion with the price appraised by Vingroup.

VIB honored with social responsibility award

Vietnam International Bank, or VIB, on Sunday received the Corporate Social Responsibility (CSR) Award 2012 for its remarkable contributions to community and society last year.

The award was launched by the Ministry of Planning and Investment in conjunction with Kinh te & Du bao magazine.

The award was granted to VIB in recognition of its good business results and contributions to the State, employees and shareholders, according to a press release from the bank. Last year, the lender implemented wage and social insurance policies for workers while making their day-to-day operations public before shareholders.

VIB was also active in environment protection activities and applied policies for the sake of consumers, customers and partners by providing products and services with good quality and reasonable prices. The bank also took part in many charitable programs in many fields such as education, history and humanity.

The bank, established in 1996, has also granted scholarships to students and joined charity walks to support underprivileged children.

VIB during its operation process has won many prestigious titles and awards granted by local and international organizations and the social community such as Vietnam Strong Brand Award, Best Retail Bank in Vietnam Award, Straight-Through-Processing (STP) Award and Most Satisfactory Bank Services Award.

Cloud computing achieves strong revenue growth

Vietnam’s cloud computing market enjoyed a huge revenue increase last year and is forecast to continue to grow strongly this year.

Cloud computing is gaining popularity all over the world. This type of computing allows organizations and enterprises to use outside hardware, software and data centers.

Truong Gia Binh, chairman and general director of FPT Group, said FPT’s revenue from cloud computing increased sevenfold over the preceding year. This spectacular growth is much higher than the growth in other information technology (IT) services provided by FPT in Vietnam.

Vo Tan Long, in charge of special projects of IBM ASEAN, said that in 2012, when he was CEO of IBM Vietnam, the company attracted 15 new cloud computing users, equaling the combined number in a few years before that.

IBM started providing cloud computing service in Vietnam in 2007.

The cloud computing market of Vietnam is full of potentials and is growing impressively, said Chawapol Jariyawiroj, country manager of VMwave for Thailand and Indochina. VMwave, a provider of cloud and virtualization software, recorded significant growth in its revenue and customer number in 2012 despite the economic woes, he said but did not reveal the figures.

He forecast his company would achieve the same growth, or even higher, this year. For the strong growth in Vietnam, VMwave for the first time has appointed a manager for Vietnam and recruited many employees for working in Hanoi and HCMC.

EuroCham Business Climate Index rises but remains low

The number of European enterprises having a positive outlook on their current business in Vietnam has risen from 26% in the fourth quarter of 2012 to 40% in the first quarter of 2013 but it is still low, says a recent report of the European Chamber of Commerce in Vietnam (EuroCham).

The survey of the first quarter EuroCham Business Climate Index shows that business confidence and outlook among EU enterprises in Vietnam have improved.

Compared to the survey conducted in the previous quarter, the number of entities optimistic about the business situation has surged to 40% from 26%. Thirty-six percent of the firms surveyed unveiled a neutral view while the remainder expressed negative views.

Regarding business prospects, the ratio of EU companies holding neutral views remains unchanged, at 42%, with 30% giving positive assessments and the remainder negative assessments.

According to the report, the number of companies with business expansion projects has slumped to 7% from 11%, while the number of businesses planning to cut investments has shrunk from 27% to 24%. Meanwhile, as high as 73% of the respondents said they want to maintain the same scale of business as in 2012 or make modest extra investments.

“In general, with 78% saying they are either maintaining the status quo or increasing investment insignificantly, Vietnam has still won business confidence in medium and long-term investment,” the report concludes.

EU companies noticed that Vietnam’s macroeconomic conditions have been changing for the better. Some 72% of the surveyed firms last year predicted a slowdown at home but the percentage this year is 57%. Most of the respondents are concerned about a continued slump, with a mere 43% expecting stability and growth.

When asked about the number of orders and expected sales in the medium term, EU entities said they believed in mild growth. While about 45% expected higher revenues, only 23% forecast their orders to decline against the 32% recorded a quarter earlier, showing a considerable improvement.

Inflationary concerns among EU firms have eased but up to 45% of the businesses surveyed still believed that inflation would leave certain impacts on their business in the medium term. The respondents estimated the country’s inflation at 5.12%, well below the 7.83% projected for 2012.

EuroCham chairman Preben Hjortlund described the survey’s result as a good sign. The EuroCham Business Climate Index in this years’ first quarter has climbed to 48 points from 45 points but the figure is still below the mid-point of 50 while it was 79 points two years ago.

Danang moves to lure Japanese investment

The People’s Committee of central Danang city has recently met with Minister-Counsellor of the Japanese Embassy in Vietnam Hideo Suzuki to seek his help in drawing more Japanese investment to the city’s hi-tech park.

Danang has to date seen the US$40 million project of the Tokyo Keiki Group and the US$11.2 million project of Niwachuzo in its hi-tech park.

Suzuki has pledged to do his best to promote the image of Danang to Japanese and businesspeople.

There are 87 Japanese enterprises and representative offices with a total investment capital of US$350 million operating in the city.

Another insurer enters Vietnamese market

PVI Sun Life, a joint venture between PetroVietnam Insurance Holdings (PVI) and Sun Life Assurance Company of Canada, made its debut in Hanoi on March 12.

This is the 15th insurance service provider operating in Vietnam. The life insurer has a charter capital of VND1,000 billion, of which 51 percent is owned by PVI.

In Vietnam, PVI specialises in life insurance, non-life insurance, reinsurance, and other financial services. It is making up 21 percent of the country’s life insurance market share and the largest non-life insurance service provider.

Sun Life Assurance Company is a wholly-owned subsidiary of Sun Life Financial – one of the top ten financial groups in Canada, with a total asset of more than CAD494 billion. The group is operating in major world markets such as the US, Britain, Ireland, Japan, India and Hong Kong.

At the inauguration ceremony, Deputy Prime Minister Vu Van Ninh confirmed that the Vietnamese government is making every effort to improve its investment environment to attract foreign businesses to operate in the long term in the country.

Canadian Foreign Minister John Baird said his government encourages its leading businesses to seek cooperation opportunities with their Vietnamese counterparts.

Deputy Minister of Finance Tran Xuan Ha handed over the license to PVI Sun Life representatives.

HCM City’s manufacturing sector grows 3.2 percent

The HCM City Department of Industry and Trade has reported that the city’s industrial production rose by 3.2 percent in the first two months of 2013, doubling the number from a year ago.

Fifteen of 26 groups of products achieved positive growth in the period, with leather and footwear growing by 36.5 percent, construction materials by 16.9 percent, and beverages by 11.2 percent. Last year manufacturing growth topped 4.9 percent.

Exports were worth nearly US$4.5 billion, a year-on-year increase of 21.4 percent over the same period last year.

The public sector reported a 23.8 percent growth, the domestic non-State sector, 6.7 percent, and the foreign sector, 31 percent.

Hanoi to help Mozambique develop agriculture

Hanoi will assist Mozambican localities in developing agriculture, said Deputy Chairman of the Hanoi municipal People’s Committee Nguyen Van Suu while receiving Mozambique’s Minister of Agriculture Jose Pacheco in the capital city on March 11.

Pacheco said Mozambique is paying special attention to growing food especially wet rice for export.

At present, Hanoi is implementing the trilateral Vietnam-Japan-Mozambique wet rice growing cooperation project in Nante, Zamberia province, and the second stage of the bilateral project in Macia, Gaiza province for the 2013–2014 period.

This year, Hanoi will earmark US$500,000 for technical assistance to Mozambique. In the past, the capital city experimented with perennial and annual rice varieties in model farms.

These farms will be expanded to yield 4 tonnes per hectare, 2.5 times higher than before.
As part of the trilateral project, Vietnam and Japan have trained hundreds of Mozambican agriculture officials and farmers, and held seminars to share its experience in wet rice farming.

A master plan to promote ASEAN’s image

The second ASEAN Communications workshop was held by the Ministry of Information and Communications (MIC) in Hanoi on March 12.

Participants were informed about the government’s Programme of Action to Promote ASEAN Cooperation and its plan to set up the National Information Committee on ASEAN and disseminate information on the bloc’s social and cultural affairs from now until 2015.

Nguyen Thi Hoang Thuy, a representative from the Ministry of Industry and Trade (MoIT), suggested related agencies create a channel to receive people’s feedback about ASEAN.

Regarding to upgrading of the Ministry of Foreign Affairs (MoFA) website, Thuy said other ministries should have their own websites linked to the MoFA to improve the quality of information.

Quan Duy Ngan Ha, MIC Director General of Department of International Cooperation, said the plan to promote ASEAN’s image until 2015 aims to highlight ASEAN’s important role, position and remarkable achievements, as well as each member country’s history, culture and daily life.

It is important to make clear the significance of building the ASEAN community for the benefit of mutual cooperation and development in the region.

Communications work needs to be done domestically and internationally on a regular basis to cover ASEAN’s major events.

Hydropower reservoirs run short of water

Hydropower reservoirs nationwide are falling short of some 5.3 billion cubic meters of water, with those in the central region lacking around 2.6 billion cubic meters, said Vietnam Electricity Group (EVN).

Because of water shortage, EVN will use coal and gas-fired generators to the fullest this month when hydropower plants are regulating water for the dry season, according to a report of EVN on power production in March.

Power supply in the south will be meager this month as there is no new power source for the region. EVN will produce some 1.1 billion kWh of electricity from fuel oil and diesel oil during the dry season at a cost many times higher than producing from coal and gas.

The electricity group informed the first generator of the thermal power plant Nghi Son 1 will run on oil for the first time this month and will be synchronized in April. EVN will try to timely put the key power projects into operation and boost supply for the southern region.

In the first two months, EVN produced and purchased 18.2 billion kWh of electricity, up 9.48% year-on-year.

Faster SOEs equitisation urged

Faster equitisation of state-owned companies in Vietnam will bring bigger trade opportunities to Vietnamese and European firms, senior officials  have noted.

EU commissioner for Trade Karel De Gucht told a press conference on the sidelines of the 19th ASEAN Ministers Retreat Meeting last week that the snail’s paced restructuring of Vietnam’s state-owned enterprises (SOEs) would be “a block” for the quicker negotiations on a free trade agreement (FTA) between Vietnam and the EU, which is expected to conclude “at the end of next year”.

He said the two sides would conduct the third round of the FTA negotiations on April 22, after the first two rounds’ successes in Hanoi in October 2012 and in January 2013 in Brussels.

The third round of negotiations would be focused on many sectors like goods, services and public procurements, he said.

“During my talks with Prime Minister Nguyen Tan Dung, I have sent our message that Vietnam would need to open its economy more to accelerate the FTA negotiations, including the quicker equitisation of SOEs,” he said.

Gucht said the EU were waiting for the Vietnamese government to open the door of its economy wider, explaining that a more open economy would mean all companies could compete equally.

“Everyone knows that it is urgent for Vietnam to boost its SOEs restructuring to lure more private enterprises,” Gucht said.

On June 26, 2012 in Brussels, Gucht and Vietnam’s Minister of Industry and Trade Vu Huy Hoang officially launched negotiations for this FTA. Both sides sought a comprehensive agreement covering tariffs, non-tariff barriers as well as commitments on other trade related aspects.

“If successful, this agreement will help move Vietnam forward on the path of openness in a broad range of ways,” Gucht said. “It will cover foreign direct investment, disciplines on state-owned enterprises, public procurement, trade in raw materials, sustainable development.”

Cheers? Sabeco brewing alone

Sabeco, Vietnam’s leading beer producer, is still struggling to find strategic partners after announcing such plans five years ago. And business observers are wondering what the problem is.

The Saigon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco) unveiled its intention to source strategic partners right from early 2008 when it convened a general shareholder meeting to commence operations under a joint stock model.

Top global brewers like Heineken, AB InBev, SAB Miller and Asahi had met Sabeco even before the time Vietnam’s top beer maker embraced equitisation in a bid to hike their stake in the Vietnamese market.

One market study showed that Sabeco’s beer production capacity made up 46 per cent of the country’s total, focusing on low and medium market segments.

As of early November 2012, businesses that expressed desire to become Sabeco strategic partners were three leading foreign brewers – Holland’s Heineken, Japan’s Asahi and SAB Miller of the US.

“Since Sabeco is Vietnam’s top beer maker in volume, its strategic partners would need to satisfy certain criteria such as not triggering interest conflicts between Sabeco and the business partner, that partner having interests compatible to Sabeco’s growth strategy, particularly not competing directly with Sabeco products,” an industry expert told VIR.

Besides, the expert added, the strategic partner should be in a position to help Sabeco boost production and improve quality of its beverages and alcoholic drinks.

In parallel to promoting technology, sales and marketing and enlarging markets, issues like effective governance of money flows in production and business or finding suitable remedies to properties which are being used or managed by Sabeco were held of foremost importance when choosing Sabeco’s strategic partners.

Industry insiders assumed the aforementioned foreign partners were less supportive of Sabeco’s plans to scale up technology innovations, sales or marketing since they produce and trade in items directly competing with Sabeco’s.

Besides, the production volumes of these foreign brands are far lower than that of Sabeco.
“Similarity in target markets and products is a stumbling block hindering cooperation between Sabeco and these foreign brands in selecting Sabeco’s strategic partners,” that expert noted.

Consider Heineken. It is the Vietnam beverage sector’s largest foreign investor, and acts as either a founding shareholder or stakeholder at Vietnam Brewery Limited, Song Han Brewery, Dung Quat Brewery, Quang Nam Brewery and some others. Heineken possesses almost all brands from top-notch to common ones.

In technology respect, Sabeco’s production factories feature cutting-edge equipment and technology with doubled production capacity compared to Heineken. In its application to become Sabeco’s strategic partner, Heineken reportedly did not mention any concrete cooperative plans besides the brewery.

In respect to Asahi, this Japan-backed brand just made presence in Hanoi and Ho Chi Minh City whereas Sabeco possesses an expansive network across the country. Besides, Asahi competes directly with Sabeco in securing exclusive sponsor packages at restaurants and food shops.

SAB Miller also competes head-on with Sabeco and its production volume is far below that of Sabeco.

About the opportunity to become Sabeco strategic partners, a representative from one of these three foreign partners admitted there was little chance for them albeit they were prideful of their technology as well as brand value.

Sabeco posted beer production output of 1.2 billion litres and after-tax profits of VND2,344 trillion ($114 million) in 2011. Corresponding figures in 2012 were 1.26 billion litres and planned after-tax profits of VND2,343 trillion ($112 million).

Japanese ODA putting railway bridge reinforcement on track

The 44 bridges that serve  Hanoi-Ho Chi Minh City 1,700-kilometre railway artery will continue to be reinforced as part of a large project backed by Japan.

According to Japan International Cooperation Agency (JICA) in Vietnam, an agreement on Vietnam’s borrowing of 13.79 billion yen ($147 million) in official development assistance (ODA) from Japan will be inked on March 22 between JICA and Vietnam’s Ministry of Finance.

The sum, which will be added by the Vietnamese government’s VND1 trillion ($48 million) as a contribution, will be used for a nine-package project to upgrade 44 railway bridges located from northern Ninh Binh province to Ho Chi Minh City. At present, 10 out of these bridges have been upgraded, 18 are being upgraded currently and work bids are being sought for the other 16.

For example, bridges that have deteriorated with age which are located over at 230-km stretch kilometres from the south to central Danang city have been replaced with new steel bridges including foundation structures. A package to upgrade the bridges of Thap Cham and Song Quao in southern central Ninh Thuan province and four bridges of Song Lon, Song Nho, Song Luy and Muong Man in southern central Binh Thuan province will be put out to tender on March 18, 2013.

“All the tender process will be open and transparent to construction firms,” said Suzuki Taketomo, project manager of Hanoi-Ho Chi Minh City Railway Line Bridges Safety Improvement Project Construction Package No2.

“Under our plan, this project will be wholly completed in 2016,” said Nguyen Van Anh, deputy chief of Project Implementation Department No.1 under the state-owned Vietnam Railway Corporation’s Railway Projects Management Unit.

“This project will help reduce the trains’ running hours from the existing 27 hours to 24 hours. It will also help the trains transport passengers and goods in a safer manner and ensure railway safety,” Taketomo said.

The project has been implemented by Japanese construction firms including Tekken, Manuberi, Yokogawa, Mitsui Ship Building, Rinkai and Taisei, and Vietnamese construction firms like CIENCO1 and Thang Long.

The new ODA loan will be the third one of the type between Vietnam and Japan, with the first one worth 8.222 billion yen ($87.87 million) signed in 2004 and the second one worth 11.737 billion ($125.43 million) clinched in 2005. These sums were also used for upgrading 19 weak railway bridges, helping to reduce the train’s running hour from 36 hours in 1994 to 29 hours in 2007.

Nguyen Dinh Thao, senior programme officer from Japan International Cooperation Agency, said all the bridges that had and would be upgraded were installed with Japan’s environmental friendly technology including stainless steel. Japanese know-how, he said, was also used in the construction management of steel girders, direct fastening track, long rails and cast-in-place piling.

“Moreover, though the Japanese government is now depreciating the yen to spur its economic development, the value of the ODA loan will not be affected as the value of the yen has been fixed at time of making design of this project,” Thao said.

BOT plan pushed for highway

The Ministry of Transport has recently submitted its  proposal for Japan-based Nexco Central Company to become investor of the upgraded Phap Van-Cau Gie highway project under a build-operate-transfer (BOT) contract.

The ministry (MoT) said that it took six months to make a decision to select Nexco Central Company instead of Vietnam’s Hai Chau Group to upgrade Phap Van- Cau Gie highway. If Nexco Central Company gets a thumbs-up from government leaders, the Phap Van- Cau Gie project would be the first foreign-invested highway project in Vietnam.

Phap Van-Cau Gie highway runs from its crossroad with Hanoi’s ring road No.3 in Phap Van to the Cau Gie-Ninh Binh Expressway in Ha Nam province.

According to the proposal, the current 30-kilometre stretch will be upgraded into an expressway with four lanes, designed for speeds of 60-100 kilometres per hour. Under BOT terms, the total investment capital is VND1.5 trillion ($71.4 million) and the construction is expected to finish within one year.

The MoT cited two reasons for choosing Nexco Central. Specifically, if Nexco Central became investor, the project would have high feasiblity due to borrowed capital with low interest from the Japan International Cooperation Agency, along with an investment procedure that would only take three months to complete.

Moreover, the MoT explained that the ability of domestic contractors to invest in a highway project was weak in terms of financial and management experience, while management, operation and maintenance were strong points for foreign contractors such as Nexco Central.

Nexco Central, however, is also seeking profit 23 per cent higher than other existing highway projects.

Le Manh Hung, Deputy Minister of MoT said: “The ministry is now asking the government to instruct related bodies to negotiate with Nexco Central with the aim to reduce the profit rate required by the investor”.

Hung added that though Phap Van- Cau Gie highway project had a small scale, if the foreign-invested highway project was deployed successfully, it would encourage other foreign investors, including more Japanese, to invest in developing Vietnam’s transport infrastructure.

In early 2011, Nexco Central submitted to the MoT the proposal for upgrading the Phap Van-Cau Gie expressway, together with Vietnam Expressway Investment Development Corp (VEC).

As planned, the construction was supposed to be started in 2011 and put into operation after three years of construction.

According to the proposal, two sides would set up a joint venture to upgrade the highway under public-private-partnership model. However, the ambition was not successful because VEC was too busy with other huge highway projects.

Founded in 2005, Nexco Central is Japan state-owned company. So far, the company has managed 1,746 kilometres highway and built 430 kilometres in Japan.

Power project faces financial snafu

Kien Luong thermoelectricity centre, to be one of Vietnam’s largest power centres, remains on paper as its investor faces financing troubles.

According to the government’s electricity master plan to 2020, the first phase of Tan Tao Group-backed Kien Luong thermoelectricity centre in southern Kien Giang province will start commercial operations at the end of 2013. However, the private investor is still tied up with site clearance.

Tan Tao Group was approved as the investor of the $7 billion centre, to include the Nam Du deep seaport, in 2008 to produce up to 4,400-5,200 megawatts.

The Kien Giang People’s Committee two weeks ago was told by the investor it had made little headway over the past two years, and the investor has just cleared 88 hectares out of 600ha.

In a report sent to the provincial committee, Tan Tao Group director Thai Van Men said the investor had disbursed $250 million into this project, but he admitted the project development had been delayed for two years because of financing trouble.

He said the firm was stalling construction because it had not received the government guarantee and undertaking agreement (GGU). According to Tan Tao Group, without GGU, the project will remain deadlocked.

Le Khach Ghi, director of Kien Giang Department of Planning and Investment, said Tan Tao Group might not receive GGU because “providing GGU to a foreign loan of a private enterprise is unprecedented.”

Furthermore, he said Tan Tao Group’s equity capital in this project had to equal to 20 per cent of total project’s investment capital, or $1.4 billion. According to the annual financial report of the company in 2012, its total debt was approximately $200 million.

Last year, central Quang Ngai province revoked the investment certificate for Tan Tao Group’s Tinh Phong Industrial Park as the provincial committee said the company did not have strong financial ability to develop it.

Phan Vu Hong, vice chairman of Kien Giang People’s Committee, said the provincial leaders were going to propose the government to reject Tan Tao Group from this mega power project in case the company did not resume the project construction before July 2013.

Vinalines drops plan for PPP port investment

The state-run Vietnam National Shipping Lines is going to withdraw from the northern Vietnam’s flagship port project Lach Huyen as part of its divestment activities.

A company’s source said Vinalines would withdraw from the joint-venture that invests in two container wharfs under International Gateway Lach Huyen Port’s first stage, piloted as a public-private partnership (PPP) in order to focus on its restructuring plan period 2012-2015.

Specifically, the Ministry of Defense-backed Saigon Newport Corporation will replace Vinalines to become Japan-invested MOLNYKIT’s partner in a two member joint stock company with charter capital of $30 million, the source said.

Earlier, Vinalines committed to contributing a 51 per cent stake in a joint venture contract signed at the end of 2011. Apart from Lach Huyen port, Vinalines will withdraw its capital at three other Cai Mep-Thi Vai based joint venture seaports.

Vinalines will divest and let its subsidiaries go bankrupt over the next two years, according to a restructuring scheme that has been approved by Deputy Prime Minister Vu Van Ninh.

After the restructuring is completed, Vinalines will concentrate on its core business, including shipping, port operations, and shipping services.

To tackle its financial difficulties, Vinalines will have to let its member units Vinashinlines and Vietnam Oil and Gas Transportation Co (Falcon) dissolve. Vinalines will also dissolve two other units, its branch in Can Tho City and the Asian Maritime Human Resources Centre Joint Venture (Vina-STC).

By the end of 2015, Vinalines will have to completely divest from 37 other businesses, and merge others so that they can be equitised later. After this restructuring, Vinalines will only hold 100 per cent stake in two businesses, and 50-75 per cent stakes in 30 other businesses.

Meanwhile, Saigon Newport Corporation, a holding company, operates the most modern, professional and biggest container terminal in Vietnam with the seaport.

International Gateway Port Lach Huyen, once completed in 2016, is expected to be able to accommodate vessels of up to 100,000 dead weight tonnes for Trans-Pacific route. The port will help reduce logistic costs to the US market.

Currently, Lach Huyen project has almost completed all procedures including capitalising for its starting stage.

State pledges to not take the eye off the ball

While Vietnam intends to improve the quality of foreign direct investment, the country should pay more attention to post-licencing monitoring.

Phan Huu Thang, former director of Foreign Investment Agency under the Ministry of Planning and Investment (MPI), said the increase of post-licencing monitoring activities at foreign-invested projects would benefit not only the government, but also investors.

“When we closely watch the development of each project, we will recognise whether the investor implements their commitments,” Thang said. “Thus, we will know exactly what project deserves incentives or not.”

Through tightening post-licencing monitoring activities, Thang added, state authorities would realise difficulties facing by investors and then to give the right support.

Since opening the economy to foreign investors in 1987, Vietnam mostly appraises foreign direct investment projects at the pre-licencing period.

This includes appraising business plans, construction schedules and environmental impact assessment reports. Poor post-licencing monitoring unintentionally created a gap for many foreign investors to violate their commitments, Thang said..

Foreign companies like Taiwanese-backed Vedan Enterprise and Tung Kwang have been detected polluting the environment by discharging waste water directly into rivers. Meanwhile, other companies like Coca-Cola and PepsiCo are suspected of transfer pricing activities.

Nguyen Mai, former vice chairman of State Commission for Investment and Cooperation (now the MPI), said authorities just focused on luring new investments, but not watched closely on the operation of foreign companies after they obtain investment certificates.

“That is our big mistake. How can we know investors will truly implement their commitments regarding labour, imports, exports and localisation to enjoy tax incentives? How can we know exactly whether a manufacturing project will pollute environment just by reading a report?” he said.
Mai, who is also chairman of Vietnam Association for Foreign Invested Enterprises, said the government should enhance post-licencing monitoring soon to ensure quality of FDI inflow to Vietnam.

The Vietnamese government acknowledged the importance of post-licencing monitoring in 2010 when Prime Minister Nguyen Tan Dung signed Decision 77/2010/QD-TTg forcing foreign invested enterprises to report gross revenue, production, legal capital, sources of disbursed capital, recruited labour, and manufacturing technology and tax every month to local Statistics Offices.

According to the decision which took effect on January 15, 2011, enterprises with more than 10 per cent of foreign capital will have to implement the reports.

However, this regulation has not been implemented seriously so far. Thang said that was because there had been no strong sanction forcing investors to comply the regulation, and because of the weak cooperation between State authorities.

“Only by increasing post-licensing monitoring activities, the quality of FDI will improve,” said Thang.

Samsung’s confident pitch

Samsung is expecting to obtain an investment certificate for its $2 billion manufacturing factory in northern Thai Nguyen province at the end this month.

This will raise the global electronic firm’s total investment in Vietnam to $3.5 billion since 2008.

A source from Samsung Electronics Vietnam, a wholly-owned subsidiary of Samsung, told VIR that negotiations between the South Korean firm and goverment agencies had entered the final round and could end this month. He added the investor planned to begin construction this month if things went smoothly.

Dang Xuan Truong, director of Thai Nguyen’s Industrial Parks Management Authority, confirmed that the provincial authority could grant an investment certificate to Samsung this month, after negotiations on project incentives finish.

Samsung on February 6, 2013 signed a contract with Vietnamese partners to rent 100 hectares at Yen Binh Industrial Zone, Thai Nguyen, for 49 years for building this $2 billion project, its second factory in Vietnam.

When Samsung’s second facility goes into operation, Vietnam would become the firm’s largest manufacturing hub for handsets.

Samsung’s existing facility in northern Bac Ninh province’s Yen Phong Industrial Zone went into operation in 2009 and last year churned out 100 million mobile phones and now employs 24,000 local workers.

This plant had initial investment capital of $670 million and was licenced to raise the investment capital to $1.5 billion in November 2012. Currently, the factory in Bac Ninh produces all of Samsung latest hi-tech products like Galaxy S III, Galaxy Tab 7 and Galaxy Tab 10, serving the Asian and European markets. Samsung expects it would reach $16 billion of export revenue by 2015 in Vietnam.

To encourage Samsung to expand investment in Bac Ninh, the government agreed to recognise this firm as a high-tech enterprises in accordance with Vietnam’s High Technology Law. This means Samsung can enjoy the highest incentive of corporate income tax at 10 per cent and also enjoy import tax exemption within the first five years.

For the project in Thai Nguyen, Thai Nguyen Provincial People’s Committee proposed a preferential mechanism for this project including a 10 per cent corporate income tax within 30 years, free corporate income tax within four years since it gains profits and a 50 per cent corporate income tax.

Local retailers meet foreign challenge

Local retail businesses are making efforts to increase their visibility amid a foreign invasion.

For example, Tran Anh Digital World JSC’s 2013 market expansion plan envisages hiking its supermarkets with IT items from four to eight in Hanoi’s key areas, of which the eighth supermarket Tran Anh Hoang Mai is slated for inauguration in 2013’s fourth quarter.

In the future, Tran Anh could increase visibility not only in Hanoi, but also in other big cities, according to company’s chairman Tran Xuan Kien.

In 2012, Tran Anh launched two new supermarkets, which were seen as the main cause behind the firm’s declined profits last year. It was similar to when it turned four small shops into two big supermarkets in 2007.
By that time, the revenue generated by two supermarkets did not increase compared to that of the four small shops, but their operating costs were three to four-fold higher.

“Declined revenue was just momentary and we were on our chosen path. The dividend was when the supermarket model arrived, we have reaped rewards, as today businesses with IT retail shops are facing going bankrupt. Not all firms dare to expand scope in difficulties, since it is risky, but it also entails opportunities for making breakthroughs,” Kien noted.

An important part in local retail firms’ decision on scope expansion is space leasing rate which has reduced remarkably thus far.
“Retail space rental fees in Hanoi and Ho Chi Minh City are not much different. The rate is about $10-12/sq.m/month for decent space for trading,” Kien said.

Deputy general director of fashion store Vinatexmart, under Vinatex, Tran Thanh Nhan agreed current space rental was more affordable than several years ago.

Vinatexmart is now visible in 13 provinces and municipalities nationwide with 82 fashion shops, including 13 shops in Ho Chi Minh City.

By 2015, the system is expected to accommodate around 200 fashion stores throughout the country, with 20 new venues alones in 2013.

However, not all retail firms found it easy for leasing or buying space at competitive rates. The Maximark supermarket chain of Ho Chi Minh City-based An Phong Investment JSC is an example.

The business currently operates five Maximark venues and set to open two new ones this year, one in Dong Nai province’s Bien Hoa city and the other in Ho Chi Minh City’s Go Vap district. It is now in legal setup stage which will soon be completed.

“Due to difficulties in finding new space at reasonable costs, we probably have to open minimarts [DainyMaxi], but have yet to source suitable leasing space,” said a company source.

Sugar industry awaits export ruling

Faced with low demand for sugar, low prices, large stockpiles, and illegal imports, the Viet Nam Sugarcane and Sugar Association (VSSA) has sought permission from the Government to export small volumes of sugar.

But a decision has yet to be announced.

While waiting for it, several firms have already exported small quantities.

At present sugar prices are around VND13,900 per kilogramme (US$0.66), VND300-500 less than before Tet last month, which represent big losses to producers.

But with demand stagnant and production significantly up, the sector has stockpiles amounting to more than 414,000 tonnes as of last week.

“The main reason for the situation is that the fight against smuggling and fraud is ineffective and smuggling of sugar heavily impacts the local market,” Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper quoted Nguyen Hai, the general secretary of the VSSA, as saying.

According to figures from the VSSA, smuggling has been increasing relentlessly reaching 400,000 tonnes per year. The low prices of smuggled sugar — mostly from Thailand — have dragged down prices in the market.

Sugar smuggling has been brazenly occurring for a long time, but authorities only seize a few hundred tonnes every year.

The sugarcane farmer is also badly affected as a result.

“I am not sure if the price will go up when the Ministry of Industry and Trade allows export of sugar,” Co Tri Dung, general director of the Soc Trang Sugarcane and Sugar Joint Stock Company, said.

But it is a fact that if large amounts of sugar can be exported, smuggled Thai sugar will flood the market and cause more losses for the industry and economy.”

Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

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