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BUSINESS IN BRIEF 19-2Vietnam becomes biggest foreign investor in Laos

Vietnam topped foreign investment in Laos with 429 projects totalling USD4.9 billion, according to the Lao Ministry of Planning and Investment.

Thailand stands in the second position with 742 projects capitalised at USD4 billion, followed by China with 801 projects worth a combined USD3.9 billion.

South Korea with USD748 million, France USD490 million, Malaysia USD430 million, Japan USD428 million, the US USD150 million, Singapore USD134 million and India USD61 million followed.

Mining was the most popular sector for foreign investors, accounting for 27% of total investment, followed by electricity generation, comprising 25%, said the ministry.

Other attractive sectors for foreign investors included agriculture, services, processing, hotels and restaurants, construction and banking.

The Lao government has implemented policies to reduce and exempt taxes for foreign companies to invest in rural areas.

In the 2011-2015 period the Lao government intends to attract USD15 billion in foreign investments to help maintain GDP growth of at least 8% per year.

Shops and cafes exploit Tet to cash in

Many coffee shops and restaurants have raised their prices following the new lunar year.

Coffee shops in Tran Hung Dao Street, Hanoi have exploited the festive period to raise prices by 20% since the 29th of the lunar December, 2012, to the 6th of the lunar January, 2013 (February 09-16).

Coffee shop staff claimed  it  was very difficult to hire employees during the Tet holiday, therefore, the manager had to offer higher wages for people working during the period.

Nam who works at a coffee shop on Tam Trinh Street said his shop had opened during Tet and he’d decided to raise prices by 30% while claiming it hadn’t affected the number of customers.

“Just few shops open during Tet. Our coffee shop has been full of customers since the first day of the lunar new year. Most of them are younger people,” he added.

Food prices in cheaper street places are two to three times higher than normal.

A bowl of crab soup noodle is being sold at an extortionate VND45,000 (USD2.14) compared to just VND20,000 before Tet, but the restaurants have remained crowded.

“If anyone who complains about high prices, they can find a cheaper place. Most of people have stopped work to enjoy Tet, except for us. So we’re using this chance to earn money,” a noodle seller said.

In Hanoi, many noodle restaurants have announced to raised bowls of noodles to VND15,000.

Restaurant owners also explained that the higher prices were attributed to the price increases in chicken, meat and beef.

Lien, owner of a restaurant in Nguyen Luong Bang Street, said a kilo of beef was currently sold at between VND250,000 and VND270,000, compared to VND200,000 and VND220,000 before Tet.

According to Lien, the price gouging would eventually return to normal.

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.

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.

Vietnamese coffee firm readies for international competition

The general director of Trung Nguyen, one of Vietnam’s leading coffee brands, expressed confidence in competing with other companies in foreign markets, and those trying to establish a foothold in Vietnam, especially Starbucks.

According to Dang Le Nguyen Vu, General Director and CEO of Trung Nguyen, coffee is one of Vietnam’s strengths and deserves to be focused on.

Despite the fact that coffee is one of the most popular beverages in Vietnam, the profit generated from foreign markets was only about 20% of that generated by international coffee corporations. Only 10% Vietnamese coffee was up to export standards.

Vu has travelled to a number of countries known for their coffee exports, such as Columbia, Indonesia or Brazil, in order to gain experience in coffee growing techniques. He also participated in regional and international conferences on the coffee industry so as to promote Vietnamese coffee as a brand.

Vu is confident that Trung Nguyen will be able to hold their own against competitors. “We’ll obtain a position in the US market. I can’t say how long it will take, but right now I have the support of a capable staff,” he said.

In order to achieve these long-term goals, he said, the domestic market has to remain the focus.

On the retail side, Trung Nguyen coffee shops also offer coffees grown around the world, “We let our customers decide what is a good cup of coffee. The market and the world is changing, so enterprises must adapt to those changes.” he said.

2013: Bigger results expected for tourism sector

In 2013, the tourism sector expects to further gain better performance when Vietnam continues to be a friendly and attractive destination for international tourists.

Despite economic difficulties in 2012, Vietnam managed to receive nearly 7 million international arrivals.

The tourism sector targets to welcome 7.2 million international tourists, serve 35 million domestic ones, and pocket a total revenue of VND190 trillion this year.

To fulfill the goals, the sector continues to place importance on international cooperation in order to gain better experience and support from countries and international organizations to promoting Vietnamese tourism potential.

A survey conducted during the annual meeting of the US Tour Operators Association (USTOA), Vietnam stands second among newly-emerging destinations mostly chosen by international tourists in 2013.

At a meeting with tour operators in Ho Chi minh City in late 2012, Deputy Minister of Culture, Sports and Tourism Ho Anh Tuan revealed that the Tourism Stimulation Program 2013 aims at three specific targets, namely increasing the number of domestic tourists and those from key markets; turning Viet Nam into an attractive and high-quality destination; and raising awareness of tourism among tour services providers and people.

The Ministry of Culture, Sports and Tourism intends to organize more farmtrips for foreign tour operators and journalists; provide exemplary tours and more tourism information; encourage tourism promotion in key and promising markets and at international tourism events in 2013.

Investors abuse power projects to exploit forests

Investors have used dozens of power projects in the southern Phu Yen Province to illegally exploit local forests, causing losses to hundreds hectares over the past decade.

The Ministry of Industry and Trade discovered the environmental abuse while carrying out inspections at small and medium-sized hydropower projects.

Phu Yen Province has about ten small hydropower projects with three of them still under construction. However, only the La Hieng 2 Project has neared completion.

The construction work for Da Den Hydropower Project in Hoa My Tay Commune seems abandoned, yet the exploitation of local forests seems to have accelerated.

Phu Yen Department of Industry and Trade said the project had begun construction in August 2005. Later, the investors said they had problems in sourcing capital, leaving 80% of the project uncompleted despite a targeted operational date in 2013.

“It looks like they cleared the road just to exploit timber, as their trucks only seem to be used to transport the wood,” Luong Thai Hoa, a local in Hoa My Tay Commune said.

Khe Cach Hydropower Project has completed just 10% of its work in seven years. The only real construction work was a road into the local woodland, while the remainder of the project remains untouched.

The same situation can be found replicated in Khanh Hoa Province. Construction for the Song Giang 2 hydropower project began in 2006 and while construction on the hydropower plant remains stagnant, over 200 hectares of forested land nearby has been exploited.

Nguyen Duy Phu, an official from the Ministry of Industry and Trade asked the authorities in Phu Yen Province to withdraw the licenses from stagnant projects that affected local people’s lives and environment.

Referring to the Khe Cach Hydropower Project, Director of Phu Yen Department of Industry and Trade Dao Tan Cam said, “We proposed that Phu Yen People’s Committee withdraw the licensing for projects three years ago because of the evident poor financial capacity of its investors, but it’s still on the list.”

The authorities had originally banned work on the Da Den Hydropower Project, but later agreed to let the investors have a second chance after they proposed adjusted designs.

Project head engineer Pham Trong Tu said “We are having troubles in finding capital. We’ll try to complete the construct by the end of the year.”

Despite his promise, some of the key documents such as documents related to the reservoirs haven’t been approved.

Ho Van Tien, spokesman of Phu Yen Province said due to the ineffective hydropower projects, they haven’t granted permission to any other projects even if it is in the planning or not.

Experts contribute opinions to draft law on State capital management

The Ministry of Finance’s draft law guiding the use of State capital in enterprises will be opened to public opinion before it is submitted to the Government in July.

Deputy Minister of Finance Tran Van Hieu said the law, if approved, would help State agencies avoid losing control over enterprises they owned. It would also prevent State owners from interfering too much into their enterprises’ operations, limiting the companies’ flexibility and creativity when doing business.

Experts agreed that the law was necessary but raised concern that the scope of regulations was too narrow.

The draft bill only covers limited liability companies completely owned by the State. But it was the loose management of State-owned groups like Vinashin and Vinalines that caused the loss of trillions of dong, seriously damaging the economy. The losses caused by inefficient use of State capital would be difficult to curb if only wholly State-owned companies were covered, warned Le Dang Doanh, former director of the Central Institute for Economic Management (CIEM).

Currently, State capital granted to companies was often re-invested in their subsidiaries, so subsidiaries must be subject to the law just as their parent companies were. State capital belonged to the people, so it must be strictly controlled, Doanh stressed.

Dang Van Thanh, chairman of the Viet Nam Accounting and Auditing Association, said that internal auditing regulations would help control business risks and avoid financial mismanagement. In addition, the actions of chairmen of management boards and general directors responsible for business and production must be clearly regulated.

Vu Nhu Thang, director of the Ministry of Finance’s Financial Strategy and Policy Institute, said that if State capital invested in enterprises was re-invested in businesses beyond their core operations, it must be strictly managed.

Doanh agreed, saying that enterprises must regularly report operation results, as modern corporate governance required high transparency and accountability. He added that the law should also regulate how staff are recruited to ensure that qualified people are hired to deal with State funds.

HCM City sets target of achieving high export turnover

HCM City aims to post export turnover of US$34 billion this year, a year-on-year increase of 13.5 per cent, according to the city’s department of industry and trade.

The ambitious target demonstrates the city administrators’ eagerness to shift the nature of exports during the 2011-15 period.

With the goal of achieving an annual growth rate of 13 per cent, the city hopes to increase the export of industrial products by 13.1 per cent each year, agro-forestry and fisheries products by 11.9 per cent and other commodities by 14 per cent.

The city will focus on exporting highly-valued industrial products as well as software and digital content. As planned, industrial products will account for 54.4 per cent of the city’s total export turnover, and high-tech and software products will also constitute a significant percentage of exports.

In contrast, unprocessed products with a low value will see fewer exports, except for crude oil. Agro-forestry and seafood products will account for only 23.1 per cent of exports. Export growth of garment and footwear will be maintained.

The city will also make every effort to keep total import costs low, around $29 billion.

The HCM City Department of Industry and Trade warned local businesses to diversify their products, both in terms of design and distribution channels, and seek more importers.

According to the department, the growth rate of the city’s export turnover was 12.5 per cent last year and export turnover reached $29.9 billion – an increase of 63 per cent against 2011.

Binh Dinh looks to make fisheries key growth sector

Improved logistics and infrastructure is an urgent need for the growing fisheries sector in Binh Dinh, says Nguyen Huu Hao, deputy director of the province’s Department of Agriculture and Rural Development.

Last year, the central province exported over 8,100 tonnes of ocean tuna, nearly 73 per cent higher than the previous year, bringing in revenues of about US$51.3 million.

In the first month of this year, local fishermen caught over 618 tonnes of ocean tuna, an increase of 54.5 per cent compared to the same period of last year.

Hao said offshore fishing and tuna export had become major contributors to the province’s economic growth, with the catch increasing year after year.

Having seen decent profits accrued from offshore tuna fishing, locals have become more and more confident bout investing and upgrading their vessels for longer fishing trips that also go further out to the sea.

As many as 242 fishing groups have been formed in the locality with the participation of over 800 local vessels with engine capacities ranging from 250HP to 900HP.

”When the fishing vessels work in groups, each vessel can be given timely support including information about fishing grounds and weather conditions, supply of fresh water, food and fuel during long trips,” Hao said.

Nguyen Van Ai, a fisherman from the province’s Phu My District, said that his fishing group had one 99HP, an 800HP and two 450HP vessels. Together, they generated revenues of VND20 billion last year from catching ocean tuna.

Each member in his crew enjoyed an annual income of VND150-160 million, making them high income-earners in the locality, he said.

However, Ai was worried about falling tuna prices. Enterprises were paying VND 60,000 – 70,000 for a kilo of tuna now, just half of the price they offered last year, he said.

Many fishermen had to borrow money from processing enterprises to prepare for their fishing trips, so they were reluctantly selling tuna to the lenders at prices offered by the latter, Ai said.

Pham Van Truong, Vice Chairman of the Hoai Nhon District People’s Committee, said local authorities need to help fishermen assess the quality of tuna and find suitable prices. Until now, fish quality and prices had been decided predominantly by the enterprises with farmers having little say, he noted.

However, Cao Thi Kim Lan, director of the Binh Dinh Fishery Joint Stocks Company, said local tuna prices were low because they were mostly being caught manually in shallow waters, despite assertions by officials that offshore fishing has increased of late.

In coastal Quy Nhon City, the Quy Nhon fishing port opened last April as a place for tuna auctions where sellers and buyers both could get reasonable prices. No auction has been organised so far.

The fisheries sector in the province has several other problems.

Several ports, including the Tam Quan Port in Hoai Nhon District and the De Gi Port in Phu My District are suffering from sedimentation.

Furthermore, sedimentation at the estuary is preventing vessels, especially ones with high capacity, from reaching the ports.

According to Hao the province is spending billions of Vietnamese dong each year to dredge the estuary around the ports. The sedimentation also poses difficulties for vessels to find shelter during the storm season.

Phan Trong Ho, director of the provincial agriculture and rural development department, said investors from Japan and the UK visited the province to look at opportunities in the fisheries sector.

To make the sector more attractive to foreign investors and expand fisheries, the province would have to improve its port infrastructure, price management and logistics sector, he emphasised. –

Jury still out on feasibility of non-voting shares

The State Securities Commission is considering whether to raise the limit on foreign holdings in listed companies by another 10 per cent by created a new class of non-voting shares, but how such shares would be traded on the stock market remains in debate.

Non-voting shares would be similar to common stock but the holders would not have the right to vote in the shareholders’ meetings or board elections. While this kind of stock is common in developed markets, it has yet to appear in Viet Nam.

Viet Nam’s total market capitalisation continues to be modest compared to most economies of this size, and the free-float ratio (the percentage of shares freely transferable) is low for foreign investors. According to many analysts, this problem has discouraged investments by many major, long-term investors.

If the proposal to lift foreign ownership in listed companies from the current 49 per cent to 59 per cent with 10 per cent allocated to non-voting shares is carried out, market insiders predict it would help attract foreign capital to the market, as well as increase the liquidity of shares.

According to financial expert Hoang Thach Lan, Viet Nam can learn an appropriate method from other international markets. In major markets like the US, common stocks and non-voting shares are classifed and listed separately.

In China, the companies themselves issue the shares, but in Thailand, a company under the Stock Exchange of Thailand is responsible for issuing and listing them as derivatives products.

“The derivatives market has not yet developed in Viet Nam,” said Lan. “Therefore, the issuing responsibility will likely belong to listed companies.”

About the concern that non-voting shares would not be popular among foreign investors, Lan said many foreigners simply want to buy shares and trade to seek profits and this type of investors, particularly exchange-traded funds (ETFs), are not seeking management participation.

“If non-voting shares are issued, we’ll consider buying in,” Nguyen Nam Son, director of the investment fund Viet Nam Capital Partners Ltd, told the newspaper Nhip cau Dau tu (Investment Bridge).

Investment opportunities for new investors such as Viet Nam Capital Partners were not high, Son said, and existing investors, especially strategic investors, would have an advantage in access to information about a company’s upcoming share issues.

Firms made to pay for investment errors

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 bao 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.

Insurers target higher growth with more diverse products

The insurance industry had targeted growth of 10-12 per cent for non-life insurance and 12-14 per cent for life insurance this year, according to the Viet Nam Insurance Association.

The industry was also expected to reinvest roughly VND100 trillion (US$4.76 billion) this year, up VND9.5 trillion against last year.

Director of the Ministry of Finance’s Insurance Supervisory Authority (ISA) Trinh Thanh Hoan said to meet the target, insurance products and services would be diversified to better meet the demands of a wide range of organisations and individuals, with difficulties forecast to besiege the financial, banking and real estate sectors, making it difficult to expand the market.

The ISA reported that total insurance premiums last year surged 11 per cent against the previous year to VND40.59 trillion ($1.93 billion). Non-life insurance contributed VND22.67 trillion ($1.08 billion), up 10.2 per cent, while life insurance reached VND17.92 trillion ($853.3 million), up 12 per cent.

Last year’s leading non-life insurer was Bao Viet Insurance Corporation with premiums of VND5.4 trillion ($260 million), accounting for 23.8 per cent of the market share. It was followed by PetroVietnam Insurance Joint Stock Corporation with VND4.6 trillion ($221 million), representing 20.4 per cent of the market.

Hoan said although the industry failed to meet its growth target of 17 per cent last year, the result was considered a success in the context of the economic slowdown. The market remained stable and foreign investors saw rich potential in the Vietnamese insurance market, Hoan said.

The Viet Nam Insurance Association also attributed the result to the success of diversified insurance products such as individual asset insurance, healthcare, export credit and agriculture.

Last year, the Ministry of Finance also selected three insurers to implement pilot agricultural insurance services in more than 20 cities and provinces which attracted the participation of 200,000 farming households with total premiums of VND220 billion. Seven others were also selected to take part in the ministry’s pilot export credit insurance programme. —

Japan’s demand for guest workers grows

Labour exports from Viet Nam to Japan were expected to increase by 1,000-2,000 people this year, according to Dao Cong Hai, deputy head of the Department of Overseas Labour (DOLAB).

Department statistics revealed that about 8,800 people were sent to work in Japan last year, an increase of about 2,000 workers against the previous year.

During the last three months of 2012, Japanese demand for Vietnamese labourers rose.

Hoang Van Hung, director of the TTLC Vinamotor Company, told the Tien Phong (Vanguard) newspaper that since the beginning of the year, many Japanese businesses had asked the company to supply labourers.

He said although Japanese companies often had very strict requirements for workers, demand had recently increased.

Hung added his company had set a target of sending 200 workers to Japan this year.

Le Nhat Tan, deputy director of the LOD Human Resources Development Company, said Japan preferred to employ Vietnamese workers these days instead of Chinese labourers as before.

Hai of DOLAB said there were 100 companies in Viet Nam licensed to send workers to Japan.

He said Japan was a good market, offering high incomes and good living conditions to workers.

The average income was from VND15-30 million (US$720-1,400).

Textile, electronics, mechanical treatment and construction were common professions for Vietnamese workers in Japan.

Hai said labour export companies needed to focus on raising workers’ professionalism and Japanese skills to ensure a quality workforce to meet the strict demands of the Japanese market.

Three bridges to be completed in Q2

Construction work on three bridges – Dong Nai, Tam Bac and Thi Cau – which started 15 months ago, will be completed by the second quarter of this year, according to Viet Nam Railways.

The projects are among nine road and rail bridges in the country designed to alleviate pressure on traffic hotspots. The bridges also will separate roads from the railway lines to ensure traffic safety.

The Thi Cau Bridge in Bac Giang northern province, the Tam Bac Bridge in the northern port city of Hai Phong and the Dong Nai Bridge in the southern province of Dong Nai are expected to be complete by Liberation Day on April 30, Labour Day on May 1 and late President Ho Chi Minh’s birthday on May 19, respectively.

PM greenlights Phu Yen refinery capacity increase

The Vung Ro oil refinery’s production capacity in the central coastal province of Phu Yen will increase from 4 million tonnes to 8 million tonnes per year, according to chinhphu.vn.

The approval was made by Prime Minister Nguyen Tan Dung at the request of the Phu Yen People’s Committee and the Ministry of Planning and Investment.

The PM has also agreed in principle to revise the location of the oil refinery project to include a specialised sea port.

The province will have to meet the requirements of advanced technology and ensure environmental safety before licences are issued.

The expected US$3.1 billion project is a joint-venture between the UK-based Technostar Management and Russia’s Telloil Group.

The Government will allow investors to enjoy several special incentives involving zero export tax and oil distribution.

According to Dau Tu newspaper, after revising the project’s production capacity and raising investment capital from $1.7 billion to $3 billion, operations at the refinery would be pushed back to the middle of this year.

The move is in line with the strategic development of Viet Nam’s oil and gas industry while the country is in the process of international integration.

The additional investment was intended to meet domestic demand and provide additional petrochemical products for export, according to the provincial committee.

The construction of this project would have a positive impact on the province’s economic development in its process of industrialisation.

The Ministry of Finance instructed the Phu Yen People’s Committee to provide details of investor fundings so the PM can determine how much State support would be necessary for additional infrastructure relating to roads, electricity, water and telecoms.

The Ministry of Planning and Investment has been given the responsibility of allocating funds from the State coffers to develop the Phu Lac Resettlement Area, Phu Lac fishing-port, and National Highway 1 from Phu Khe commune to Hoa Tam Industrial Zone in Phuoc Tan commune.

Foreign investment begins year with a bang

Viet Nam is expected to attract a wealth of foreign direct investment (FDI) this year after a bumper January kickstarted efforts with a total FDI registration of over US$280 million.

The figure is largely comprised of $202.9 million in processing industries, representing 72.1 per cent of the total sum, followed by $50 million in the real estate sector and $13.9 million in scientific and technological projects.

Japan remains the largest investor with its total licensed FDI capital of $157.7 million making up 56.1 per cent of the January figure, followed by Thailand with $54.2 million licensed investment and France’s $20 million contribution.

The influx of Japanese FDI is forecast to continue rising in Viet Nam. In addition to the processing and manufacturing industries, Japanese investors have also shown interest in services and retail sector projects in Viet Nam, according to the Vietnamese Government’s website.

The Japan External Trade Organisation (JETRO), has predicted a possible third “boom” of Japan FDI investments in Viet Nam. Hirokazu Yamaoka, chief representative of JETRO in Ha Noi, was quoted by the website as saying Viet Nam remains in most Japanese investors’ plans for business expansion across the information, software, retail-wholesale and health sectors.

Economists also proposed that Viet Nam should ready itself to greet a new wave of Japanese investment in the country by taking a proactive role in improving the local investment environment.

The January 2013 FDI figures also show that Viet Nam remains a magnet for foreign investors despite the shrinking FDI inflows faced during the recent economic difficulties.

In 2009, Viet Nam’s FDI income plunged by around two thirds against 2008 and has since dropped to roughy $10 billion. The fall was mostly attributed to the global economic downturn.

Dr. Tran Du, General Secretary of the Viet Nam Association of Foreign Invested Enterprises told the Government Website that the situation saw slow improvements sparked by large-scale real estate schemes and the country initiated a new policy on practical FDI projects.

But the problem worsened in 2011 as Viet Nam’s inflation rate reached 19.58 per cent – the highest in Asia – and firms were put off by soaring production costs and an unstable climate.

However, the Government got to grips with the problem and by 2012, Viet Nam was rated as the second largest FDI recipient in Southeast Asia thanks to its cheapest labour costs and newly competitive business environment, according to the latest report from Hong Kong and Shanghai Bank (HSBC).

According to the bank Viet Nam is still a dynamic economy which specialises in low-skilled manufacturing industries like garments, textiles and footwear.

Meanwhile, a recent ASEAN Business Council survey ranked Viet Nam as the second most attractive investment destination behind Indonesia, but ahead of Singapore, Thailand and Malaysia.

Experts predicted that closer diplomatic ties between Viet Nam and countries such as Japan, the US and Russia would open up more opportunities for FDI inflows.

Jet-setting Vietnamese travellers made some 3.5 million foreign trips in 2012 representing a year-on-year increase of 20 per cent, according to figures from the Viet Nam National Administration for Tourism (VNAT).

China, Cambodia and Thailand were the most attractive destinations for Vietnamese travellers, who spent over $3.5 billion on their overseas tours, Vu The Binh, Deputy Chairman of Viet Nam Tourism Association, told local media.

According to local tour operators, the numbers of Vietnamese booking outbound tours has increased significantly in the past couple of years and their spending on these trips are “relatively high”.

Despite this, the amount spent by Vietnamese travellers on their “outbound” trips in 2012 equaled just fifty per cent of the revenues brought by foreign visitors to the country last year. VNAT’s figures revealed that in 2012, Viet Nam welcomed 6.8 million foreign visitors, attaining total revenues of nearly $7 billion.

Binh added that although more Vietnamese were taking flight, their outbound tours were not well organised and managed.

These challenges facing local tour operators will be discussed at the Viet Nam International Tourism Fair due to run in Ha Noi between April 18-21 2013. 500 million litres of beer for Tet

Economic turbulence and high inflation rates have by no means dampened the Vietnamese fondness for beer during Tet.

Brewery manufacturers estimated that some 500 million litres of beer have been consumed during this year’s Tet – the Lunar New Year of the Snake.

Sai Gon Brewery Co (Sabeco) remains the biggest manufacturer with 260 million litres of beer expected to be consumed, followed by Viet Nam Brewery Ltd. (VBL) with 100 million liters and Ha Noi Beer, Alcohol and Beverage JSC (Habeco) with the same amount. Imports and produce from 350 other breweries nationwide were anticipated to account for the remaining 40 million litres of beer consumed by the local market.

Despite the huge volume of supplies, beer prices continued to rise at local markets during the days before Tet.

Prices of Sabeco’s three main products increased by five per cent from January 15.

Market demand was relatively high with its 333 sales up by 11 per cent and Saigon Red up by 23 per cent in comparison with the same period last year.

A survey conducted in 36 cities nationwide has found that Vietnamese prefer Saigon Red products (28.1 per cent), followed by 333 (16 per cent), Hanoi beer (11.4 per cent) and canned Heineken (10 per cent).

It was the import tariff reduction from 45 per cent to 30 per cent in 2012 which precipitated the increase in imports. It is estimated that nearly 100 import products bearing 40 well-known brands are now available in the domestic market.

Products sourced from Germany, Belgium, France, Czech, Russia, the US and Japan have been selling very well in Viet Nam, even though they are 4-10 times more expensive than domestically made products.

Euromonitor International, a market survey firm, pointed out that Viet Nam is the biggest beer consumer in South East Asia with 2.6 billion litres of beer sold in 2011.

Kirin Holdings, a well known brewery manufacturer from Japan, has also listed Viet Nam among the 25 thirstiest countries in the world, with average consumption increasing by 15 per cent per annum.

Over the past decade, beer consumption has increased by 200 per cent, as beer output rose from 1.28 billion litres in 2003 to over 2 billion litres in 2008 and 3 billion litres by 2012.

This now equates to each Vietnamese consuming 28 to 30 litres per year.

These figures make Viet Nam the third biggest beer consumer in Asia, just behind Japan and China, the Sai Gon Tiep Thi (Sai Gon Marketing) newspaper reported.

According to the Ministry of Planning and Investment, Viet Nam has some 350 breweries throughout the country, including 20 breweries with capacity of over 20 million litres per year.

Auto industry receives needed policy stimulus

Auto producers are trying to put last year’s disappointment behind them and are hoping for a prosperous 2013.

2012 was a challenging year for Viet Nam’s automobile industry. The market dropped by more than one-third with just 93,000 units sold.

Most of last year’s decline can be attributed to increases in existing fees and taxes and proposed new levies.

However, since the start of this year, the Government has cancelled plans for personal vehicle fees, and reduced registration fees to 10 per cent for new under-ten-seat cars and to 2 per cent for secondhand vehicles. This seems to have stirred the market.

Industry insiders agreed that the Government’s lowered lending rates and huge capital injection into the economy would also be decisive for the auto market’s recovery.

Mercedes-Benz Viet Nam CEO Michael Behrens told Viet Nam Economic Times the demand for luxury cars in the local market still had great potential. More and more successful young Vietnamese people were opting for safe and luxury cars.

Laurent Charpentier, chairman of the Viet Nam Automobile Manufacturers Association (VAMA) and General Director of Ford Viet Nam, forecast that 2013 would be a difficult year with many challenges for the economy in general and the auto industry in particular.

The slow recovery of the economy plus fees and tax barriers targeting car users would demand greater efforts from manufacturers to prevent sales from falling further.

However, he also noted positive signals in the regional auto market. The demand for automobiles in Viet Nam was still very high compared to other countries in the area, due to rising salaries.

Charpentier believed that this year’s sales volume would reach 100,000 units, a year-on-year rise of 8 per cent.

By 2018, the auto import tax among ASEAN countries will fall to 0 per cent, in line with the ASEAN Free Trade Area (AFTA) policy.

The tax break is imminent, but frequent changes to tax and fee policies by the Government and authorities are discouraging buyers.

According General Director of Audi Viet Nam Laurent Genet, Viet Nam needed to convey support for the manufacturers if the country wanted to develop the car industry.

Toyota Motor Viet Nam’s general director Yoshihisa Maruta said that the biggest problem now lay in the policies. The most important thing to help the industry grow was a stable, clear and consistent management policy.

The Ministry of Industry and Trade (MOIT) had been making efforts to develop the automobile industry, focusing on boosting domestic demand, according to Deputy Minister Tran Tuan Anh.

A stable and transparent roadmap to lower taxes for the post-2018 period when imports from ASEAN would be tax-exempt would be considered carefully to help auto firms formulate production plans.

Signs indicate that the Vietnamese auto market is on the road to recovery.

VietJet Air to offer sale promotion in April

The budget airlines VietJetAir will offer a sale promotion programme for travellers from Ha Noi to HCM City and the southern provinces in the middle of April.

The airlines will sell 10,000 tickets with prices ranging from VND100,000 (US$4.8) to VND1 million ($48).

The promotion is set to serve travellers flocking to Viet Nam International Travel Mart in the capital in April.

Building material industry needs support to overcome economic difficulties

The Government was 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.

“This would help stimulate demand for cement while reducing imports of asphalt,” the association’s president Tran Van Huynh told Thoi Bao Kinh Te Viet Nam (Viet Nam Economic Times).

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.

Beer festival to debut at Travel Mart

Sai Gon-Binh Tay (Sagota) Beer festival will be held at the Viet Nam International Travel Mart in Ha Noi on April 18-21, vice chairman of Viet Nam Tourism Association Vu The Binh has said.

It will be the first time, the HCM City-based outfit debuts its premium 100 per cent malt beer at the event.

Organisers hope this year’s event will attract at least 20,000 beer fans and visitors.

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.

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

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