Home » Business » BUSINESS IN BRIEF 20/1

Property firms hit the wall

Nearly 18,000 real estate and construction companies faced losses, went bankrupt or closed last year because of the challenging economic situation in the country.

Of this number, the Ministry of Construction said that nearly 15,300 companies faced losses.

The number of companies that stopped operations or went bankrupt totalled more than 2,600, a year-on-year increase of 9.4 per cent.

This figure included more than 2,100 construction companies and 527 companies trading in real estate.

The situation was not much better for corporations managed by the ministry, with many of its companies’ faring worse in 2012 than in the previous year.

Total production value as well as investment value and turnover were lower than the targets set in 2012 and in the previous year.

The ministry said the construction sector last year faced many challenges as the market continued to be stagnant, while inventory of property stacked up to a high level.

Moreover, real estate prices fell in all property segments, leading to company losses and bankruptcies.In Ha Noi, about 1,800 transactions worth VND6.1 trillion were carried out on 94 transaction floors.

Meanwhile, 129 floors in HCM City reported about 4,000 transactions in 2012, with total value of more than VND11 trillion.

Inventories totalled nearly 2,400 apartments in Ha Noi and 10,100 apartments in HCM City.

Experts predict that conditions will remain tough for the market this year, and inventory will remain high.

Industrial parks in Can Tho fail to get off ground

Many proposed industrial parks and zones in the Mekong Delta city of Can Tho have been unable to pay for land rent or attract investment while thousands of families are suffering since they cannot farm just because lands are earmarked for the zones.

There are now six operational industrial parks in the city with a total area of 900 hectares.

Of them, only Tra Noc 1 and 2, measuring 292ha in total, have infrastructure and leased out land to investors.

The remaining parks have only managed to lease out 11 – 32 per cent of their space.

The developers of Hung Phu 2B, expected to measure 62ha, have failed to pay compensation or clear land for the last six years.

For three others, O Mon (600 ha), O Mon North (400 ha), and Thot Not (second stage), the city has been unable to find developers.

“Land compensation and clearance for industrial parks have been carried out slowly in Can Tho,” Vo Thanh Hung, head of the city Industrial and Processing Zones, admitted to Sai Gon Giai Phong (Liberated Sai Gon) newspaper.

With much land earmarked for these parks, however, locals are unable to use it for growing crops.

Land prices are higher in Can Tho than in neighbouring provinces but developers do not get incentives.

Now it costs IZ developers US$150 to acquire and develop one square metre, five times the cost it was just five years ago.

Vo Thanh Thong, deputy chairman of the Can Tho People’s Committee, said: “The master plan for industrial parks remains unchanged despite the slow pace. The situation requires related authorities to work together with developers.”

Push into S Korea needs support

Vietnamese enterprises need more support to expand into the South Korean market, said Ta Hoang Linh, deputy director of the Viet Nam Trade Promotion Agency at a seminar yesterday.

In 1992, Viet Nam and South Korea officially established diplomatic relations. Since then, the total two-way trade turnover has increased by nearly 40 times, from US$500 million in 1992 to $20 billion last year. Consequently, Korea has become Viet Nam’s largest trading partner.

In November 2012 alone, exports from Viet Nam to South Korea reached $5.07 billion, while imports from Korea came to $14.6 billion.

The Vietnamese government has created several incentives for Korean businesses to expand production in Viet Nam; the Korean side has also made it easier for Vietnamese goods to enter its market and sped up free-trade negotiations (FTA).

According to Ki Bong Moon, a representative from ASEAN-Korea Centre, the seminar aimed to help Vietnamese businesses enter the Korean market and introduce those selling goods to prospective buyers.

Also at the seminar, co-organiseda by the Trade Promotion Agency and ASEAN-Korea Centre, experts from E-mart provided information to Vietnamese businesses about furniture, appliances and home decoration and South Korean designers shared their knowledge about design practices.

Insurance premiums tipped to rise

The insurance industry targeted total premiums of VND44.6 trillion (US$2.12 billion) this year, up 10.1 per cent over last year, according to the Ministry of Finance’s Insurance Supervisory Authority (ISA).

Of the total, non-life insurance premiums were expected to surge 10 per cent to VND24.94 trillion ($1.19 billion) and life insurance premiums would increase 10.2 per cent to VND19.74 trillion ($940 million).

Director of the department Trinh Thanh Hoan said to meet the target, insurance products and services would be diversified this year to better meet the demands of a wide range of organisations and individuals.

ISA reported that despite economic hardships, insurance premiums last year surged 11 per cent against the previous year to VND40.59 trillion ($1.93 billion).

To the figure, non-life insurance contributed VND22.67 trillion ($1.08 billion), up 10.2 per cent, while life insurance – VND17.92 trillion ($853.3 million), up 12 per cent.

Insurers last year paid total compensation of VND16 trillion ($761.9 million), of which VND9.17 trillion was on non-life insurance. Last year also saw a record of VND105 billion of agricultural insurance premiums.

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 economic slowdown. The market remained stable and foreign investors saw rich potential in the Vietnamese insurance market, Hoan said.

Hoan attributed the result to the success of diversified insurance products such as individual asset insurance, healthcare, credit and agriculture.

Insurance enterprises last year accumulated VND90.59 trillion ($4.314 billion) to reinvest in the economy, up 9 per cent against the previous year.

Hoan estimated that next year’s investment would hit VND95 trillion ($4.524 billion), although difficulties would continue to besiege financial, banking and real estate sectors, making it difficult to expand the market.

200,000 may cotton on to jobs

With export turnover expected to grow 12 per cent this year, the textile and garment sector will create an additional 200,000 jobs.

The sector targets a turnover of US$19 billion this year, according to the deputy general director of the Viet Nam National Textile and Garment Group (Vinatex) Le Tien Truong

He was quoted as saying by Lao Dong (Labour) newspaper that for every $1billion in turnover, the industry has typically been able to create an additional 100,000 jobs.

Truong urged textile and garment companies to develop solid strategies to consolidate their status in the increasingly volatile market, suggesting focus be placed on small- and medium-sized orders that require fast delivery turnaround, while improving both productivity and product quality.

In the past five years, the textile and garment sector has seen rapid and sustainable growth. Last year’s sales were not as robust as expected because of sluggish economic growth in major markets such as the US, EU and Japan.

“However, Viet Nam still achieved textile and garment export turnover of $17.2 billion and more than 2 million labourers worked in the industry last year,” he noted.

Moreover, Vietnamese textile and garment products were becoming more valued in markets around the world, according to Truong. Exports to the US went up 9.2 per cent, to Japan rose 19.3 per cent and to South Korea, 9 per cent last year, he said.

In 2012, the textile and garment sector used 47 per cent local materials. This year, the sector aims to increase the rate to 50 per cent and to over 50 per cent by 2015.

Quang Ngai licenses EZ projects

Quang Ngai Provincial Industrial Zone Management Board on Monday granted investment certificates to four projects with a combined registered capital of over VND140.7 billion (US$6.7 million).

These are the first four projects to be licensed this year in the province’s Quang Phu and Tinh Phong Economic Zones.

The two zones had 67 projects come on stream, creating jobs for more than 11,000 locals.

Dung Quat rakes in export revenue

Dung Quat Economic Zone in central Quang Ngai Province has earned US$350 million from exports last year.

The zone in 2012 offered certificates to six projects worth over VND4,200 billion ($201 million) and granted the investment license to five projects with a total registered capital of VND44,553 billion ($2.1 billion).

Total industry, commerce and service output in Dung Quat zone reached VND129.8 trillion ($6.2 billion) while State budget revenues received over VND16.6 trillion ($798 million) last year.

Cargo transport via the port was 13.8 million tonnes, equal to 107-184 per cent of the plan.

VN, Chinese firms display goods

Vietnamese and Chinese businesses are showcasing their products at the Ta Lung International Border Gate Trade Fair, which opened in the northern province of Cao Bang on Tuesday.

As part of activities to mark the 63rd anniversary of Viet Nam-China diplomatic ties (January 18, 1950), the week-long fair features consumer goods, fine arts, machines and equipment, electronic products, households utensils and garments.

Ta Lung is one of the most important border gates in Cao Bang province. Import-export turnover via the border gate has rapidly increased in recent years, exceeding $200 million in 2012.

Ta Lung is now home to 30 projects with a total investment of over VND2.5 trillion ($120 million), of which 11 have become operational.

MBV reinforces market hold

Mercedes-Benz has always been the leader in Viet Nam’s luxury car segment with a market share consistently being above 50 per cent.

Although the year 2012 was challenging for the Vietnamese automotive industry – the market dropped by more than one-third, Mercedes-Benz delivered almost 2,000 vehicles to consumers, increasing the total number of Mercedes owners in the country to 30,000.

MBV has been in the Southeast Asian country for 17 years, according to the Viet Nam Automobile Manufacturer Association (VAMA).

Thai products on display in Ha Noi

More than 100 Thai companies are showcasing their products at an exhibition in the capital city from January 17-20.

The event has attracted more than 300 booths exhibiting food, beverages, fruit, household utensils, garments and textiles, jewellery, electronic equipment, healthcare products, cosmetics, auto parts, bicycles and decorative appliances.

The exhibition was co-organised by the Trade Promotion Department under the Vietnamese Ministry of Industry and Trade, along with the Thai Ministry of Commerce, the Thai Embassy in Ha Noi and the Viet Nam Trade Fair&Advertising Joint-stock Company (Vinexad).

Tax for loss-making securities investors reconsidered

Loss-making securities investments may not subject to income tax if investors can prove their losses, according to a draft decree amending the Law on Personal Income Tax.

Under the current regulation, investors can choose between two alternative ways of paying taxes: 20 per cent on investment profits or 0.1 per cent of each transfer value. Those who follow the first method must register with tax authorities early in the year.

However, this rule has drawn criticism from investors, who suffered a hard year due to the market’s prolonged decline. As nearly all investors are paying taxes at the rate of 0.1 per cent of each transfer value, they still have to pay taxes on loss-making share sales.

“All of our customers choose to pay the tax rate of 0.1 per cent of the transfer value because it’s much simpler than the tax rate of 20 per cent on investment profits,” said Huynh Minh Quang, analyst of Woori CBV Securities Corporation.

“The first method requires investors to collect receipts or documents proving they incurred losses from a deal. In addition, investors feel hesitant to go to the tax authorities before the end of the year.” In order to make tax payment easier for investors, the new regulation no longer requires investors to register their tax payment method from the end of the previous year.

“This means if investors think they may incur losses during the year, they can choose to pay at the 20 per cent on profits rate by the end of the year and can ask for a tax refund for their loss-making deals,” an expert from the Ministry of Finance who asked to be unnamed said.

“However, to be eligible for the refund, investors must show proof of reasonable cost.” Incomes from dividends, she added, were still subject to taxation.

The draft decree, prepared by the Ministry of Finance, will take effect in July.

New Lao Airlines services to Da Nang takes off

Lao Airlines has launched a tri-weekly service between Laos’s southern city of Pakse and Da Nang, operating a 68-seat ATR 72 aircraft.

It not only reduces the travel time between Laos and Viet Nam, but will also help tourists travel easier between Thailand and Viet Nam.

A round-trip costs VND4.01 million ($191).

Hong Kong Dragon Airlines Ltd, or Dragonair, a subsidiary of Cathay Pacific, announced last week that on March 28 it will begin a tri-weekly service from Hong Kong to Da Nang using an 180-seat Airbus A320 aircraft.

ADB lends Vietnam US$176 million

The State Bank of Vietnam (SBV) and the Asian Development Bank (ADB) on January 17 signed four loan agreements totaling US$176 million to support four projects in Vietnam.

The loans will help the Vietnamese Government increase public private partnerships (PPP) and infrastructure investment, enhance the competitiveness of towns along the Greater Mekong Sub-region (GMS) economic corridors, improve sanitary and phytosanitary conditions, and food safety handling in cross border trade and tourism, as well as developing the national capacity to mitigate HIV risks and vulnerability in border areas with other GMS countries.

To increase private investment in infrastructure, ADB will provide a US$20 million loan from its Asian Development Fund (ADF) to fund the Public Private Partnership Support Project. The money will be used to establish a Project Development Facility (PDF) to bring bankable PPP projects to the market.

To enhance the competitiveness of towns along the East-West and Southern Economic Corridors and transform the GMS transport corridors into vibrant economic corridors, a US$130 million loan will convert the corridor towns of Dong Ha, Lao Bao and Moc Bai into economic hubs by improving urban-environmental infrastructure and the institutional capacity of provincial and local authorities.

To help Vietnam improve food safety, ADB will provide an US$11 million ADF loan to finance the Trade Facilitation: Improved Sanitary and Phytosanitary Handling in GMS Trade Project. The project will support the country establish food safety surveillance and inspection programmes, including food handling in the tourism industry, and regional cooperation in sanitary and phytosantary management in GMS food trade.

To reach high-risk and vulnerable populations in the border areas along shared economic corridors, ADB and the Vietnamese Government are implementing the GMS Capacity Building for HIV/AIDS Prevention Project. Financed by a US$15 million ADF loan, the project will help the Government develop its national and regional capacity to mitigate HIV risks and vulnerability, primarily in 15 border provinces.

Seminar discusses trade access to RoK

A seminar was held in Hanoi on January 17 to improve business access to the Republic of Korea (RoK) and boost trade exchanges with E-mart, the RoK’s largest retailer.

Jointly organized by the Trade Promotion Agency under the Ministry of Industry and Trade (MoIT) and the ASEAN–Korea Centre (AKC), the event offered participants the chance to seek new partners and learn about sought-after products in the RoK.

Ta Hoang Linh, Deputy Head of the Trade Promotion Agency, said since the establishment of bilateral diplomatic ties in 1992, two-way trade has increased 40-fold to US$20 billion in 2012, making the RoK the largest trade partner of Vietnam.

Vietnam is creating favourable conditions for RoK businesses to expand trade in the country. Meanwhile, the RoK is also making it easier for Vietnamese goods to enter its market, and is accelerating the free trade agreement negotiations.

Ki Bong-moon, AKC Representative, said the centre was set up in 1992 to promote activities in trade, investment, culture and tourism between ASEAN member countries and the RoK. It has helped Vietnamese businesses ship products to the RoK and vice versa.

E-mart experts informed participants of the RoK market trend in interior decoration and household appliances. The group will open its first branch in Vietnam this year. They expect to have 17 outlets in the country by 2017.

On the occasion, E-mart purchased products from Vietnamese firms to stock in its retail outlets.

Amata Vietnam joins Thai bourse

Amata Vietnam officially joined the Stock Exchange of Thailand on January 17 in a bid to seek more investment capital to expand its operation in Thailand.

After joining the bourse (with code name AMATAV), Amata Vietnam expects to increase its capital from US$12.5 million to US$15 million thanks to financial assistance from Siam Commercial Bank and OSK Securities (Thailand).

A subsidiary of Thailand’s Amata Corporation, Ho Chi Minh City-based Amata Vietnam involves in developing real estate and industrial infrastructure.

Thailand has invested around US$6 billion in Vietnam, ranking 10th among foreign investors in the country.

Plastic exports to surpass US$2 billion in 2013

Revenue from plastic exports is expected to rise by 11-13.5 percent to hit US$2 billion in 2013, according to the Vietnam Plastics Association (VPA).

Its export earnings in 2012 reached US$1.98 billion, an increase of 42.2 percent over 2011. Of the figures, plastic products accounted for US$1.58 billion and plastic materials for US$397 million.

Japan has been Vietnam’s largest market for plastic goods over five successive years with the highest export growth in 2012 (up 24 percent on a year earlier), accounting for 22.6 percent of plastic export turnover.

The country’s plastic sector strives to become an advanced industry, producing highly competitive and environmentally friendly products of various types to meet the demand of domestic market and increase the quantity of value added goods for exports.

By 2020, the industry plans to shift its structure to reduce the production of plastics for households and packaging and increase those for building materials and technology.

Southern agricultural producers get new VietGap certificate

Fourteen agricultural producers in the south have been granted the Vietnam Agriculture Practice (VietGAP) green label certificate, which is one level higher than the conventional VietGAP recognition.

The certificates were presented at a conference jointly held by the National Agro-Forestry-Fisheries Quality Assurance Department (NAFIQAD) and the Canadian International Development Agency (CIDA) in Ho Chi Minh City on January 15. The event aimed to promote the linkage between production, distribution and consumption of VietGAP green label agricultural products.

The awarded producers included three vegetable cooperatives, five pig raising farms and six chicken raising establishments.

At the conference, about 20 contracts were signed between agricultural producers winning VietGAP green label and major distributors and consumers in Ho Chi Minh City.

Compared to previous VietGAP standards, VietGAP green label sets stricter standards on the quality of products and covers the whole process from growing to processing, packaging and trading.

Preferential tariffs – a boon for exporters

Vietnam should take advantage of free trade agreements (FTAs) signed with foreign countries to achieve its set target of 10-percent export growth in 2013.

The suggestion was made by Pham Van Chinh, Head of the Import-Export Department under the Ministry of Industry and Trade (MoIT).

He said preferential tariffs offered by FTAs will help Vietnamese exporters penetrate overseas markets while enjoying production expansion, trade promotion and incentive monetary policies.

Chinh added that Vietnam has already signed FTAs with some other ASEAN nations, Chile and Japan which account for 25 percent of the world’s total import turnover (estimated at US$13 billion).

He emphasized the key role of the ASEAN market in boosting Vietnam’s export revenue, saying those countries contribute about 45 percent to the country’s total export turnover.

Last year Vietnam earned approximately US$53.5 billion from exports to these markets, Chinh said.

As the country has completed negotiations on the Trans-Pacific Partnership (TPP) agreement and FTA with the European Union (EU), Vietnam expects to achieve 86 percent of its export earnings from the FTA markets.

In recent years, he noted, Vietnam’s exports to FTA markets, especially to ASEAN members, Japan, China and the Republic of Korea (RoK), have grown considerably.

However, Chinh said, local businesses should seize every opportunity offered by FTAs in the process of achieving deeper international economic integration. They should make full advantage of certificates of origin (C/O) to enjoy preferential tariffs stipulated by FTAs.

Vietnam to join Int’l Tourism Bourse in Berlin

A delegation of the Vietnam National Administration of Tourism (VNAT) will take part in International Tourism Bourse (ITB) to be held in Berlin, Germany from March 6-10.

They will launch various activities within the framework of the 2013 national tourism promotion programme.

More than 20 Vietnamese businesses will put up their stalls covering 142 sq.m with the theme of “Red River Civilization” to introduce sea and island tourism services to the international community.

Accordingly, Ha Long Bay is Vietnam’s tourism trademark, but the Trang An relic site in Ninh Binh province will be advertised as a cultural heritage worth being recognized by the United Nations Educational, Scientific, and Cultural Organization (UNESCO).

ITB 2013 will draw the participation of travel agencies, airlines, hotels, transport companies and online service companies.

The highlights of the event will be exhibitions, seminars on tourism, meetings between businesses and international partners, press conferences, presentations of tourist products and services.

ITB 2012 attracted a total of 10,644 stalls from 187 countries and territories over the world, including 65 from Vietnam.
As a result, the number of foreign visitors to Vietnam in 2012 rose to nearly 7 million, up 13.86 percent compared to 2011, including 106,608 German arrivals showing a year-on-year increase of 9.63 percent.

Emivest Company admits unreasonable hike in egg price

The Emivest Feelmill Company on January 16 admitted that they have indeed caused an unreasonable hike in the price of chicken eggs, leading to instability in the market and much consumer concern.

They were speaking at a meeting with authorized organs in Ho Chi Minh City and the neighboring province of Binh Duong, to clarify the recent egg price hike.

At the meeting, authorized organs proved that the egg supply in HCMC had not reduced but increased, hence the hike was unjustified.

On the same day, the company lowered the price to VND23,200 for a pack of ten chicken eggs and said they would further reduce to VND20,200 by January 19.

Emivest also promised to keep the chicken egg price stable from now until Tet Lunar New Year.

Dao Thi Huong Lan, director of the Department of Finance in HCMC, said that the egg price increase by Emivest caused instability in the market and violated the law.

She proposed the tax department in Binh Duong Province charge tax on revenue generated by the company on the recent hike of egg price.

HCMC will send a report to relevant ministries and departments to propose measures to strictly handle CP and Emivest Companies for their irrational price hike.

Because of tough responses from authorized organs and Co.opMart Supermarket, which has refused to sell eggs supplied by CP Company, the latter slashed egg prices by VND700-800 per egg to cost VND2,160 since January 16.

However, the company has not reduced prices in the northern region, which have increased four times within the last one month.

At retail markets, the price of chicken egg remains high at VND2,800-3,100 per egg and for duck egg at VND3,100-3,300.

Nguyen Tien Dung, director of Co.opMart Supermarket in Hanoi said that CP Company has not made any move to trim down egg prices in the northern region.

Co.opMart Hanoi has been forced to stop selling eggs supplied by CP Company as they are selling eggs under the price subsidized program.

Authorized organs in Hanoi have yet to meet with representatives of the CP Company to clarify their reason for the sudden hike in egg prices.

HCMC, Binh Duong Province attract Japanese investors

Japan has become the biggest foreign investor in Ho Chi Minh City with a total capital investment of more than US$2.7 billion in various projects.

Mitsuhiro Mori, Chairman of the Japanese Business Association in HCMC, said apart from 600 Japanese businesses operating in the City, many more are keen to invest here.

Japan also leads the flow of foreign capital in the southern province of Binh Duong, with 176 valid projects and capital investment of   US$3.1 billion.

Japanese investors contributed 18 percent of the total Foreign Direct Investment (FDI) in Binh Duong Province, mostly in hi-tech and high value-added industries, such as car manufacturing, food and beverage processing.

Becamex IDC Co has invested US$1.2 billion in one project alone–the Binh Duong Tokyu urban area. The project will cover 71 hectares and will comprise of 7,500 apartments, villas, amusement parks, trade centers and offices for lease.

Meanwhile, Dai Nippon Printing has developed a $35-million factory that produces laminate film and printing and packaging material.

Japan’s Aeon, the biggest retailer in Asia, has injected a further $95 million into a project to build a big shopping centre that covers more than six hectares.

Another Japanese enterprise, Wonderful Saigon Electrics, channeled $150 million into its hi-tech factory to produce camera modules used in mobile phones.

The Saigon Stec Co–a Japanese funded corporation in HCMC has spent $175 million to hire land in Tan Uyen in Binh Duong Province for expanding its factory to produce electronic circuit boards for cameras.

EVN forced to buy power from China

Due to lower hydropower output, the State-owned Electricity of Vietnam Group (EVN) intends to spend nearly VND5 trillion (USD239.6 million) on power purchases from China this year.

Dang Hoang An, EVN Deputy General Director said on January 16 that dry weather would affect several areas in Vietnam this year with the central and southern regions being the hardest hit.

As a result, apart from power purchases from foreign sources, EVN would have to spend as much as VND5.542 trillion (USD265.5 million) on mobilising more diesel-fuelled sources in 2013, driving up retail power prices, he noted.

The country’s power output is estimated to total 133.4 billion kWh this year, up 11% from a year earlier. The national power consumption during this dry season is estimated at 64.14 billion kWh.

The country targets hydropower output at 53.94 billion kWh during the year, accounting for 40.4% of the national figure.

Coal-fuelled power sources are expected to contribute 22% to the national output, equivalent to 29.4 billion kWh while gas-fuelled power sources 44.35 billion kWh, representing 33.24% of the national figure.

The country is estimated to have to mobilise 1.57 billion kWh from diesel-fuelled power sources and import over 3.6 billion kWh from China.

According to An, the mobilisation of diesel-fuelled power sources would drive up production costs and more losses. He explained that it costs VND3,530 to produce 1 kWh which is then sold at an averaged VND1,400.

He estimated that the consumption of 1.57 billion kWh from diesel-fueled power sources this year would mean EVN has to bear additional productions cost of up to VND5.542 trillion (USD265.5 million.

Concerning power purchases from China, EVN Deputy General Director Dinh Quang Tri said the group has signed five-year contracts to buy electricity from the neighbouring country.

EVN currently has to pay around VND1,300 per kWh of electricity sourced from China, according to a reported by made Minister of Industry and Trade Vu Huy Hoang at a National Assembly’s meeting in the middle of last year.

This means that EVN would have to pay VND4.773 trillion (USD214.3 million) on power purchases from China this year.

According to existing contracts EVN would be forced to buy a certain amount of electricity from China annually.

As a result, EVN was compelled to continue buying power from China at prices much higher than domestic sources last year even though domestic power supply was sufficient.

Regarding power consumption, Dang Hoang An emphasised the urgent need to work out more effective measures to encourage people to use electricity more efficiently.

“Domestic power consumption is still inefficient,” he assessed.

Power retail prices are estimated to increase by 7.2% to averaged VND1,459 per kWh this year.

Experts: Settling bad debt no easy task

Foreign financial experts have cast doubt on a quick fix for bad debt in Vietnam, saying the country lacks a clear mechanism for debt settlement.

Darry Dong, a global financial market expert at International Finance Corporation (IFC), said Vietnam lacked a mechanism for foreign investors to get involved in settlements of bad debt. Few foreign investors pay attention to bad debt settlements here due to the unclear mechanism.

Investors would buy debts here in the country if the mechanism was favorable, Dong told a seminar on debt settlements held by IFC in Hanoi on Tuesday and attended by debt settlement experts from many banks.

P. Varangis, IFC global head for small and medium enterprises, said Vietnam has yet to reach a consensus on the national asset management company (AMC). He asked if it would be established by the State or through a public-private partnership.

The scheme for AMC establishment was submitted to the Government on December 27 and will be passed this month.

Time is an enemy of bad debt, said Dong. The longer bad debt settlement is delayed, the costlier it will be, said Sameer Goyal, the country coordinator for finance and private sector of the World Bank.

According to international accounting standards, the bad debt ratio of Vietnam may be three times higher than the 8.6% announced by the central bank, said Goyal.

Vietnam-EU FTA not for substandard commodities

The forthcoming free trade agreement (FTA) between Vietnam and Europe Union will help reduce up to 90% of tariff lines on Vietnamese exports to EU to zero but this market accepts high-quality commodities only, heard a seminar in Danang on Wednesday.

According to the seminar held by the EU-funded Multilateral Trade Assistance Project (EU-Mutrap) in coordination with the Vietnam Chamber of Commerce and Industry’s Danang branch, EU is one of partners seeking the highest criteria on food safety and hygiene, labor and environmental protection. Therefore, to benefit from the FTA between the two sides, Vietnamese enterprises will have to strengthen their competitive capability as well as products’ quality.

At another seminar in HCMC on December 22, 2012, Claudio Dordi, chief consultant of EU-Mutrap, said this technical assistance project will keep Vietnamese firms updated on technical standards to boost their exports to the EU. Besides, he said, the project will provide market information to help Vietnamese products satisfy EU consumers’ demand.

Supposing that Vietnamese enterprises can meet EU technical criteria, they will also be unable to win the confidence of the EU market if failing to offer goods ensuring health safety and satisfy their choosy demand, the expert noted.

Moreover, according to the seminar in Danang, consultants of the EU-Mutrap project also noted difficulties for Vietnam when deploying commitments of the FTA, including applying a 0% tax rate for most of products imported from EU.

Specially, Vietnam will have to open services markets and apply transparent regulations on business management and investment, they stated.

These consultants advised local relevant authorities and entities to consider the possible challenges to avoid negative outcomes accordingly.

Meanwhile, the European Chamber of Commerce in Vietnam (EuroCham) said the agreement will benefit both Vietnam and EU in terms of bilateral trade. For instance, the agency said, the two sides will soon conclude commitments on market opening, and removing tariffs, technical barriers and anti-dumping problems.

Import tax reduction in line with the FTA will facilitate Vietnamese exporters to accelerate exports to EU, especially products facing fierce competition from foreign rivals like China and others that have yet to clinch an FTA with EU.

On October 8, 2012, the first round of the bilateral FTA negotiations officially started in Hanoi, with four rounds of talks set for this year.

EU now is one of Vietnam’s leading partners in terms of trade and investment. In 2012 it emerged as the largest importer of Vietnamese products with total value of US$20.3 billion, marking up 22.5% year-on-year and accounting for 17.7% of the country’s total.

Vietnam-EU cooperation relationship has entered a new phase since the signing of the Partnership and Cooperation Agreement (PCA) in June 2012. PCA has opened up great chances for establishing a more liberal trade area, eliminating barriers and enhancing trading and investment conditions for both sides.

Color-coated steel sheets face anti-dumping case

After Indonesia slaps anti-dumping duties of 13.5-36.6% on Vietnam’s cold-rolled steel, Thailand will likely bring up an anti-dumping case against Vietnam’s color-coated steel sheets due to an upsurge in export of this item to Thailand.

The Vietnam Steel Association (VSA) said on Tuesday the metal-plated and color-coated steel sheet association of Thailand late last year had issued the second warning, saying that it would file a petition or put up a trade defense against Vietnamese steelmakers.

The Thai association said the volume of color-coated steel sheet exported from Vietnam to Thailand did not fall but kept surging after its first warning in October 2012.

From November 2011 to July 2012, Vietnam exported around 1,000-3,000 tons of color-coated steel sheets per month to Thailand. The export volume rose to 6,000 tons a month in August and September and then, nearly 10,000 tons in October.

In the second warning sent to VSA in December 2012, Korrakod Padungjitt, chairman of the metal-plated and color-coated steel sheet association of Thailand, stressed color-coated steel sheets from Vietnam were posing a threat to Thai producers. This is the reason why the association is considering trade defense or anti-dumping petition against Vietnamese steelmakers.

VSA has recently sent a dispatch to local steelmakers, telling them to get prepared for the worst. In addition, the association has requested the companies exporting color-coated steel sheets to Thailand to control their export volumes and prices to avoid making the situation more complicated.

Local steelmakers now have a capacity to produce 2.6 million tons of metal-plated and color-coated steel sheets every year, far exceeding the domestic demand. Therefore, they have to boost export and face a high risk of dumping accusations.

In 2012, the sales volume of construction steel was only 4.5 million tons, down 10% against 2011. However, consumption of other steel products such as steel pipes, cold-rolled steel and galvanized steel sheets increased 20-40%, leading to growth of 3% in total steel demand.

Given the difficulties in 2013, VSA forecast steel consumption will only pick up 2-3%. In January-November 2012, Vietnam had exported over two million tons of steel, bringing in more than US$1.6 billion.

Beihai-Halong sea service due this month

The sea tourism service connecting Beihai in China’s Guangxi to Halong City in the northern province of Quang Ninh, will be opened late this month with one journey per week.

Ha Quang Long, director of the Department of Culture, Sports and Tourism in Quang Ninh Province, said that the service was scheduled for opening on January 25. In the first phase, there will be a ship transporting around 500 tourists from China to Halong every week, he added.

In addition to this new service, a sea route from China’s Fangcheng nearby to Halong was opened last month, bringing hundreds of Chinese tourists to Halong each week.

Currently, the number of Chinese tourists coming to Halong by sea is growing well, with regular journeys of international cruise lines from China.

Specifically, StarCruises is operating weekly journeys from China’s Sanya Island to Halong. From last November until this April, StarCruises will have 88 journeys to Halong with over 1,000 tourists each, mainly coming from China, Hong Kong, Japan and South Korea.

According to the department, there were over seven million tourists coming to Quang Ninh Province last year, up 8% from the previous year, with international tourists accounting for around 2.4 million. The province’s tourism revenues obtained last year were estimated to reach VND4.1 trillion, up 16%.

HCM City wants to extend tramway project’s route

HCMC authorities are seeking approval from the Ministry of Transport to extend the route of the tramway No.1 project to Binh Thanh District’s Tan Cang area instead of having it end at Ben Thanh Market as planned earlier.

The proposal is an effort of the local government to further develop commuter transport service as the adjusted scheme for the tramway is still aligned with the 1/2000 scale of an urban zoning plan on a total area of 930 hectares for the city’s center.

Under the initial design, the tramway No.1 will link Ben Thanh Market in District 1 with Mien Tay Coach in District 6, stretching 12.2 kilometers along Vo Van Kiet Boulevard. However, after completing the detailed zoning plan of the heart of the city, the municipal authorities want to lengthen the route to Tan Cang to attract more passengers to use the public transport facility. In the future, the tramway might be connected with Thanh Da Peninsula to serve tour visitors to the city.

At a meeting of the HCMC Department of Transport in HCMC on Tuesday, Minister of Transport Dinh La Thang urged the local government to accelerate the zoning plan to pave the way for the project’s construction.

In 2008, the city’s government clinched an agreement with a consortium of two investors, Thanh Danh Construction & Trading Limited Co. and Malaysia’s Titanium Management Co., to carry out the project.

But both sides had failed to share the same voice in talks three years ago over financial issues including total investment capital, resulting in the project’s suspension, and the city has been seeking new investors since then. Site clearance process of the tramway scheme running along Tau Hu Canal has been complete as of now.

While awaiting new investors for the scheme, the city has opened a bus rapid transit route connecting Ben Thanh Market with Mien Tay Coach running along Vo Van Kiet Boulevard to help ease severe traffic congestion in central areas, especially those routes from Ben Thanh Market to District 6.

Investor of Lach Huyen port to be replaced

Saigon Newport Corporation may replace Vietnam National Shipping Lines (Vinalines) as developer of Lach Huyen international port in the northern port city of Haiphong.

According to a representative of Vinalines, the Ministry of Transport is seeking approval from the Government to award the project to Saigon Newport and a Japanese partner.

Besides, Saigon Newport has also proposed to borrow preferential loans to develop the project while the Japanese partner wants its capital contribution to be increased to 49%.

Previously, Deputy Prime Minister Hoang Trung Hai asked the ministry to propose a firm which can replace Vinalines and carry out the project under the public-private partnership (PPP) format with the Japanese partner.

The Lach Huyen international port project has two components, with the first component worth nearly US$900 million and using Japan’s official development assistance (ODA) loans and Vietnam’s reciprocal capital. Meanwhile, the second component worth US$321 million is invested by Vinalines and Japanese partners.

Vinalines signed a deal with Japan’s Itochu, MOL and NYK to develop the port in November, 2011. However, the project has yet to be commenced.

Under the seaport system development planning until 2020, Haiphong City’s Lach Huyen international port will be the main center for sea goods transport between northern provinces and regional countries.

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

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