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Purchasing power sees slight decline

The purchasing power of Vietnamese residents has slightly reduced according to the General Statistics Office (GSO), following a month-on-month decrease of 0.1 per cent of the total retail sales value of goods and services.

In the first nine months of this year, the total sales value reached VND1.7 trillion (US$81.6 billion), up 17.3 per cent over the same period last year.

The turnover of industrial goods in 2012 was VND1.3 trillion ($63 billion), accounting for 77 per cent of the total. This is a year-on year rise of 16.5 per cent.

The revenue from hotels and restaurants rose 19 per cent from last year, making up 12 per cent of this year’s figure.

Sales from other services totalled 10 per cent of the value, representing a high growth rate of 40 per cent.

Vu Manh Ha, an economist from the GSO said that a 2.2 per cent surge of the consumer price index (CPI) this month – the highest it has been so far this year – was a factor behind the decrease in purchasing power.

Notably, prices of healthcare services rose by 23 per cent while education and training climbed 17 per cent, Ha said.

He added that purchasing power is expected to increase again in the last months of the year providing there are no financial and monetary fluctuations affecting the CPI.

He said CPI was expected to remain stable in single digits for the whole year.

Firms call for fewer tax adjustments

Frequent changes in tax regulations, issued by the Government in a flurry of tax-related circulars, are posing difficulties for enterprises seeking to anticipate and comply with all the regulations, according to business representatives at an annual dialogue with the Ministry of Finance held in Ha Noi on Thursday.

Viet Nam Chamber of Commerce and Industry president Vu Tien Loc said that 15 per cent of over 1,500 enterprises surveyed about tax and customs policies raised concerns over procedures and ability to access updated regulations, as well as high tax rates.

However, few enterprises criticised the performance and attitude of tax and customs officials, Loc said.

Enterprises have limited capacity to access tax information, said a representative from the Small- and Medium-Sized Enterprises Association in the northern province of Phu Tho, Nguyen Xuan Hue.

Doan Trong Ly, director of the HCM City-based APROCIMEX Joint Stock Co, complained of cumbersome documentation requirements, offering an example of the city requiring documentation of previously-imported goods to document tax payments.

Other time-consuming procedures included applications for exemption or reduction of land use fees and personal income tax refunds, the business representatives said.

Tran Quang Binh from the Animal Feed Joint Stock Co in the northern province of Yen Bai also asked for relief from high value-added taxes during the current economic downturn, noting that VAT rates had actually risen on some raw materials his company used, e.g., tapioca.

The deputy head of the General Department of Taxation, Cao Anh Tuan, said relevant bodies would study and work to simplify regulations.

He noted increased use of electronic tax filings in recent years has helped to save time. There were about 1,500 users in 2009, 9,000 people in 2010, 80,000 people in 2011 and, through this month, the number had increased to over 153,000, he said.

Export controls key to maintaining security

The need for more stringent export controls related to maintaining national and regional security was highlighted at a conference held in HCM City yesterday.

Tran Thanh Hai, deputy head of the Import-Export Administration under the Ministry of Industry and Trade, said many acts of terrorism have occurred recently in the world related to political and religious issues, and several countries were in possession of nuclear and other weapons of mass destruction.

The situation has seriously affected the security of each country in particular and the region in general. Therefore, export control activities were necessary to limit potential accidents, he said.

He said that keeping in mind the important role export plays in the process of transforming the economy, the Ministry of Industry and Trade and other ministries have issued various regulations to strengthen exports while ensuring national security and defense.

Viet Nam’s consistent purpose in its export control policies was to prevent the dispersal of items that endanger society while creating maximum favourable conditions for businesses to enhance exports, he said.

Atsuko Nishigaki, director of the Office of International Affairs for Security Export Control of Japan, said export control aimed at preventing products and technology that can be used to develop weapons or military material by countries or terrorist forces, threatening the world’s peace and security.

“There are certain dual-use goods or technologies that can be used for both civil and military purposes. They are generally intended for civil use, for example, in industry, but can also be used to develop weapons or military material,” she said.

She urged Viet Nam to complete export control regulations in an effort to further develop the country’s economy and contribute to regional security.

She said many experts were concerned that terrorism forces can take advantage of “loopholes” in Viet Nam’s export control regulations to transit dangerous products.

Tran Xuan Long, director of Import-Export Administration’s Legal Affairs, said the country would soon review existing regulations on export control mechanisms with a view to making them more comprehensive.

“It will also strive to enhance international co-operation in order to bring the country’s export control systems in line with international standards,” he said.

Furthermore, the department would work to increase awareness of the importance of export controls among officers, civil servants, citizens and businesses, he said.

The conference was jointly organised by Viet Nam’s Ministry of Industry and Trade and Japan’s Ministry of Economy, Trade and Industry.

Auto bosses call for rational policy

Automobile manufacturers and experts have affirmed that taxes and fees need to be changed to stimulate the automobile industry and the sluggish car sales in Viet Nam.

Speaking at a seminar on Thursday, the Viet Nam Automobile Manufacturers’ Association (VAMA) chairman Laurent Charpentier said 10 years ago Viet Nam’s automobile industry made great contribution to the country’s economy.

Now the volume of cars being sold had turned down. He said in the first eight months of this year, car sales fell to 64,520 units, a year-on-year decrease of 33 per cent.

Charpentier attributed the reduction to the economic downturn and taxes and fees that influenced consumer psychology.

Pham Anh Tuan, deputy director of the Ministry of Industry and Trade’s Heavy Industry Department, said Viet Nam was the only ASEAN country facing a downturn in the automobile industry. Tuan said continually changing taxes made the local car market fluctuate strongly.

Tuan said the Viet Nam automobile market still had great potential but it needed stable long-term policies to develop, such as policies on support industries, taxes and fees and infrastructure development.

At the seminar, Do Huu Hao, former deputy minister of the Ministry of Industry and Trade, affirmed that in the following decades, no transport means could totally replace cars. The seminar was a chance for economists, policy makers, and associations to propose solutions to support the domestic auto industry.

Bui Ngoc Huyen, general director of Xuan Kien Auto JSC (Vinaxuki), blamed the changeable tax and fees policies on the poor vision of policy makers. Huyen said Viet Nam had professional skills and materials to produce cars but inappropriate policies had hindered development of the automobile industry.

Huyen also said support industries has fallen short of expectation and needed backing.

Nguyen Manh Hung, deputy chairman of the Viet Nam Standards and Consumers Association (VINASTAS), said cars were not considered a luxury nowadays. Taxes and fees needed to be stable to maintain consumer interest, he said.

Nguyen Khanh Toan, from the VAMA, said authorised agencies needed to review taxes and fees. Cars were currently subject to five kinds of tax and nine kinds of fees. Therefore, the valued added tax should be slashed from 10 per cent to 5 per cent, corporate income tax should be cut to 20 per cent from 25 per cent and special consumption taxes and import taxes should be balanced with international and regional countries.

Tran Tan Trung, general director of Lien A International JSC, said car ownership registration fees were raised 20 per cent in Ha Noi, 15 per cent in HCM City and 10 per cent in other cities. That needed to be re-adjusted to avoid tax fraud as cars from Ha Noi and HCM City were being registered in neighbouring cities

Do Huu Hao said developing a sustainable automobile industry required consistent policies.

HCM City supermarkets say no to price increase by distributors

Supermarkets in HCM City have held off pressure from distributors to hike prices.

Nguyen Thanh Nhan, director of Co.opmart, said there would be no price increases in October though many distributors wanted his supermarket chain to raise them.

Nhan told Viet Nam News that Co.opmart could keep prices unchanged because “there was a big volume of goods in stock.”

“[But] we are carefully considering the demand from distributors. If they are reasonable, we will discuss with them how to share the burden with consumers.”

Any price increase would be gradual, he promised, adding, however, that the prices of goods that have been in price-stability programmes would not be increased.

Duong Thi Quynh Nga, director of public relations at Big C, too said her supermarket would not increase prices in October.

Her supermarket was also examining distributors’ demands, she said.

Since the end of last month supermarkets in the city like Big C, Co.opmart, Citimart, and Maximark have been pressured by more than 100 distributors to increase prices by up to 15 per cent in October, mostly of processed foods, cosmetics, and home appliances.

The distributors blamed the need to hike prices on the higher cost of cooking gas, petrol, and raw materials. They pointed out that prices had been untouched since the beginning of the year.

Supermarkets are comparing various distributors’ prices to choose the lowest. Many of them agreed that the time was not ideal to hike prices.

They are not only committed to keeping prices stable, but also are planning more promotions.

In the first half of October Co.opmart, Lottemart, and Big C are set to roll out discounts of up to 50 per cent.

HCM City eyes high performance computing

Viet Nam National University in HCM City (VNU-HCM) and Intel Viet Nam signed a Memorandum of Understanding to advance High Performance Computing (HPC) in HCM City over the next three years.

This will be done through short-term training programmes, Masters programmes in computational science and HPC, projects for developing pilot urban hydrometeorology and traffic behavior modeling.

A press release from VNU-HCM and the city People’s Committee said the “Viet Nam National University will be building a HPC centre with a 30Terflops Intel-based HPC system to enhance developing applications to address important issues confronting HCM City”.

It said VNU-HCM would develop a curriculum and start the Computational Science/HPC Master programme for the school year 2013-14 with an annual enrolment of 15-20 students.

“Meanwhile, Intel will provide an HPC software development platform, including hard disks and software development tool suites for its standard HPC enabling activities and training for course instructors and a system administrator in 2012-13,” it said.

VNU-HCM staff will also receive support to participate in training programmes of Intel or Intel’s partners.

Rai Hazra, vice president of Intel Corporation’s Technical Computing Group, said: ” We believe HPC will improve daily lives of the Vietnamese people by finding solutions to challenges such as flooding, predicting natural disasters, and solving traffic congestion.”

The HCM City People’s Committee will designate and allocate budgets for computational science and HPC research programs. It will also support people of different levels to participate in short-term training courses and the Masters programme.

“At the end of the first phase (2012-15), the project’s outcomes will be evaluated and a decision, made on implementing next phases, the press release said.

It said the goal for a “prospective second phase (2016-20), would be to develop large HPC applications and upgrade the HPC system to 200 TFlops.

By 2020, Viet Nam would need to build a computer system with computing speed up to 1PFlops to serve domestic scientific and computing communities, it said.

Cooking gas price keeps climbing

Cooking gas prices rose by VND16,000 (0.77 cent) to an average price of VND434,000 ($21) per 12kg canister as of today, gas importer Sai Gon Petrol deputy sales manager Do Trung Thanh told news website dantri.vn.

The new price is nearly 4 per cent higher than last month’s.

He said gas importers adjusted the gas price due to the high world gas price which this month hit US$995 per tonne, a $45 increase against the previous month.

He added that, during the last three months the gas price has increased by VND119,000 ($5.6) per 12kg canister.

“Up to now, we see as much as 38 per cent growth in gas price, compared to the third quarter”, added Thanh.

However, in Ha Noi, the price of gas in some districts still remains at VND418,000 ($20).

Nguyen Huy Hung, a gas retailer in Long Bien district, said he would increase the gas price as soon as his current gas stocks sold out.

Temporary importers must pay VND5billion deposit

The businesses dealing with temporary import for re-export frozen foods and foodstuffs will soon have to deposit VND5million (US$240,000) at the State treasury branch where they are granted business licences.

The regulation is included in a draft circular on temporary import for re-export frozen foods prepared by the Ministry of Trade and Industry.

The circular also requires the businesses to have at least two year experience in temporary import for re-export to get a frozen food trading licence.

The importers must have a storage facility of at least 3,000sq.m which is surrounded by a hard fence at least 2.5m high. The storehouse must be powered by both national grid and electric generators, with other necessary precautions taken to protect the frozen goods.

In addition, the storage areas must be owned by the importers or hired under a contract lasting at least three years. The areas are also required to be accessible to lorries carrying containers and managed by a local People’s Committee.

The importers are asked not to split the temporarily imported containers into smaller parts.

Under the draft circular, the temporarily-imported goods are kept in Viet Nam no longer 45 days before being re-exported to a third country.

The maximum extension for keeping them in Viet Nam is 15 days. After this time, the importers are ordered to re-export the goods to the country they were sent from.

The draft is released to receive contribution ideas from concerned parties.

Hanoi admits failure in upgrading traditional markets

Hanoi Party Committee Secretary Pham Quang Nghi has ordered a reassessment on upgrading traditional markets into commercial centres.

He said the unsuccessful upgrading had not only caused problems for traders, but had also annoyed the public.

At the briefing conference with districts, Nghi said he approved of stopping the plan to transform Nghia Tan market into a commercial building. This project has already been opposed by hundreds traders. Hanoi authorities have stopped the ground clearance work on suggestions of Cau Giay People’s Committee and the investor.

“Moving traditional market in a commercial building hasn’t done anything but concern people.” Nghi said.

Hanoi has upgraded several traditional markets into commercial buildings but they have failed miserably.

O Cho Dua commercial centre has been derided by shoppers and stall holders alike as a white elephant commercial building. The seven storey building remains largely empty beyond the first and ground floors, yet 80% of the market kiosk and office cubicles have been abandoned.

Explaining the situation, experts said people like to buy goods at open markets because of their flexible prices and dynamic relationship between traders and customers.

Furthermore, the way to manage a traditional market is vastly different from how to manage a commercial building and those dynamic features are mostly killed off when a traditional market is put into a commercial building.

State-owned food processor to focus on core line of business

The Viet Nam Southern Food Corp (Vinafood 2) will focus on its core business from now until 2015, as part of its reorganisation scheme recently approved by the Ministry of Agriculture and Rural Development.

Its core business includes food preservation and processing, food wholesaling and retailing storage as well as food circulation and processed agricultural products.

According to the scheme’s mission statement: “Vinafood 2 will continue to bring into play its role as the State-owned enterprise in food trading and make greater efforts to stabilise food prices, while ensuring the country’s food security and contributing to the overall economic stability.”

From now to 2015, Vinafood 2 will purchase of 3.5 million tonnes of rice annually, 90 per cent of which will be used for exports, while speeding up the completion of a rice warehouse system with 1.7 million tonne capacity.

It also aims to post annual growths of 4.67 per cent and 4.16 per cent in revenue and pre-tax profit respectively during the period.

Meanwhile, Vinafood 2 will retain the wholly State-owned stake in its three affiliates including HCM City Food Limited Co, Kien Giang Import-Export Co and the Singapore-based Saigon Food Pte.Ltd.

These three affiliates will then be privatised after 2015 with 65-75 per cent of their stake to remain State-owned.

The company plans to divest capital from non-core areas which experienced poor economic results such as banking, insurance, sea transport, cement and tourism by 2015.

Electronics industry teeters on the brink

With many businesses shifting from production to imports, Viet Nam’s electronics industry is standing on the verge of extinction.

The Sai Gon Giai Phong (Liberated Sai Gon) newspaper reported said last Tuesday that impressive growth figures for the industry were mainly posted byforeign-invested enterprises.

The report cited the Viet Nam Electronics Business Association, as saying that from 2007 until now, the export turnover of Vietnamese electronics industry has increased every year by an average of 40 per cent. The export turnover is expected to reach $4 billion by the end of this year.

The Central Institute for Economic Management estimates that there are more than 10,000 enterprises active in the electronics industry at present.

Although the number of businesses and the export turnover is high, more than 90 per cent of the exports are by foreign-invested firms. Main electronic export items include printers, computer RAMs, and motherboards.

Most electronics businesses imported 100 per cent of the parts and raw materials, and the localisation ratio in products like televisions and music systems was very low.

Furthermore, despite the high export growth rate, the competitiveness of Vietnamese electronics industry was very low compared to ASEAN countries such as Singapore, Malaysia, Thailand and the Philippines.

The report noted that in recent years, electronic manufacturers and assemblers including foreign-invested enterprises have reduced production drastically and shifted to importing finished products for sale.

In 2008, Sony announced it would stop production and assembly in Viet Nam. It was followed by JVC and Toshiba soon after. All these firms switched to import their products from other countries.

Other electronics brands have also gradually decreased production and assembling. As a result the volume of products imported has increased to 3-4 times that produced and assembled in the country.

Nguyen Trung Hoang, director of the Quang Hoang Electronics Services and Trading Ltd. Co. said the main reason for large imports of electronic products in the recent past was the low five per cent import tax.

Meanwhile, a strategic plan to develop the Vietnamese electronics industry has been in place for some time now, but it seems unrealistic, said Ngo Van Vi, general director of the Tan Binh Electronics Joint Stock Co.

The Government names electronics as a key national industry, but it still lacks specific investment policies. There has been no effective implementation of trade promotion activities to attract investment into the electronics support industry, he said.

Nguyen Minh Duc, lecturer at HCM City National University’s Economics Faculty pointed out another reason for the electronic industry’s “bankruptcy” – technological backwardness compared to international standards.

New rules discourage banks from listing

Joint-stock credit institutions, including banks and financial companies, are expected to face even more difficulties to be listed on the stock market after the central bank’s newly issued circular goes into effect on October 29.

On September 13, the State Bank of Viet Nam issued Circular No 26/2012/TT-NHNN, guiding approval procedures for listing shares of joint-stock credit institutions on domestic and foreign securities markets.

According to the new circular, joint-stock credit institutions, including joint-stock banks, joint-stock financial companies and joint-stock financial leasing companies, will be required to meet nine conditions if they want to get permission from the SBV to list shares on the stock market.

One of the strictest regulations concerns the non-performance loan (NPL) ratio. At the end of the quarter, it must be less than 3 per cent of the total outstanding loan during the two quarters preceding the application, instead of two years as the current rules require.

In the context of current economic and financial difficulties, many banks, including major ones, are unable to keep their NPL ratio under 3 per cent for two quarters.

Banks are also required to perform debt classification and risk provisioning at the end of the quarter, preceding the quarter of application, in accordance with the SBV’s regulations.

Many banks find it difficult to meet the rules of SBV Decision No 493 on classification of debts and loss provision for banking operations of credit institutions. Thus, many of them do not have qualified risk-reserve funds.

The new circular also says that subjected credit institutions must comply with restrictions to ensure safe operations in accordance with applicable legal texts for a continuous six-month period, preceding the time of application for listing shares.

The credit institutions eligible for being listed must have an internal audit entity and internal control systems to ensure compliance with Article 40&41 of the Law on Credit Institutions and other relevant legal texts.

This regulation is also difficult for many banks to realise because many of them do not have qualified internal audit entities or control systems.

The circular also requires that joint-stock credit institutions will have an operational duration of at least two years, up to the date of the application, instead of five years in the current rule.

Nine credit institutions are listed on the domestic stock markets: the banks ACB, CTC, EIB, MBB, NVB, SHB, STB and VCB as well as a finance company PVF.

Many banks planned to list their shares this year, but they may have to delay their application because of strict regulations. They include Nam A, Phuong Nam, Dai A, DongA, Techcombank, Quoc Te and HDBank.

Foreign investors eye retail

While the market in most areas is sluggish due to the prolonged recession, the domestic retail and consumer goods industries are still attractive to experts and domestic and overseas investors, thanks to their stability.

Foreign investors, for example, are very interested in the milk industry because of its high growth rate.

Between 1996 and 2006, the industry grew15.2 per cent per year on average and its annual growth rate increased to 29 per cent for the 2006-2011 period.

The development potential was high because the country’s milk consumption was rapidly growing and would reach two billion litres estimated in 2013.

Viet Nam’s per-capita milk consumption is expected to increase much more in the future since it is still low with 15 kilos, compared to the Asian average of 35 kilos.

The Viet Nam Dairy Products Joint Stock Company (VNM), which holds a 40 per cent share of the domestic milk market, has already reached US$1 billion in turnover.

In addition, the Viet Nam Soya Products Company (VinaSoy) also generated VND1.2 trillion (US$57.63 million) in 2011 and expects to reach VND2 trillion this year.

Thanks to its yearly profit growth rate of 50 per cent, the price of VNM’s shares increased by 1.5 per cent in 2011 and are stable, although the rates on a series of shares listed on the market dropped significantly.

Foreign investors hold the maximum permissible level of 49 per cent of VNM’s stakes. They are also ready to pay prices higher than the market rates in order to be able to buy VNM’s shares.

Similarly, shares of Masan Group Corporation specialising in production of instant noodles, soya, fish and chilli sauce, are also being hunted down by foreign investors thanks its advantages and positive business results.

The main products of Masan include essential goods with low value, so consumers still need them in spite of high inflation. In addition, the Masan Group has a wide distribution network.

The company’s turnover is estimated to reach VND11 trillion ($523.8 million) and its after-tax profit is expected to be VND3.5 trillion($166.7 million) in 2012.

As a result, the US-based Kohlberg Kravis Roberts (KKR) Investment Fund is ready to spend $159 million to buy back 10 per cent stake in Masan Consumer, a unit of the Masan Group Corp, according to Viet Nam Stock Market News.

Foreign investors have paid attention not only to consumer goods producers but also to retailers and distributors because these kinds of enterprises have stable growth in line with foreign investors’ long-term investment policy.

FPT Joint Stock Company (FPT), for example, is proficient at retailing IT products and mobile phones, with up to 60 per cent of its turnover raised from this business. Foreign investors in FPT try to hold the maximum permissible level of FPT shares (equivalent to 40 per cent).

After spending more than $60 million to acquire a 10 per cent stake in software giant FPT last year, Singapore-based Orchid Fund increased its holdings to over 11 per cent this month through the purchase of another 2.7 million shares.

US-based Red River Holdings already holds a 5.5 per cent stake in FPT and has been trying to increase its holdings since early this year.

In addition, shares of enterprises involved in production of fertilisers, animal feed and breeding plants are also being sought by foreign investors.

Foreign investors hold a stake of between 25 per cent and 35 per cent at the National Seed Joint Stock Company (NSC) and Southern Seeds Joint Stock Company (SSC).

Fund to aid small firms

The Prime Minister on September 7 signed a decision approving a development plan for small – and medium-sized enterprises (SMEs) for the 2011-2015 period. During this period, Viet Nam will have about 350,000 newly established SMEs and 600,000 by the end of 2015.

In the next five years, the country will strive to reach an export-turnover rate of SMEs at 25 per cent of total export turnover. Investment of SMEs would account for 35 per cent of the total social investment capital. SMEs would contribute to about 40 per cent of the country’s gross domestic product (GDP) and 30 per cent of the country’s total State budget revenues. They are expected to create more than 3.5 million jobs.

Eight groups of solutions were given to carry out the SMEs development plan. They include improving the legal framework for entry, operation and withdrawal from the market of SMEs; supporting finance and credit access and improving the capital-usage efficiency for SMEs; supporting technological innovation and application of new technologies in SMEs; and establishment of a fund to support SMEs.

Among them, the measure to set up a fund to support SMEs is considered to be the most important since most SMEs find it very difficult to get access to bank loans because of high interest rates and strict conditions.

According to the Enterprises Development Department, the future fund would be set up as a financial organisation specialising in supporting SMEs.

There is a difference between the current Credit Guarantee Fund and the future SMEs Support Fund. The new fund would be established only at the central level, and would be responsible for giving preferential loans to SMEs, or directly financing SMEs based on specific cases.

This means that with the SMEs Support Fund, enterprises with feasible investment projects would find it much easier to have capital to carry out business.

The capital for the fund would likely come from the State Budget and domestic and overseas organisations.

Many overseas sponsors have applied many measures to support Vietnamese SMEs, but this capital resource has been used ineffectively because of a lack of management unity.

The fund is expected to help use the sponsored capital resources effectively and, thus, attract the attention of more sponsors.

Bourse merger faces more delays

The merger of the nation’s two stock exchanges will be completed as early as 2014, the head of the State Securities Commission’s market development department, Nguyen Son, said on the sidelines of a meeting last Wednesday. Officially, however, commission chairman Vu Bang is more non-commital. “We expected to propose the merger to the Government later this year but have had to postpone because of the many issues still to be resolved,” Bang said. “It took Malaysia six years to complete the same process,” he said, adding that the merger would have to be split into stages and taken gradually.

Sugar processor’s shares to debut

Son La Sugar Co (SLS) will list shares on the Ha Noi Stock Exchange from October 16 at a reference price of VND20,700 per share. The State Debt and Asset Trading Co is both the largest and the founding shareholder of SLS, currently holding a 47.5-per-cent stake. The company posted a net profit of VND60.12 billion (US$2.8 million) in the first six months of the year, nearly doubling last year’s level.-

Companies to delist shares this month

Three companies will delist shares, including SME Securities Co (SME) and construction firm Song Da 3 (SD3) on the Ha Noi Stock Exchange and Sai Gon Cable (CSG) on the HCM City Stock Exchange. CSG will have its last trading day on October 3, and SME and SD3 will delist on October 26. While SME and SD3 violated disclosure regulations, CSG will delist in preparation for dissolution.-

Investors back out of BOT deals

Slow progress and difficulties in mobilising capital on Build-Operate-Transfer (BOT) projects have forced some investors in HCM City to break from their initial commitment and hand projects back over to the authorities early.

BOT projects are initially designed, built and operated by private sector companies who raise a set amount of the required capital and are entitled to retain all revenues from the projects. After an agreed period of time elapses, the project is handed over for public administration and the responsibility of the private investor ends.

The deputy director of HCM City’s Department of Transport, Bui Xuan Cuong, said that there are currently 10 BOT transport projects being implemented in the city, while nine others are being discussed with potential investors. There have been recent complications over the return on the investment of private companies.

One major operation that is facing difficulties is the on-going Phu My Bridge project, which will connect HCM City’s Districts 2 and 7. Work has been stopped and responsibility passed back to the city after the investor, the Phu My Construction Investment Corporation (PMC), claimed that it would be unable to collect enough of its initial investment back in the agreed period before handing over responsibility to the State. Income from the bridge will be generated from tolls.

Cuong said that the municipal People’s Committee was considering the issue. “Phu My Bridge is not the first BOT project to die prematurely,” he said, adding that currently BOT investors in the project have raised 10 to 15 per cent of total investment capital.

The State is yet to issue clear regulations about the capital assessment process, where investors prove they have the financial capability for the required investment. At the moment, this assessment is based on appraising financial returns recorded by investors over just a few years. After the contract has been negotiated and signed, the authorities only have a limited overview of investors’ business activities.

Senior figures have argued that the BOT mode is not proving successful for either the private or public sector.

Doctor Nguyen Xuan Thanh, director of the Fulbright economic teaching programme, said it was risky for investors to take up BOT contracts as the actual traffic flow through completed transport projects often did not generate enough revenue to meet the expectations of the investors.

Meanwhile, Cuong admitted that BOT contracts would continue to be a burden to Government finances, with the shortfall being left if investors abandon projects being covered by taxes. He said, “the investors should share the risks with the Government, but at the moment contracts are allowing them the right to evade responsibility.”

Pham Sy Liem, vice president of the Viet Nam Federation of Civel Engineering Associations, said that the BOT mode should be replaced by PPP (Public – Private – Partnership), a system where investment and responsibility were shared between the State and investors, limiting the risks for both.

According to Cuong, PPP would be an improvement as, unlike BOT, it accurately appraises the total investment. The regulations in PPP contracts are also more attractive to partners.

Government to fund more research projects on domestic hybrid rice cultivation, production

Hybrid-rice production and cultivation in Viet Nam has been on the upswing in the last few decades, but farmers still must import at least 70 per cent of the hybrid seeds, mostly from China, according to agricultural experts.

To address the need, the Ministry of Agriculture and Rural Development has set up plans to expand areas devoted to hybrid F1 seeds from the current 2,000ha to 5,000ha by 2015.

The Government will also offer funds to private and State-owned companies as well as research institutes in an aim to develop domestically-produced seeds of better quality.

In 1991, the country began planting F1 hybrid-rice seeds, which have higher yields and are more resistant to disease than inbred varieties. The area under cultivation with such seeds increased to 700,000ha by 2009.

Not only did this help secure the country’s food security, it made Viet Nam the world’s third-largest hybrid-rice producer, after China and India, according to the Plant Cultivation Department under the Ministry of Agriculture and Rural Development (MARD).

Hybrid-rice varieties, which are used mostly in the central and northern regions, are favoured by many farmers over inbred-rice varieties because they are easier to grow.

Over the last year, however, the country’s hybrid-rice cultivation area has fallen to about 559,000ha, with an average yield of 6.19 tonnes per hectare a crop, accounting for 12-15 per cent of the country’s total rice-cultivation area.

Speaking at a seminar in northern Nam Dinh Province on Sept 18 to discuss targets for the 2013-20 period, Pham Dong Quang, deputy head of the Plant Cultivation Department, said many domestic hybrid-rice varieties had been certified, but most of them were not key varieties and could not compete with imported varieties.

Viet Nam needs between 15,000 tonnes and 18,000 tonnes of F1 seeds for cultivation a year, but domestically produced F1 seeds meet only 20-25 per cent of the demand.

Also speaking at the seminar, which was organised by MARD and the Nam Dinh People’s Committee, was Nguyen Thanh Lam, general secretary of the Viet Nam Seed Trade Association.

He said the Government had invested more money to produce F1 seeds to meet demand, but fewer farmers were using them.

Only a few domestically produced hybrid-rice varieties were available in Viet Nam, and these come from the same female parental line.

Thus, there are not enough different kinds of hybrid-rice seeds to suit a variety of soil and climate conditions in the country.

The director of the Hybrid Rice Research and Development Centre, Nguyen Tri Hoan, who is also head of the Institute of Food and Foodstuff Crops, said the shortage of researchers was a major cause behind the poor development of F1 seed production.

The lack of cooperation among research institutes and seed companies was another obstacle, he added.

Once the seed varieties are developed by research institutes, seed companies must take part in production activities. Research institutes would only be able to produce about 50-70 per cent of the seeds, Hoan said.

Mai Ba Luyen, deputy director of central Thanh Hoa Province’s Department of Agriculture and Rural Development, pointed out that the most significant problem was whether local researchers could create hybrid-rice varieties with quality as high as imported seeds.

“If they are competitive, then seed companies and farmers could earn profits from producing the domestic variety of F1 seeds, and we could expand cultivation areas,” he said, adding that Thanh Hoa Province had developed areas where farmers specialise in producing F1 seeds.

Under MARD’s plan to 2015, the area under hybrid-rice cultivation would increase to 800,000ha. Domestic production of F1 seeds must meet 50-60 per cent of the country’s demand.

Duong Duc Huy, deputy director of northern Lao Cai Province’s Department of Agriculture and Rural Development, said domestic seed companies could reach this target easily.

But the problem is the limited number of female parental lines to produce F1 seeds.

“If we choose domestic female parental lines and import female parental lines for cross-breeding, then we could have enough to meet demand,” he said.

For example, the hybrid-rice variety LC 25 was cross-bred from an imported female parental line and a domestic male parental line by Lao Cai Province’s Agriculture and Forestry Seed Centre.

It received national certification a year ago, and many farmers bought the F1 seeds.

This year, the production cost of domestically produced F1 seeds has been about VND50,000 a kilo, while the price of Chinese F1 seeds cost VND100,000 a kilo.

“This shows that the production cost of domestically produced F1 seeds can compete on price with Chinese F1 seeds,” Huy said.

Le Quoc Doanh, head of the Plant Protection Department, said MARD planned to invest in infrastructure and equipment for F1 seed production in the Tay Nguyen (Central Highlands) province of Dak Lak, the central provinces of Quang Nam and Thanh Hoa, and the northern provinces of Lao Cai and Son La.

From 2013 to 2020, MARD would increase hybrid-rice cultivation area for the winter-spring crop and summer-autumn crop in the north – central region, the Hong (Red) River Delta, and the mountainous northern region.

Forum discusses the problems facing Vietnam’s economy

Vietnam’s economy saw some goods signs in the beginning of year such as lower inflation and a trade surplus. However, a number of problems have grown, including increasing bad debts, decreasing budget income and credit growth.

Dr. Tran Dinh Thien, Associate Professor, Director of Vietnam Institute of Economics, made the statement at the opening ceremony of the Autumn Economic Forum held yesterday in the southern city of Vung Tau.

Dr Thien also pointed out some paradoxes in the Vietnamese economy such as local banks having large amounts of money, while many enterprises complain about accessing capital.

“Many outstanding problems relating to land disputes, lax management at state-owned enterprises or risks to the banking system, etc. are bringing more difficulties to the economy and people’s lives,” he said, while proposing solutions including setting out a long range development plan, removing quotas for provincial GDP growth, and providing more assistance to enterprises.

National Assembly Deputy Tran Du Lich from HCM City also agreed with Dr Thien, saying that it was necessary to lower corporate income tax and help firms access credit.

Dr Nguyen Dinh Cung, Deputy Director of the Central Institute for Economic Management and other experts also expressed that the solutions should not be based on old viewpoints because they would not help change the situation in a long term.

Vietnam’s economy is facing more challenges, which can be seen in decreasing GDP, the rising number of enterprises going bankrupt and unsold inventories.

The forum was co-organised by the National Assembly’s Economic s Committee, Vietnam Academy of Social Science, Vietnam Chamber of Commerce and Industry and UNDP in Vietnam.

Banks flout state bank interest rate cap  

A number of small banks have raised their short-term deposit interest rate to 12.5%-13.5% per year, higher than the long-term levels despite the State Bank of Vietnam (SBV)’s ban.

The violation started right after the SBV decided to cap deposit interest rate at 9% since June 11, down from the previous 11%.

For small banks which faces weak liquidity, the 9% rate is not enough attractive to depositors, and from now to the year end, they need higher capital demand.

Tran Minh Tuan who deposits money at three banks said, “Last week, some staff called to inform me they were raising deposit interest rates to 12% per annum. A number of small banks offered up to 12.5% per year for one to three-month terms.”

He added that, previously, banks often gave customers a paper certifying interest rate disparities along with a savings book, but now, they only write down the interest rate of 9% per year on the book, meanwhile, the interest rate disparity is paid to customers in cash.

“Previously, only customers who deposited over VND1 billion (USD47,600) were carefully taken care of, but now, bank staff pay attention to VND100 million (USD4,760) deposits. On my birthday, banks sent me a flower basket worth around VND500,000 (USD23.8) as a gift,” he shared.

An unnamed bank director said his bank had raised deposit interest rates to 12.5% per year since September 19. Interest rate negotiations would be applied on deposit higher than VND150 million (USD7,142), instead of the previous VND500 million (USD23,800).

A bank clerk at a state-owned bank said “We’ve been set quotas to increase deposits. Our board has five members who have been told to raise at least VND110 billion (USD5.23 million) per month. The boss even sets quotas for each person if the situation is too difficult.”

After the introduction of the deposit interest rate cap at 9%, banks have had to set up separate funds to offer better under the table interest rates to big clients.

A new staff member of a commercial joint stock bank said that every month, she had to encourage customers to make deposits of VND2 billion.

“My relatives had to help find customers so that I could fulfil the target, but next month, I don’t know how I’ll manage to meet the target,” she said.

Banks are now racing to attract deposits to ensure liquidity from now to the year-end, said a leading commercial joint stock bank official.

Electricity producers face record high coal price hike   

Vinacomin has raised various coal prices to a record high of 28% to nearly 40% depending on the quality for local electricity procurers.

Under the government’s approval to adjust power sector coal prices during the 2012-2013 period, the price increase applied since September 15 is expected to bring Vinacomin an additional VND600 billion (USD28.5 million) in revenue this year.

Coal prices for the power sector just cover less than half of Vinacomin’s production costs, therefore the new price levels will help to cover 70% of Vinacomin’s current losses.

This is the second coal price increase for the power sector after prices were raised 10-11.5% on July 1. The rise is also the highest level so far compared to the average rate of around 10% in previous years.

Despite the two price hikes earlier this year, Vinacomin still required VND7.4 trillion (USD352.3 million) in subsidies due to the losses incurred when selling coal to power producers.

Vinacomin plans to continue increasing coal prices sold to the power sector in 2013 to ensure that the prices align with retail coal prices for other sectors. However, the decision will only be taken by the Prime Minister and be based on the electricity price increase roadmap.


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