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BUSINESS IN BRIEF 22-12Vietnamese products must improve quality to gain foothold

Essential consumer goods are believed to be the strong point of Vietnamese companies, but in reality they are overwhelmed by imported goods because of their better quality, which Vietnamese-made products lack.

The Ministry of Industry and Trade has reported that import turnover of milk, vegetables, fruits, confectionery and medicines touched US$1.38 billion in November, a slight drop compared to the previous month but an increase of 12.5 percent year-on-year.

In the first 11 months of this year, total imports of these commodities hit $13.3 billion, up 11.7 percent over last year, accounting for 12.6 percent of total imports from Vietnam. Of these, vegetables and fruits rose by 16.8 percent; confectionery and cereal products by 66.4 percent; medicines by 20.2 percent; and plastic goods by 24.1 percent.

At first glance, these figures seem irrational as Vietnamese companies can produce these products easily. However, they are being held back on account of two reasons.

First, the quality of Vietnamese products is not on par with foreign made goods and hence do not satisfy consumers. Second, Vietnam had signed many tariff agreements within the framework of free trade agreements such as ASEAN, ASEAN-China, ASEAN-South Korea, and WTO. As tariff cut is inevitable and irreversible, foreign-made products have more opportunities to enter the Vietnamese market. In addition, consumers prefer foreign-made products, so despite the economic slump that has caused people to tighten spending, imported milk and medicines are still in much demand, irrespective of price.

Vietnamese products sell through local supermarkets and trade centers, but foreign-made products have such a firm foothold that if Vietnamese companies do not put greater effort, their products stand to be altogether rejected by consumers on their own home turf, said Nguyen Khanh Long, a representative of wooden toy producer Long Nhat Company.

In fact, Vietnamese-made products have been facing fierce competition as more imported products have been landing in markets. In order to compete with foreign-made products, authorities should put up technical barriers against imported goods and encourage Vietnamese consumers to use domestic-made products and firms should focus on improving quality.

Trinh Chi Cuong, CEO of Dai Dong Tien Plastic Company, said that in order to compete with foreign products, besides improving quality by launching anti-bacteria plastic household products, the company also diversified its products. Currently, the company produces high-quality interior products besides plastic household goods.

Most Vietnamese companies have been attempting to improve quality and their image in the eyes of consumers.

In the competition with foreign confectionery this Tet Lunar New Year, Vietnamese companies are struggling to produce high-quality products.

A representative of Bibica said that this year the company concentrated on making many kinds of high-class sweetmeats with spectacular designs. Despite having the same quality as foreign-made confectionery, Bibica’s sweetmeats will be sold at a lower price by about 20 percent.

Besides efforts from local firms, the intervention of authorities by setting technical barriers is necessary as most companies do not hesitate to compete fairly with high-quality foreign-made products but low-quality imported products that have been flooding the market. Up until now, Vietnam has not built national standards as well as technical barriers against imported products to fortify competitiveness for local products.

According to Nguyen Dang Hien, CEO of Bidrico, the Government should intensify control of imported goods. Loose sanctions have caused more difficulties for Vietnamese firms as Vietnamese products usually have to meet many strict requirements to export to other countries.

Moreover, the Government should encourage Vietnamese people to consume Vietnamese-made products so that in 2015, when the free trade agreement between ASEAN and China takes effect, Vietnamese-made products will already have made a strong foothold.

Companies announce Tet bonus plans, despite financial straits

Despite financial difficulties, many enterprises are trying to find ways to pay Tet bonuses for their employees and buy bus tickets for them to return home for the holidays.

Workers produce furniture for export in the Nam Dinh Forest Product Corporation.
Nguyen Tan Dinh, deputy director of the HCM City Export Processing and Industrial Zones Authority (Hepza), said that, as of today, 160 out of a total of about 1,000 enterprises at industrial parks and export processing zones in HCM City had reported their bonus plans for Tet 2013.

The highest and lowest Tet bonuses at domestic enterprises would be VND400 million (US$19,175) and VND2.1 million, respectively.

Foreign-invested companies are paying from VND2.3 million to VND217.4 million ($10,421).

In general, each worker will receive an average Tet bonus equal to one month of basic salary, he said.

The base monthly salary for this year was higher than last year’s, so the lowest bonus for 2013 Tet would be higher than the previous year’s Tet bonus.

In addition, 56 per cent of the 160 enterprises also plan to offer nearly 15,000 Tet gifts worth VND4 billion for disadvantaged employees and launch other support programmes.

But Dinh said that Tet bonus payments had not been confirmed at many companies.

More than 800 enterprises at IPs and EPZs in HCM City have yet to report their Tet bonus plans to Hepza.

However, 600 companies with trade unions have pledged salary commitments and bonus payments to workers.

“The remaining enterprises are still quiet about their plans,” he said, noting that Hepza had asked these companies to report their Tet bonuses to Hepza so the latter can prepare gift plans.

“Last year, all enterprises paid Tet bonuses to their employees, so we hope this year will be the same,” Dinh said.

Ho Xuan Lam, Hepza’s office manager, said that enterprises were co-operating with Hepza’s trade unions to offer 6,000 free bus tickets to workers and labour union staff so they can return home for Tet.

Hepza and the HCM City Department of Transport, for the first time, will help sell bus tickets at the city’s IPs and EPZs to save time for workers in buying bus tickets.

Buses will go directly to an IP or EPZ to pick up workers if enough of them sign up for tickets.

Hepza will also organise a meeting for 600 workers at IPs and EPZs who have not returned home for many years. HCM City Party Committee leaders will visit and present gifts to them.

Finance Ministry urges fee collection for road use

The Ministry of Finance has requested people’s committee nationwide to collect road use fees for motorbikes, but has not outlined how such a fee should be collected.

The ministry has proposed that people’s committee outline the fee collection programmes and directly instruct the Department of Transport and the Department of Finance on their implementation.

Cities and provinces are required to draft fee levels in line with Circular 197 and submit these to their people’s councils for consideration. The fees must suit the specific socio-economic conditions of their localities.

According to the Ministry of Finance, the fees will be added into the Road Maintenance Fund and the fund use will be tightly supervised.

Under Ministry of Finance Circular 197 which takes effect from January 1, 2013, a fee level of VND130,000-VND1.04 million (USD6-USD47.6) per year will be applied for cars and VND50,000-VND150,000 (USD2.38-USD7.14) to motorbikes.

The regulation will affect around 35 million motorbikes and 1.5 million other vehicles.

Japan sees more FDI ahead for Vietnam

Vietnam, known for its affordable labour force and a cultural affinity to Japan,  is positioned to capture a larger share of future Japanese investments outside of China,  Japan business experts said.

Japan consistently leads in foreign direct investment (FDI) into Vietnam and in 2012 has extended its margin over other countries. In the first 11 months of 2012, FDI from Japan into Vietnam reached $5.051 billion, accounting for 41.5 per cent of the total registered FDI into Vietnam and leaving Singapore, the second biggest foreign investor in the country with $1.554 billion, only accounting for 12.8 per cent of the total.

“The interest of Japanese corporations in Vietnam is increasingly vigorous,” said Yasuzumi Hirotaka, managing director of Japan External Trade Organization (Jetro) in Ho Chi Minh City.

According to Daiwa Capital Markets, after a rapid increase in Chinese wages in the recent years, labour costs are now much lower in the Association of South East Asian Nations (Asean). As a result, the baton is now passing from China to what economists described as the Asean-7 – Thailand, the Philippines, Vietnam, Indonesia, Laos, Cambodia and Myanmar.

Daiwa Capital Markets cited Nike as typical case in point. According to the statistics, in 2000, 40 per cent of its shoes sold globally were made in China compared to 13 per cent in Vietnam. But today, 41 per cent of Nike shoes are manufactured in Vietnam, compared to 32 per cent in China.

Vietnam’s export growth in the labour-intensive industries of textiles and clothing has been higher than that of China for most of the past decade, while Cambodia’s export growth rate of the sector has also exceeded China’s in the last two years, economists said.

According to Hasu Vietnam, a Vietnam-based consulting firm, Vietnam is highly appreciated as the most suitable destination especially for Japanese investors in manufacturing sector. Because China has no longer been the best destination for Japanese investors, Vietnam can catch the larger share of outbound Japanese investments if Vietnam improves its administrative procedures.

However, the firm said Vietnam has directly competed with Indonesia and India to lure Japanese investors. In spite of some inconvenient administrative procedures, Vietnam still achieves a little higher point compared to Indonesia and India. Japanese prefers Vietnam’s cultural characteristics to Islam characteristics in Indonesia because Vietnam’s culture is more similar to Japan’s. Meanwhile, alhough India’s labour force has advantage of fluent English, Japanese investors use little English, said Vo Thuan, director of Hasu Vietnam.

Vietnam’s labour force is known for its good quality, hand dexterity, good eyesight, diligence and high literacy rate. Moreover, Vietnam has a small number of national holidays and affordable labour costs, said Omi Kenji, director of Jetro’s research division.

Curtain call for road fund

State authorities are busy for the launch of central road maintenance fund to debut in 2013.

The Ministry of Transport (MoT) has started a training programme about legal documents relevant to the road maintenance fund operations to transport businesses in northern areas to Thua Thien-Hue province.

“We have required each provincial transport department to send at least three transport businesses in their areas to join the training courses,” said Central Road Maintenance Fund’s chief of Office Le Hoang Minh.

A similar training round the same in content will follow suit in Ho Chi Minh City on December 17, 2012.

Parallel to training activities, a circular guiding management and usage of the fund would be enacted by the MoT no later than December 31, 2012 to ensure the fund’s smooth running, according to Minh.

Earlier, another circular guiding fee collections to the fund (Circular 197/2012/TT-BTC) and relevant decisions on the fund’s organisation, operation and human resources were ratified by the prime minister.

“In principle, all the sum from road users will be treated as to other state budget raising sources, while expenditure will be controlled through State Treasury system,” said Deputy MoT Minister Nguyen Hong Truong.

According to the MoT, if the fund enters into service on schedule the fee amount from auto drivers would reach VND4.5-4.6 trillion ($214-$219 million) every year to channel into road maintenance, a big amount given the fact that total state capital for maintenance of the country’s highway system was only VND2.495 trillion ($120 million) in 2012, tantamount to 40 per cent of actual demands.

“Due to chronic capital shortages, total investment for periodical repairs of some arterial highways including seriously deteriorated National Highway 1 would be VND8.180 trillion ($390 million) in 2013,” said deputy chief of Directorate for Roads of Vietnam Nguyen Van Quyen.

Besides, the MoT reportedly mulls opening at least 16 toll stations on highway 1 striving to recoup investment capital for build-operate-transfer (BOT) projects.

In a bid to ease transport firms’ burdens the Vietnam Auto Transport Association would further propose for transport firms to pay road maintenance fees every month, instead of every year or every six month as initially planned, according to association’s chairman Nguyen Manh Hung.

“For big transport firms with hundreds of car units one-off fee payment in a huge sum would challenge firms’ operations,” said Hung.

Cai Mep delay is floated

The delayed launch of Cai Mep-Thi Vai port complex is being proposed to address a glut of capacity at southern deep-water ports.

This striking proposal was aired by Vietnam Business Forum 2012’s Infrastructure Working Group and representatives from some foreign-invested businesses providing port services in a bid to tackle capacity redundancy at seaport group 5 covering Ho Chi Minh City and southern Ba Ria-Vung Tau province.

Cai Mep-Thi Vai reports a huge investment capital of VND13.9 trillion ($660 million), much of it ODA funds, and up to 90 per cent of construction is reportedly finalised.

The proposal was viewed as a stopgap solution, while the Infrastructure Working Group’s Ports Sub-group suggested ‘immediately ceasing the licencing of all container terminal building projects in Ho Chi Minh City’s inner parts.’

“Southern container terminals’ financial picture will see critical hardships if no suitable remedies are in place,” said Maersk Vietnam chief executive officer Peter Smidt Nielsen.

According to Vietnam Maritime Administration (VMA) deputy chief Bui Thien Thu, it would be a great waste if the launching of the Cai Mep-Thi Vai port was delayed until market rebound.

“The Ministry of Transport is still urging VMA to continue bidding procedures associated with the port leasing slated for completion in June 2013,” said Thu.

With annual capacity of around one million throughput 20-foot equivalent units (TEU) and two million bulk cargoes and proposed launching from June 2013 this would exaggerate capacity redundancy-cargo deficiency dilemma in southern deep-water container ports.

In reality, rampant development of Vietnamese seaports is put at an alarming level.

Vietnam Seaports Association figures show that actual capacity at port group 5 has doubled market scope, whereas construction of new ports is now underway.

That was why most state-of-the art joint venture container terminals in Cai Mep-Thi Vai area whose total investment amounted $740 million, in which the Vietnamese partners- Vietnam National Shipping Lines and Saigon Port Authority hold 51 per cent of chartered capital, incurred heavy losses.

“Several port operators are on the brink of going bankrupt and since the Vietnamese government is the main shareholder at these port joint ventures the risk to the national budget would be significant,” according to the Ports Sub-group.

Apart from the fact that the shipping market is in a depression globally, serious capacity redundancy at port group 5 came on the back of less effective cooperation among relevant state authorities and local governments when too many licenses on port investment were granted in the past years without taking into account the consequences.

Diapers look to clean up market

Diaper-makers are scaling up efforts for bigger market slices in Vietnam.

The Vietnamese market was currently home to over 50 kids’ diaper brands, according to market research firm TNS, but there were only three big diaper makers, Diana a member of Japan’s Unicharm Group, US’ Kimberly Clark and Procter & Gamble (P&G).

Of them, Diana accounted for 30 per cent market share and was the top diaper maker in Vietnam with an average 30 per cent annual growth expected to hold on in 2013.

Kimberly Clark and P&G, albeit not sharing details about their market share in Vietnam, confirmed their diaper business in Vietnam has contributed a marked part to their global revenue.

“The Vietnamese market is promising to quality family and personal care products which is P&G’s core field,” said P&G Vietnam director Emre Olcer.

Consumer goods’ analysts assumed diaper market big players have over-emphasised the urban market, whereas 70 per cent of the Vietnamese population lives in rural areas.

In this respect, Olcer said the Vietnamese market had saturated the segment of common products, while still lacking quality innovative products to satisfy consumers’ increasingly strict requirements.

“This has motivated development and also represented challenges to firms, forcing firms to try their best for higher market efficiency.”

In the recent past P&G, owner of Pampers brand, pumped $80 million into Pampers factory expansion within the next three years to better serve Vietnamese kids.

To date, P&G’s total investment in two Binh Duong-based factories has approximated $200 million and will increase further in the next three years.

Parallel to expanding factory in Vietnam, P&G also scales up export volume to Asia, Europe and America.

Kimberly Clark also exports products made in Binh Duong-based factory to different Asian markets, Australia, Europe and Latin America.

Unicharm Group recently stepped into Vietnamese market through acquiring 95 per cent stake in Diana in 2011. In the forthcoming time, the group contemplates building the region’s largest factory for product supply to South East Asia and southern China, according to Diana’s general director Do Anh Tu. Unicharm is holding 25 per cent of the diaper and toilet paper market share in Asia.

Auto firms feel the heat

Policy changes have boxed auto businesses into a corner.

The Vietnam Register’s recent requirement to test safety standards of sample car from each batch of imported completely-built unit cars (CBUs) is hurting auto firms.

Auto firms assumed the requirement was unreasonable since these CBU similar versions were earlier checked and got quality certifications from the Vietnam Register.

Firms argued these were global car models which were approved by foreign relevant competent agencies. The cars imported into Vietnam are the same in models with some minor differences related to interior, comfort level or steering wheel position to match Vietnam’s traffic conditions.

“Such requirement goes counter to Clause 7, Item 1 in Ministry of Transport’s Circular 31/2011/TT-BGTVT stipulating that testing is exempted towards sample cars of subsequent batches imported by authorised sales and guarantee agents the same in models with cars getting quality certifications from relevant state agency,” a car business executive commented.

The requirement cast a dent on firms’ sales figures since it could drive up firms’ expenses while customers have to wait for getting needed certifications from registration bodies.

Such requirement came after Vietnam Register officials found most imported double cabin pick up models like Isuzu Dmax, Ford Ranger, Toyota Hilux or Nissan Navara are models not yet approved by foreign agencies.

This would mean manufacturers assembling the cars, ignoring complex checking process abroad and dodging Vietnamese laws to import these cars into Vietnam. The cars thereby might have lower quality than those in foreign markets, according to Vietnam Register.

Vietnam Register made the proposal based on that argument and insisted that the phenomenon had occurred after the Ministry of Industry and Trade enacted Circular 20/2011/TT-BCT imposing stringent requirements on import of under nine seat brand-new cars, which resulted in only auto joint ventures eligible to import cars with almost no competition from commercial firms.

Industry insiders assumed the move would exaggerate firms’ burdens since amid flat sales firms would not import cars in big volumes, while after taking the test a brand-new car would be regarded as a used car with lower selling prices, thus hurting firms’ pockets.

“It is unclear whether the requirement is to shield consumers or to maximise capacity of state invested motorised vehicles gas emission-testing centre. At present, each test at the centre costs around VND100-200 million ($4,700-$9,500),”

“Auto firms are on the tenterhooks since an unexpected policy change would drive up the costs and cause firm headaches,” said car firm representatives.

Chinese steel threats local manufacturers

In the latest movement, the world’s sixth largest steel-maker, JFE Steel Corporation, is wavering whether to acquire a major stake at Taiwan-based E-United Group’s $4.5 billion integrated steel project in Vietnam on concern over China ’s industrial clout in the region.

JFE in March announced it had signed a memorandum of understanding with E-United Group for studying the feasibility of building and operating an integrated steel project with an annual capacity of 3.5 million tonnes by 2016, and the final decision would be released at the end of this year.

E-United Group has secured a site in central Quang Ngai province’s Dung Quat Economic Zone for
the project. This is a part of JFE Steel’s plan for expansion production in South East Asia or India to meet the increasing demand for steel products in emerging economies.

“We initially said a conclusion will be reached by the end of this year, but we’ll need a bit more time,” Eiji Hayashida, president and chief executive officer of JFE, was quoted by foreign media in an interview in Tokyo early this month.

He said despite appreciating the long-term growth potential in South East Asia, JFE “needs to carefully consider the timing” and would push to lower the Dung Quat-based mill’s costs and decide whether to move to the environmental assessment stage by the end of next March.

“Growing competition from China’s steel makers are the biggest challenge for domestic ones. This could lead to the delay of some investment plans in steel industry,” said Pham Chi Cuong, chairman of the Vietnam Steel Association (VSA).

A year ago, Korea’s Posco VST, the only cold-rolled stainless steel maker in Vietnam, warned that it might have to close production due to tough competition with cheap imported products.

According to the VSA, steel imports from China in 2012’s first eight months mounted 5.5 times on-year to 137,500 tonnes. This pressured all domestic steel-makers, especially in the context of economic slowdown.

GDS pushes ITC service

Global Data Services JSC, a joint venture between Japan’s NTT Com and Vietnam Posts  and Telecommunications Group, has become the first foreign-invested enterprise to obtain a telecom licence providing non facility-based services.

The license from the Ministry of Informationand Communications (MIC) enables the company (GDS) to offer a wide range of domestic and international telecom services, beefing up its ability to provide total information and communication technology (ICT) services to multinational companies in Vietnam.

The new telecom services include direct connection to domestic Internet exchanges (IX), overseas connection via international IP-VPN (Arcstar Universal One™), domestic IP-VPN, Internet access, video conferencing and teleconferencing.

New domestic data network service includes local carrier selection. Using this multicarrier capability with carrier-redundant access, GDS designs and provides reliable, cost-efficient networks for the mission-critical systems of corporate customers, such as services for online games or e-commerce. In addition, GDS provides SLA-backed network services to consolidate multicarrier connectivity nationwide.

“With the new licence, GDS is empowered with more opportunities to create new services packages to bring utmost comfort to customers,” said GDS deputy general director Nguyen Trong Nghia.

“We have been extremely pleased with the quality of the GDS data centres and Internet access services that we use to provide to customers in Vietnam. Thanks to its acquisition of this telecom licence, we look forward to using their expanded range of outsourcing services for our delivery of more reliable services,” said CEO of NHN Vietnam Park Jong Buhm. NHN Vietnam is one of GDS customers.

By combining these new network services with existing data-centre, cloud-computing (IaaS, mail and web hosting) and system-integration services, GDS can now offer optimal customer-tailored services covering comprehensive operation, maintenance and support, including various application procedures.

GDS, founded in 2008, operates Vietnam’s most advanced Tier-3 Thang Long Data Centre with ISO27001-certified information security management. The company’s ICT enterprise services, backed by unmatched network stability, realise ideal solutions for online gaming, e-commerce, SNS and recruiting-service providers, as well as insurance and securities firms and banks that require data-center services to manage their websites, data backup and business continuity planning.

Local agro-products yet to penetrate S.Korean market

South Korea, the country with strongly protectionist of its agriculture, has opened the door to a number of Vietnamese farm produce but local firms have yet to tap the foreign market effectively as expected, heard a seminar in HCMC last week.

At the seminar, Chu Thang Trung, deputy head of the Department of Trade Policy for Asia-Pacific Markets under the Ministry of Industry and Trade, said South Korea only allows for the import of fresh fruit on a case-by-case basis, except for easy import of coconuts, pineapples and bananas from other countries.

But in fact, Vietnamese exporters have almost failed to ship the three kinds of fruits to South Korea due to failing to ensure quality of such products, Trung told the seminar held by the National Committee for International Economic Cooperation and the WTO Affairs Consultation Center of HCMC.

In the meantime, other nations and territories like the Philippines and Taiwan have been exporting large volumes of these products to South Korea.

As for other fruits, those countries keen to export products to South Korea must experience many steps. For instance, South Korean relevant agencies will go to the exporting countries to check materials and fruits’ diseases.

At the moment, there are two more Vietnamese fruits permitted to enter South Korea, including dragon fruits accepted in 2011 and mango in October, 2012.

South Korea has accepted Vietnam’s dragon fruits on condition that the product must be applied with heat treatment. The requirement has pushed up prices of dragon fruit by three to four times, so local companies are still seeking the most appropriate way to approach the market.

In 2011, Vietnam exported more than US$18.8 million worth of vegetables and fruits to South Korea, according to the General Department of Customs.

Also, Vietnam is exporting cassava to South Korea but this is the product that South Korea is applying a strict quota system with an import tax rate of nearly 900% for volumes beyond the quotas.

South Korea has committed to accept an annual cassava import quota of 25,000 tons under the free trade agreement with ASEAN. In addition, the nation also fixes voluntary quota adjusted yearly depending on local market demand, with a quota of 160,000 tons set for 2011 and 200,000 tons for 2012.

Vietnam’s cassava exports to South Korea totaled 148,500 tons valued at over US$39 million in this year’s January-October. Similarly, given difficulties in rice tenders and delivery conditions, Vietnamese exporters have only exported a small rice volume to the foreign market since 2011.

Consumers face e-commerce risks

Internet users are facing huge risks in e-commerce activities as they have little chance of verifying information on the websites, a police official told the Vietnam Ecommerce Forum 2012 in HCMC last Friday.

The forum was jointly organized by the E-commerce and Information Technology Department under the Ministry of Industry and Trade, the HCMC Department of Industry and Trade and the Vietnam E-commerce Association.

At the forum, Le Minh Loan of the hi-tech crime fighting police department under the Ministry of Public Security, said his department had prosecuted three companies operating e-commerce floors.

The violators include MB24 trading floor of Online Trading Training JSC mobilizing some VND650 billion from over 100,000 customers. Two others are Cong Dong Viet Trade & Services Investment JSC mobilizing more than 200,000 customers with about VND400 billion and Tam Mat Troi Investment JSC attracting more than 20,000 customers with around VND100 billion.

Loan ascribed the lamentable situation to the loose collaboration in managing website administrators and information on websites among local competent authorities – the Ministry of Information and Communications, the Ministry of Culture, Sports and Tourism and the Ministry of Industry and Trade.

“As of now, there is no information on the number of websites active as e-commerce floors that have not been approved by the industry ministry,” he said.

Meanwhile, detecting signs of violations and tackling the cases is very slow. It is because no State management agency takes responsibility for inspecting and supervising activities of e-commerce floors and news websites, he reasoned. Decree 57/CP on e-commerce has yet to clarify this activity, he stressed.

Ha Ngoc Son, deputy director of the Technical Safety and Environment Department under the municipal industry department, noticed many shortcomings in penalties for the e-commerce industry. Corporate violators are just fined small amounts, so the sanction is not strong enough, he said.

According to Circular 46/2010TT-BTC of the industry ministry, one e-commerce floor will only be established by individuals and organizations registering for business. This means individuals will not be able to set up e-commerce floors without business registration.

However, he said, Article 52 of Decree 06/2008/ND-CP on administrative punishment of e-commerce activities in general mentions no penalty in this case.

Workshop on Vietnam-Switzerland investment

Opportunities for boosting Vietnam-Switzerland cooperation in economics, trade, investment, education, science-technology and tourism were recently discussed at a workshop in Switzerland.

Trade Councilor Luong Manh Hung said Vietnam has achieved an economic growth rate of 5.2 percent and its GDP per capita income has reached US$1,540 in 2012.

The country has invested US$15 billion in 738 projects overseas, and attracted nearly US$213 billion in registered investment capital from 14,364 projects.

Vietnam and Switzerland have signed a number of memorandums of understanding on cooperation in education, finance and banking.

Switzerland ranks 19th among foreign investors in Vietnam, injecting nearly US$2 billion into 91 projects. The capital value remains modest compared to the European nation’s economic power, which is expected to gross US$700 billion in GDP in 2012.

Expert Pham Nam Kim, who works on banking and finance in Switzerland, said Vietnam has adequate conditions to attract foreign investment, especially for its long-term investment plans.

However, he warned that like many other countries Vietnam has struggled to shore up its economy in the context of the global economic recession, and it is no easy task. He suggested Vietnam should show its strong resolve to maintain its achieved economic position.

Dr Minh Tri Amacher, general director of TRISTAR Consulting Co. Ltd. pointed out the legal corridor, infrastructure, and people’s education level as major factors in boosting trade promotion and drawing investment into Vietnam.

Vietnamese ambassador to Switzerland Nguyen The Phiet confirmed that his embassy is willing to provide businesses with up-to-date information on Party and State policies to facilitate their operations, and make recommendations concerning economic policies to the Party and State.

The Vietnamese embassy, in collaboration with relevant Vietnamese and Swiss agencies, has organised 15 business roundtables and investment promotion conferences since late 2009.

Land use fee calculation to be reviewed

Property firms may be relieved of the pressure of land use fee in the coming time as relevant ministries have promised to remedy the inadequacies in this issue.

This was one of the most discussed issues at a seminar aimed to seek solutions for the problems in the HCMC property market held by the HCMC Real Estate Association (HoREA) in the city last Saturday.

Under the calculation method given in Decree 69, property enterprises have to buy land twice: in the form of site clearance compensation and land use fee payment, said Pham Dinh Cuong, director of the Department of Public Asset Management.

HoREA proposed the State allow deduction of all costs spent on compensation for site clearance, or consider this cost as a tax with a fixed rate of 10-15% of the land price. This will ensure transparency and make it easy for enterprises to calculate the cost of development.

Cuong agreed with the proposal, saying that it was reasonable to calculate land use fee on a percentage basis.

At the seminar, HoREA revealed data on real estate inventory and property-related bad debts in HCMC. In particular, unsold property products in the city are reported to have reached about VND30 trillion, while outstanding loans for the realty sector make up some VND66 trillion of the total amount of VND85 trillion, including VND4 trillion of bad debt.

Speaking at the seminar, Minister of Finance Vuong Dinh Hue requested these figures to be reviewed. If inventory amounted to VND30 trillion, he wondered where the remaining sum had gone, exclusive of equity capital of enterprises.

However, the minister admitted the real estate market was currently very bleak, causing troubles for other sectors such as building materials, finance-banking and even the labor market.

Therefore, solving difficulties for the real estate market is not only for the sake of property firms, but also for the common good, contributing to the socio-economic development, he said.

The Government is seeking solutions for the difficulties of the economy and thus the problems of the real estate market will be soon settled, he added.

Ton Dong A to build US$100-million plant next year

Ton Dong A Corporation will start building its second steel plant having a total capacity of around 650,000 tons in Dong An 2 Industrial Park in Binh Duong Province in next year’s second quarter.

The project will require an investment of US$50 million in the first phase and another US$50 million in the second phase, and its products are expected to gradually replace imported metal roofing sheets.

In preparation for construction of the plant producing roofing sheets next year, Ton Dong A has invested US$1 million in the enterprise resource planning (ERP) project to manage purchasing, production, quality control and inventories. The firm also plans to apply the ERP project at the plant in Binh Duong Province, its representative office in HCMC and branches in Danang and Hanoi.

Nguyen Thanh Trung, chairman and managing director of Ton Dong A, said that the ERP project would play a key role in reducing risks, increasing management of the plants, offices and helping the board of directors fully understand their business at any time.

The first plant of Ton Dong A in Binh Duong Province’s Song Than 1 Industrial Park has a designed production capacity of 250,000 tons per year.

Ton Dong A obtained a growth of 15-20% in both production volume and revenue this year. Among its output of 134,000 tons last year, 28% was exported to Southeast Asian countries as well as the Middle East. The company’s revenue this year is expected at VND3.3 trillion compared to VND2.6 trillion of last year.

Phan Vu exports concrete pipes to Japan

The first shipment of concrete pipes produced by Phan Vu Investment Corporation for export to Japan was loaded onto a ship at Lotus Port in HCMC’s Nha Be District last Saturday.

Phan Khac Long, chairman cum CEO of Phan Vu, said the fact that Japan had accepted product quality of Phan Vu opened up opportunities for the company to ship concrete pipes to other markets rather than only Cambodia as of now.

“In 2010, we won confidence of Japan Pile Corp., the leading concrete pipe manufacturer of Japan, and last year they became the largest shareholder of Phan Vu with a 49% stake in the Phan Vu Quang Binh project.”

“The plant is scheduled to start operation next year with advanced technology transferred from Japan Pile, enough to meet the strict requirements of Japanese Industrial Standard (JIS) A5373-2004,” Long told the Daily.

The shipment consisting of 151 concrete pipes worth some US$200,000 is for export to Wakachiku Construction Co. in Japan, marking the beginning of the business relationship between Phan Vu and Wakachiku Construction.

Masahiro Tatsumi, project manager of Wakachiku Construction, told local reporters that before choosing Vietnam, his company had surveyed the quality of centrifugal concrete pipes made in China, Thailand, Malaysia and Indonesia.

“In the coming time, we will continue to buy products of Phan Vu to build large projects like airports, seaports, bridges and tunnels,” he said.

Speaking at a press briefing on this event, Long informed Phan Vu had signed a contract with Taiwan’s Formosa to supply pre-stressed concrete pipes worth US$75 million.

“The contract term is three years. Most of the pipes will be used in the project of Formosa in Ha Tinh,” he said.

Phan Vu is now negotiating an export contract worth US$45 million with India.

VRG sets same business targets for next year

Vietnam Rubber Group has set a total revenue target of nearly VND30 trillion for 2013, with an after-tax profit of VND6 trillion, equivalent to the targets for this year.

The group held a meeting in HCMC last Friday to allocate revenue and profit targets to its member firms.

The after-tax profit target for 2013 is based on the downbeat forecasts about the global economic situation, while most of VRG products are for export. For instance, the U.S. is forecast to not undergo any significant change; Europe will face potential risks when dealing with public debts; and China’s growth will slow down, said VRG.

Rubber remains the main source of revenue for VRG in 2012, generating 70% of the total revenue of the group. The second biggest source is industrial parks business, bringing in VND786 billion in revenue and VND184 billion in profit.

The revenue and profit targets for 2013 are the same as those for 2012 as VRG predicts the average rubber export price will be over US$3,000 per ton. However, if rubber prices declined next year, the group’s revenue would be lower than the planned figure, said Dinh Van Tien, head of VRG Import-Export Department.

The rubber output of Vietnam in 2012 had been forecast at 920,000 tons, but in fact one million tons have been produced. Similarly, the global rubber output has reached 11 million tons, while the forecast was 10.8 million tons.

If this scenario repeated in 2013, supply would exceed demand and rubber prices could hardly stay high, said Tien.

In 2013, VRG intends to grow nearly 11,800 hectares of rubber, up 300 hectares against 2012.

Regarding investment abroad, the group is focusing on Cambodia, aiming to accomplish the goal of growing 100,000 hectares of rubber in this country by 2014.

EVN seeks funds for urgent projects

Deputy Prime Minister Hoang Trung Hai has asked banks to provide capital for Electricity of Vietnam (EVN) to develop urgent power supplies and the grid over the next two years.

The ground-breaking ceremony of the Duyen Hai 3 thermal power plant in the southern province of Tra Vinh in early December.

Hai said that although EVN made a profit this year, they still lacked funds because of aggregated losses.

He asked the Ministry of Industry and Trade to send a list of EVN’s projects to the Prime Minister this month and to co-operate with the Ministry of Finance to issue EVN bonds.

Hai also asked the Ministry of Finance to provide favourable conditions for EVN and Vietnam National Power Transmission Corporation to get loans for the power supply and grid projects from the Vietnam Development Bank (VDB).

He also asked the Ministry to seek a Government guarantee for EVN’s loan to build Duyen Hai 3 thermal power plant in the southern province of Tra Vinh.

Meanwhile, the Ministry of Industry and Trade has issued a circular stating that wind-power projects need power transmission and capital commitments – plus agreements from buyers – before being carried out.

Investors will be only allowed to develop wind-power projects on lines set out by the Ministry of Industry and Trade.

If investors don’t start projects within 12 months, they may lose their licences.

Investors will also have to provide regular reports on their work to the General Energy Department.

GSO, FPT team up for data center

The General Statistics Office (GSO) last week clinched an agreement with FPT Information System Joint Stock, or FPT IS, on a project to develop a statistics data center and an internal web portal of the industry.

The project will build up core software to support statistics activities to cope with the rising data volume.

Do Thuc, head of GSO, said this is the most important project of the statistics industry. Via the project, the industry is looking to build up an advanced statistics information system connecting the central authorities with local ones based on FPT IS’s cloud computing technology.

Bad regulation blamed for consumer losses

Although the world petrol prices have decreased, domestic companies are reluctant to make decreases.

In the last two weeks petrol prices in Singapore, the main supplier to Vietnam, were reduced to USD111-113 per barrel. With the current domestic retail prices, the wholesalers are able to make profits of VND900 (USD0.04) per litre .

Enterprises calculate their prices in accordance with Decree 84, stating that the time between consecutive petrol price adjustments now is 30 days. Many petrol firms have complained that this is the reason they are posting losses.

Some experts said if the Government amended the decree consumers could save VND500 per litre.

Pham Quoc Tuan from Vietnam Petrol Information wanted to change the price adjustment period to ten days because the decree was, according to him, hindering the market. If the decree were changed, the domestic prices could be quickly adjusted to the world prices, he said.

Tuan also said that the Government should change the working system of domestic petrol firms in order to improve transparency. Many enterprises have had continued complaints that the price of VND600 per litre is insufficient, and makes it difficult to calculate profits.

Economist Nguyen Minh Phong, also in favoured the change, adding that Decree 84 does not encourage competition.

Since Decree 84 was issued many, even some inside the Government, have criticised the regulation. Pointing out its weak points, there have been a large number of suggestions to amend the law; but this has yet to happen.

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

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