Home » Business » BUSINESS IN BRIEF 23/4

Possible tax breaks cause concern for budget

The government has proposed to the National Assembly to cut corporate income tax rates from 25% to 22%.

The government made the proposal at a National Assembly Standing Committee meeting on April 16.

Earlier, it recommended a reduction to 23%.

The current 25% tax rate is forecast to result in a reduction in the budget of VND1.43 trillion (USD68.1 million) this year. The tax of 25% has been imposed since 2008 following being slashed from 28%.

The government has also recommended applying a flat rate of 20% on corporate income tax for small and medium-sized enterprises, said Deputy Minister of Finance Vu Thi Mai. She added that growth in this sector would be good for the state budget.

By January 1, 2016, the common corporate tax for all enterprises is expected to stand at just 20%.

Phung Quoc Hien, Chairman of the National Assembly Finance and Budget Committee, however, added to a number of concerns about the possible impacts of lowering the rate, saying, “These new tax policies could lead to a drop of VND2.65 trillion (USD126 million) in state revenue.”

FDI projects provide thousands of jobs in Ben Tre Province

The Investment Promotion Center in the Mekong Delta province of Ben Tre on April 20 said that many of the Foreign Direct Investment (FDI) projects in the province have helped provide employment and a stable income for almost 18,000 local residents.

The province currently has 41 FDI projects with total capital exceeding US$309 million, mainly concentrated in production of coconut products, fertilizer, garments, plastic items, shoes, automobile accessories and seafood processing.

FDI projects cover more than 40 percent of the manufacturing and 60 percent of the export turnover in the province.

Provincial authorities are now creating advantageous conditions to lure more businesses to invest in long-term projects.

The opening of Rach Mieu and Ham Luong Bridges for vehicular traffic has created better transport links with the province.

Economist urges removal of interest rate caps

The government should not apply any caps on either deposit or lending interest rates as it’s not good for the market, one economist has said.

Economist Vo Tri Thanh, Deputy Director of the Central Institute for Economic Management, said, “Any administrative interference could distort the market in terms of both resources and morality.”

According to Thanh, his views have been proven by negative impacts on the market in 2008 when the country applied a ceiling lending interest rate.

He said that Vietnam should try to gradually reduce administrative measures with priority given to removing the ceiling interest rate for deposits in VND and then USD under the condition that the potential dollarisation of the economy is avoided.

He estimated that if bad debts are settled, the State Bank of Vietnam could remove such a cap by the end of this year.

The issue remains controversial when many enterprises and banking experts have proposed maintaining ceiling lending interest rates but removing the cap on deposit interest rates so as to pull down lending interest rates and facilitate enterprises to get bank loans.

Despite a considerable disparity between deposit and lending interest rates, deposit interest rates could be further cut by 0.5% to around 7% per annum.

The trend heavily depends on the progress in dealing with weak banks and bad debts, he added.

Hanoi slow to implement narrow house ban

The Hanoi Department of Construction proposed that the municipal People’s Committee push back the deadline for dealing with extremely narrow houses until the end of the second quarter this year.

Earlier, the city requested the department to clear away this type of house by the end of the first quarter of 2013. However, according to the department, by late March localities had only succeeded in demolishing 345 out of 597 slated for destruction.

In a report to the municipal authorities, the deputy director of the department, Nguyen Duc Hoc, said that several localities were facing obstacles in dealing with the problem because the deadline was not specific enough. Several districts failed to mention the issue in their reports to the department.

The Department of Construction also said that documents issued by the local People’s Committee, the Department of Planning and Architecture and the Department Natural Resources and Environment were late, slowing the process of getting rid of the houses in violation of code.

In addition, compensation for site clearance has not been sufficient to encourage tenants to leave their homes and administrative procedures for land confiscation remain time-consuming and cumbersome.

Following the Department of Construction’s proposal, the vice chairman of the People’s Committee, Nguyen Van Khoi said, “The department has not yet offered up any concrete solutions to deal with the issue in a quicker way.”

The vice chairman has requested the Departments of Planning and Architecture and Natural Resources and Environment to make a report on their progress before April 30.

Small businesses the trend in Vietnam

According to the Vietnam Chamber of Commerce and Industry (VCCI) report for 2012 the country remained lacking in large and medium-sized enterprises, causing possible difficulties for the economy.

The general secretary of the VCCI, Pham Thi Thu Hang, said that over the last decade 700,000 companies were granted business licenses, but the number of those that have remained in operation was modest. They estimate the number to be around 300,000.

“The number of very small enterprises in the economy is on the increase, causing the country to fall short of targets for medium and large businesses,” Hang said.

The report also revealed that two thirds of very small businesses surveyed did not expand between 2002 and 2011, and 30% of the remaining companies had even made cutbacks. A significant amount also laid off employees.

The number of companies that were unprofitable did increase; 30.2% of enterprises were unprofitable in 2006, a figure which rose to 42% in 2011.

Many have blamed the government’s lack of incentive policies for disappointing numbers in the lack of businesses expansion.

“If I were eligible to get government subsidised loans, I would expand my business and even hire more people,” said the owner of an electric cable company in Hanoi.

Vu Quoc Tuan, former member of the government’s Research Committee, agreed, saying that small and medium-sized enterprises have not received due attention from the government.

“These companies often lack capital and need incentive policies for low interest loans. But the Credit Guarantee Fund has only just been set up, and only in 13 locations. In addition, most of them are not even in operation yet. Despite repeated requests from the business community the government has not decided on the proposed cut to the income tax rate,” Tuan said.

He added that policy that would help small and medium-sized enterprises deal with their obstacles is needed.

US need for furniture helps Vietnamese exports soar

Exports of Vietnamese wood products to the US in the first quarter of this year have surged 8.4 percent compared to the same period in 2012, with figures hitting $394 million.

The amount accounts for one third of the country’s total furniture exports all over the world, according to the General Administration of Customs.

Vietnam’s total furniture exports have also increased significantly in 2012, reaching $1.78 billion, up 24 percent year-on-year.

In 2011 the sector experienced only a modest growth of 3 percent.

The vice chairman of Ho Chi Minh City’s Handicraft and Wood Industry Association, Dang Quoc Hung, attributed the good results to the fact that US consumers are now replacing furniture after two years of curbing their spending.

In addition, he said US companies had sold out their inventories and so needed to import more to meet consumers’ demand for this year.

American businesses used to mainly import wood products from China. However, now they have started to receive resources from a range of countries in Southeast Asia, including Vietnam, a representative from the US-based TigerTrade, which specialises in export promotion, told Saigon Times Online. Far-sighted Vietnamese enterprises have spotted the trend and taken advantage.

The deputy general director of Truong Thanh Wood Processing Company, Ngo Thi Hong Thu, said that some businesses are struggling to fulfil all of their orders due to their restricted financial capacity.

Despite the introduction of lower interest rates, these firms have still encountered difficulties in accessing bank loans, he added.

Nguyen Thanh Binh, Director of Nguyen Thanh Furniture Company agreed. He said many wood processing companies, especially domestic ones, were now facing capital shortages meaning that they were unable to utilise the huge opportunities presented by the US market.

Steel sector sees positive signs in 2013

With new policies stimulating the realty market of late, the steel sector has begun to see positive signs in 2013, though growth is still lower than expected.

Since early this year, steel prices have been increasing, now reaching VND17 million ($814.7) per ton. According to the Ministry of Construction, the quantity of steel was around 270,000 tons in March, an increase of 13,000 tons compared to February. The trade deficit in the steel sector in the first two months of this year topped US$1 billion, according to figures. The full-year figure in 2012 was as high as $5 billion.

A five percent year-on-year decrease or 30,000 tons in quantity in the first quarter of the year due to weak purchase power is estimated.

The Department of Customs said imported steel in the first three months of the year reduced by 11.6 percent compared to the same period last year.

Pham Chi Cuong, chairman of Vietnam Steel Association (VSA), said around 40,000 tons of steel had been consumed in March and figures in the first quarter of 2013 were more than one million tons. Slow consumption of steel in 2012 resulted in high inventory; however, once realty market is supported and exports open, inventory will shrink, Cuong said.

Another problem the sector is facing is that many companies are importing cheap Chinese steel, even what local steel makers are able to manufacture. Last year Vietnam imported millions of tons of cheap boron steel from China.

While the total import turnover was several million US dollars, the product was subject to zero import duty. The imported products were then sold as rolled construction steel, while the authentic construction steel was subject to a 10 percent import tariff.

Le Minh Hai, president of Viet Duc Steel Joint Stock Company, warns 2013 will still be difficult for construction material businesses but not quite as challenging as 2011 and 2012 because the Government’s credit policies may ease pressure for construction materials to revive the real estate sector.

VSA sets growth target of 2-3 percent for 2013. Nevertheless, the target is dependent greatly on the government public investment and development of realty market. More importantly, fierce competition with Chinese counterparts can influence the target.

VSA therefore proposed to the government stricter control over imported steel. One of the solutions is to set up technical barriers and tighten procedures to apply for an import license and eliminate technical barriers that unnecessarily add to the challenges facing domestic steel businesses.

The Ministry of Industry and trade and the Ministry of Science and Technology said they are working on a decree to tighten control over imported steel. As per the decree, related agencies will take imported steel sample for testing of quality. With strict management on imported steel and low lending rate, the sector will see a new picture in the future.

Gov’t development fund for small, medium businesses

The Prime Minister has approved a development fund to support small and medium businesses, which will help these enterprises increase production and trade in their respective fields.

The nonprofit fund will operate under the management of the Ministry of Planning and Investment and enjoy tax exemption.

Financial assistance will be channeled through the Vietnam Development Bank and some other commercial banks.

The government will provide an initial sum of VND2 trillion (US$96 million) towards the fund that will gradually help businesses enhance competitiveness, create employment and increase income of laborers.

With a maximum loan duration period of seven years, loans will be available on 70 percent of the basic capital not exceeding VND30 billion ($1.44 million).

Interest rate will be decided by the Ministry of Finance based on current credit ratings and not more than 90 percent of present lending rate.

According to the Business Annual Report by the Vietnam Chamber of Commerce and Industry (VCCI) released on April 18 in Hanoi, Vietnamese businesses are becoming smaller in terms of labor in the last ten years. The number of workers fell from 74 per company in 2002 to 34 in 2011.

However basic capital has increased substantially from VND23 billion in 2002 to VND47 billion in 2011.

Medium size businesses account for only 2.1 percent in Vietnam, which tend to reduce work force and rarely grow into larger companies.

The period 2002-2010 witnessed impressive development in the services, property and consultancy sectors with annual growth rate of 35 percent.

Capital investment has increased much more in the service sector, but dropped at a steady pace in the agro-aqua-forestry and industrial industries.

HP’s Unified BYOD Networking Solutions

They aim to create new revenue opportunities for partners.

HP has announced its unified wired and wireless solutions that deliver a simple, scalable and secure network supporting bring-your-own-device (BYOD) initiatives while creating incremental revenue opportunities for partners.

The new solutions and services, introduced at the HP Global Partner Conference, include the industry’s only complete solution that supports growing BYOD initiatives. This solution delivers unified wired and wireless management and switching platforms that create a single network for wired and wireless connectivity.

The offerings also enable partners to leverage the HP FlexNetwork architecture to better support their clients’ BYOD essentials with new device on-boarding and provisioning functionalities through a single management application and automated security with software-defined networks (SDN) technology, while being supported by mobility connectivity services.

By 2016, two-thirds of the workforce will own smartphones, and 40 percent of the workforce will be mobile. Yet, the legacy infrastructure requires two separate networks and management applications for wired and wireless connectivity, resulting in operational complexity. Additionally, these legacy infrastructures lack scalability to support multiple devices per user or the security to protect mission-critical information.

According to Gartner, every business needs a clearly articulated position on BYOD, and formal BYOD programs are a fast-growing phenomenon due to the booming, innovative mobile device market.

“Organizations are struggling to deploy BYOD solutions within a complex, legacy infrastructure that spans two separate networks and management applications,” said Morten Illum, Vice President and General Manager, Networking, HP Asia Pacific and Japan. “HP’s complete unified BYOD solution is the first to solve this issue and—combined with HP’s comprehensive training, programs and services—will create new, profitable opportunities for partners”.

Sao Khue awards given to 66 IT products and services

Sixty-six information and technology (IT) products and services were honoured at the Sao Khue Awards 2013 in Hanoi on April 21.

Speaking at a ceremony to mark the 10th anniversary of the award, Minister of Information and Communications Nguyen Bac Son praised the Sao Khue programme’s contribution to the development of the software and IT industry.

The new industry’s turnover increased from US$50 million in 2002 to more than US$2.3 billion in 2012 with hundreds of high-qualified staff contributing considerably to the national process of industrialisation and modernisation.

Son expressed his hope that the programme will encourage organisations and individuals to further develop the national software and IT industry to help Vietnam become a strong IT nation in the near future.

The Sao Khue awards 2013 marked a sharp increase in the provision of IT products and services for the medical and education sectors. Products using cloud-computing show that domestic businesses are making great effort to catch up with the international IT industry.

The healthcare social network, Yton.vn, was rated as the most outstanding software product, picking up the “Five Star Sao Khue” title.

Yton.vn aims to create a medical bridge between citizens, doctors and medical experts who wish to share medical information about kinds of diseases and online-treatment.

FDI businesses urged to create high value added products

Vietnam’s export turnover increased sharply in recent years, thanks to the great contributions from foreign direct investment (FDI), however, foreign-invested enterprises do not create high value added products.

In the first quarter of this year, Vietnam’s export turnover reached US$29.76 billion, up 19.7 percent on last year’s period. Of that figure, FDI enterprises earned US$17.25 billion, accounting for 58.5 percent of the country’s total exports (excluding crude oil).

Key exports include telephones and spare parts, electronics, computers, footwear, garments and textiles. However, to produce US$17.25 billion worth of exports, FDI enterprises have to import US$16.60 billion in input components while their export turnover was actually only US$1.19 billion.

Le Thi Minh Thuy, Deputy Head of the Department of Statistics, Trade and Services under the General Statistics Office (GSO) says  despite great contributions to national income from the foreign invested sector, its real profits come mainly from outsourcing.

Samsung Vietnam raked in US$6 billion from exporting telephones and components in 2011 and US$12.6 billion in 2012. During the above mentioned period, these types of goods were Vietnam’s biggest export turnover for the first time, with total earnings of nearly US$4.5 billion, 90 percent higher than the same period last year.

The US$3.2 billion project complex in Thai Nguyen province is forecast to record an annual US$20 billion in exports to Samsung.

Vice President of the Vietnam Association of Foreign Investment Enterprises, Nguyen Van Toan says that it is not necessary to export huge volumes; the most important thing is to export hi-tech and high value added products.

In the past, industrial projects by Intel and Foxcon have imported almost all input components from foreign nations, with support from the Vietnamese Government. Although these projects have enormous amounts of investment capital and generate many jobs, they have failed to create value added products and reduce import surpluses to make a positive impact on domestic businesses.

Most FDI businesses choose to invest in Vietnam to take advantage of the  low-cost labour force and the government’s preferential land lease and corporate income tax policies, which has resulted in the production of low value added products.

Kyshiro Ichikawa, leader of the Support Industry Task Force under the Japan-Vietnam Joint Initiative, says that weak support industries and a low rate of localization are the main reasons FDI enterprises have not added value to the  national economy.

According to statistics from the Japan Business Association in Vietnam, the localization rate in Vietnam was only 22.4 percent, much lower than other nations in the region.

Ichikawa states that support industries play an important role in developing the national economy. In the future, Vietnam should amend its policies to develop essential support industries and implement strict requirements for foreign investors in order to promote the nation’s industrialization and modernization.

The country’s export growth has been primarily attributed to foreign investors, which has reduced local businesses’ share of the export market.

According to economists, Vietnam must develop its own support industries, improve the localization rate to replace imported goods, and enhance the status of local support industries, enabling them to become the main suppliers of components for FDI businesses operating in the country.

Trade turnover hits US$10.55 bil in first half of April

Vietnam’s total trade turnover for the first two weeks of April is estimated at US$10.55 billion, up 4.9 percent over the second half of March, according to the latest statistics released by the General Department of Vietnam Customs.

Between April 1 and 15, Vietnamese exports, mainly telephones and spare parts, jewelry, cameras, coal, and steel, earned about US$4.67 billion, a decrease of 11.5 percent compared to the last two weeks in March,

Since the beginning of 2013, Vietnam’s trade turnover has reached US$69.75 billion, up 19.7 percent over last year’s same period, with export earnings hitting nearly US$34.41 billion (up 19 percent) and imports recording almostUS$35.35 billion, up 20.3 percent.

The country’s trade deficit as of April 15 was US$941 million, accounting for 2.7 percent of its total export revenue.

Can Tho to become industrial hub by 2015

Can Tho city is set to become an industrial hub, accounting for 46.9 percent of economic growth in the Mekong Delta region by 2015.

Municipal authorities have already mobilised about VND220 trillion (US$10 billion) to invest in industrial and other economic sectors, with 5,000 hectares of land for a hi-tech complex and 10 new industrial parks.

The city is focused on supporting small and medium-sized enterprises, and competitive sectors like agro-forestry-fishery, garments, leather and footwear, electronics, information technology, mechanical products, pharmaceuticals and consumer goods.

Apart from hi-tech and open economic zones, facilities for heavy industries like oil and gas, metallurgy, chemicals, fertilisers and construction materials and a cluster of small and medium-sized enterprises (SMEs) will be set up in rural areas.

Can Tho will provide new technology courses for workers involved in farming production for export by 2020.

The city will help the processing industry strengthen trade ties with other localities in the region.

This year, Can Tho aims for over VND27 trillion billion (US$1.2 billion) in industrial production value, a year-on-year rise of 15 percent.

Poor forecasts create difficulties for livestock breeders

Many livestock breeders in Vietnam have suffered great losses due to price fluctuations and ineffective market forecasting.

The National Institute of Animal Husbandry (NIAH) Pig Research Centre reported that purchases of specific pig varieties decreased 70 percent in the first quarter of 2013 compared to the previous year, and there is still an inventory of more than 10,000 piglets, which presents difficulties for breeders because of capital shortages.

Pork prices are falling dramatically, averaging around VND37,000 per kilo, and farmers face an estimated loss of VND10,000/kg. Prices of chickens have also dropped by VND10,000-12,000/kg and are now lower than market prices in China and Thailand.

Le The Tuan, Director of the NIAH Centre for Pig Research, said the livestock industry has encountered numerous challenges since 2012 due to negative impacts from the economic downturn, as well as some pig breeders using banned drugs to produce leaner meat.

In addition, he said, epidemics of pig diseases are still prevalent in many localities, which has a significant effect on domestic pork consumption.

China, a large pork importer, sometimes bans the importation of Vietnamese pigs, which also causes strong price fluctuations and an imbalance of supply and demand.

Tuan attributed the unstable pork market to a lack of a sustainable zoning the animal breeding sector.

In Vietnam, only25 percent are produced by large-scale breeding farms with processing facilities while up to 75 percent of pigs and poultry are raised by individual households. At present, Vietnam only exports pork to China, and has not yet penetrated other high-demand markets like Japan and Europe.

Professor Dr. Nguyen Dang Vang, Chairman of the Vietnam Animal Breeding Association, admitted that both farmers and relevant agencies have been very passive regarding forecasting and the current market solutions are not practical.

Reports are only made based on facts and figures from the General Statistics Office (GSO). However, most of these statistics are based on local reports, not scientific research or general surveys. As a result, the present forecasts and solutions fail to meet the necessary requirements for livestock breeders.

Local farmers need accurate market forecasts with updated information on current prices and demand, Vang noted.

He argues that farmers’ losses can be partially attributed to weak, inefficient forecasting. Proper, accurate forecasts are essential to boost the capacity of the Vietnamese livestock industry, he added.

Vietnam’s animal breeding sector is predicted to face huge challenges in 2015 as the Association of Southeast Asian Nations (ASEAN) will establish a common market and remove all tariff barriers

Many foreign businesses’ greater involvement in the Vietnamese livestock market in the future will create fierce competition for local farmers and businesses.

Construction on Duyen Hai seaport begins

Vietnam Electricity began construction on a seaport for the Duyen Hai Electricity Centre in the southern province of Tra Vinh on April 21.

The port is part of a master plan for the power complex in Dan Thanh commune, Duyen Hai district. It aims to handle 12 million tonnes of coal and 100,000 tonnes of oil per year for the centre’s three thermal power plants.

The port will cover more than 427 hectares of water, and include two coal terminals for 30,000-tonne ships, one oil terminal for 1,000-tonne ships, a 3.9km bulkhead, and a loading/unloading coal system together with electricity, water and communication facilities.

The port is being built by China Communications Construction Company Ltd. with a total investment of over 5.8 trillion VND (about 280 million USD) and is scheduled to be completed in 32 months.

High value transactions be notified to central bank

Any transaction over 300 million VND (14,250 USD) must be reported to the State Bank of Vietnam under a recent decision that will take effect on June 10.

Signed by Prime Minister Nguyen Tan Dung on April 18, the decision applies to financial institution and relevant organisation and individuals conducting non-financial business line prescribed in Article 4 of the law on Anti-Mont Laundering.

The decision replaces Government Decree 74 dated 2005 with stipulated that any transaction worth over 200 million VND must be reported to the Central Bank.

The Vietnam law on Anti-Money Laundering came into affect on January 1 this year.

Vietnam became the 34th member of Asia/Pacific Group on Money Laundering in May 2007.

Hanoi helps with loan repayments

The capital city of Hanoi will support cost-investment interest rates for medium and long term loans (from one year and longer) in Vietnamese dong for enterprises headquartered in the city.

The city will pay 0.2 percent of the interest on loans (equal to 2.4 percent per year) for a 12 month period.
The loans should be invested in new projects, expanding existing projects and technological innovation.

Eligible enterprises must operate in the fields of manufacturing key industrial products, farming, processing farm products and foodstuffs or producing alternative products for imported goods with sales of at least 100 billion VND in 2012 and have over 200 employees.

Despite strenuous efforts by the State Bank of Vietnam (SBV) to adjust loan interest rates, they are still too high for most businesses.

Short-term loans with an annual interest rate of 11 percent are given only to businesses operating in five prioritised fields, while all other companies pay interest of 12-15 percent. Interest rates for individuals looking to buy houses or cars hover around 15 percent.

Experts said that high interest rates increased production costs and rendered domestic products less competitive than their foreign rivals.

President of the Small-and Medium-Sized Enterprises Association Cao Si Kiem said that domestic businesses were unable to pay high interest rates on bank loans.

This was why products imported from Thailand and China were often cheaper than domestic products, he stressed.

Kiem insisted that interest rates should be lowered to help businesses access more capital and stand firm on their home turf.

The Government recently asked the SBV to reduce credit rates, accelerate the monitoring of commercial banks, simplify borrowing procedures, give priority to the agricultural and rural sector, stabilise exchange rates and control the value of the Vietnamese dong more strictly.

Bac Lieu’s seafood exports rise sharply

Exports of seafood from southern Bac Lieu province have seen a sudden rise in both quantity and value in April, with 2,800 tonnes of frozen shrimp, worth over 27 million USD, shipped abroad in the month so far.

The province recorded 8,300 tonnes of frozen shrimp exports in the first four months of 2013, generating more than 84 million USD, a year-on-year increase of 50 percent.

The achievement is attributable to businesses’ activeness in finding new markets in Asian and Arabian countries, Australia , Hong Kong and the Republic of Korea.

To maintain their prestige in new markets, businesses have tightened quality control, hygiene and safety.

However, the province’s seafood exporters still face difficulties accessing capital from banks. In spite of a fall in interest rates, borrowing conditions remain hard to satisfy. Therefore, businesses have failed to make long-term production and trade plans.

Vietnamese firms attend Handicrafts Trade Fair

Deputy Foreign Minister Nguyen Phuong Nga and Mayor of the Italian city of Florence Matteo Renzi inaugurated the 77th International Handicrafts Trade Fair, which Viet Nam is invited to participate as a special guest.

As many as 16 Vietnamese businesses are attending the annual fair, which opened on Saturday in Florence, the capital city of the Italian region of Tuscany.

According to the Deputy Foreign Minister, Viet Nam’s participation in the event aims to popularise its image, culture and people, particularly to enhance the friendship between the two countries.

On this occasion, Viet Nam is not only presenting its handicrafts, apparel and seafood, but holding performances of traditional dances and music, which have received the attention of a great number of visitors.

This is within the framework of the “Viet Nam Days in Tuscany ” from April 17-28.

Meeting discusses Van Don tourism development

A seminar on developing tourism in Van Don district in the northeastern province of Quang Ninh opened on Saturday. The event was co-hosted by the provincial Department of Culture, Sports and Tourism and the Van Don District People’s Committee.

Participants said luxury tourist products can not be offered if the Van Don landscape is spoiled. Therefore, coastal areas and islands should remain intact and untouched, especially in Bai Tu Long Bay.

Tour operators also shared localities and foreigners’ experiences in organising tours. They suggested Van Don should pay more attention to human resources training and ramp up infrastructure in the district. In particular, prices of tourist services should be kept stable.

VN enjoys import-export surge

According to the latest figures released by the Viet Nam General Customs Department, the country’s total import- export volume from January 1 to April 15 hit US$69.75 billion, up 19.7 per cent over the same period last year.

Of the total, exports reached $34.41 billion, a rise of 19 per cent, while imports hit $35.35 billion, up 20.3 per cent.

In the first half of April alone, export revenue reached $10.55 billion, a rise of 4.9 per cent compared to the second half of March. Exports from FDI enterprises in the first 15 days of April totalled more than $2.7 billion, raising the total figure from January 1 to April 15 to nearly $19.95 billion, up 25.9 per cent from the same period last year and accounting for 58 per cent of the country’s total export revenue.

In the first 15 days of April, Viet Nam imported $5.88 billion worth of goods, an increase of 22.9 per cent from the second half of March. Rise in imports were mostly seen in computers, electronics, spare parts, vehicles, machines and mobile phones.
Wheels in motion for solar equipment project transfer

The deal for a project to produce solar panels in HCM City’s Dong Nam Industrial Park, Cu Chi District is expected to be finalised this year.

Chris Brown, country manager for property services firm Cushman & Wakefield Vietnam, said that he expected the transfer of the project, whose total registered investment is US$1.2 billion, would be done later this year.

Construction of the factory kicked off in March 2011.

The project owner wants the sale due to global oversupply and Cushman & Wakefield Vietam as its agent for the transfer, he told the press on the occasion of his company’s 5th anniversary

Brown said on Wedneday that there are two potential buyers, but declined to identify them or provide other project evaluation details.

Talking about HCM City’s industrial property segment, Brown said that by 2020 the total area of industrial land might increase by 2,700ha, up around 75 per cent over 2012’s figure, with 29 IPs in operation, compared to current 18.

Solutions sought for bad loans

Viet Nam’s non-performing loans (NPL) can be managed even though they might be as high as 10 per cent, says an economist with the Standard Chartered Bank.

Betty Rui Wang said there were different estimates that put the country’s NPL ratio at between five and 10 per cent, “but our judgement is that as long as it does not exceed 20 per cent, it is manageable”.

“We believe that government involvement either via credit extension or budget financing will be key to accelerating the problem solving process,” she said.

She noted the peak ratio in 1998 of Thailand was 45-50 per cent and Indonesia, 40 per cent, and their recapitalisation were respectively 34 and 20 per cent of their GDP.

Potential funding channels for bank recapitalisation includes banks taking a “haircut” that would introduce more discipline to their future lending decisions, Rui Wang said.

“But a significant cut could undermine the banking sector and would be unfavourable to foreign capital involvement. Given that the government is the ultimate shareholder of most banks, much of the write-offs could be borne by the government, and hence, taxpayers,” she said, adding the State Bank has said bad debt provision in the banking system is about 1.6 percent of the GDP.

On the possibility of a budget bailout, she said that the country is running a fiscal deficit, and there is little money carried over from past years.

The government has also not set aside money for the Asset Management Company to buy back bad debts in the 2013 budget. This option may also be socially unpalatable, as it would be seen as using taxpayers’ money to bail out banks, she said.

If the government or a policy bank buys back bad loans, it would take the loans off the balance sheets of commercial banks and put them into an institution with a public mandate (but commercial standards), but determining the “haircut” level would be an issue, she added.

Rui Wong said capital injection from the central bank using FX reserves would be another channel, but Viet Nam does not have a big pool of FX reserves to start with.

Petrol price hike to have knock-on effect

Experts are predicting that the cost of everything from food to transportation will soon increase due to the recent rise in petrol prices.

Do Quoc Binh, Chairman of the Ha Noi Taxi Association, said that after the petrol price hike, some companies that belonged to the association had proposed raising fares. Such a move could prompt a huge loss of customers, but there was no other choice, Binh said, adding that prices were expected to increase from VND600 to 1,000 per kilometre.

Additionally, five bus companies plan to increase fares, according to Nguyen Hong Trung, director of the Ha Noi Bus Management Company.

Nguyen Mai, owner of an online food shop, said her shippers asked for higher fees just after the hike was announced – meaning she had to ask her customers in turn to pay higher prices, for which she received many complaints.

Vu Vinh Phu chairman of the Ha Noi Supermarket Association, said that in the first three months purchasing power was too weak – 1 per cent of what it was last year. Higher shipping fees and higher production costs would drive up prices, causing supermarkets trouble, he said.

In HCM City, VINATEX Supermarket suppliers asked for a 5 per cent price increase due to the petrol price hike. Similar requests were sent to Lotte Mart and Maximark Cong Hoa Supermarket.

And Nguyen Thi Lan, who runs a grocery store on Doi Can Street in the capital, reports fewer customers due to the higher prices.

The recent rainy weather also increased vegetable prices in most traditional markets in Ha Noi by VND1,000- 5,000 per kilogram or bunch. Meanwhile, the current epidemic threat from China has driven up the price of local chicken by VND10,000-20,000 per kilo.

Compounding the problem, Viet Nam National Coal and Mineral Industries Group (Vinacomin) recently proposed raising the price of material coal for the electricity industry, which would cause the electricity price to go up and all other prices to increase as well.

Local firms step up foreign investments

Domestic companies have increased their overseas investments in the agro-forestry and aquaculture sectors, with about 150 ongoing projects valued at nearly US$2.5 billion.

According to the Ministry of Agriculture and Rural Development, this figure accounts for more than 20 per cent of the total investment made by Vietnamese companies in foreign countries and territories.

It said that 28 per cent of the total investments are in Laos and 54 per cent in Cambodia, mostly for rubber cultivation and wood-processing plants.

Vietnamese companies are also investing in China, ASEAN-member countries and Africa, where Mozambique, Tanzania, Sudan, Mali and South Africa are developing the cultivation of seafood.

Companies in the agro-forestry and aquaculture sectors said it was profitable to invest overseas because of lower costs for land, taxes and human resources.

However, because many of the countries remain undeveloped, Vietnamese companies often encounter problems, such as weak legal systems and an insufficient number of skilled workers.

In addition, Viet Nam faces competition as many other countries like Thailand and China are exploiting these markets for the same advantages.

Despite these shortcomings, local companies said their investments abroad had brought profits that had allowed them to re-invest domestically.

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

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