Home » Business » BUSINESS IN BRIEF 25/11

Cashew machines make a mark

Viet Nam has taken great strides in cashew nut processing technology over the past few years, with local firms making 80 per cent of the machinery used by factories in the country.

The claim was made by Nguyen Thai Hoc, Chairman of the Viet Nam Cashew Association (VINACAS), at an exhibition of cashew nut processing machinery held in southern Binh Duong Province last week.

Hoc said the machines have helped reduce the problem of labour shortage faced by cashew processing factories.

Machines are now used in all phases of cashew nut processing, especially in shell cutting and peeling phases, which previously required a large number of manual workers.

Pham Van Cong, Vinacas deputy chairman, said “The cashew industry faces fierce competition from other industries in terms of attracting labourers.”

Currently, most young labourers want to work for foreign invested companies, and almost all workers at local cashew processing companies are in their forties. Processing firms therefore must use machines to solve their labour shortage, he said.

Shell cutter and peeling machines helped cut about 70 per cent of labour force required in these phases, he said.

Currently, more than 50 per cent of local cashew processing factories used locally made peeling machines, Hoc said, adding that the figure was expected to reach 100 per cent in the next two-three years.

Low price is one of the main advantages of locally made machines. A factory with a daily capacity of 5,000 tonnes can save 40 per cent of its investment cost if it chooses locally made machinery over imported ones.

Apart from the price, made-in-Viet Nam machinery also scored in performance, Hoc said.

“For example, a Vietnamese shell-cutting machine that is priced one-fourth of that from Italy can cut or split shells of different sizes of cashew nuts with lower loss rates,” he said.

Thanks to these advantages, Indian businesses have been ordering cashew nut processing machines from Viet Nam, he added.

Despite these advantages, Vietnamese manufacturers should focus more on improving the products’ accuracy and durability, Hoc said.

According to local cashew exporters, the use of machinery in cashew processing has not only helped address the issue of labour shortage, but also increased hygiene and safety of cashew products.

Delta shrimp losses even greater than last year

About 78,700ha of shrimps in the Cuu Long (Mekong) Delta had died in the past seven months, as many deaths as the entire previous year, the Ministry of Agriculture and Rural Development (MARD) has reported.

Most of the deaths were in Soc Trang, Ca Mau, Tra Vinh, Kien Giang and Bac Lieu provinces, the ministry said.

About 30,000ha of shrimps died from acute liver and pancreas disorders, while more than 40,000ha died for other diseases and polluted water.

Total losses were estimated at nearly VND6 trillion (US$285 million).

Vo Van Be, deputy director of the Soc Trang Agricultural Promotion Centre, said: “This is the first time so many shrimp have died here in such vast numbers.”

In the past seven months, about 90 per cent of shrimp in the province have died. In previous years, losses only accounted for about 30 per cent.

Recent weather in the province had been abnormal, with a combination of hot weather and heavy rain making it difficult to raise shrimp, he said.

Moreover, farmers failed to follow seasonal schedules and environmental protection regulations.

The province organised a conference on the issue, and decided to help farmers to sterilise the affected ponds.

“Local agricultural experts have also advised farmers not to raise new shrimp for at least one month,” he said.

Meanwhile, the MARD has asked the aqua product sector in the delta to improve irrigation systems, control waste water and manage the selection process, culling substandard shrimps.

Local authorities asked farmers not to use chemicals and pesticides in or near shrimp ponds, especially substances containing Cypermethrin and Deltamethrin as they killed shrimps and remained in the water.

Provincial inspectors were required to check aquatic product medicine and food trading enterprises to detect and prevent the use of banned substances in raising aquatic products.

Scientific agency tests showed water in shrimp ponds in the delta contained Cypermethrin and Deltamethrin which caused liver and pancreas failure. The substances could come from chemicals used to kill other unwanted fish.

Shrimp also died when farmers failed to follow seasonal schedules and environmental protection regulations, including discharging waste water and mud from affected ponds into the environment, experts said.

Lack of bio fuel demand puts cassava farmers in quandary

Lack of demand for bio fuel has caused factories to lower production, leaving thousands of cassava farmers in a quandary.

E5 bio fuel, which is gasoline mixed with 5 percent ethanol, did not have sufficient demand to have its own filling stations but was distributed through gasoline retail outlets.

The Department of Agro-Forestry Processing and Salt Industry, under the Ministry of Agriculture and Rural Development, was approved by the government in 2010 for the production and consumption of E5 bio fuel. As a result bio fuel began to be sold commercially in August 2010 but few people have been using it since.

Meanwhile six factories have been operating at a total capacity of 550 million liters a year, in places where farmers plant cassava, such as the central provinces of Quang Ngai and Quang Nam; the southern provinces of Binh Phuoc and Dong Nai; the highland province of Dak Nong; and the northern province of Phu Tho.

Scientists were convinced that when natural fuel becomes prohibitably expensive and scarce then E5 bio fuel would be its replacement as an eco-friendly substitute.

However, as much as 90 percent of production of E5 bio fuel is exported, as the domestic market shows no interest in bio fuels although 10 oil enterprises have agreed to sell the bio fuels. Petro Vietnam Oil (PVN) has been selling E5 bio fuel since August 2010 through its 106 stations countrywide.

E5 bio fuel is currently VND200 a liter cheaper than A92 gasoline, and it would help the country save hundreds of millions of dollars on fuel imports. Moreover, the greatest benefit is that bio fuels could help reduce 30 percent of CO2 emissions.

Yet, until now, total E5 bio fuel consumption in the country is just 35,000 cubic meters while three factories have been designed to produce 300,000 cubic meters ethanol, enough to make six million cubic meters of bio fuel or 94 percent of consumption demand in the country by 2014.

Phung Dinh Thuc, chairman of PVN, said that even PV Oil could sell only 15,000 cubic meters in the first nine months of this year, very little compared to consumption of petrol of 1.2 million liters per month. Low demand for bio fuel has caused factories to scale down their operations.

Experts said poor consumption of bio fuel is because people still know little about E5 or E10, which has 10 percent ethanol, and consumers are confused between ethanol and methanol – antifreeze solvent fuel which recently was blamed for bike fires as gasoline was mixed with methanol causing the fires.

Another reason was that very few people knew about bio fuel, which is why retailers are reluctant to spend money on new storage facilities because they have to spend large sums on building infrastructure for mixing ethanol with gasoline. Accordingly, among 12,000 petrol filling stations in the country, only 155 stations agreed to sell bio fuel.

The consequence of poor consumption of bio fuel is that thousands of cassava farmers are in despair as their product cannot be sold. Massive growing of the tree lowered prices to VND1,400 a kilogram, causing losses of VND600,000 (US$28.7) per ton.

The Ministry of Agriculture and Rural Development said farm area for growing cassava in the country is very large. For years, people exported cassava to China; however, exports are not stable so the ministry does not encourage expansion of land area but demands existing areas to provide material for starch processing factories and ethanol manufacturing.  Enterprises say the government should sell bio fuel to secure cassava farmers.

The Ministry of Industry and Trade is adopting a road map to use bio fuels in an effort to promote production. According to the ministry’s proposal, the use of E5 bio fuel will become mandatory from December 1, 2014, especially for vehicles in big cities and provinces such as Hanoi, Ho Chi Minh City, the northern port of Hai Phong, the central city of Da Nang and central province of Quang Ngai and the southern city of Can Tho and southern province of Ba Ria – Vung Tau.

From December 2015, E5 bio fuel and E10 fuel, which has 10 percent ethanol, will be used in the above seven localities and across the country.

Real estate inventory causing huge losses

The real estate sector is in the doldrums with many condominium projects on hold while other projects are being launched in the hope that the year end will bring cheer to the market.

Long lasting losses have however weakened the financial capacity of many enterprises. Last year, Quoc Cuong Gia Lai (QCG) was listed among those groups of enterprises that were suffering losses of nearly VND40 billion (US$1.9 million).

In the third quarter of this year, QCG continues to see losses to the tune of VND468 million ($22,468).

Last year, the Song Da Company (SJS) announced a net loss of VND71.04 billion and this year the figure has reached VND109 billion; with unsold property valued at VND4 trillion and bank loans now touching VND1,757 billion.

In his report to the State Securities Committee, Pham Van Viet, SJS’s deputy managing director, explained massive investments without orientation of the market as the major setbacks in the real estate market at present and the focus on site clearance for important construction works.

Condominium project developers have lowered their prices to lower their inventory. Statistics from stock exchanges in Hanoi and Ho Chi Minh City show that 32 real estate enterprises, construction material companies, steel and construction-related companies have a total inventory valued at VND400 billion.

Unsold condos are valued at VND74,670 billion ($3.5 billion) including bank debt of $7.5 billion. Accordingly, houses in companies’ stocks have increased year-on-year.

Doom in realty estate has led to drop in orders for cement, steel and other material for construction. The Ministry of Industry and Trade statistics show that in the first ten months of the year, cement in factory warehouses increased by 51.3 percent or to around four million tons.

There is still gloom in the market and a dreary property market is only helping increase inventory, which leads to freeze in capital, which leads to bad debts. It’s just one big vicious circle. It is high time that some solution is found to revive this very important sector.

HCM City builds property indices

Statistics on the property market will be more detailed as the HCMC government has assigned the Department of Construction to create indices on the property market in the city.

The upcoming indices covering apartments, land lots and office buildings are expected to serve as a reference for agencies, organizations and individuals in managing and developing the property market.

Apartments will be categorized into four groups which have a price of over VND60 million, VND30-60 million, VND15-30 million and under VND15 million per square meter.

Meanwhile, statistics on the segment of houses and land lots will be based on existing townhouses and land lots in urban areas and housing projects.

Similarly, offices for lease will also be graded, with grade A having a rental of over VND700,000 per square meter per month, VND400,000-700,000 for grade B and less than VND400,000 for grade C.

Hanoi office rent to fall in 2013: Savills

Rental of grade A and B offices in the center of Hanoi will slump by 3% year-on-year in 2013 but will bounce back in 2014, Savills Vietnam forecasts.

In the city’s center, the average rent will rise slightly in 2014 by 1% after falling by 3% next year, Savills said. The property services provider ascribed the situation to office areas in the heart of the city facing shortfall in the future.

Savills expects supply for grade A and B offices in the inner city to continue soaring by 14% annually in 2013-2014.

From January to September, the average rent tumbled 10% against last year given the ample supply at home.

In the city’s center, the average rent of grade A and B office buildings was 13-38% higher than market levels over the past six years. The average occupancy rate was 12% higher than the average market level, reaching 90% in the third quarter.

Statistics of Savills shows that the Hanoi market in the third quarter of 2012 had new supply of about 48,500 square meters, up 4.6% over the preceding quarter. The market is expected to welcome around 400,000 square meters of new leasing office areas from now to 2013.

Large numbers of tenants of grade A and B offices in the inner city are foreign companies, accounting for 54%. And the remainder is local firms mainly in banking and finance, insurance and production sectors.

There are five sources of information to develop the indices, including the Department of Justice, the Department of Natural Resources and Environment, the Taxation Department, property trading floors and the HCMC Real Estate Association.

Those property indices will be published every quarter, on the fifteenth of April, July, October and January and on January 15 annually. The first indices will be provided in the first quarter of next year.

Savills Vietnam early this month launched the indices for the property market in HCMC which focus on housing and office-for-lease segments with two separate price indices: the quarter-on-quarter index (QoQ index) and the quarter-on-base index (QoB index). The calculation of the two indices will evaluate levels of impacts of different factors on movements and price changes on the market and are expected to measure the market accurately and help policymakers manage development trends and recognize hidden problems of the market.

Chance high for building material export to Cambodia

The demand for building materials in Cambodia is rising sharply, offering great chances for Vietnamese exporters, said the Vietnam Trade Office in Cambodia.

In the first nine months of 2012, the Ministry of Land Management, Urban Planning and Construction of Cambodia granted certificates to 1,350 construction projects with total investment capital of US$1.8 billion. These projects are mainly garment factories, hotels, commercial houses and high-rise buildings, according to the Vietnam Trade Office in Cambodia.

Tran Duc Huy, general director of Vinh Tuong Industrial Corporation, said Vietnamese building material exports to Cambodia had been growing over the past years, with the main items being iron, steel, electrical cables, cement, partitions and wall panels.

In particular, wall brackets, partitions and decorative panels produced by Vinh Tuong are holding 60% market share in Cambodia. Growth in this market is kept at 5% per year.

To successfully penetrate the Cambodian market, local enterprises should conduct in-depth market surveys through partners in this country. These partners will share their experience and offer the products of local companies to Cambodian consumers, said Huy.

Specifically, when first entering the Cambodian market, Vinh Tuong chose three partners who are large distributors in this country to bring its products into the market. Now, Vinh Tuong is still cooperating with two partners, who are holding a combined 80% market share in Cambodia.

Local construction firms are actively joining bids for large-scale projects in Cambodia. However, the fact that Cambodian laws require construction projects using foreign contractors to make tax payments worth 7-14% of the project value puts Vietnamese constructors at a disadvantage.

To solve this problem, Huy suggested local enterprises let Cambodian firms directly operate their business activities. They understand consumers properly, so they can offer training courses and help remove difficulties during business operations, he said.

According to the General Department of Customs, Cambodia was the biggest buyer of Vietnamese iron and steel in the first nine months of the year. Vietnam had exported 388,100 tons of iron and steel to Cambodia, worth US$293.4 million, up 23.3% in volume and 18.6% in value over the same period last year.

Stronger incentives for Dau Giay-Phan Thiet Expressway

The Government has provided a new mechanism for development of the Dau Giay-Phan Thiet Expressway project under the format of public-private partnership (PPP), with two additional incentives for the investors.

Specifically, the Government will guarantee a preferential loan from the World Bank for the primary investor, Binh Minh Import Export Production and Trade Co. (Bitexco), to carry out the project.  The loan is counted as the investor’s capital.

In addition, the Government will not expand the National Highway 1A section in parallel with the expressway to ensure toll revenue for the investors and thus the feasibility of the project.

Under the new mechanism issued in late October, the investors must invest in the project a sum not lower than 20% of the total construction cost. Previously, the old mechanism specified funds for the project would be sourced from private investors at home and abroad (10.6%), commercial loans from local and international banks and bond issuance (11%), State budget capital (29.4%) and preferential loan from the World Bank (49%).

Bitexco was originally the only investor, but now the new mechanism allows selection of a second investor through international competitive tenders. Capital contribution of the two investors is 60:40.

Meanwhile, site clearance, compensation, resettlement, mine clearance and relocation of infrastructure facilities will be financed by the State budget.

Bitexco has given no comment on the new mechanism, but the new incentives make the project more attractive to investors and increase its feasibility.

The Dau Giay-Phan Thiet Expressway will have a total length of 98.7 kilometers with one end connecting to the HCMC-Long Thanh-Dau Giay Expressway and the other in the National Highway 1A at Ba Bau, Binh Thuan. The six-lane road is designed with a maximum speed of 120 kilometers per hour.

The total investment cost of the first phase is over US$846 million. The project is piloted in the PPP form by the Government and the World Bank.

In 2008, Bitexco was assigned to map out a scheme for the project. In 2010, the Ministry of Transport submitted the scheme to the Prime Minister for approval.

Due to some problems regarding the mechanism, the project has yet to get off the ground. With the introduction of the new mechanism, the project will be kicked off in 2013 if preparation work goes smoothly, according to the transport ministry.

The Dau Giay-Phan Thiet Expressway will shorten the time for traveling from HCMC to the south-central region and ease traffic congestion on National Highway 1A. Moreover, the expressway will promote formation and development of industrial parks and tourist sites along the route.

Vietnam’s business environment report released

The Central Institute for Economic Management (CIEM) in Hanoi on November 21 released its latest report on Vietnam ’s business environment in 2011.

According to CIEM, the report was based on a survey of 2,500 small- and medium-sized enterprises operating in the processing industry. Its focus was to analyse Vietnam ’s business environment, in particular labour growth, investment, financial access and business capacity.

The report found in recent years, small- and medium-sized enterprises have seen a decline in investment and financial access. 444 of the 2,000 firms said that they have not made new investments in the past four years.

Credit is considered the biggest obstacle in the development of enterprises. 39 percent of respondents said that they are facing credit problems.

Dr. Pham Thi Thu Hang from the Vietnam Chamber of Commerce and Industry said that it is important to improve the quality of products to absorb more of the domestic market from goods that are illegally imported. The domestic market remains small- and medium-sized enterprises’ primary market.

According to many experts, Vietnam is facing development challenges in small- and medium-sized enterprises. Many post-crisis policies are made and implemented by the Government to maintain the competitiveness of enterprises, small- and medium-sized firms in particular.

HN – Phu Quoc direct air route to be launched

Viet Nam national flag carrier – Viet Nam Airlines will open two new direct air routes in December.

From December 12, passengers can make a direct connection between Ha Noi and Phu Quoc Island with five Airbus A321 flights per week on Monday, Wednesday, Thursday, Friday, and Sunday. Flights will depart from Ha Noi at 10am and Phu Quoc Island at 13.15 pm.

The estimated flying time is around 2 hours and 25 minutes.

On this occasion, on the Ha Noi – Phu Quoc – Ha Noi route, 300 one–way tickets (taxes, fees and surcharges not included in the fare) will be offered with the price of VND 120,000 each.

In December, the Airlines will operate four direct flights per week between Ho Chi Minh City and Jakarta on every Tuesday, Wednesday, Friday, and Sunday.

On this occasion, the carrier will also offer a huge promotional program. Return tickets on the Ho Chi Minh City – Jakarta route is VND 2.905 million, down 22%.

Seminar empowers businesses on trade issues

Vietnamese businesses had a chance to influence laws and practical investigative measures on anti-dumping, anti-subsidy and trade protectionism work at a seminar in Ho Chi Minh City on November 22.

At the event, which was co-organized by the Vietnam Competition Authority under the Ministry of Industry and Trade, the Centre of Integration WTO Technical Assistance and business associations of the city, experts presented an overview of the US International Trade Commission and its role in investigating and defining loss in trade disputes.

They shared information on how to conduct anti-dumping, anti-subsidy and trade protectionism lawsuits in the US market.

Nguyen Van Toai, a former commission expert, said that in order to minimize and effectively deal with proceedings, domestic enterprises need to actively prepare information on their products and establish connections with representative agencies overseas to monitor market developments and predict business conditions.

To protect the domestic market, businesses need to understand how to recover from damage caused by imports when carrying out cases, said experts.

Laos-Vietnam JV Bank opens branch in Laos

The Laos-Vietnam Joint Venture Bank (LVB) opened a new branch in the centre of the Phonsavan commune, Xiangkhouang province, in Laos on November 22.

LVB representatives said that the opening of the facility is part of their business strategy for the 2010-2015 period to develop and expand LVB’s operations. .

The branch is integrated with their human resource structure to ensure smooth and effective delivery of business services. It also aims to ensure the provision of products to customers, according to the Lao law.

Established in 1999, LVB is one of the leading commercial banks operating in Laos, with total assets reaching nearly US$460 million. It also has a reputation for reliable services for Lao customers as well as investors from Vietnam and abroad.

The new office brings the number of LVB branches to six, demonstrating the bank’s commitment to business investors and economic cooperation between the two nations.

Vietnam joins Australia Sourcing Fair

A Vietnamese stand at the 2012 Australia International Sourcing Fair (ASIF) in Sydney from November 20-22 has attracted large numbers of visitors.

The stand, organised by the Vietnam Trade Office in Australia (VTOA), was aimed at introducing its businesses to potential new partners at the ASIF.

VTOA Head Nguyen Bao said that trade promotion activities, including participation in various international trade fairs, offer a great opportunity for Vietnam to boost its exports.

This year’s ASIF featured more than 400 stands showcasing products from around the world, fashion accessories, gifts, carpets and interior decorations sourced from Egypt, Bangladesh, Pakistan, Fiji, the US, Thailand and Indonesia, as well as textiles and garments and traditional handicrafts from India and China.

The ASIF board said the event provides international businesses with access to more than 3,000 partners from Australia and New Zealand.

Vingroup wins two int’l real estate awards

The Vingroup has won the “Best Developer” and “Best Villa Development” awards at the Southeast Asia Property Awards 2012 in Singapore.

The Best Villa Development was given to Vingroup’s Vincom Village thanks to its unique design and architecture.

Vingroup General Director Le Thi Thu Thuy said it is a great honour to receive the awards which acknowledge the group’s investment and trading achievements.

The Southeast Asia Property Awards aims to honour outstanding real estate businesses and projects in the region. Nearly 1,500 businesses and projects from countries such as Singapore, Thailand, Indonesia, Malaysia, the Philippines, Vietnam and Cambodia were nominated for the honour.

Vingroup also successfully overcame rivals to win the “Best Retail Developer Award” selected by world financial magazine Euromoney in September.

SMEs see a decline in investment, financial access

The Central Institute for Economic Management (CIEM) in Hanoi on November 21 released its latest report on Vietnam’s business environment in 2011.

According to CIEM, the report was based on a survey of 2,500 small-and medium-sized enterprises (SMEs) operating in the processing industry. Its focus was to analyse Vietnam’s business environment, in particular labour growth, investment, financial access and business capacity.

The report found in recent years SMEs have seen a decline in investment and financial access. About 444 of the 2,000 firms said that they have not made new investments in the past four years.

Credit is considered the biggest obstacle to the development of enterprises. Thirty-nine percent of respondents said that they are facing credit problems.

Dr. Pham Thi Thu Hang from the Vietnam Chamber of Commerce and Industry (VCCI) said that it is important to improve the quality of products to absorb more of the domestic market from goods that are illegally imported. The domestic market remains small- and medium-sized enterprises’ primary market.

Many experts say Vietnam is facing development challenges in small- and medium-sized enterprises. Many post-crisis policies are made and implemented by the Government to maintain the competitiveness of enterprises, small- and medium-sized firms in particular.

Market potential for domestic-made household plastic goods

With Vietnam’s household plastic goods market flooded with made-in-China products, the domestic industry is now trying to gain back home ground in recent years–although to reach new heights, local firms will have to make more improvements on their products.

In the last ten years, Vietnam’s plastic manufacturing industry has developed rapidly, with an average growth of 15-20 percent.

There are many kinds of plastic products, such as for packaging, household goods, construction and industrial plastic–but it is the household plastic goods sector that needs developing because of a constant and rising demand.

Earlier, the country’s plastic industry mainly focused on producing goods for packaging, which is why the void was filled by made-in-China plastic products and which still holds majority of the market share.

However, the new belief that Chinese plastic products are unsafe has dragged down sales of Chinese products in the last few years. Seeing this as a golden opportunity, Vietnamese plastic companies have begun advertising and improving their product designs to draw consumers back to domestic-made products.

Currently, at big supermarkets like Co.opMart, Big C, and Metro, plastic products made by Dai Dong Tien, Long Thanh, and Duy Tan companies are holding more shelf space than imported plastic products.

According to a representative of Co.opMart, Vietnamese plastic products account for 90 percent of the total stock of plastic products at Co.opMart and are preferred by most consumers. Vietnamese plastic companies have gained in competitiveness as they have been improving designs and endurance of their products and do not sell recycled plastic products for safety reasons. Besides, they have also built new development strategies and offer their products at very reasonable rates.

Starting as a small cooperative with obsolete equipment, Song Long Plastic Company mortgaged its workshop to get the money for modern machinery and equipment. It restructured its manufacturing and did research to produce several products that were suitable for consumers.

Presently, there are more than 500 products under Song Long trademark which have been registered for trademark protection in Vietnam, China, and Laos. In order to expand their distribution network, the company employed around 55 general agents across the country.

Trinh Chi Cuong, CEO of Dai Dong Tien Plastic Company, said that his company established a distribution network of more than 700 stores nationwide and entered big supermarkets like Big C, Maximark, Co.opMart, and Vinatexmart to gain market share. In 2009, the company promoted advertising, improved its operations, and rebuilt its trade network. It is forecast that growth of the company will be at 40 percent with revenues touching around VND1.4 trillion.

Although they have succeeded in winning consumer confidence, made-in-Vietnam household plastic products have just broken into the common market segment while the high-class segment is being held by foreign trademarks.

At supermarkets and trade centers, various products which consumers currently have high demand for, such as food storage containers, and handy water bottles, are under Lock&Lock trademark. Despite higher prices, consumers with above average income prefer Lock&Lock products because of their light weight and modern and spectacular design. Lock&Lock now has 19 stores in Vietnam and is also promoting sales on television.

In 2010, Dai Dong Tien presented their first high quality food container Sina, which applied anti-bacteria technology nano-silver to provide longer freshness for foods. However, due to a shortage of capital, the company was not able to develop this product line. Up to now, most Vietnamese plastic companies are merely able to produce household plastic products, such as tables, chairs, buckets, and baskets. They have neither advertising strategy for each product line nor any plan to develop high-end products to compete with foreign-made plastic products.

On the occasion of its debut in Vietnam, Martin Skryja, representative of Elmich Group–a multinational group specializing in producing and trading high-end household products–said that Vietnamese plastic companies have not invested in production of high-class plastic products yet not because they do not have enough resources but because they underestimate demand for high-end products. Meanwhile, many foreign household producers have chosen Vietnam as their potential market for high-class plastic products.

According to distributors, the demand for high-quality household plastic products has increased in Vietnam and will rise by about 5 percent annually in the next few years. In order to avail this potential market, local firms must confidently invest in market research, machinery upgrade, strengthen creative ability, as well as foster advertising and distribution.

Trade with Israel increases

Two-way trade between Viet Nam and Israel saw an annual increase of 33 per cent to hit nearly US$357.7 million during the past 10 months, according to statistics from the General Department of Customs.

During the period, Viet Nam earned $236.8 million from exports to the Israeli market, up twofold on the same period last year. Among Viet Nam’s export items to record strong growth in turnover were cashew nuts, garments and textiles and coffee.

The country’s main imports from Israel were fertilisers, pesticides, machinery, chemicals and pharmaceuticals.

Bilateral trade turnover is expected to reach $429 million by the end of the year.Lao-Viet JV Bank opens new branch.

Enterprise export top $310m

Enterprises in the southern province of Bac Lieu are estimated to have generated more than US$310 million from exports during the first 11 months of this year, up 47 per cent year-on-year or exceeding its yearly target, local authorities have announced.

Typically, seafood exports experienced significant increases in both volume and value, reaching 34,200 tonnes and $238,000 respectively.

The encouraging results were attributable to great efforts by provincial enterprises to improve the quality of their exported products and better meet international hygiene and food safety standards.

Deals done at agriculture fair

Up to 756 contracts worth a total of VND170 billion (over US$8 million) were signed during the 2012 Viet Nam International Agriculture Fair, which closed its door on Wednesday in the southern city of Can Tho.

The week-long event, which was themed “Co-operating for Agricultural Development, Promoting Exports and Building a New Rural Area Model”, was co-organised by the Ministry of Industry and Trade and the Ministry of Agriculture and Rural Development.

Featuring 500 booths, the event showcased machinery, production lines, processed products, agricultural equipment, fertilisers, pesticides, animal feed and aquatic products.

A range of seminars, talks and trade promotions are also being held during the event for businesses to promote their products, exchange technological experiences and attract investment.

Firms fall short on corporate governance

Corporate governance of 100 listed companies was unsatisfactory last year, according to a scorecard survey released yesterday by the State Securities Commission and International Finance Corporation.

The survey showed all scores were below 60 per cent with the average score across all companies sitting at 42.5 per cent, compared to 43.9 in 2009 and 44.7 in 2010.

Similar scorecards across Asia showed Thailand at 77 per cent last year, Hong Kong at 73 per cent in 2009 and the Philippines 72 per cent in 2008.

The 100 companies on the Ha Noi Stock Exchange and HCM City Stock Exchange represented more than 80 per cent of the total market capitalisation.

The survey indicated firms which had better corporate governance demonstrated better performance in business. The 25 firms with the highest scores had higher return-on-equity and return-on-asset ratios than those who ranked lower.

However, no company in the sample group could be complacent as the best failed to reach 60 per cent.

Of the 25 firms with better scores, there was an average foreign ownership of 27.7 per cent.

“Foreign ownership indicates a better chance of a higher level of corporate governance because foreign investors want to protect their investment,” said IFC corporate governance consultant Anne Molyneux.

Meanwhile, another difference in this year’s survey was in corporate governance of the VN30 index, which tracks the performance of the HCM City Stock Exchange’s 30 leading shares.

“The (VN30) index had a better average of “observed corporate governance practices” than the 70 other companies in the sample,” Molyneux said.

The VN30 showed a smaller dispersion of corporate governance scores, she said.

It could be concluded that companies were not playing their part in developing a quality market for investment in Viet Nam.

“This regression is despite a regulatory framework for good corporate governance being in place and the authorities having actively developed the right instruments in recent years.”

There were a number of potential reasons for this step backwards. Last year, Viet Nam suffered an economic downturn, business was less vibrant and companies were in a cost reduction mode.

Also, annual reports were less expansive, perhaps due to challenging conditions and to mask poor results, and company disclosure declined, particularly in regards to board and supervisory board activities.

Also, information related to stakeholders was noticeably poorer. The role of stakeholders comparatively declined by a significant 6.7 per cent against 2010’s results.

The report stated: “In difficult economic times, companies seemed to not consider, not do as much as previously and not report on activities regarding employees and the working environment.”

Furthermore in 2011, the State Securities Commission was more active in monitoring and enforcing regulations and announcing violations to the market. As a result, more negative information about companies was available and regulatory challenges to related party transactions and to financial statement information were evident.

“It is accurate to say corporate governance practices in Viet Nam remain more evident in rules than in application and implementation,” the survey report said.

Commission president Vu Bang said the agency would increase sanctions to ensure corporate governance compliance.

Privately-financed airport reveals next step in island development

An international airport linking isolated Phu Quoc Island to the rest of the world will be put into operation on December 15, according to Lam Minh Thanh, chairman of the People’s Committee of the southern Kien Giang Province’s Phu Quoc District.

This is the first international airport built using completely private capital.

Construction started in November 2008 in the district’s Duong To Commune, covering a 905 ha area with an investment of VND16.2 trillion (US$771.7 million).

The airport is expected to transport seven million passengers and 27,600 tonnes of goods per year.

Phu Quoc, which houses 100,000 people on an area of 589 square km., is Viet Nam’s biggest and most populated island, according to the people’s committee chairman. With potential advantages in the tourism and fishery sectors, it can contribute significantly to the economic development of Kien Giang Province and the Cuu Long (Mekong) River Delta.

Since 2005, the island’s socio-economic situation has experienced positive changes. This year, its GDP is estimated to reach VND2.15 trillion ($102 million), five times the 2004 statistic. The number of tourists has increased by 13 per cent per year.

Poor monitoring allows pesticide abuse to continue

Concern has grown over inadequate pesticide management in Vietnam, putting people and the environment at risk.

Statistics by the Plant Protection Department under the Ministry of Agriculture and Rural Development (MARD) said fake and substandard pesticides are flooding the Vietnamese market.

The number of chemicals and mixtures of active elements registered for import to Vietnam had sharply increased from only four to five in 1996 to 800 in 2011. The figure exceeds the number of active elements registered for use in the country, resulting in a chaotic and dangerous pesticide market and a major obstacle to management.

Despite the negative impact on human health and the environment, Vietnam is still facing many difficulties in the preservation and management of pesticides.

According to MARD, there are around 22,000 pesticide stores across the country. On average, each province has from 400 to 500 such stores.

However, only 80% of those who trade in such chemicals are licensed and unlicensed chemicals are mainly available in small quantities and in remote areas.

There have also been inadequacies in pesticide advertising and labelling, while many farmers still continue to ignore basic instructions on their use.

Meanwhile, management of pesticide sales, import and usage remains ineffective, especially at a local level, fostering the sale of fake products.

A recent report on chemical storage showed that agricultural chemicals stored in 39 cities and provinces nationwide total over 37,000 tonnes, with 53% stored in the Mekong Delta region alone. However, more than 730,000 chemical products still lack labelling, have been improperly disposed of,  posing a threat to the environmental and human health.

Worse still, most localities lack specialised warehouses for pesticides.

Dr Nguyen Thi Viet Huong, Deputy Director of Institute of State and Law, said most current warehouses were designed to store normal goods, not dangerous chemicals. Most of the warehouses are in substandard condition.

In some places like Lao Cai Province, there are no warehouses for pesticides, forcing authorities to store such chemicals in other locations. Several warehouses in Lang Son Province are overloaded.

Nguyen Xuan Hong, head of Hanoi Plant Protection Department, said in order to ensure effective pesticide management, they regularly co-ordinated with relevant agencies to conduct inspections of pesticide stores and trading companies in the capital.

Hong admitted that they faced many difficulties in managing pesticides due to inadequate responsibility and vagueness over which agency was responsible for the monitoring of the market, warehousing, costs of preservation and destruction.

To improve the situation, he called on co-operation between several ministries.

Decentralisation adds to waste in public investment

The mechanism to allow localities to license projects is among major causes of ineffective public investment, said Economist Pham Chi Lan.

“In the last National Assembly session, many deputies agreed to deal with the massive public investment, however, during the discussion most of them wanted more projects to be implemented in their own localities,” she shared at a recent conference to improve public investment efficiency held by the Ministry of Planning and Investment, in Hanoi.

The mechanism to allow localities to license projects is among major causes of ineffective public investment

Speaking at the conference, Trinh Huu Thang, director of Bac Giang Province’s Department of Planning and Investment, said that a commune of just 6-7 cadres was permitted to approve investment projects despite their limited capacity.

“In some projects, communal officials simply follow the instructions of consultants even though it is usually in the interest of consultants to recommend larger projects, as this translates into bigger profits for them,” he added.

Over the past several years there has been a rush to build industrial parks, but to date only 46% them have been utilised. Many have no waste treatment systems and cause serious harm to the local environment. Up to 40% of Vietnamese public investment is poured into infrastructure projects, while the investment in agriculture, technology and education has been on the fall.

Mr. Thang also pointed out loopholes in the bidding process, in which investors are allowed to approve projects’ technical design and contractors. This mechanism has created opportunities for investors to collude with contractors.

According to Economist Pham Chi Lan, “Currently, up to 75% of projects are being implemented under the form of appointing contractors, not having them bid. Lan said that this is among the reasons for the inefficiency of public investment. She added that it is necessary to narrow the scale of public investment and ensure that contractors are competent.

Public opinion should be a factor

According to Economist Pham Chi Lan, the failure of public investment projects has the potential to cause numerous difficulties for the restructure of the banking system and State-owned enterprises because they are all closely interrelated.

She suggested the construction of a legal framework that could improve the efficiency of public investment. Currently, the Law on Public Investment is still being reworked. Meanwhile, a number of related laws have been issued, weakening the means of management of public investment.

Lan said that public opinion is almost never taken into consideration before projects are selected and implemented. “In fact, those projects that were done with the input of the public in mind have proven to be more successful,” she said.

The mechanism of oversight for public investment also needs to be strengthened, she emphasised.

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