Home » Business » BUSINESS IN BRIEF 29/8

Restructuring State-owned enterprises

Equitization should be done in timely fashion to restructure State-owned enterprises (SOEs).

At the recent third conference of the Communist Party of Vietnam Central Committee, this was considered to be the best way to apply competitive market-based principles in the State economic sector, with a focus on State-owned groups and corporations.

The success of Vinamilk and REE shows that, without promoting equitization and opening doors to attract capital, human resources, technology, and good governance, the State sector will be unable to develop major brand names in the process of national industrialisation and modernisation.

The slow progress of equitization, along with shortcomings in mechanisms for managing and supervising State-owned assets, is raising concerns about more scandals like what happened at Vinashin and Vinalines.

Since early 2011, after inspectors discovered numerous violations of the operational procedures in State-owned groups, the Prime Minister has stressed the importance of equitizing SOEs.

The aim is to reform the management and restructure its affiliated companies to improve business quality, productivity and competitiveness, as well as internal strengths of the key areas under State control.

However, only 60 businesses had been equitized by 2011.

There is high hope for successful restructuring of SOEs in 2012, as the political system and authorities at both central and local levels have expressed their determination to speed up the process. But only six businesses have been equitized so far this year, too small a fraction of the projected figure of 93 businesses.

No one has been criticized for such slow progress and the Prime Minister’s plan to equitize 573 SOEs between 2012 and 2015 is seemingly far off the mark.

Other barriers in the way of equitizing SOEs are the gloomy stock market and economic growth prospects.

Since the economic crisis broke out in 2008, only 39 out of 117 businesses have managed to sell stocks in their initial public offerings (IPOs) on the HCM City and Hanoi exchanges.

In the meantime, most of the businesses that need to be equitized are large-scale with complicated financial situations and they have been valued unreasonably high, despite their operational inefficiency.

For the success of the plan, equitization should be done in a transparent manner according to market principles to avoid the risk of financial fraud and those businesses with poor operational skills should be closed down.

The debt burden on local businesses

Vietnam’s explosive credit growth over a long period of time, together with bank policies to provide easy access to credit, have made Vietnamese businesses more dependent on bank loans.

However, this was not revealed until the double global crisis hit the country.

Since 2011, many leading groups and corporations have suffered losses and even faced the risk of bankruptcy. This has been attributed to the overuse of bank loans and trying to earn more profits by investing in “non-core” projects.

At a recent investment conference, Nguyen Xuan Thanh, Director of the Public Policy Program at the Fulbright School in Ho Chi Minh City, said Vietnam has 709 businesses listed on the country’s stock exchanges.

Of that total, more than 50 are financial businesses under commercial banks, financial corporations, and security companies and 647 are non-financial enterprises. Together they have a debt-to-capital ratio of 1.53, much higher than the figures of companies listed on the stock exchanges in the US (1.2) and China (1.06).

Of the 647 businesses listed on Vietnam’s stock exchanges, construction and real estate companies have the highest financial leverage rate of 2.07, followed by non-financial ones (1.53), energy (1.44), and raw materials (1.39).

The consumer goods sector uses the lowest financial leverage rate of 0.8.

The use of financial leverage at high rates over the past years has created the difficulties confronting construction and real estate businesses.

Thanh said there is no clear relationship between financial leverage and the scale of businesses, but there is a huge difference in the amount of debts among industries.

According to statistics announced by the Ministry of Finance, State-owned enterprises (SOEs) have a debt-to-capital ratio of 1.71.

Nguyen Nam Thanh, Managing Director of Vietnam Capital Partners, estimates the debt ratio of Vietnamese businesses at 1.2 percent, much higher than the regional average of 0.45.

Leading enterprises such as the Hoang Anh Gia Lai Group, Vinaconex, and Phat Dat all have high debt to capital ratios and are facing the possibility of bankruptcy.

There has actually been a boom in the banking system recently. While credit growth in the 1990s was only 20 percent, credit outstanding nationwide hovers around 140 percent of GDP, higher than other ASEAN countries and only lower than China.

Bank credit is focused on the business sector, with outstanding credit now reaching VND2,021 billion (77.2 percent).

Economists say there is now a trend of debt deflation in the economy, which should ease the debt burden on businesses. This is reflected in the decrease of the credit to GDP ratio.

Banks are now moving their investment to government bonds and other short-term bonds to refinance their debts.

Economists also proposed SOEs reduce their debts by selling property and accelerating equitization.

Once businesses are able to pay their debts, commercial banks will have more money to help other enterprises, especially small- and medium-sized ones.

Businesses honoured for social responsibility

The Corporate Social Responsibility Award 2012 (CRS Award 2012) was launched in Hanoi on August 27, to honour businesses gaining achievements in their operation and environmental protection.

The award is jointly organized by the Vietnam Chamber of Commerce and Industry (VCCI) and the Ministry of Planning and Investment, the Ministry of Industry and Trade, and the Ministry of Natural Resources and Environment.

VCCI General Secretary Pham Thi Thu Hang said the current global economic recession is an opportunity for businesses to enhance their competitiveness through improving both working and living conditions for their workers, as well as protecting the environment.

Florian Beranek, Chief Technical Advisor of the United Nations Industrial Development (UNIDO)-VCCI CSR project, asserted that the award aims to recognize businesses having a comprehensive view on their social responsibilities and putting these CSR principles into their daily operations.

Businesses can register to join the award until the end of November. Evaluating processes and assessment criteria can be found on the website www.sd4b.vn/dondangky.

Vietnam ranks second in footwear exports to Colombia

Vietnam is the second biggest exporter of footwear to Colombia, earning more than US$28 million during the first five months of this year.

The export earnings represented 16 percent of the South American country’s total footwear imports.

Vietnam came in second after China in value, but fourth in volume, shipping 1.16 million pairs to this market.

According to the Colombian Association of Footwear and Leather Manufacturers (ACICAM), Colombia imported nearly 25.7 million pairs in the first five months of 2012, valued at US$177.2 million, a year-on-year increase of 21 percent in volume and 25 percent in value.

In 2011, Vietnam exported about 2.87 million pairs to this South American economy, ranking fourth in export volume and second in value with US$66 million.

Over 4.7 million tonnes of rice shipped abroad

As of August 23, Vietnam had exported 4.715 million tonnes of rice this year, valued at US$2.141 billion, according to the Vietnam Food Association (VFA).

The price of rice in the Mekong Delta, Vietnam’s largest rice basket, is currently hovering around VND5,650-5,900 per kilogram.

Unhusked five-percent broken rice is selling for VND8,650-8,750/kg, while the prices of unhusked 15-percent and 25-percent broken rice are VND8,300-8,400/kg and VND7,900-8,000/kg, respectively.

Local rice traders have increased their purchasing volume, driving rice prices up as they are enjoying rising prices in foreign markets, which have increased US$5-7/tonne in recent days.

On the global market, Vietnamese rice (five-percent broken) is traded at US$435-445/tonne, while 25-percent broken rice is valued at US$410-415/tonne, much lower than those from India and Pakistan.

Vietnam has set a target to export 6-6.5 million tonnes of rice in 2012.

Gold prices follow global market fluctuations

Domestic gold prices increased substantially on August 27 in line the global market trends.

In the morning, SJC gold in Ho Chi Minh City was listed at VND44.3-44.5 million per tael, up VND250,000/tael compared to last weekend.

In Hanoi, SJC gold hovered around VND44.3-44.55 million per tael before hitting VND44.7 million per tael at 9am.

This morning, the price on the world market saw a slight increase to US$1,676.28 per ounce, up US$5 per ounce over the previous transaction.

Domestic gold prices saw strong fluctuations over the past week, from around VND42 million/tael on Monday to nearly VND45 million/tael on Thursday.

Vietnam’s gold price on August 23 was VND3 million/tael higher than that on the global market. However, economists said, the domestic price is likely to be adjusted in line with the global market during upcoming transactions.

Meanwhile, the US dollar exchange rate was stabilized over the past week, staying at VND20,830-20,880/USD. The average rate over the past eight months has stood at about VND20,828/USD.

Agricultural, forestry, aquatic exports up 10 percent

Total agricultural, forestry and aquatic exports in the past eight months rose 10 percent to US$18 billion.

Some key items, such as coffee, rice and rubber saw remarkable growth in both volume and value.

Coffee fetched nearly US$2.7 billlion, rice US$2.5 billion and rubber more than US$1.7 billion, respectively.

Foreign arrivals up 9.4 percent in eight months

Vietnam has welcomed almost 4.4 million visitors in the first eight months of 2012, a year-on-year increase of 9.4 percent, according to the General Statistics Office.

Most of the tourists came from the Republic of Korea, followed by Malaysia, Thailand, Japan, Taiwan and France.

During the period, Vietnam also saw a sharp drop in the number of American, Chinese, Australian and Cambodian visitors to the country.

The number of international visitors in August is estimated to be 525,292, up 6.5 percent against July but down 4.3 percent against the same period last year.

The 8-month figure has helped the country’s tourism sector meet 67.5 percent of its target to attract 6.5 million visitors in 2012.

Vietnam expects to welcome many more foreign visitors as important events are scheduled during the rest of the year.

Vietnam Airlines recently offered discounts up to 50 percent on international air routes to entice more foreigners to the country.

Bank profits dip as credit growth slows

Commercial banks in HCM City are concerned that they might not be able to meet their year-end business targets because lending has declined in the last seven months.

According to the State Bank of Viet Nam, in the first seven months of the year, credit in the banking sector grew by only 1.06 per cent compared with the figure recorded late last year.

In July, credit growth dipped to negative numbers, compared to 1.4 per cent for the first six months.

By the year-end, the entire banking sector will have 6-8 per cent credit growth, according to the central bank.

Independent market observers said that credit still remained the main source of income for banks.

Although in the last seven months, it met 50 per cent of its business plan for the year, DongA Bank says it remains under pressure.

The bank’s general director, Tran Phuong Binh, said income from credit activities in the first seven months contributed to 70-75 per cent of the bank’s profit.

However, the bank’s credit growth in the last seven months was only 4 per cent, compared to its target of 15 per cent for the year.

Because of this, the bank has decided to adjust its profit target of VND1.5 trillion (US$71.4 million) for the year.

In the last seven months, the Orient Commercial Joint-Stock Bank (OCB) achieved credit growth of only 1 per cent, much lower than the 15 per cent set for the year.

Trinh Van Tuan, chairman of the OCB executive board, said that increasing lending at this time was not an easy task, so the bank would have to make extra efforts to meet its profit target of VND1.5 trillion ($71.4 million) for the year.

“Adjusting the profit target is inevitable,” Tuan told Dau Tu (Investment) newspaper.

Major banks are also meeting difficulties in realising their profit targets for the year.

For example, Sacombank’s pre-tax profits in the first six months was VND1.49 trillion ($70.9 million), accounting for only 43 per cent of its yearly plan.

According to a Sacombank representative, market fluctuations will prevent the bank from reaching a high profit level this year.

By August 22, the Asian Commercial Bank (ACB) has obtained pre-tax profits of VND2.34 trillion ($111.4 million) , while the bank plans to reach VND5.5 trillion ($261.9 million) in profits for the year, according to its newly elected general director Do Minh Toan.

Market experts said the rapid increase in bad debts at commercial banks had corroded profits because they were forced to set aside more money to set up reserve funds, as required by the central bank.

Although many banks, including major ones, have fulfilled half of their profit targets for the year, their profits have dropped significantly because of the mandatory contributions to reserve funds.

Dr Tran Ngoc Tho of HCM City Economics University said banks’ earnings had dropped, but were still higher than many other industries.

Cambodian traders buy up rice

Unlike previous years, large volumes of Vietnamese rice produced from the summer-autumn crop have been sold at the Cambodian border in southern provinces.

Pham Thai Binh, director of the Can Tho-based rice exporter Trung An Co, said a number of traders from Cuu Long (Mekong) Delta provinces had bought Vietnamese rice and sold it to Cambodia traders at areas along the border of the two countries.

Binh said Thai companies also had purchased many kinds of Vietnamese rice, from low-quality IR 50404 to high-quality rice such as long-grain and fragrant rice, from Cambodian traders.

According to figures from Sai Gon Giai Phong (Liberated Sai Gon) newspaper, at least 400,000 tonnes of Vietnamese rice have been sold to Thai buyers, including 100,000 tonnes of 5 per cent and 25 per cent broken rice and 300,000 tonnes of broken grains of rice.

Le Truong Son, general director of the Dong Thap-based Docimexco, said Thai companies’ purchase of Vietnamese rice caused prices to rise in Viet Nam.

Truong Thanh Phong, chairman of the Viet Nam Food Association (VFA), said natural disasters in many countries would cause rice prices to increase for the rest of 2012.

Droughts and floods in India have led to a reduction in rice exports in that country, while China is expected to import more rice this year.

According to VFA, in the first seven months, Viet Nam signed contracts to export 6.3 million tonnes of rice this year.

Last week, Vietnamese high-grade 5 per cent broken rice sold for US$435 to $445 per tonne and low-quality 25 per cent broken rice for $405 to $415 per tonne.

Viet Nam is expected to reach its target of exporting 7 million tonnes of rice this year, but will have little opportunity to earn profits from high rice prices in the world market later this year, according to Phong.

Developer delists bonds in Singapore

Hoang Anh Gia Lai Group (HOSE: HAG) has delisted US$90 million in its international bonds from the Singapore Exchange (Stock Trading) to reduce costs.

HAG was the first company in Viet Nam to have its bonds listed on an overseas exchange, and the withdrawal may give a negative impression to international investors.

According to a recent announcement by HAG, the delisting would help save the listing maintenance fee.

The number of the bond-holders was small as well as the number of bond-trading deals.

The five-year bonds were issued on May 20 last year and listed on SGX-ST on May 23, with an annual interest rate of 9.875 per cent.

In March, HAG was downgraded to “negative” from previously “stable” by rating firm Fitch because of its real-estate products in stock that were worth VND3.5 trillion (US$166.6 million) at the end of 2011, thus facing a credit risk.

The company said it had VND313 billion ($14.9 million) from issuing 10 million shares for its hydro-power business, and receivables of VND560 billion ($26.6 million) in the third quarter from a property-project sale, and receivables from apartment sales on instalments.

According to the company, its liquidity would be ensured as a new hydropower project, the Ba Thuoc 2, will begin production at the end of this month. In addition, its sugar plant and first rubber crop in Laos, together with its VND2.2 trillion (as of June), will contribute to liquidity.

On August 17, HAG issued VND850 billion ($40.4 million) in domestic bonds, with three-year terms.

Trade fair opens in Can Tho

Hundreds of local and international firms will display their products at an annual trade fair that opens today in Can Tho City.

They include electronic products, cosmetics, garment and textile, machinery, equipment, timber products, and handicrafts.

The event until September 3 seeks to help boost sales of domestic companies, particularly those in the Cuu Long (Mekong) Delta, strengthen exchange of information among businesses, and promote technology transfer to improve their competitiveness.

A seminar to promote exports from the delta will be held during the fair.

Giant soy-milk plant starts in Bac Ninh

A ground-breaking ceremony for a locally invested soy milk plant was held in Tien Son industrial zone in the northern province of Bac Ninh on Saturday.

With a designed capacity of 1 billion cartons a year, Vinasoy-Bac Ninh Plant, invested by Quang Ngai Sugar Joint Stock Company, is expected to become one of the world’s five largest soy milk factories.

Covering an area of 60,000sq m, the plant is equipped with synchronous and automatic equipment from Sweden’s Tetra Pak group. It will employ 200 workers and help local soybean growers secure a stable source of income.

HCM City gets firm on price rises

HCM City authorities, reviewing the socio-economic performance in the year to date, said greater efforts are required to prevent price rises and volatility caused by the fuel price hikes in August.

People’s Committee Chairman Le Hoang Quan said Government agencies should address problems faced by companies and take measures to boost demand for their products.

He also urged relevant agencies to keep unsafe goods out of the city.

“Relevant authorities must take measures to stop the sale of harmful fruits,” he said.

The city enjoyed a trade surplus of nearly US$1.6 billion, with exports amounting to $19.27 billion, up 1.2 per cent compared with the same period last year. Imports rose by 3.7 per cent.

Industrial production was up 4.2 per cent over the same period last year.

The city welcomed 290,000 foreign visitors in August and a total of 2.41 million international visitors in the first eight months, a year-on-year increase of more than 10 per cent.

According to a report released at the meeting by the People’s Committee, the city achieved “positive” socio-economic development in the same period.

Measures taken by the authorities to help businesses combat difficulties, like reducing and waiving tax, have proved fruitful, it said.

The VAT payments that were deferred by six months in April and May amounted to VND579 billion (US$27.7 million).

The 30 per cent reduction in corporate income tax in the first and second quarters totalled VND335 billion, while landlords and owners of creches enjoyed tax waivers worth VND8 billion in return for their pledge not to raise rentals and fees this year.

But the report also spoke about the challenges facing socio-economic development, such as the low rate of growth of some sectors, below-target tax collections, low disbursement by foreign investors, and return of inflation (the increase in CPI) in August after two months of price decreases.

The city’s consumer price index rose by 0.66 per cent in August, according to the HCM City Statistics Bureau.

The highest increase, of 3.56 per cent, was seen in entertainment, followed by a 2.17 per cent rise in accommodation, electricity, water, and fuel.

Ten goods and services saw rises, one remained unchanged, and one saw a drop.

The three hikes in fuel prices in a single month were the major reason for a 1.17 per cent rise in transport prices.

Similarly, an increase in cooking gas prices caused a 2.17 per cent rise in electricity, water, and fuels.

Nguyen Dinh Cung, deputy head of the National Economic Management Institute, said the 0.66 per cent rise in August was not high, but characterised it as “sudden” after the CPI fell by 0.57 per cent in July.

The sharp rise in fuel prices had little impact on food and foodstuff prices because they were dependent more on crops than fuel, he explained.

The August inflation takes the rise in prices this year to 2.14 per cent. The increase was 4.28 per cent year-on-year.

Trading rules face tightening to stop swindlers

The Ministry of Industry and Trade has vowed to tighten control of foreign traders’ purchases of agricultural products to limit possible violations and help farmers avoid being swindled.

“All violations on purchases of agricultural products will be strictly punished,” said director of the ministry’s Domestic Market Department Vo Van Quyen at a conference on the dissemination of legal documents related to activities of foreign traders in Viet Nam in the Mekong province of Can Tho yesterday.

He said that the ministry would actively co-ordinate with relevant sectors to enhance inspection and controls to punish violations as well as increase the dissemination of related laws to people.

The ministry would also speed up the building of legal frameworks relating to rights of imports and exports of foreign traders who do not have trade representatives in Viet Nam, together with a database of foreign-invested enterprises for post-checking, he added.

A report from Quyen’s department shows that the purchases of foreign traders had helped to create outlets for certain agricultural products, especially those with high productivity and short cultivation times, as well as increase employment and income for locals.

However, the report also said that there were many cases of foreign traders visiting Viet Nam under a tourist visa and operating illegal purchases, which had affected raw-material zones and the processing industry, and resulted in a volatile market, loss in tax collection and economic sustainability.

Since May last year, there have been reports about foreign traders coming to Viet Nam and operating a series of mass purchases of agricultural products, resulting in complicated developments. It’s reported that the purchases are made without consideration of quality, size and quantity. Many traders are said to have made deals with farmers in short time frames and at any cost, leading to losses for farmers.

The trade ministry viewed the increasing demand for Viet Nam’s agricultural products as the reason for the phenomena and claimed that there was a group of domestic traders supporting the illegal purchases for private benefit. Some farmers had also sold products directly to foreign traders for short-term benefit without realising the illegality of the practice, the ministry’s report said.

Also, the dissemination and education of related laws was said to be insufficient and unsuitable for different cases.

Speaking at the conference yesterday, some delegates from the Cuu Long (Mekong) Delta region urged the ministry to increase the dissemination of the related laws to all people, especially farmers and traders, to improve their understanding of trade activity regulations and to help them consider the pros and cons of purchase contracts.

900m kWh of electricity saved

More than 900 million kWh of electricity has been saved since the beginning of the year, according to the Electricity of Viet Nam (EVN) ‘s Business Department.

EVN Deputy General Director Nguyen Tan Loc said the group’s efforts to encourage households, enterprises and agencies to use energy economically and efficiently had brought about positive results.

EVN’s branches had focused on co-operating with the media to inform people about the need to conserve electricity, organising exchanges at schools and universities which attracted 160,000 students in Ha Noi and lauching weekly power saving programmes.

Vietnam’s cosmetic market ruled by foreign brands

According to the Chemical Cosmetic Association in Ho Chi Minh City, 430 cosmetic brands operate in the country, of which 90 percent are well-known foreign brands.

Comparatively, only a few Vietnamese cosmetic brand names are visible in the market, such as Saigon Cosmetics, My Hao Chemical Cosmetics and Thorakao of the Lan Hao Company.
Customers buying Thorakao brand cosmetics in a shop at 241 Bis Cach Mang Thang Tam Street in HCMC (Photo: SGGP)

The cosmetic industry in the country has high development and growth potential with an average turnover of US$150 million a year and an annual sale increase of 30 percent.

However, Vietnamese cosmetic brands only satisfy a cheaper market segment currently, while income of people is increasing and the young are seeking affordable yet good products.

The country’s market has thus become a growing market for well-known brands to exploit.

Young people in Vietnam nowadays only know of famous international brands such as Estee Lauder, L’Oreal, Clinique, Clarins, Maybelline, Oriflames, and the Faceshop, which are now well established in the country. In addition, many foreign brand names have their production plants in Vietnam like Olay, Pond’s and Avon.

A director of a cosmetic company admits that the quality of Vietnamese-made cosmetics is the same as their foreign counterparts; however, local companies lack the capital to market as aggressively.

Le Thi Chau Giang, former president of ASEAN Cosmetic Scientific Body, said Vietnamese enterprises have many advantages as against their foreign rivals. Firstly, they understand beauty habits of local women; secondly, the country’s weather is conducive for growing plants for making raw material, such as peppermint, cajuput and citronella and natural cosmetics are better than chemically made beauty products; and lastly, the young population is very large and the cosmetic market has huge potential to grow.

Giang said that cosmetic enterprises should adopt a basic strategy for short-term and long-term development. Marketing plays a vital role in an enterprise’s success. Enterprises should listen and understand the consumers’ demand to produce what they need.

Nonetheless, enterprises themselves cannot do all such things without contribution of many related agencies including providing capital and fight against fake products, Giang said.

Nguyen Kim Thoa, director of Saigon Cosmetic, a successful brand name in Vietnam, said a company has to target a specific consumer group and offer competitive prices for it to be successful in this field.

Ways out for apartment sale in tough times

Though the real estate market is said to be frozen, apartment projects with affordable prices still find customers. The project owners that comprehend the market demand continue to launch new projects and obtain success.

Statistics of Jones Lang LaSalle Vietnam show that the number of apartments put up for sale is on the rise after interest rates are lowered. Specifically, in the last two quarters, some 1,200 apartments were launched in HCMC.

Apartment supply rises significantly in the third quarter with multiple condo projects opened for sale. Most of these projects are near completion, or can hand over homes to buyers within this year, and in the mid-end segment.

On May 26, Gia Dinh Real Estate Investment Co., through Hung Thinh Land as a broker, began to offer the condo project Nguyen Thuong Hien located at the corner of Nguyen Thuong Hien and Tran Binh Trong streets in Go Vap District, HCMC.

The project consists of two 12-story apartment blocks with 264 units priced from VND960 million each. The entire 90 apartments put up for sale were bought on the first day of offering.

As planned, the apartments will be handed over to buyers in the first quarter of next year.

Nguyen Duy Minh, deputy general director of Hung Thinh Land, said that although the housing demand is surging in line with urban development, not anyone can afford to buy himself a flat. Therefore, the condo projects aimed at end-users with low prices and flexible payment methods, especially those in preparation for handover, still attract attention of customers.

Minh said his company was quite successful in the sale of The Harmona project on Truong Cong Dinh Street in Tan Binh District on August 12. Over half of the 90 condos priced at VND1.5 billion each have been ordered.

The project developed by Thanh Nien Joint Stock Company includes three blocks with some 570 apartments, set for handover in the fourth quarter of this year.

Similarly, An Gia Real Estate Investment and Development Co. and its two partners Khang Gia and Danh Khoi on August 25 opened for sale an apartment block of the building complex Khang Gia-Go Vap on Phan Huy Ich Street in Go Vap District.

More than 320 apartments are offered at the price of VND11.2 million per square meter, or some VND537 million per unit. Payments will be made in installments within 20 months.

Nguyen Ba Sang, director of An Gia, expected the project will sell well because the apartments are priced reasonably, appropriate with middle-income earners.

Many companies have been lowering apartment prices in a bid to stimulate the weak purchasing power. Still, real estate firms said they would not directly offer discounts of tens of percents, as this method would downgrade their projects.

A senior source from a property company described direct discounts and excessive promotions as a two-edged blade, which can stimulate the purchasing power but also can make buyers hesitant and wait for further discounts. Therefore, many firms have chosen banks as intermediary to slash prices via interest rate support programs for buyers.

In this way, investors can reduce the number of unsold products while banks are praised for good lending policy. As such, customers of a number of projects have recently been offered very low lending rates, even at 0%.

For instance, Vietcombank offers customers of Indochina Plaza Hanoi interest-free loans for 15-year terms. In addition, many investors have announced preferential programs for homebuyers with 0% interest rate for 2-3 year terms.

In other words, investors will pay bank interests on behalf of their customers.

Nguyen Phuoc Thanh, general director of Vietcombank, said there are now many programs with preferential interest rates for homebuyers. The burden of soft loans is not shouldered by lenders alone, but shared by them and project owners.

With Indochina Plaza Hanoi, Vietcombank provides an interest rate of 12% in the first 12 months for loans disbursed prior to September 21, and then the interest rates will be calculated in accordance with current regulations, said Thanh. The interest rate of 0% is given as a way for the project owner to assist customers and thus quickly sell products, and in this case, the developer bears all interest sums.

In addition, there are home loans with interest rates of 7-8%, but banks actually offer 12-14%. The gap will be covered by investors, said Thanh.

Owners of property projects have chosen this method to reduce the interest burden on homebuyers and tackle their inventories.

Indochina Plaza Hanoi opens on Friday

The shopping center Indochina Plaza Hanoi (IPH) at 241 Xuan Thuy Street, Cau Giay District in Hanoi will open on Friday.

Richard Leech, managing director of CBRE, representing the project management board said that the occupancy rate of IPH was 77%. At present, 88% of the stores are in preparation for the opening day.

IPH allocates commercial space to tenants that are owners of familiar brands of fashion, accessories, perfumes, cosmetics, children’s toys, furniture and interior decoration items. In addition, IPH marks the market entry of the fast-food brand Burger King and four British fashion brands LK Bennet, Vivi Boutique London, Closet and Glamorous.

The shopping mall also features discount fashion center F.O.S with four popular brands Gap, Old Navy, Espirit and H & M.

IPH targets not only families living in apartments and office workers but also around 39,000 students of nearby universities and young people aged between 15 and 34 living in the surrounding residential areas.

PMC chosen as SouthTowers operator

Property firm PMC has been appointed by Nova Real Estate Investment Corp. (Novaland) as operator of the SouthTowers apartment buildings in the residential complex Sunrise City in HCMC’s District 7.

The US$500-million Sunrise City consists of 12 apartment buildings of 31-35 stories, classified into NorthTowers, SouthTowers and Central Plaza.

With staff experienced in property management, PMC has surpassed other management units thanks to its professional and cost-effective working methods, said a representative of the company.

PMC has officially launched its property management service in HCMC, after the company had provided this service in Hanoi for the last three years.

PMC is currently managing more than 118,000 square meters of office space, 10,000 square meters of commercial space, and 753 luxury apartments.

Liberty raises investment capital to VND1.2 trillion

Liberty Insurance Limited has announced to increase its investment capital by VND209 billion to over VND1.204 trillion, equivalent to around US$60 million.

Carlos Vanegas, CEO of Liberty Insurance, said that the capital increase would help the firm continue to invest in information technology, human resource training, product diversification and service quality improvement in order to be one of the top five non-life insurers operating in Vietnam.

After five years of operation, Liberty Insurance now ranks seventh in terms of insurance premiums among 29 non-life insurance firms in Vietnam.

According to a recent survey conducted by the consulting firm Cimigo with over 1,000 automobile insurance buyers nationwide, Liberty was the most favorite automobile insurer with over 82% of customers saying they were satisfied with its service quality.

Liberty Insurance is a 100%-U.S.-invested non-life insurance firm and a member of Liberty Mutual Insurance.

Liberty Mutual ranked 82nd among the 100 largest groups in the U.S. based on revenues in 2010 with total assets worth US$112.4 billion and total revenues of US$33.2 billion.

Hanoi to put 10% tax on abandoned villas

Hanoi authorities proposed to impose new taxes on abandoned villa projects as a punishment to investors.

According to the Hanoi Department of Construction, as of June the city had about 655 villas and 574 linked houses, which were completed but unused.

The villas that have been abandoned for less than three months will be subject to a 5% tax on the contract value, while a 10% tax will be applied to those abandoned for over that term.  The Ministry of Finance also proposed fining the investors VND10-20 million (USD478-957) per villa.

However, experts said this could prove difficult since the government has not yet clearly defined what constitutes abandonment.

In addition a progressive tax system has been suggested for those households that buy more than one property.  Many have suggested that the properties are considered assets of the investors.

Others claim, however, that these abandoned villas are proof that the investors are having difficulties and more taxes will simply add to their difficulties in tough economic times.

The Prime Minister has ordered the local authorities to carry out an inspection on the matter, and requested that investors comply by putting the villas to use by the third quarter, suggesting that they may be forced to sell them to people with real demand.

Mega highways face different paths

Competent state agencies are weighing up the best-case scenarios for two mega highway projects.

In late August 2012, the ministries Planning and Investment and Transport (MPI and MoT) convened a meeting discussing two investment plans on expanding trans-Vietnam 1,760 kilometre Hanoi-Can Tho route (National Highway 1) and 1,811 kilometre north-south highway network which are of foremost importance to Vietnam’s socio-economic development in the next decades.

These two routes contain many sections running parallel less than 10km in distance.

In the first-case scenario, apart from the Hanoi-Ha Tinh section now under construction National Highway 1’s Ha Tinh-Can Tho section, spanning over 1,050km with total investment of around VND92 trillion ($4.38 billion), will be divided into 18 build-operate-transfer (BOT) projects. Each project will involve building 70km road and a toll station. State capital will be around VND55 trillion ($2.6 billion) with estimated toll level of VND500/CPU (cost per unit)/km (3.5 fold more than basic level) and subject to be revised following consumer price index (CPI) situation which is estimated at 6 per cent per year. Time for capital recovery of each project will be from 25 to 30 years.

In respect to north-south highway network eastern part with construction cost reaching VND479 trillion ($22.8 billion), the MoT envisages completing building of 136km section by 2015, increasing to 793 km section by 2020 and the remaining 1,018km section will be completed after 2020.

Apart from 260km section involving Danang-Quang Ngai, La Son-Tuy Loan and Ben Luc-Long Thanh highways which have completed loan arrangements, the remaining sections will source capital under public-private partnership (PPP) model with 60 per cent state capital support.

In the second scenario, National Highway 1’s expansion plan will link closely to progress of north-south highway project in which the latter project investment plan remains the same as in the first-case scenario.

In respect to National Highway 1 investment, the section stretching from Ha Tinh to Can Tho will have road surface reinforced. Existing highway sections will remain unchanged (282km). Of an estimated VND80.5 trillion ($3.8 million) investment, VND43 trillion ($2.04 billion) will come from state budget with toll level set at VND500/CPU/km and will be revised matching CPI situation, while the remainder will be sourced from private sector.

MoT Minister Dinh La Thang assumed to create breakthroughs in social and economic development national highway 1 should be expanded before 2016.

MPI Minister Bui Quang Vinh said the country could not evolve if current transport bottlenecks were not effectively addressed. Hence, relevant ministries MPI, MoT and Ministry of Finance much reach a common voice to create a suitable mechanism attracting diverse investment sources into highway development.


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