Home » Business » BUSINESS IN BRIEF 30/11

South Korea pushes for trade deal

South Korea wants to sign a Free Trade Agreement with Viet Nam as soon as possible to further enhance economic ties between the two nations, a South Korean official has said.

Jang Mi Yeon, deputy director of the Free Trade Agreement (FTA) division of South Korea’s Ministry of Knowledge Economy, said the two countries met in September for the first round of FTA negotiation.

Jang spoke during a seminar on the Korea – ASEAN FTA co-organised by South Korea’s Ministry of Knowledge Economy and the Korea Trade and Investment Promotion Agency (KOTRA) yesterday in HCM City.

South Korea and ASEAN, of which Viet Nam is a member country, already have an FTA in force since 2007.

“ASEAN is getting more important to Korea compared to other regions,” she said, adding that Korea wants to establish bilateral FTAs with ASEAN members to promote relations in a wide range of fields with each ASEAN country, including Viet Nam.

Korea considers Viet Nam one of most important trade partners in ASEAN, according to Jang.

“Tariffs under the Korea-Viet Nam FTA would be lower than those under the Korea-ASEAN FTA,” said Park Il Yeong, director of the Ministry of Strategy and Finance of Korea’s FTA Promotion and Policy Adjustment Authority.

Won-Chul Shin, deputy director at the FTA Promotion and Policy Adjustment Authority from the Ministry of Strategy and Finance of Korea, said an FTA was seen as an effective way to deal with the slowdown in the economy. Since the global recession in 2008, more FTAs have been signed.

As of October, the number of FTAs has reached 346, according to the World Trade Organisation.

An FTA abolishes tariff and non-tariff barriers, while, from the consumers’ perspective, a wider variety of products and services at more reasonable prices becomes available.

“In fact, if you take a look at the change in bilateral trade since the effectuation of Korea-ASEAN FTA, the volume of trade was US$66.4 billion a year before the FTA came into effect. After five years, total volume increased to $127.4 billion,” he said.

In 2006, Korean investment in ASEAN countries was about $3.6 billion. In 2010, it was $7.1 billion.

Such results can be viewed as the effect resulting from mutual economic cooperation through FTAs and more transparency in investments, he added.

Park said bilateral trade between Korea and Viet Nam had reached more than $8 billion last year.

Viet Nam is the major investment market for Korean enterprises in the steel, urban development and hotel industries, with many large investors such as Posco, Doosan Heavy industries, Kumho and Samsung Engineering doing business here.

Kim Jongsang at the KOTRA’s emerging market research team said currently more than 90 per cent of total items are already exempted from tariff owing to the ASEAN-Korea FTA.

Butchers vow plentiful supplies at Tet

Meat supplies were plentiful and imports would not be necessary for the approaching Tet (Lunar New Year) holiday, Department of Animal Husbandry director Hoang Kim Giao said on Monday.

Giao refuted rumours that approval would be given for 200,000 tonnes of meat to be imported for the period.

Figures for the department, under the Ministry of Agriculture and Rural Development, showed pork supplies would increase by 2-3 per cent by the end of the year and poultry by 7-10 per cent compared to the same period last year.

Giao was speaking at southern Dong Nai Province’s Association of Animal Husbandry seminar where he said meat prices would increase by only 8-10 per cent this year, compared to 20-30 per cent in previous years.

This was because farmers had been selling meat below cost due to the flood of imported meat on the domestic market, some of it low-quality.

Deputy chairman of the province’s Thong Nhat District’s People’s Committee Huynh Thanh Vinh said losses by district farmers from May till November this year totalled VND330 billion (US$15.72 million), due to the decline in meat prices.

The association said the price of frozen chicken this month was only VND20,000 ($0.95) per kilo, a loss to the farmers of VND10,000 ($0.48) per kilo.

Phu Son Husbandry Company director Le Van Me said meat producers could not develop if imports were not tightly controlled.

Farmers called for tight controls on imports of frozen meat and by-products to prevent low-quality and expired meat being dumped on the market.

Giao called on ministries to bring frozen meat imports under tight control.

He said his department was considering allowing the imports of whole chickens only, as was the system in Thailand and Malaysia.

The association proposed price stabilisation policies be introduced for meat products to better encourage farmers.

SMEs call for more support at conference

The critical role that small- and medium-sized enterprises (SMEs) can play in Viet Nam’s developing economy spurred passionate conversation in a high-level conference organised by Association of Chartered Certified Accountants (ACCA) and the Viet Nam Chamber of Commerce and Industry (VCCI) in Ha Noi on Monday.

The conference was attended by representatives from the Ministry of Planning and Investment, Ministry of Science and Technology and more than 250 other participants, including micro financiers, local and international companies, development agencies and ACCA members.

Topics discussed included current trends in the SME sector development, finance solutions for SMEs, enhancing SME investment and trade capacity, overcoming the challenge of being small and increasing SMEs’ competitive capacity by improving access to global markets. Many attendees emphasised that official institutions such as banks, through which these funds and products are often channelled, need to be encouraged to promote them more actively to their SME clients.

“In recent years, the number of new businesses has increased, but they are mainly small, so it is very hard to approach new markets and expand existing ones,” said Pham Thi Thu Hang, VCCI’s secretary general.

“In this challenging economic context, the issue of having good inventory is a major challenge not only for SMEs, but also for large enterprises. To overcome this difficulty, enterprises should review the whole system of production, distribution, product innovation and innovative technology applications to further participate in the global value chain, exploit the domestic market and enter niche markets. At the same time, enterprises should closely involve themselves in the cluster system and industrial zones and collaborate with other business associations to improve product quality while keeping prices reasonable, thus increasing access to markets.”

Le Thi Hong Len, head of ACCA Viet Nam said that Viet Nam’s SME sector can play a critical role in the future success of the economy.

“More than 97 per cent of all enterprises in Viet Nam are SMEs and they provide more than half the employment opportunities in the country, which underlines their importance,” he said. “Small businesses, because they can act quickly, will also lead the development of the Vietnamese economy, but they face a number of challenges, such as limited access to finances.”

Rosana Mirkovic, head of SME Policy at ACCA, said that the problems facing small businesses in Viet Nam were hardly unique. Many other countries also face challenges such as regulation, access to finance and access to cross border trade, she said, and “supporting SME development ought to be an active agenda across government departments”.

For example, those departments responsible for fiscal policy, justice or employment law may well have a bigger effect on SME growth and access to finance – through their decisions on tax policy on equity funding, setting up or developing better access to efficient credit information facilities right through to well-functioning property and contract law frameworks, she said.

Insurers predict 10% growth

The insurance industry will see modest growth in earnings of 10 per cent next year despite a third consecutive year of slowed economic growth, predicts Association of Viet Nam Insurers (AVI) general secretary Phung Dac Loc.

Non-life premiums next year were expected to grow by 13-14 per cent while life premiums would increase 11-12 per cent, Loc told the publication Dau tu Chung khoan (Securities Investment).

To maintain profitability, non-life insurers would emphasise personal asset insurance, health insurance, financial insurance and agricultural insurance, he said. Life insurers would continue to strive to attract new customers and retain existing contracts while waiting out the sustained downturn in the real estate and securities markets and the decline in personal incomes.

Life insurers were also expected to increase their focus on bancassurance (a term used to identify a range of insurance products sold through banking networks). They also were also likely to continue building their base of insurance agents as a key competitive strategy in the coming years.

Nation courts Japan investors

Viet Nam considers Japan its leading partner in foreign investment and pledges to provide the best environment for Japanese investors.

Vietnamese Minister of Planning and Investment Bui Quang Vinh made the affirmation at the sixth Viet Nam-Japan Economic Forum, which took place in Tokyo yesterday.

He said that the forum, jointly held by the Vietnamese Ministry of Planning and Investment (MPI), the Vietnamese Embassy in Japan and the International Friendship Exchange Council (FEC), was an opportunity for Japanese businesses to speak about their desire to invest in Viet Nam.

“Viet Nam, with 65 million people of working age, provides a safe investment environment for Japanese businesses,” he stressed.

Vinh spoke highly of the friendship and long-term economic co-operation between Viet Nam and Japan, noting that the two sides have agreed to select five priority sectors for development co-operation, including electricity and electronics, food processing, agricultural machinery, shipbuilding, and environmental and energy-saving industries.

He added that he had high hopes for the development prospect of the support industry as well as public-private partnerships (PPP) with Japanese businesses.

At the forum, Head of the MPI’s Foreign Investment Agency Do Nhat Hoang presented Viet Nam ‘s investment policies to help Japanese businesses better understand the country’s investment environment.

The former Panasonic Viet Nam General Director, Mitsuru Okada, who has had 20 years experience in business and investment in Viet Nam, said that Viet Nam was a good partner in the political, economic and cultural spheres for Japan.

According to Okada, the support industry is very necessary for Viet Nam and the country sees opportunities to attract Japanese investment in the sector.

During the visit to Japan (from November 24 to December 1), Minister Vinh attended working sessions with leaders of the Japanese Ministries of Foreign Affairs, Land, Infrastructure, Transport and Tourism; the Japan Federation of Economic Organisations (Keidanren), the Japan International Cooperation Agency (JICA) and the Japan External Trade Relations Organisation (JETRO).

EU donates IT, office equipment to health ministry

A European Union delegation and the Ministry of Health carried out a handover of information technology and office equipment worth 137,000 euros (US$177,000) yesterday.

The new equipment will help the Ministry collect data on health management and health planning. These activities are part of the health sector reform discussed in the Health Partnership Group on planning and finance.

Cashew producers to halt exports if decree approved

Around 150 cashew producers – half the growers in the country – will be forced to stop exporting cashews if a drafted decree on trading and exporting cashews gets approval from relevant sectors, said the Viet Nam Cashew Association.

Under the draft, cashew exporters must have a total cashew processing capacity of at least 2,500 tonnes per year, the association said. That would eliminate many smaller producers without such large capacities.

The association expected that Viet Nam would see the number of cashew exporters decrease to 75 in the coming years, helping the country control cashew prices on the world market.

Ha Noi industrial index rises 5.1% in 11 months

The industrial production index of Ha Noi saw a year-on-year increase of 5.1 per cent for the first 11 months of this year, according to the Ha Noi Statistic Office. In November alone, the index had a month-on-month surge of 1.4 per cent.

During the first 11 months, industrial production increased 4.7 per cent for processing, 11.3 per cent for electricity and fuel and 16 per cent for water supply and waste water treatment. Meanwhile, other industries saw reductions in production such as food processing (2.7 per cent), textiles (17.9 per cent) and paper (3.8 per cent).

At present, industrial production in Ha Noi is still experiencing difficulties mainly due to high inventory but producers have started to resume stable operations and plan to have enough goods on hand for the holidays at the end of the year and lunar new year.-V

Ha Noi targets 23 million tourists by 2020

The capital city of Ha Noi aims to draw 3.2 million foreign visitors and 20 million domestic visitors by 2020, according to the city’s development plan on tourism by 2020 with vision toward 2030.

The city People’s Committee said the tourism sector expected to gain US$3.79 billion in total revenue by 2020.

Ha Noi plans to increase the variety of cultural, ecological and entertainment tourism options it offers in order to reach this goal.-

Draft decree would limit labour subcontracting

While the subcontracting of labour was authorised in the 2012 revision of the Labour Code, the new code does not specify further conditions or procedures. A draft decree setting forth conditions for subcontracting labour is currently be circulated for public comment.

Under the draft decree, a labour contractor would be required to place a deposit of at least VND1 billion (US$47,800) in escrow at a licensed commercial bank in Viet Nam that would be used to compensate the subcontracted employees if the contractor breaches any agreement with them.

Labour contractors would be required to be licensed by the Ministry of Labour, Invalids and Social Affairs and (i) maintain legal capital of at least VND2 billion ($95,700); (ii) maintain a registered office in the same location for at least one year; and (iii) have an executive with civil capacity, a complete curriculum vitae and at least a bachelor’s degree or higher.

If the draft decree is promulgated in its current form, labour subcontracting would be limited only to certain business sectors as specified in the schedule accompanying the decree and subject to various other restrictions. For instance, labour subcontracting would only be allowed (i) to meet sharply increased human resources demand; (ii) replace an employee taking maternity leave, leave related to a workplace accident, or performing a citizen’s obligations; or (iii) to place highly-skilled workers.

Government regulates trade of alcoholic beverages

Government Decree No 94/2012/ND-CP, regulating the production and trade in alcoholic beverages, classifies production of these beverages into three types: mass production, small-scale production; and small-scale production for sale to enterprises licensed to conduct further processing. Trade is also classified into three types: distribution, wholesale and retail.

The decree also requires that the quantity of an alcohol trading license be set according to population density. An alcohol distribution license will be allocated based on a region with a population of 400,000. An alcohol wholesale license will be allocated for each 100,000 people in a province and an alcohol retail license for each 1,000 people in a district.

Only enterprises with alcohol distribution licences will be eligible to directly import alcohol, a change from the prior regulation allowing only alcohol wholesale enterprises to import alcohol. The new decree will take effect on January 1, 2013, replacing Decree No 40/2008/ND-CP.

New rules applied for food additive labelling

The Ministry of Health issued Circular No 19/2012/TT-BYT on November 9, on labelling products in conformity with food safety regulations. The circular applies to processed and/or packaged food, food additives, food enhancers, packaging materials, and instruments in direct contact with food. For additives and enhancers not on the official list of those permitted for use either in Viet Nam or the product’s country of origin, as well as products containing these additives and enhancers, the Food Safety Bureau will determine whether and how the product will be labelled. The circular takes effect on December 25 this year.

Soai Rap River to be dredged for ship traffic

Large vessels cannot travel directly from the East Sea into ports in HCM City because the Soai Rap River is not wide or deep enough. Instead, they must follow an 85-km route from Vung Tau to the Sai Gon River, taking up a lot of time.

But this distance will be cut in half when a project to dredge the Soai Rap River, now in its second phase, is completed. The project, which began on Saturday, will allow larger vessels to travel up the river into the Hiep Phuoc Port complex in HCM City’s Nha Be District (No 24).

The project will dredge 54-km of water, increasing the river’s depth to 11.5m, according to the Soai Rap River Dredging Project Investment Management Board, under the jurisdiction of the city’s Transport Department. Originally, the river had a depth of 5-6 metres, but in the first phase (2009-10), the river was dredged to a depth of 9.5m, allowing vessels of 30,000-50,000DWT to traverse it.

After the second phase, the Hiep Phuoc Port complex will be able to receive larger ships with loading capacities of 50,000 – 70,000DWT.

The final phase of the project will dredge this section of the river to a depth of 12m, allowing it to receive vessels with loading capacity of more than 70,000 tonnes by 2015.

The second phase, with an investment of nearly VND2.8 trillion (US$134 million) of which VND2.2 trillion ($105 million) comes from Belgian ODA loans and the rest from the city budget, is expected to be finished in 16 months.

Nguyen Van Cong, Deputy Minister of Transport, said the project would help increase connectivity among seaports and enhance logistics and export services in HCM City in addition to boosting the sea economy of the Mekong Delta.

A representative from the Viet Nam Seaports Association said dredging the Soai Rap River would help not only reduce transport costs but also make Vietnamese products more competitive.

Soai Rap, together with the Cai Mep-Thi Vai River in Ba Ria-Vung Tau Province, would help the southern economic zone become one of the country’s most important economic zones and make Hiep Phuoc Port one of the major ports not only in the region but also globally, said Tran The Ky, deputy director of the city’s Department of Transport.

According to Ky, the city also planned to improve the road system that connects to the port.

A 2-km road would be built to link Sai Gon-Hiep Phuoc Port with the road system. Then a 2.2-km road would be added to connect Hiep Phuoc industrial park with the Ba Chiem traffic circle in District 7.

These would be finished concurrently with the dredging of the Soai Rap River, he said.

Vietnam’s farm produce at a disadvantage without processing

Ninety percent of Vietnam’s farm produce is exported in its raw state and at a very low price to foreign buyers who then process and label it with their own brand name to sell at higher rates, said Nguyen Duy Luong, deputy chairman of the Vietnam Farmer Association.

Vu Huy Hoang, Minister of Industry and Trade, also admitted at a National Assembly meeting that although Vietnam has a variety of high-quality farm produce, most of it is exported in raw form.

According to Vu Dinh Bac, chairman of the Thanh Ha Litchi Export Association in Hai Duong Province, Vietnamese farmers have been exporting fresh litchi to China for last several years. Chinese importers then process the litchi fruit, pack and label with their brand name and sell at a much higher price than in which they imported.

Because most farm produce in Vietnam has not developed brand names despite a large export output, the margin of profit remains far too low, said Mr. Bac.

Nguyen Viet Vinh, secretary general of the Vietnam Coffee and Cocoa Association, said that Vietnam has not yet paid attention to processing of farm produce for export purposes.

For instance, a kilogram of coffee bean sells for US$2 but after processing importers earn $7 for just one cup of coffee.

According to Mr. Luong, the State should formulate policies and use their capital resources to help localities and businesses develop specialized areas for growing of certain produce, so as to establish a brand name. Scientists should assist farmers with advanced processing technology methods to add value to their produce for export.

Economic expert Nguyen Minh Phong said that Vietnam has hundreds of farm produce in need of building brand names. Initially, the country should focus on produce that has the highest export output like rice, coffee, tea and fruits.

Vietnam’s automobile industry in stagnation

Even though the peak season of Tet Lunar New Year is nearing, October auto sales continued to dip, causing the car production line to slow down in an already dying car industry.

The Vietnam Automobile Manufacturers Association (VAMA) reported October industry sales figures at 7,998 units, which included 3,128 cars and 4,870 trucks.

The locally assembled car volume reached only 6,782 units and imported vehicles were 1,216.

In the first ten months of the year, car sales for the entire market reached 30,000 units, down 50 percent year-on-year.

Accordingly, turnover in the first ten months of the year decreased 50 percent compared to the same period last year.

The association forecasts that around 94,000 units will be sold this year, much lower than previous predictions of 140,000 units.

Sensing bad market trends, many manufacturers and importers have changed their strategy. Toyota, which has the biggest market share in the country, has reduced production from 36,000 to 25,000 vehicles. Other manufacturers have followed suit and workers in factories now work only three days a week.

Importers are lamenting–some like Hyundai Thanh Cong, Renault, and Volkswagen have not imported any vehicle parts for the last one month. Some had to negotiate with partners to cancel deposit contracts.

According to VAMA figures, in the last three months, only 1,000 units have been imported into the country while the Ministry of Industry and Trade figures show a decrease of 65 percent in volume and 71.6 percent in value in imported cars.

At a recent seminar to iron out the difficulties in the automobile industry and market, people blamed increasing taxes and fees for poor sales. Michael Berhrens, Chairman of Mercedes Benz proposed that Vietnam should adopt more transparent and long term tax policies and fees to help the automobile industry grow.

It is impossible for the industry to sustainably grow if tax and fee policies are changed so frequently, Berhrens said.

Agreeing with Berhrens, Nguyen Khanh Toan, VAMA’s deputy chairman, said that right now a vehicle has to pay nine different kinds of taxes and fees, which raises prices while incomes remain low. He pointed out that the income of Vietnamese people is equivalent to one-fiftieth that of an American and automobile prices are 365 times higher.

Untapped market in children’s clothes, bra segment

Despite the government’s call to ‘Be Vietnamese Buy Vietnamese’–an effort to help domestic enterprises expand in the consumer market–some sectors like the textile and garment industry have failed to tap potential in many segments which look promising.

Home textile and garment firms have not focused on children’s clothes in the age group from 7-12. Vietnamese parents nowadays have 1-2 children and want to give their children the very best of things and don’t hesitate in spending large sums on items such as clothes.

However, the local textile and garment firms have been disappointing and hence there is a huge void in this segment which is being filled by foreign made children’s clothes, mainly being brought into the country in small quantities by tourist agents or flight attendants.

Prices of these clothes are not cheap. For instance, an outfit for a nine-year-old boy costs from VND300,000-VND500,000 (US$14.39-$24) and a girl’s dress can cost upto VND800,000 ($38) or more.

Mrs. Tram, an assistant at a children’s clothes store on Xo Viet Nghe Tinh Street in Binh Thanh District, said the store was opened three years ago and such clothes have done well recently. The store imports goods from Hong Kong once a week so it has new designs and most of the customers are people with an average income who look for good designs and material rather than prices.

Meanwhile, people of a lower income usually choose Chinese-made clothes at cheaper rates and an assortment of designs.

Similarly, Chinese-made underwear for females is available in markets across Vietnam and is very popular as it is cheap at VND20,000-VND50,000, while domestic made bras are priced at VND100,000-VND250,000 a piece.

Most Vietnamese bras are displayed in supermarkets and some famous brands have established distribution networks in many districts. However, this segment is taken by international brands such as Triumph, Pierre Cardin, Bon Bon and La Senza.

The country has more than 2,000 textile and garment firms which have no interest in making bras. According to a company, to manufacture a bra, it needs 20 subsidiary materials plus wages of VND25,000 per bra, with the cheapest sale price being VND60,000, excluding tax. In any case, Vietnamese-made bra cannot be cheaper than Chinese-made bras.

Moreover, an investment for an assembly production line costs hundreds of dollars and training workers takes a long time as making a bra needs skilled workers. As a result, Chinese-made bras that were embedded with strange pills were selling across the country, and authorities cannot do anything as customers with low incomes have no choice but to buy these low priced bras.

The Vietnamese textile and garment sector has not exploited local markets in such important segments, which raises the question whether Vietnamese commodities can meet all demands and whether the problem can be resolved with government help.

Sharp increase in foreign tourists to Vietnam

Vietnam National Administration of Tourism informed that the country has received more than six million international visitors since the beginning of the year, an increase of 11.5 percent compared to the same period last year.

In November, almost 656,000 foreign visitors came to Vietnam, an increase of 24.5 percent over last month and 7.2 percent year-on-year.

Ho Chi Minh City alone saw 3.46 million foreign visitors since the beginning of the year, up by 12 percent over the same period last year.

Between November and March is usually peak season for Vietnam’s tourism industry.

With the current momentum, the number of international visitors to Vietnam will exceed the target of 6.5 million by end of 2012, according to the National Administration of Tourism.

Firms blamed for choosing personal relationships over improved efficiency

Vietnamese enterprises tend to pay too much attention to developing personal relations instead of their technology and administration, leading to poor results, experts said.

Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) said at a press conference to introduce the Consortium of Vietnam Business Forum (VBF) 2012 that business environment in the country had yet to encourage enterprises to enhance their competitiveness.

He said that most enterprises spent too much time on developing relations rather than focusing on improving their technology and administration. This resulted in a large number of local companies filing for bankruptcy despite foreign-invested companies being able to develop despite the economic difficulties.

Alain Cany, Co-chairman of VBF Consortium, said after nearly 30 years of renewal, Vietnam was regarded as a country that had great development potential but it still lacked skills to manage enterprises.

Even though the country’s productivity had remarkably improved, its enterprise management capacity was well below par, he emphasised.

According to Cany, Vietnam’s business environment remained unstable due to capital shortages and a heavy dependence on banks.

Vietnamese businesses get bank loans by guaranteeing their assets while banks seem not to pay enough attention to their business capacity to make a profit prior to providing the loan. When opportunities to access low-interest loans become narrower, Vietnamese enterprises should improve their management capacity, along with making better preparations for the worst case in case of bank bankruptcy, he recommended.

“One reason why FDI firms operate more effectively than Vietnamese ones is that they borrow less, have good management capacity and well-developed recruitment policies,” Cany noted.

Vu Tien Loc said that even though the country has seen a considerable decrease in inflation and the trade deficit, enterprises are still facing a lot of unexpected difficulties. FDI firms have better competitiveness amid economic difficulties due to their more competent management.

Vietnamese small-and-medium sized enterprises (SMEs) seem to have better management capacity than larger ones, Loc assessed.

Concerning the upcoming Vietnam Business Forum scheduled for December 2, Cany said that partners will share a dialogue with the government and make suitable recommendations to deal with banking crisis and support SMEs.

He said that Vietnam has applied tight monetary policies for a period and has achieved positive results. However, he said that such policies should not be maintained for a long time as it could result in more enterprises filing for bankruptcy in the time to come.

Loc said that recommendations would focus on three major issues, maintaining macroeconomic stability, saving and supporting enterprises and enhancing corporate management competency.

PM requests that EVN withdraw from non-core businesses

Prime Minister Nguyen Tan Dung requested that the State-owned Electricity of Vietnam Group (EVN) complete its plans to withdraw capital from several non-core businesses by 2015.

Dung made the request in a decision to approve EVN’s restructuring plan for the 2012-2015 period.

As a result, EVN must complete capital withdrawal from An Binh Commercial Joint Stock Bank (ABBank), An Binh Securities Company, Global Insurance Company (GIC), Saigon Vina Real Estate Company, Central Power Real Estate Joint Stock Company (LEC), and EVN Investment and Construction Joint Stock Company by the end of 2015.

The restructuring plan aims at ensuring that EVN concentrate on more effective investment in its core business of power production and trading in order to better to serve society and the economy.

The plan estimated that EVN would have assets worth VND143.4 trillion (USD6.9 billion) after the restructuring.

In early 2012, EVN sought approval from the State Bank of Vietnam in HCM City to hand over its 5.37% stake in ABBank to HDBank. However the proposal was turned down for failing to meet requirements.

In early July, Dinh Quang Tri, EVN’s Deputy General Director, said at a seminar on the group’s restructuring that EVN is facing difficulties in the process of capital withdrawal.

By that time, EVN’s investment in securities, banking, insurance and real estate totalled VND1.1 trillion (USD52.7 million), including VND757 billion (USD36.3 million) in ABBank.

By the end of last year, EVN held a 24.3% stake in ABBank. The group was seeking approval from the Government to sell its shares in the bank at VND10,000 each in order to reduce its stake in the bank to 20%. However, the bank’s share price on the OTC market is much lower than the expected selling price of VND10,000 per share.

EVN had bought shares worth VND125 billion (USD6 million) or a 22.5% stake in GIC. EVN now plans to cut its stake to less than 20% by the end of 2015 by selling a part of its stake to a German company, ERGO International AG. The plan must first be approved by the Ministry of Finance as the German firm already owns a 20% stake in GIC.

EVN has also invested VND103 billion (USD4.9 million) in LEC and EVN Land Saigon. EVN has decided to allow LEC to sell off all its assets and return the capital to shareholders. By the end of last year EVN held a 4.3% stake in LEC.

Under the decision, the PM also allowed EVN to retain its dealings in four major business spheres, with 14 subsidiaries and one holding company.

EVN is authorised to wholly own nine enterprises, hold more than 50% of chartered capital in five companies and 50% in six companies.

The group must submit a detailed plan to complete the restructuring by the fourth fiscal quarter.

Business mogul arrested for fraud

One of the largest companies in Hai Phong City was sold at a symbolic price of USD1, leaving businessmen arrested and the company unable to pay their debt of VND1.3 trillion (USD62 million).

The Thai Son Industry and Trading Company, one of the 500 biggest private enterprises in Vietnam, was bought by Truong Sa Consulting and Investment Company in HCMC for just USD1.

The chairman of Thai Son Company, Pham Van Thu, was arrested for fraud and misappropriating assets in August. His son, Pham Hai Thanh, former General Director of the company, along with Duong Hoang Son, former Director of its subsidiary,Thanh Son Steel Company were also arrested.

Thu made a substantial sum by dismantling old ships and selling off the parts. In 2008, he incurred a debt of VND250 billion as the market saw a slump.

Despite a very high inventory, Pham Hai Thanh managed to borrow VND270 billion from DongA Commercial Bank and allegedly tricked other banks into giving loans.

In the three following years, the business did not show any signs of growth, and interest on the loans mounted up. As of February, 2012, Thu owed 12 banks and one finance company VND725 billion. He also owes another seven enterprises a total of VND180 billion. The creditors said the debt is overdue and Thai Son Company has become insolvent.

The case was exposed when Thu transferred the company to new owners, Truong Sa Consulting and Investment Company, in April.

When the company asked for their business permit, the Department of Planning and Investment in Hai Phong asked the State Bank of Vietnam to carry out an inspection because of irregularities.

Dan Duc Hiep, Deputy Chairman of Hai Phong People’s Committee said, “The laws do not ban the transfer of a company. However, Truong Sa was only established in 2011, with a registered capital of only VND4.9 billion. Management of the company has proved to be incompetent, and it raised red flags when they wanted to buy Thai Son, which has and still is incurring a huge debt.”

Truong Sa Company also refused to answer questions about how they plan to pay off their debts.

“They bought the company for almost nothing and hoped that the Government would extend debt relief in near future. We’ll investigate the business operations of other businesses who have irregularities in transfers of ownership in the future. Any individuals found to have been in violation of the Laws on Enterprises or perform irresponsibly will be punished,” Hiep said.

Furniture makers club together for domestic supply

Over ten woodwork enterprises are setting up a business group providing woodwork products for the domestic market.

The group includes directors of over ten woodwork processing and exporting enterprises which are members of the Handicraft and Wood Industry Association of HCMC (Hawa). The group last week held the first meeting in HCMC to discuss a plan of selling products of the enterprises at a joint showroom in downtown HCMC.

According to Tran Viet Tien, director of Gia Long Fine Art Joint Stock Company, although members of the group produce many different products such as doors, floors and kitchen furniture, key products are tables, chairs, beds and wardrobes. The group aims to sell products to investors of housing and residential projects, especially via showrooms of member companies.

“The idea of establishing a group supplying furniture products for the domestic market started in 2009, but not until now do enterprises find that the time is ripe to set up the group and provide high-quality items for consumers,” Tien said.

HCM City aims at GDP growth of 9.5-10% in 2013

Although the economic situation is forecast to remain difficult next year, the HCMC government still sets a gross domestic product (GDP) growth target of 9.5-10% with a value of VND686.7 trillion and GDP per capital of US$4,000.

As per the report on the 2012 socio-economic situation delivered at the 12th meeting of the HCMC Party Committee on Monday, the municipal government predicted the chance of inflation surging again would be high. In addition, bad debts would stay high and businesses would continue to face problems regarding capital, labor and market.

In 2012, GDP of the city is estimated at over VND595.3 trillion, up 9.2% against 2011, with GDP per capita at US$3,600. The GDP growth of 9.2% under the impact of the global economic woes is a positive result, said the HCMC government.

However, the city has yet to obtain the GDP growth target for this year, together with the targets for export turnover, budget revenue, job creation and housing area per capita.

In 2013, the municipal government will continue to accomplish the goals of generating jobs for 120,000 laborers and increasing the percentage of trained laborers to 66%, poverty reduction, social security and environmental protection.

Increased credit targets not easy to obtain

While they were still determined to achieve higher credit targets approved by the central bank in September, several banks now admit it is hard to obtain such targets as capital absorptive capability of businesses is low.

Dang Quang Tien, deputy general director of Military Bank (MB), told the Daily that reaching the new target was a challenge for MB. As of end-October, MB’s credits had grown 17% against the end of last year, meeting the old target, but still below the new target of 25%.

In fact, MB has approved a lot of applications for loans, but capital absorptive capability of businesses is limited.

Loan applications of many companies have been granted, but they did not come to the bank to take out loans. In addition, some applications were initially considered as qualified, but at the time of loan disbursement, borrowers no longer satisfied the requirements.

MB is urgently looking for new corporate borrowers. The fact that many banks hesitate to give loans to new borrowers is a chance for MB, said Tien, explaining that among those in need for bank loans, there will be good businesses.

Nevertheless, appraisal of collateral will be done carefully to avoid risks, he said.

Meanwhile, credit growth at HDBank is some 20% in the first ten months, versus the new credit target of 30%. Le Thanh Trung, deputy general director of the bank, said his bank would strive to meet the new target, though knowing that it is not easy.

He explained the demand for loans among enterprises was low given the huge volume of inventories. In addition, lending rates are still high, making lending for production and business potentially risky.

Therefore, enterprises are hesitant to take out loans at present. “During the final months, the demand for loans to make Tet goods often surge compared to other months. However, the situation this year is quite different as the demand of corporate clients is not as high as previous years, though lending rates are going down,” said Trung.

Nguyen Hoang Minh, deputy director of the central bank’s branch in HCMC, said banks could hardly obtain the increased credit targets.

He forecast credit growth of HCMC in the whole year would be at 5.4%, failing to meet the revised target of 8-10%. This figure is exclusive of bonds because government bonds are mainly paid by the budget and the volume of corporate bonds issued is negligible, he explained.

HCMC is still promoting connection programs between banks and businesses. On Tuesday, Sacombank will sign a loan contract with price stabilizers and small traders worth some VND1 trillion in preparation for the Tet season.

In 2013, both banks and enterprises will face greater problems as the macro-economy does not improve much. Therefore, credit growth in 2013 will not be an easy target, said Minh.

CPI slightly up on small food catering services price hike

The November consumer price index (CPI) increased a mere 0.47% month-on-month even though prices of nine out of eleven groups of items surged and many groups posted higher price growth than last month, according to the General Statistics Office.

In a report announced last Saturday, GSO ascribed the inconsiderable surge of the national CPI to the slight decline of food and food catering services as the most-weighted group in the commodity basket. This month’s CPI inched up 0.47% against the previous month, with the eleven-month index marking up 6.52%, soaring 7.08% year-on-year.

Nine out of eleven groups in the basket of commodities used for CPI calculation have contributed to the 0.47% growth, with the group of medicine and health services making a substantial contribution when jumping 5.16% month-on-month. Healthcare services alone grew 6.66% while the eight others recorded a moderate rise of less than 1%.

For instance, the group of textile, garment and footwear edged up 0.83%; drinks and tobacco 0.2%; housing, building materials and gas 0.53%; household utensils and appliances 0.56%; and transport services 0.03%.

However, curbing the CPI rise at 0.47% is thanks to a month-on-month fall of 0.08% of food and food catering services that account for 40% of the basket. This is one of the rare decreases of the group since the year’s beginning, with foodstuff slipping 0.21%, food surging 0.05% and restaurant services growing 0.2%.

The November index also sees the post and telecommunications group barely dropping, at 0.01%. As such, the index picked up 6.52% compared to the rate reported in end-2011. With the year 2012 having more than one month to be out, there is a high possibility that the Government will be able to control inflation at 8% as targeted. The CPI slowdown at the end of this month is quite different from the normal trend of price hikes towards  year’s end, meaning local demand remains low in the peak season of the year.

Commodity price hikes in rural areas were much stronger than in urban areas, with the CPI growing 0.57% month-on-month, higher than the national average, while urban areas posted a rise of 0.36%, GSO said.

CPI this month recorded modest growth against October in a majority of provinces and cities, with HCMC posting an increase of 0.1%, Hanoi 0.22%, Thai Nguyen 0.11% and Danang 0.37%. The index in a number of localities decreased, with a month-on-month contraction of 0.1% reported in Gia Lai and 0.12% in Vinh Long.

Fresh FDI falls further

As of November 20, there had been 980 new foreign direct investment (FDI) projects licensed nationwide with total registered capital of US$7.25 billion, down nearly 40% year-on-year.

In this period, 406 operational FDI projects raised their capital by US$4.92 billion, a rise of 41.3% over the same period last year. However, this did not help push up the total newly-registered and additional FDI.

In the first 11 months of 2012, the total fresh and additional FDI amounted to US$12.18 billion, only equal to 78.6% of the year-ago figure, says the latest report on FDI attraction of the Foreign Investment Agency (FIA) under the Ministry of Planning and Investment.

Processing-manufacturing still took the lead in attracting foreign investors, luring 431 fresh FDI projects and total newly-registered and additional capital of US$8.5 billion, or 69.8% of the total FDI inflow into the country.

Despite the frozen real estate market, FDI inflow into this sector ranked second with nine new projects and fresh and additional capital at US$1.84 billion, accounting for 15% of the total FDI inflow.

Wholesale, retail and automobile repair attracted 169 new FDI projects with total capital, both fresh and additional, of US$465.6 million, taking the third place in terms of FDI attraction. Information and communications occupied the fourth place with total newly-registered and additional FDI funds of US$403.4 million.

In the year to date, Japan has always been the biggest foreign investor among 56 nations and territories with investment in Vietnam, with total newly-pledged and additional capital of US$5.05 billion, or 41.5% of the total in the first 11 months.

Singapore came second with US$1.55 billion in fresh and additional FDI capital, followed by South Korea and Samoa with US$1.08 billion and US$899.8 million respectively.

Still, according to FIA, Vietnam has achieved certain positive results in FDI attraction. Notably, disbursement of the foreign-invested sector increased sharply, with some US$10 billion disbursed in the first 11 months, equal to 99.5% of the year-ago figure, a very good result in the context of economic woes.

The foreign-invested sector’s exports, including oil and gas, are estimated at US$65.61 billion in the first 11 months of the year, up 31.8% year-on-year, accounting for over 63% of the total export turnover of the country.

Meanwhile, businesses in this sector imported some US$54.96 billion worth of products, picking up 24.3% over the same period last year and standing at 52.85% of the nation’s total import turnover.

Overall, in the first 11 months of 2012, the foreign-invested sector recorded a trade surplus of US$10.65 billion.

So far, Binh Duong has lured the most FDI, US$2.28 billion, accounting for 18.8% of the total fresh and additional FDI capital. HCMC ranked second with US$1.14 billion, 9.4%, and Dong Nai took the third place with US$1.11 billion, followed by Hai Phong, Bac Ninh and Hanoi.

(Vietnam Net)

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