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BUSINESS IN BRIEF 31-1Eximbank and Sacombank plan merge

The Vietnam Export Import Commercial Joint Stock Bank (Eximbank) and the Sai Gon Thuong Tin Commercial Joint Stock Bank (Sacombank) have unveiled merger plans at a cooperative agreement’s signing ceremony in Hanoi on January 29.

The agreement specifies the two banks will submit a plan of merger to State agencies and a general assembly of shareholders in the next three to five years.

Eximbank is Sacombank’s largest shareholder. The merger will help both banks overcome their respective difficulties, improve their competitive capacity, and contribute to the sustainable development of the Vietnamese banking system and economy.

Under the agreement, both banks will support each other in optimising capital resources and liquidity.

They will also work together to meet customer demand in foreign currency and gold trading while complying with the regulations of the State Bank of Vietnam (SBV).

Eximbank currently has a charter capital of VND12,355 billion. By the end of 2012’s third quarter, the bank’s total assets were valued at more than VND160,000 billion. Sacombank’s charter capital is VND10,739 billion and its total assets exceed VND147,000 billion.

Slump in pangasius exports

According to the Directorate of Fisheries under the Ministry of Agriculture and Rural Development, the breeding area for pangasius fish is currently around 5,910 hectares with output around 1.28 million tons and export turnover of US$1.74 billion, a year-on-year drop of 3.4 percent.

These figures were revealed at a meeting organized by the ministry on January 25, to review production and consumption of pangasius in the Mekong Delta in the year 2012 and plans for 2013.

At the meeting, Truong Dinh Hoe, General Secretary of Vietnam Association of Seafood Exporters and Producers (VASEP), predicted that the production of pangasius in 2013 will decrease below one million tons or around 800,000 tons, resulting in low export turnover of $1.5 billion.

This fall is the result of the present economic crisis. However, it needs to be addressed and problems solved for the sector to develop and grow pangasius exports by 2014.

The pangasius breeding sector has never before fallen into such difficult times, with price down to VND19,200 per kilogram while feed and other overheads have increased, resulting in farmers suffering a huge loss of VND4,000 per kilogram.

More worrisome is the fact that seven out of ten of Vietnam’s major export markets for the fish, such as the EU, the U.S., China, middle eastern  countries and Egypt have decreased imports of the fish due to economic woes and spending cuts.

The country has around 300 exporters but only 70 of them have processing facilities. Many enterprises that cannot directly process have ruined the market by decreasing prices.

Nguyen Huu Dung said that the Vietnam Association of Seafood Exporters and Producers are dishonest as they pour water into the fish to increase its weight, a practice which is most unacceptable.

Many FDI projects in Vietnam’s real estate sector

At the end of 2012, 389 Foreign Direct Investment (FDI) projects in real estate worth US$49.8 billion were licensed, according to a report of the Ministry of Planning and Investment released yesterday, January 24.

Thus, Foreign Direct Investment in the real estate sector accounts for about 23.32 percent of total FDI in Vietnam.

Ho Chi Minh City attracted the bulk of FDI with 163 projects worth $12.4 billion, followed by Hanoi, Ba Ria-Vung Tau, Phu Yen, Binh Duong and Dong Nai.

Singapore is currently the largest foreign trade partner in Vietnam’s real estate sector with 55 projects and capital of $8.6 billion. The Republic of Korea ranks second with 79 projects worth $6.7 billion.

Most foreign investors are involved in the construction of luxury hotels, resorts, offices for lease, and high-end apartment buildings.

According to the Ministry of Planning and Investment, progress was made in FDI disbursement, but a number of projects were moving far too slow due to policy issues on land use and management.

Compounding the problem were difficulties caused by economic slowdown, inflation, land acquisition and compensation, and complicated procedures on investment licenses.

To attract more foreign investors, the Ministry of Planning and Investment suggested simplifying investment procedures, reforming the legal framework on mortgage loans, and setting up funds for housing development in specific localities.

Professional motorbike taxi service in Hanoi

A professional motorbike taxi service (xe om) has been started in Hanoi.

Tran Dinh Bach, Director of Nam Minh Joint Stock Company, said the company had about 20 motorbikes, but plans to expand to other areas after Tet.

Driver Dinh Xuan Hoang said the service has attracted quite a lot of customers, who appreciate the ability to call the switchboard directly to order motorbike services. He said that his salary has increased to around VND5 million per month.

Not only are the motorbikes equipped with metres, but drivers are also fitted with uniforms so they will be distinguishable from individual motorbike drivers.

The initial ten kilometres is costs VND6,000/km and is reduced to VND4,000 per km after that, he said.

This business model has been in operation in HCM City for some time.

“After three months we see that customers are happy at not having to bargain for the price of a ride. Also, each of our motorbikes is equipped with GPS so that the driver will be able to take the shortest route,” said Doan Huu Phat, Director of Thien Khach Company who was also in charge of setting up the service in HCM City.

Experts show ‘grave concerns’ about economy

The nation’s leading economists expressed their grave concern about the challenges the economy will have to face after going through a very tough year.

They were speaking at a workshop called “Vietnam Economy 2012-2013 – Corporate Restructuring and Macroeconomic Balance” held by the Economic Committee of the National Assembly (NA) and the National Economics University in Hanoi on Sunday.

Truong Dinh Tuyen, former minister of trade, said the Government was having a hard time dealing with short-term risks being businesses in trouble and a long-term risk of high inflation.

“The Government must find a connecting point for the issues in the short and long term. The short-term problems cannot be left unsolved, while the long-term goal cannot be missed,” he said.

In the short term, the situation remains bleak with negative credit growth, but prices are still rising. Moreover, the aggregate demand of the economy is very low, he remarked.

Bad debt is driving the economy into a deadlock as enterprises with good projects cannot borrow loans and banks cannot lower lending rates. “The governor keeps speaking about an interest rate cut, but how?” he wondered.

In the long term, he said bad debt settlement and bank restructuring were moving at a slow pace, hindering the cash flow into the economy. State-owned enterprises (SOEs) are granted much credit and public investment has not shown any sign of reform.

Vo Tri Thanh, vice president of the Central Institute for Economic Management, added: “The so-called economic achievements are incomplete. Macroeconomic stabilization is full of risks and high inflation will likely return.”

For the first time in history, disbanded companies outnumber newly-established firms in January and the inventory index is as high as 21%.

Meanwhile, given the current difficulties in the State budget collection, the Government is facing a severe lack of resources to save businesses.

“Perhaps, the Government wants to quickly stimulate the economy, but finds many risks and has no idea about the market reaction,” he said.

Associate Professor Pham Hong Chuong from the National Economics University said the Government was responsible for both macroeconomic stability and economic stagnation.

He predicted it would take at least five years for Vietnamese enterprises to improve their competitiveness, which had been adversely affected by an excessive focus on real estate speculation over production and business activities.

“We are being surpassed by other nations in the region, including those previously well behind our country,” he said.

Meanwhile, economist Vo Dai Luoc said that although economic growth in 2012 was higher than in 1999, the economic situation was much better back then.

He said Vietnam cannot implement economic restructuring if insisting on SOEs playing the leading role in the economy.

“When carrying out economic restructuring, the specific features of Vietnam cannot cancel out the advanced and modern features of the world,” he stressed, hinting at the wrong way of positioning the State sector as the driving force.

Former Deputy Prime Minister Vu Khoan described the economic restructuring program as shapeless. It has not been touched after being submitted to the NA.

“The 2013 economic situation has been exhaustively discussed. The Government has made a resolution and the NA has approved it, so all discussions are meaningless now,” he said.

Minister in the dark about state of real estate market

There have been no complete statistics on the actual state of the real estate market, especially financial contributions of homebuyers to the ongoing projects, Minister of Construction Trinh Dinh Dung said on Thursday.

Currently, about 42,200 houses, mostly apartments, 100,000 square meters of office space, 100,000 square meters of retail space and 7.9 million square meters of land lots in 50 provinces remain unoccupied. The total value of inventory is some VND111.9 trillion, says a report by the construction ministry.

“This figure is much smaller than the reality,” Dung noted at the question and answer session of the National Assembly (NA) Standing Committee.

He explained the report only covered the projects that are complete or basically complete. Meanwhile, data on ongoing and inactive projects, to which homebuyers and secondary investors have contributed finances, has not been gathered.

“Consumer and business loans improperly used for investment in real estate, along with outstanding loans with collateral being properties, account for around 46.5% of the total outstanding credits,” said the minister, estimating such loans are worth over VND1,000 trillion. Therefore, 6.5% is not the accurate ratio of bad debt to total property outstanding loans.

“The figure of unsold properties reflects only a part of the reality. The inventory of the incomplete contracts has not been counted. This leads to bad debts of customers and disputes between project owners and customers that need to be settled,” said Dung.

He said the majority of realty firms could hardly pay due debts because of their unsold products.

In fact, the property market has got a little warmer than before, he said. Many projects in Hanoi and HCMC have offered discounts of up to 50%, and the Government has passed Resolution 02 with several solutions for the property market.

The NA deputies present at the Q&A session wondered whether inventory settlement would fully resolve the problems of the property market, or just rescue certain interest groups. In addition, they asked why banks had not sued property companies for their inability to pay debts and what the Construction Ministry and relevant agencies are responsible for.

Deputy Tran Du Lich said: “Developing the real estate market at present is like selling air tickets only to business-class customers. If intervention is necessary, it should be made in accordance to the market rules, or else the market would become more complicated.”

In response, Dung said rescuing the property market is necessary, but it is not an easy task. The solutions given in Resolution 02 will help resolve the market’s problems gradually, not immediately.

“The most important thing is a long-term vision so as to achieve a supply and demand balance,” he said.

He said there had been no regulations on which the ministry must be in charge of developing the property market or managing its development.

However, NA vice chairwoman Nguyen Thi Kim Ngan disagreed with his opinion. She ascribed the slow release of legal guidelines for the real estate sector to the spontaneous and rampant development of property projects. “The accountability of the ministry is very clear,” she stressed.

For example, the Law on Urban Planning became effective three years ago, but not until recently has a decree giving guidelines for this law been issued. “If the decree had come out earlier, the market would not suffer such chaos,” said Ngan.

The inspection into 33 banks in 2012 reveals that banks did not force any of their debtors to file for bankruptcy, but injected more capital into the incomplete projects so that they could be finished early. Moreover, since the bankruptcy procedure was not perfect, most creditors did not want to adopt this method, said Nguyen Thanh Binh, deputy governor of the central bank.

In related news, at a conference on the January socio-economic situation of HCMC taking place on Thursday, To Duy Lam, director of the central bank’s branch in the city, said the banking regulator would continue to take appropriate credit measures to remove difficulties for enterprises.

The central bank has requested State-run banks to set aside a certain sum to lend to low-income earners and public employees to buy low-cost houses or commercial houses of less than 70 square meters each, priced at VND15 million per square meter.

In addition, banks will continue to give loans with preferential interest rates to developers of low-cost housing projects or those seeking to convert their commercial home projects into low-cost ones.

Japan remains Vietnam’s largest investor

This month’s foreign direct investment (FDI) approvals are forecast to be higher than in the same period last year, with Japan continuing taking the lead, according to the Foreign Investment Agency (FIA).

Like last year, Japan has this month continued topping the list of foreign investors in Vietnam, with total capital pledges amounting to US$157.7 million, 56.1% of the total in the country. Thailand came second with US$54.2 million, making up 19.3%, and France third with US$20 million, representing 7.1%.

Citing data from provinces and cities, FIA, which is under the Ministry of Planning and Investment, said the nation has attracted 37 new projects this month with total commitments of over US$257 million, up 293.6% year-on-year. Nine operational FDI projects have applied to increase capital by a total of US$24.3 million.

Pledged investment capital of operational and new projects has amounted to more than US$281 million this month, surging 74% versus the year-ago period. Foreign investment management authorities see this as good news for this year’s FDI picture.

FIA said disbursed capital of FDI enterprises is high this month, at some US$420 million, a year-on-year pickup of 5%.

Processing and manufacturing industries in the year to date have taken the lead in FDI attraction with 21 newly-registered projects and capital pledges of around US$203 million, 72.1% of the total. The real estate sector ranks second with US$50 million, or nearly 17.8%.

The Planning And Investment Ministry predicts registered FDI capital at US$13-14 billion in all of 2013, with disbursements at US$10.5-11 billion, equivalent to the figure in 2012.

HCM City posts high FDI attraction

Total foreign direct investment (FDI) capital in industrial parks (IPs) and export processing zones (EPZs) in HCMC in the first quarter is estimated at US$250 million, Nguyen Tan Dinh, deputy head of the HCMC Export Processing Zones and Industrial Parks Authority (Hepza), said.

The forecast figure as such jumps 110% year-on-year and realizes 50% of the 2013 plan, Dinh told a conference on the January socioeconomic results in HCMC on Thursday.

Dinh noted that Japan’s Nidec Tosok Company in Tan Thuan EPZ a few weeks ago applied for a capital increase by US$95 million. Similarly, he said, Japan’s Saigon Precision Company in Linh Trung EPZ had asked for approval for scaling up capital by US$120 million.

“The fact that the two entities, who have already invested in Vietnam, continue putting money into new projects is a positive sign for the city’s investment attraction in 2013,” Dinh told the Daily on the sidelines of the conference.

Total FDI poured into EPZs and IPs citywide from January 1-23 including fresh and additional capital was US$26.1 million, surging 2.25 times year-on-year, he said.

Hepza in 2013 has set the target of drawing FDI of US$500 million into local IPs and EPZs. The authority also set the same target last year but it finally saw only 85% of the goal achieved as a result of the current difficult economic conditions.

Most FDI schemes approved in HCMC this month specialize in making synthetic plastic fiber, stirring machine, medicine and drug storehouses.

Despite FDI flow’s recovery, investment activities of local firms have recorded a sharp fall in HCMC. Both new and increased investment capital of local enterprises in local IPs has only stayed at VND150 billion this month, shrinking up to 77.3% year-on-year.

Concerning the municipal socioeconomic situation in January, HCMC chairman Le Hoang Quan stated that the city’s economy has shown signs of recovery, citing a contraction of nearly 6% of manufacturing inventory indexes compared to the same period last year.

The city’s report on industrial production indicates that up to 36 out of 39 industries have posted growth from the same period last year, with foodstuff and milk rising 7.3%, footwear 56.7%, cosmetics, soap and washing-up liquid 61.5%, cement 79.5% and medicine 51.4%. Only the auto and electronic appliances industries have recorded a drop in production, at 6% and 35.5% respectively.

HCMC has this month exported US$2.7 billion worth of goods, a year-on-year pickup of 42.2%, focusing on seafood, textile and footwear. Total sales of the retail and services industries of the city has reached VND52.74 trillion, marking up 21.5% year-on-year

Wood firms face labor shortage in peak season

January is the peak month for wood processing enterprises to fulfill orders ahead of the Lunar New Year (Tet) holiday that falls on February 10, but the sector is facing a labor shortage.

According to a wood exporter in Dong Nai Province, his firm’s number of orders this month is 10-15% higher than in previous months, and customers are also urging the firm to finish deliveries before Tet.

However, he said that workers, mainly coming from northern provinces, tended to quit jobs and return to their hometowns for family reunion at Tet, which has created his firm a headache.

“Several workers returned to hometowns right after receiving salaries and year-end bonuses and do not stay and receive January salaries and Tet bonuses,” he said.

According to Dien Quang Hiep, director of Binh Duong Province-based Mifaco Co., many workers have decided to quit their jobs with low bonuses as the reason. In fact, some local wood enterprises are in trouble and thus pay low salaries or even no bonuses, which discourages workers from working.

Statistics of the General Department of Customs showed that Vietnam exported over US$209 million worth of wood products in the first half of this month, up 11% year-on-year. Besides, the export of such products last year amounted to over US$4.6 billion, up 18%.

Ben Thanh metro terminal linked with city spots

Ben Thanh central terminal of the Metro Line No.1 heading to Suoi Tien Theme Park in HCMC will be connected via underground areas to be developed in 23/9 Park and nearby buildings, the local authorities revealed.

For Metro Line No.1 project, the city’s government has assigned the Department of Planning and Architecture to cooperate with the HCMC urban railway management board to make surveys and design the terminal in line with the zoning plan of urban railway routes.

Specifically, the terminal’s design will be closely connected to the zoning plan of underground spaces of basements which will be developed in 23/9 Park and nearby buildings in the Ben Thanh Quadrilateral and the Saigon Hospital area.

The planning department by June will complete zoning plans of underground spaces at a number of intersections which railway routes run across.

The intersections include Cong Hoa Roundabout of Nguyen Van Cu, Hung Vuong and Ly Thai To streets and Dan Chu Intersection of Vo Thi Sau, Ba Thang Hai and Cach Mang Thang Tam streets.

The Ben Thanh-Suoi Tien metro line project started construction of a 17.1-kilometer elevated section in August. The line, when in place in 2017, will transport 186,000 passengers a day, with the number increasing to 620,000 by 2020 and 1,020,000 by 2040.

Wind farm commissioned on Phu Quy Island

PetroVietnam Power Corporation (PV Power) on Thursday inaugurated a wind farm on Phu Quy Island in the offshore district Phu Quy of Binh Thuan Province.

The power facility consists of three turbines with a total capacity of 6MW. Work on the VND335 billion project started two years ago, said Vu Huy Quang, president and CEO of PV Power.

When operating, it will provide around 25.4 million kWh of electricity every year.

The 6-MW wind power plant will meet about 50% of the electricity demand on Phu Quy Island, and the other half will be satisfied by thermo-power.

“PV Power is considering developing another wind mill on Phu Quy in the coming time in order to increase the percentage of wind power to 80%,” said Quang.

The wind power project has great meaning to Phu Quy District of Binh Thuan Province, especially in terms of economic development, national security and defense.

Phu Quy District comprises ten islands, with Phu Quy being the largest and only inhabited island. The district has three communes, ten hamlets and 5,400 households with nearly 27,000 people, who make a living fishing and providing marine logistics services.

The district has a potential to supply around 5,000MW of wind power. The government of Binh Thuan has approved development of 12 wind power projects, two of which were built before the plant on Phu Quy.

Bitexco launches shopping center

Bitexco Group has brought into service the retail area of the 68-storey building Bitexco Financial Tower in downtown HCMC.

Brian Cannon, deputy director of Bitexco Financial Tower, said the city’s tallest structure’s Icon68 Shopping Center is opened to customers, featuring international fashion, home and leisure shops, cafes and international dining and a seven-screen Cineplex.

The Icon68 Shopping Center spreads over five floors with total floor area of almost 10,000 square meters. It will serve as a shopping and entertainment destination for families, giving a chance for them to cast a view upon the city from the building’s observation floor named Saigon Skydeck from the 49th floor, some 182 meters from the ground.

Around two years ago, the group opened the office area in the Bitexco Financial Tower, providing the local office market with 39,000 square meters of Grade A office.

Realty firms doubt market bailout feasibility

Though advocating the State policy of converting commercial housing projects to low-cost ones and buying unsold apartments for the resettlement purpose, real estate companies wonder how this policy is carried out.

Le Huu Nghia, director of Le Thanh Commercial Construction Co., said it is not easy to turn a commercial apartment project into a low-cost one. In this process, the apartment sizes must be reduced to meet the demand of buyers, and thus the number of residents in a project will increase.

Meanwhile, Nguyen Xuan Quang, chairman of Nam Long Investment Corp., said a commercial project is much different from a low-cost one. Therefore, not all projects can be converted into low-cost ones.

He predicted when those wanting to buy low-cost apartments can access low-interest loans, the market will start moving. Then, enterprises will be willing to switch to the low-cost segment.

Tran Minh Hoang, chairman of VinaLand, remarked that as many developers are seeking to pull out of the market, many commercial condo projects currently have lower prices than low-cost and resettlement housing projects. Therefore, it does not matter if a project is of the low-cost housing segment, but finance is the major problem.

“The State can offer homebuyers soft loans, rather than classifying projects as low-cost or not, because the conversion procedure is very complicated,” said Hoang.

He said rescuing the property market by promoting the low-cost housing segment would not produce any effect, but it would even pose a risk of bad debt. Buyers of low-cost houses have limited ability to repay debts, so banks will not dare to grant them loans, he explained.

Resolution 02 of the Government encourages localities to buy unsold apartments from commercial projects to use for resettlement.

Quang of Nam Long deemed this policy theoretically feasible, but the problem is whether localities have enough money to buy commercial apartments. In fact, owners of several commercial projects have lowered prices in a bid to quickly pull out of the market.

Nghia of Le Thanh said most of the unsold apartments have large sizes and high prices, not suitable for resettlement. Moreover, in the projects which have been partly sold, the buyers would object to turning the remaining flats into resettlement houses.

HCMC has bought more than 1,000 apartments from the resettlement project Rach Chiec developed by Duc Khai Co. and 470 condos of the Era Town project also developed by Duc Khai in District, together with some other projects in District 2.

In addition, the city placed orders for apartments of several projects, including 75 units from the Good House project and 160 units from the Carina project in District 8, but these deals were unsuccessful as the buyer failed to make payments on time.

Ford Vietnam holds Special Sales Day

Ford Vietnam announced on Thursday that it will hold a Special Sales Day from 8:00 to 21:00 tomorrow at all of its dealers nationwide to celebrate the 150th birthday of Henry Ford, who created Ford Motor.

Joining this day, customers will be able to take test drive and experience professional service as well as added value offered by the dealers. In particular, the lucky draw will provide participants a chance to win valuable gifts, including iPad Mini, miniature models of Ford cars, kettles and others.

In addition, a promotional program will be introduced to support customers with discount of VND10-VND35 million per car. The promotion will be applied to Focus, Fiesta, Escape, Mondeo and Everest vehicles.

Aussie wool producers eye Vietnamese suppliers

Australia is looking to develop a sustainable supply chain for its wool industry in Vietnam.

Towards this, Australian Wool Innovation (AWI), the research, development and marketing organisation for the Australian wool industry, has been implementing a so-called Out of Vietnam project since last June.

The project not only aims to develop a sustainable supply chain in Viet nm, but also to expand its manufacturing sector.

With Australia currently sending about 80 percent of its wool to China and becoming increasingly reliant on this country, AWI sees the need to develop a new processing and manufacturing market for Australian wool, its General Manager for Product Development and Commercialisation, Jimmy Jackson, told the English-language daily Vietnam News.

“Vietnam comes out on top in comparison with other countries,” Jackson said.

“Vietnam meets a host of essential criteria, including its low sovereign risk, its well-established textile manufacturing industry and infrastructure, a large, skilled workforce, its large and growing exports of textile products, its large trade access including a Free Trade Agreement with the US and an abundant supply of water,’ he said.

After visits and meetings with potential partners, the key message that has emerged is that “the time is right for wool in Vietnam.”

Jackson said the country offers an alternative to relying so heavily on China as the major buyer of Australian greasy wool.

“We have received a fantastic response to this project. Apart from the 30 partners we also have four new wool spinning plants looking to invest as well as about 20 knitters.”

AWI owns the Woolmark Company, which is the world’s leading wool textile organisation.

The Out of Vietnam project was launched in Hanoi on June 6 and its second phase commenced in HCM City on November 29 last year.

Ten industry partners including leading weaving companies have agreed to participate in product development trials commencing March 2013, Jackson said.

Nine leading spinning companies from Italy, Germany, China, Thailand and India participated in a Spinners Meeting held in Hanoi from December 10-12 last year, where they held one-on-one meetings with 16 companies from Hanoi and HCM City.

A healthy relationship had been established between AWI and Vietnam National Textile and Garment Group (Vinatex) – the State-owned arm of the Vietnamese textile industry, Jackson said.

AWI also plans to host two fashion shows in Hanoi and HCM City as part of the celebrations of 40 years of diplomatic and trade relations between Vietnam and Australia, showcasing a collection of garments all made from Australian Merino wool.

The motto for the fashion shows is “Grown in Australia, Made in Vietnam,” said Jackson.

He added that AWI would open a representative office in Hanoi between March and July this year.

Foreign remittances estimated at $10bn

Last year’s overseas remittances into Vietnam have been calculated between $9.5 billion and $10 billion, considerably exceeding the total of $9 billion for 2011.

Luong Thi Bach Van, chairwoman of the Ho Chi Minh City-based Association for Liaison with Overseas Vietnamese, put her total estimate at $10 billion.

Meanwhile calculations by Nguyen Hoang Minh, deputy director of the State Bank’s Ho Chi Minh City Branch, showed that the 2012 result would be $9.5-9.6 billion based on a fact that overseas remittances into the southern hub accounted for about 43 per cent of the country’s total for years.

“About $4.1 billion in foreign remittances were sent to Ho Chi Minh City in the entire 2012,” he said.

The Ministry of Industry and Trade estimated Vietnam’s 2012 total export revenues to be around $114.5 billion. If the year’s all foreign remittances reach $10 billion, it will be represent almost 8.74 per cent of the export performance.

Vietnam’s 2011 foreign remittance result of $9 billion was equal to 92 per cent of the country’s trade deficit.

Around 4.5 million Vietnamese, including some 500,000 guest workers, are living in more than 100 countries and territories worldwide, according to the State Committee for Overseas Vietnamese Affairs. Over 80 per cent of them are settling in developed nations.

Vietnam plans to send 90,000 people to work in foreign countries and territories in 2013, mainly to South Korea, Malaysia, Russia and Taiwan, according to the Vietnamese Ministry of Labour, Invalids and Social Affairs. Last year’s number was about 80,000.

At present, remittances sent back home by Vietnamese guest workers from Malaysia, Taiwan and elsewhere in Asia have increased considerably, while those from Europe and the U.S. have decreased, according to Maritime Bank’s forex and foreign remittance department.

Bike brands hitting the fast lane

Famous motorbike brands continue to be top targets of local parts manufacturers with production volumes from 3-3.5 million motorbikes per year.

In a recent meeting on implementation of 2013 business plans of the Vietnam Engine and Agricultural Machinery Corporation (VEAM) the business set a target of achieving 10 per cent hike in supporting industry production revenue from supply to Japan-backed motorbike maker Honda Vietnam Company (HNV).

Since VEAM holds a 30 per cent stake in HVN, after HVN kicked-off operations, VEAM’s several member companies made great efforts to become HVN’s production satellites through spare part and components supply.

VEAM’s four members, Machinery Spare Parts JSC 1 (Futu1), Pho Yen Mechanical JSC (Fomeco), Song Cong Diesel Co (Discoco) and Vikyno Co, have become HVN satellite units.

In 2012, VEAM reaped VND842 billion ($40 million) from component and spare part supply to HVN. Of this, except Vikyno which earned only VND4.2 billion ($200,000) revenue posted by Futu1, Fomeco and Vikyno was in the range of VND250-VND300 billion ($12-$14 million) each.

Apart from production units, VEAM’s some other members providing transport services for HVN like Vetranco JSC and Matexim also revealed fairly good business outcomes in 2012.

Also in 2012, Futu1 inked a contract on technical devices supply worth VND128 billion ($6 million) to VAP, a joint venture in which Japan Honda and HVN hold a ruling stake.

Generally, motorbike parts manufacture generated VEAM revenue of VND1.2 trillion ($57 million) in 2012, accounting for 30 per cent of its total industrial production revenue.

However, it took several years before some of VEAM’s member units were acknowledged as HVN production satellites as the products needed to meet strict quality standards at reasonable costs, according to the executives at HVN satellites.

However, in return when scores of mechanical businesses faced stagnant production due to lack of orders and low consumption, HVN satellites held stable production with better year-on-year revenue figures.
Labourers’ average per capita incomes at HVN satellites are from VND5-9 million ($240-$430) per month, almost double to those at other mechanical units.

Thereby, concentrating resources into parts manufacture for HVN is a priority for VEAM and its members.

A VEAM executive unveiled this year VEAM would strive to witness 15 per cent hike in component and part supply to HVN against 2011 which was the year HVN eyed record production output exceeding two million motorbikes, in which HVN satellites target 10 per cent hike in supporting industry production value against 2011.

Amata, partner plot bold “Future City” plan

Thailand’s Amata Corporation plans to expand its foothold in northern Vietnam with a large property project in Quang Ninh province.

The property developer would join hands with Tuan Chau Au Lac for developing a 3,000 hectare urban project, Future City, in the province’s Quang Yen town, said a source at Quang Ninh Provincial Investment Promotion Agency.

Amata, which entered Vietnam in 1994, now owns a 1,353ha industrial park – Amata Bien Hoa City in southern Dong Nai province. The well-known industrial park has attracted 100 multinational companies to make investments. The Thai developer last year also announced plans to develop a giant Amata Express City project in Dong Nai, worth $20 billion.

In Quang Ninh, Amata plans to develop Future City within three years, comprising a green industrial park, residential urban area, sport facilities, convention centre, schools and university and entertainment facilities, according to the source. However, he declined to reveal the estimated investment of the planned project.

“Everything is in the initial stage. We will discuss it further with the developers to reach a final decision,” the sources said. Quang Ninh provincial leaders, he added, acknowledged the project, if implemented, could be a breakthrough to attract more foreign direct investment capital to the province.

“Amata is a well-known developer in Thailand and it has been successful with the industrial park in Dong Nai. More foreign investors will pay attention to Quang Ninh once Amata invests here,” he said.

Bordering Lang Son, Bac Giang, Haiphong and Hai Duong provinces and China’s Guangxi province, Quang Ninh is now the third largest economic hub in northern Vietnam, after Hanoi and Haiphong. It is also the site of the largest coalmine in the country.

The Vietnamese government saw Quang Ninh as part of the pivotal economic development triangle of Hanoi-Haiphong-Quang Ninh in northern Vietnam that would drive the economic development in the northern region.

To enhance the appeal to private investors, Quang Ninh has recently proposed the Vietnamese government unprecedented incentives for investors starting business in the province’s Van Don and Mong Cai, which are planned to be special administrative and economic zones in the future.

Outlook not rosy for supporting industries

A 2012 survey of more than 650 companies in supporting industries in Ho Chi Minh City, Dong Nai and Binh Duong provinces provides a mostly cloudy forecast on growth for the next three years.

According to the report, only 35.9 per cent of the surveyed companies offered a positive outlook in the development of supporting industries in Ho Chi Minh City and the two neighbouring provinces, as well as Vietnam as a whole.

But more than 25 per cent of the surveyed companies expressed a negative outlook, and the remainder said they did not a clear outlook for such development, said Nguyen Viet Se, the chief author of the survey.

The fact that almost two-thirds of the companies gave such dreary answers showed that corporate confidence in development policies and opportunities in supporting industries was low, said Se, director of the Ho Chi Minh City Branch of the National Centre for Socio-Economic Information and Forecast under the Ministry of Planning and Investment.

On a more positive note, 41.4 per cent of the surveyed firms said they would continue to invest in business expansion over the next three years, including 42.3 per cent of private Vietnamese owned firms and 40.6 per cent that of foreign-invested enterprises (FIEs). The proportion of companies with no definite answer to a decision for business expansion investments over the next three is 42.3 per cent, he said. Specifically, the rate of private Vietnamese enterprises is 38.7 per cent, of FIEs is up to 44.5 per cent. While the overall rate of companies expressing no plans to expand was 16.3 per cent, there were wide differences in sectors. The footwear section saw a 36.4 per cent rate, textile and garment 24.1 per cent, rubber, chemicals and plastics 13.8 per cent, engineering 16.5 per cent and automobile production 11.7 per cent.

The survey was conducted over 650 companies – 250 in Ho Chi Minh City, 200 in Dong Nai province, and 200 in Binh Duong. In terms of market selection, 54.5 per cent of the surveyed businesses said they gave top priorities to the Vietnamese market, and the rest chose overseas markets.

Japanese investors look on bright side

More than two-thirds of Japanese firms operating in Vietnam plan to expand investment in the country over the next two years.

This despite challenges like wage hikes, according to a survey of Japan External Trade Organisation (Jetro).

The survey, released by Jetro Hanoi office last week, points out that 65.9 per cent of Japanese companies operating in Vietnam wanted to continue expanding business in this country in 2013 and 2014, while 32.1 per cent responded they would keep the same size. Only two per cent said they would downsize in Vietnam or relocate to other countries.

Japanese companies’ interest in Vietnam was lower than that of Indonesia, Myanmar and Cambodia, but higher than that of Thailand, China, Malaysia, Singapore and the Philippines.

Head of Jetro’s Hanoi office Hirokazu Yamaoka said it meant Vietnam remained among the best choices of Japan’s firms for overseas investment expansion.

“Information technology, software, wholesale and retail, chemical and healthcare will be the most interesting industries for Japanese investors to invest in Vietnam,” he said.

According to the survey, the proportion respondents planning for expansion in China at this time was 52.3 per cent, a 14.5 point decline, which was the greatest drop among the surveyed countries or regions.

The main rivals of Vietnam in the investment attraction from Japan were Indonesia and Thailand, which were getting considerable attention from Japanese firms, said Yamaoka.

Yamaoka said many Japanese firms were concerned they could not recruit enough labour for their investment in Thailand at this time and this was an advantage of Vietnam to attract Japan’s investment.

The business result of Japanese companies in Vietnam last year remained positive, with 60.2 per cent of firms expect to make profit. Meanwhile, 20.3 per cent expected to make a loss, according to Jetro’s survey.

Though the proportion of profitable firms decreased for the third straight year in Vietnam, like in China and Indiana, a business confidence index of Japanese firms in this market improved to 34.2 points, an increase of 13.8 points on-year.

“This is a positive signal for the Vietnamese government to attract investment from Japan,” said Yamaoka.

However, Japanese firms also face challenges in Vietnam, such as rising wages. According to the survey, Vietnam’s average wage increased 19.7 per cent in 2012, the highest rate among the surveyed countries and regions. And the rate in 2013 is expected to increase 17.5 per cent, also among the highest increases.

JX Nippon looks for the good oil

Japan-based JX Nippon Oil and Energy Corporation has started construction of  its lubricant blending plant in Haiphong’s Dinh Vu Industrial Zone.

The four-hectare, $40 million JX Nippon Oil and Energy Vietnam Lubricant Blending project is planned to begin commercial operation in early 2014 with an annual productivity of about 40,000 tonnes.

JX said it expected Vietnam to be a potential market for lubricant oil and the corporation selected Dinh Vu because of its strategic location, easy access, good transport infrastructure and tax incentives.

Most importantly, JX said the industrial zone already had built its jetty and supporting pipe rack system for clients in petrochemical industry.

JX Nippon Oil and Energy Corporation is the eighth Japanese investors to have developed a project in Dinh Vu Industrial Zone.

So far, Dinh Vu has attracted 47 projects of with Japanese investment accounting for 50 percent of the total registered capital.

In 2013, Dinh Vu Industrial Zone expect to attract some more $100 million in foreign direct investment.

JX Nippon Oil and Energy started its lubricant business in Vietnam in 1996 and established its representative office in Ho Chi Minh city in 2010.

Ascendas ready for new investment opportunities

Singapore-based Ascendas is upbeat about its development potential in Vietnam despite some headwind.

Han Ann Foong, country head of Ascendas Vietnam, said the company had received increasing enquiries and visits, especially from Japanese companies, to its new industrial park in Binh Duong province.

“We are hopeful to have more closed deals,” said Foong. In May 2012, Ascendas completed the infrastructure for phases 1 and 2 of the 500-hectare Ascendas-Protrade Singapore Tech Park (APSTP), which focuses on developing industry clusters for the electronics, pharmaceutical and food and beverage production, and general industries. Foong said Ascendas could begin building infrastructure works for phases 3 and 4 of the park once there were signs of new demands.

Vietnam, he said, was well poised to benefit from the “China+1 or +2” strategy of multinational firms and he had observed a continuous trend of those companies relocating out of China to South East Asia to reduce costs, especially Japanese investors.

Foong said the negative impacts from the global economic woes in the past few years had delayed new investment and expansion plans of many companies contacted by Ascendas.

“However, they are also telling us that they continue to pursue a ‘plus two’ policy. We firmly believe that stands to be one of the main beneficiaries of this trend,” he added.

With optimistic forecasts of the economic recovery in the US and China since 2012’s last quarter, Foong said Vietnamese manufacturing sector may benefit from the improved external demand.

“We continue to be optimistic of long-term fundamentals of the Vietnamese economy,” he said.

“This year we will continue to focus on promoting our industrial park, APSTP, as well as leverage on our global networks to attract more new investments. We will also keep a lookout for acquisition opportunities or new projects at good value,” said Foong.

Ascendas, which first entered Vietnam in 1996, has boasted it understands how to develop a successful industrial park in the country by effectively addressing problems encountered in other industrial parks such as lack of essential amenities for workers and environment pollution treatment.

Ascendas has therefore invested substantially in waste water treatment systems, which will relieve most of its tenants from the need to build their own treatment plant.

“With worker dormitories and amenities offering training facility, food courts, and green areas, APSTP will be the new generation of industrial parks in Vietnam,” Foong added.

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

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