Home » Business » VIETNAM BUSINESS IN BRIEF 2/11

FDI enterprises post up trade surplus

Foreign directed investment (FDI) enterprises in Vietnam have continued to post up high export growth rate this year with total trade surplus estimated at US$9.4 billion up to now.

Speaking at the press briefing on the nation’s industrial and commercial situation on Monday, Phan Thi Dieu Ha, deputy head of the Import-Export Department under the Ministry of Industry and Trade, said that the nation’s export value is expected at US$9.9 billion in October, a 17.4% year-on-year increase.

FDI enterprises, excluding those exporting crude oil, are expected to gain US$5.6 billion in export value, rising 5.7% against the previous month and 17.7% compared to the same period of last year.

The total export revenue is estimated at US$93.5 billion in the January-October period, an 18.4% year-on-year rise, with FDI enterprises contributing US$58.5 billion. The revenue increase mainly results from industrial products of FDI firms such as cell-phones and related devices, computers, electronic products, cameras and film recorders.

Meanwhile, import value is expected to rise 12.6% against last year to US$10.4 billion this month. Of which, FDI firms post up a revenue of US$5.6 billion, a 11% month-on-month and 23% year-on-year rise.

The total import value is expected at US$93.8 billion in the January-October period, a 6.8% year-on-year rise. Local firms account for 48% of the total, with a value of US$44.6 billion, a 7.3% year-on-year decline. Meanwhile, FDI enterprises contribute nearly US$49.2 billion, surging by 24% against the same period of last year.

The nation’s 10-month trade deficit is expected at US$357 million, or 0.4% of export revenue. The deficit mainly comes from trade with China, ASEAN nations, South Korea and Taiwan.

Nguyen Nam Hai, deputy minister of Industry and Trade, said that the local production and business still face many difficulties.

“This year’s lower trade deficit is a positive sign in improving balance of payments but suggests that import demands for local production is declining,” Hai said.

Export-processing firms restricted from domestic sale

Export-processing companies would be restricted from selling their products in the domestic market if the amended decree on industrial parks, export-processing zones and economic zones was passed.

Particularly, export-processing firms are allowed to sell their products in the local market provided that domestic sales do not exceed 10% of their annual revenues, according to the draft amended decree of the Ministry of Planning and Investment.

Export-processing companies are those established and operating in export-processing zones or the firms based in industrial parks and economic zones that export all of their products. Under the current regulations, such companies are not restrained from domestic sale.

Section 2, Article 15 of the Government’s Decree 108/2006 permits export-processing firms to launch into the domestic market the products not listed as banned items, the products greatly demanded by the local market and production scraps not forbidden for export or allowed for import.

Under Vietnam’s commitment to the World Trade Organization (WTO), tax incentives for enterprises meeting the export rates will be removed five years after WTO accession. It is to say export-processing firms have no longer enjoyed corporate income tax incentives since late 2011.

If exporting all the products made of imported materials, enterprises will be tax exempt. However, when selling a portion of their products in the home market, they will have to pay taxes under the prevalent law.

Meanwhile, export-processing firms using domestic materials are subject to supervision of customs agencies.

If the draft decree is approved, then export-processing firms will be restricted from domestic sale, while tax incentives are no longer available for them. As such, it will be more difficult for export-processing zones to lure investors, said consulting firms.

A new point in the draft decree is that localities can only set up new industrial parks when the operational ones are 60% occupied. This provision is aimed to hinder massive development of industrial parks, causing waste of money and farmland, said experts.

At present, industrial park planning and development is dispersed. Several localities have industrial park occupation rates of less than 60%, but still ask for establishment of new industrial parks.

There are currently 267 industrial parks nationwide, mainly in the southeast region, the Red River Delta and the Mekong Delta, with an occupation rate of slightly above 45%.

SBV says will not stabilize gold price

The State will not sell out gold to stabilize gold prices as the yellow metal is not essential goods creating added value for the nation’s economy, said Le Minh Hung, deputy governor of the State Bank of Vietnam (SBV).

The viewpoint of the central bank indicates that local residents’ practice of holding gold brings about no benefits for the economy as a large volume of capital under the form of gold is not used effectively. The Government therefore has no intention of importing gold or using gold reserves to stabilize the local market, Hung affirmed.

In fact, gold imports will cause a large volume of foreign currencies to drain out of the country while the foreign reserves are very necessary for the economic development, Hung noted.

Also, the central bank will not ready to buy gold from commercial banks, he said.

The central bank will think twice in buying gold from commercial banks who have earlier bought the yellow metal from local citizens. SBV will only sell out gold to support certain banks having problem with gold liquidity but this doesn’t mean that the monetary authority will sell gold at low prices to stabilize the market.

The State will treat the precious metal as it has been dealing with foreign currencies, meaning it will shift from borrowing to trading gold to allow people to buy and sell gold at companies and lenders meeting required conditions. To have their assets kept safe, local people can use pay box rental services while credit institutions in the future are no longer allowed to raise gold to avoid potential risks.

Dinh Nho Bang, vice chairman of the Vietnam Gold Traders Association, said that stabilizing the gold market, if any, should be conducted on the basis of State macro management as the nation’s gold supply will never satisfy rising local demand.

The central bank now doesn’t have enough ability to stabilize gold prices, Bang said. For instance, the strong gold selling by five lenders in cooperation with Saigon Jewelry Holding Co. (SJC) conducted last year failed to close the gap between global and local gold prices as local demand surged, he clarified.

Economist Vu Dinh Anh, meanwhile, noticed that even the price stabilization programs for other essential goods were not as effective as expected, saying commodities prices are largely adjusted by macroeconomic conditions and market factors rather than the mere State intervention.

Besides, launching gold price stabilization will certainly fail to help minimize the gap between international and domestic gold prices, he insisted.

SBV will reschedule the ban for banks to stop gold mobilizing and lending until June 30 with an aim to facilitate the lenders to buy and mobilize gold and recover loans in gold to solve liquidity difficulty.

The central bank in the year to date has bought over US$10 billion while credit institutions have purchased 60 tons of gold from local people over the past five months. This is the reason why liquidity of Vietnam dong has become abundant in the previous months, meeting credit demand from local enterprises.

Auto-makers hit judder bars in a slowing market

Auto-makers are experiencing such tough times in Vietnam’s slowing market that some companies may shut down assembly plants and transfer into importing autos.

Sales of so-called completely knocked down (CKD) vehicles that were assembled from auto parts imported to Vietnam stopped at around 50,000 units during the first nine months of 2012, only half the expected total for 2012.

These vehicles accounted for more than 70 per cent of the overall sale, which included fully-assembled imports, according to Vietnam Automotive Manufacturers’ Association (VAMA).

“Should the locally-assembled market continue to go down so drastically, for some brands the cost of maintaining the assembly in Vietnam may exceed the profit generated,” said Laurent Genet, general director of Automotive Asia Limited, Audi’s official importer in Vietnam.

Genet said that without efforts to support the CKD industry, some auto-makers would have to halt assembly and switch to imports.

In January, when the import tax was reduced for pick-ups, all CKD operators in Vietnam stopped assembly and switched to imports from Thailand.

Isuzu Vietnam’s general director Kenji Matsuoka told VIR that Isuzu Vietnam had transferred to completely built-up units (CBU) instead of CKD for pick-ups because of the lower import tax compared to the cost of importing automotive parts for assembly in Vietnam.

Matsuoka said the import tax applied for CBU pick-ups imported from Thailand was only 5 per cent. Genet said the tax policy planned a further 10 per cent import tax reduction in 2013 and 2014 and the switch to CBU would gain momentum.

Vietnam reducing import taxes in align with the agreement on trade in goods in ASEAN (ATIGA) is accelerating this trend towards CBU from ASEAN, China, South Korea or Japan further.

“In mainstream segments, CKD players with focused products that minimise product diversity in production should be more resilient.

“For 2012, premium CBU imports are again growing and exceeding CKD sales,” Genet said.
According to the General Administration of Customs, Vietnam imported around 2,000 CBUs in September, a slight growth of five per cent over the previous month.

The total value hit $62 million, a remarkable increase of nearly 33 per cent compared to the previous month.

Contractors in the slow lane

Korean  contractors  for two major northern highway projects are facing serious penalties after dropping behind the Ministry of Transport deadlines.

The contractors at the $1.25 billion Noi Bai-Lao Cai project and the $476 million Hanoi-Thai Nguyen expressway have been urged by the ministry (MoT) to exert their best efforts to put the projects into operation before the end of 2013.

MoT Minister Dinh La Thang said these two expensive projects, once operational, could generate big socio-economic efficiency, and contractors failing to deliver good quality would incur sanctions.

“The contractors need to review their entire workload and … accelerate [construction] pace to reach the set progress target,” said Thang.

At the Noi Bai-Lao Cai expressway project, Keangnam is the first international contractor to subject to penalties from the MoT for its poor performance over the past two years since the project started.

Thang said 50 per cent of the work at A4 tender package and 80 per cent at A5 tender package of this expressway project should be handed over to other contractors.

“If Keangnam continues to fail progress targets, the MoT will nulify its guarantee for the contract implementation,” said Thang.

Vietnam Expressway Corporation (VEC) report shows that by mid October, Keangnam had completed only 9 per cent of the assgined contract at tender package A5. Event at tender package A1, where Keangnam has shown its best performance, the South Korean contractor has fulfilled only one-sixth of the contract.

“We saw no opportunity for Keangnam to complete A5 package on December 31, 2013 as scheduled,” said the project chief consultant Francisco Javie de Bonigaz at Spain-based consulting firm Gentisa.

Keangnam’s construction pace at A4 package was also at an alarming level with only 23.13 per cent of the workload done.

MoT Vice Minister Nguyen Hong Truong said Keagnam’s president had promised to provide more resources for for the project, but “little progress has been made at A4 and A5 packages in the past three months”.

A4 and A5 packages’ total contract value reached VND2.8 trillion ($133 million).

The Noi Bai-Lao Cai expressway project consists of eight tender packages. After two years, only packages A7 and A8 have been undertaken timely. The remaining six packages, all performed by Korean contractors, are assessed being weak in term of handling capacity. Furthermore, contractors are criticised for not seriously abiding by contract terms.

At the Hanoi-Thai Nguyen highway project, Project Management Unit 2 (PMU2) under the Directorate for Roads of Vietnam had to ‘shear’ a number of contractors due to their poor performances.

PMU 2’s general director Nguyen Ngoc Long said in the past three months, the authority had required the main contractor to replace 24 out of 84 sub contractors in the project.

Unlike the Noi Bai-Lao Cai expressway project, contractors at this 61km highway are all local firms. Just 58 per cent of the value of the four tender packages are expected to be fulfilled by the year end.

“Without significant improvements seen in their progress in the forthcoming months, we would propose the MoT slash part of the main contractor’s work to hand-over to other contractors,” said Long.

ADB to help Vietnam quest for higher economic status

The Asian Development Bank (ADB) on October 31 emphasized the institution’s continued assistance to Vietnam, enabling the country to reach upper middle-income status.

ADB Country Director for Vietnam Tomoyuki Kimura made the announcement in a conference launching the organization’s country partnership strategy for the 2012-15 period.

Though Vietnam has made some major achievements over the past two decades, such as rapid GDP growth and poverty reduction, the ADB has said that the country’s development has been constrained by some persistent structural rigidities.

Yumiko Tamura, Principal Country Specialist, said that low productivity, low competitiveness and inefficiency in Vietnam’s economic management were long-term issues caused by skilled labour shortage and infrastructure bottlenecks.

She warned “Vietnam is one of the countries most vulnerable to environmental degradation and climate change.”

The country’s efforts to increase transparency and consistency in economic policies – key to restoring market confidence – also needed to be stepped up, she added.

Meanwhile, as a lower middle-income country, Vietnam’s access to Official Development Assistance (ODA) resources may change in terms of both volume and the types of concessions granted, Kimura said.

“Although this may be a challenge, we see it as an opportunity for Vietnam to review the role of ODA in order to ensure its more strategic use. This allows ADB to refocus our assistance programme and enhance co-ordination and collaboration with other development partners.”

Throughout the 2012-2015 period, ADB will support Vietnam’s target of rising to upper middle-income status through achieveing inclusive growth and enhancing economic efficiency and environmental sustainability.

The support provided will be based on principles that align with the priorities of the country’s socio-economic Development Plan 2011-15, which also intersect with its Socio-Economic Development Strategy until 2020.

Inclusive growth will be reached by improving infrastructure, rural development, access to economic resources and support to education.

To efficiently improve the economy, the ADB plans to continue supporting structural land policy reforms, including those regulating state-owned enterprises (SOE). They will also invest in strengthening public sector management and help Vietnam adopt clean technology to become more resilient to the impact of climate change.

The new strategy will focus its support on six core areas in the public sector: education, energy, finance, transport, water supply, and agriculture, natural resources and environment (ANR).

Total suggested lending for the period will amount to US$2.6 billion from ordinary capital resources and US$1.2 billion from concessions granted by the Asian Development Fund. Funding for technical assistance will reach US$8 million annually.

The transport sector will be the largest beneficiary, receiving 34 percent of the US$3.8 billion in total. The energy sector comes next with five projects worth US$700 million, while the ANR sector will receive US$340 million.

“We will also help the Government promote private sector participation in infrastructure projects through various innovative modalities including public private partnership,” Kimura said.

“We will continue working closely with the Government, other stakeholders and development partners to help Vietnam maintain strong reform and restructuring momentum,” he added.

Danish businesses sound out Vietnam market opportunities

Vestas, the world’s biggest wind turbine manufacturer, and other Danish businesses will seek opportunities to boost cooperation with Vietnam in the fields of economics, trade and wind energy.

The businesses will accompany Danish Prime Minister Helle Thorning-Schmidt during a visit to Vietnam in early November, which was made at the invitation of his Vietnamese counterpart Nguyen Tan Dung, Danish Ambassador John Nielse said at a press conference in Hanoi on October 31.

This is the first visit to Vietnam by a Danish Prime Minister, reflecting the fine development of bilateral relations. It will also be an opportunity for the two countries to strengthen multilateral cooperation in all fields.

The Danish Ministry of Climate and Energy and the Vietnamese Ministry of Industry and Trade will sign a cooperation agreement, under which Denmark will provide more than US$14 million to help Vietnam’s small- and medium-sized enterprises use energy resources effectively.

Denmark hopes that Vietnam will continue improving infrastructure and the quality of human resources to help Danish businesses work more effectively in the country, Ambassador John Nielse added.

Vietnam, Argentina increase economic cooperation

Vietnam and Argentina have committed to creating favourable conditions for goods of each country to enter the other market.

The agreement was reached at the third meeting of the Vietnam-Argentina joint committee for economic and trade cooperation joint committee in Hanoi on October 31.

In the agricultural sector, they specified cooperation projects and plans to implement them.

Vietnam welcomed Argentinean investors, especially in energy, oil and gas, and bio-fuel, said Deputy Minister of Trade and Industry Tran Tuan Anh.

The country also highly valued the signing of an MOU on science and technology cooperation between both sides and thanked Argentina for its help in training forensic personnel for Vietnam.

Argentinean Secretary of Foreign Trade Beatriz Paglieri said she hopes that both sides will seek measures to overcome existing difficulties and agree on specific programmes and projects to strengthen bilateral cooperation in the coming time in order to mark the 40th anniversary of the two countries’ diplomatic ties in 2013.

According to Deputy Minister Anh, Vietnam-Argentina trade and investment relations have developed constantly over the years.

Vietnam earned US$91.6 million from exports to Argentina in 2010, a year-on-year increase of 64 percent. It also imported goods worth US$826.3 million from Argentina, marking a yearly rise of 41 percent.

Vietnam exports to Argentina footwear and accessories, rubber and rubber products, machines and mechanical and electronic equipment while importing animal feed, soybeans, animal fat and vegetable oil, cereals, automobiles, farming machines, garment accessories, footwear and seafood from the Latin American country.

Vietnam, Hungary boost economic cooperation

The fourth session of the Vietnam-Hungary Joint Committee on Economic Cooperation took place in Hanoi on October 31.

The event was co-chaired by Deputy Minister of Industry and Trade, Ho Thi Kim Thoa, who is head of Vietnam’s sub-committee, and Peter Szijjarto, Hungary’s Secretary of State for Foreign Affairs and External Economic Relations and head of Hungary’s sub-committee.

Both sides reviewed every aspect of bilateral cooperation since the third session, including diplomacy, trade, science and technology, education and training, natural resources and the environment.

Two-way trade between Vietnam and Hungary reached US$168 million in 2011, up 16.3 percent against the previous year. However, the figure reached only US$80.3 million in the first eight months of this year, an annual drop of 53 percent, due to the global economic recession.

Cooperation in health had a special significance to bilateral ties, which was marked by the signing of a contract between Can Tho city and the KESZ NOVOTRADING partnership, to build the Can Tho Tumour Hospital.

The two sides agreed to speed up negotiations between Vietnam’s Finance Ministry and Hungary’s Export-Import Bank in order to sign a credit agreement to fund the project before the Framework Credit Agreement expires on January 22, 2013.

They also reached a consensus on a number of specific measures to foster bilateral cooperation in the future, including starting new projects using the Hungarian Government’s conditional preferential credits for water supply projects in Quang Binh and Ha Tinh provinces and a population e-management project in Haiphong City.
According to Thoa, both countries will increase cooperation in economics and direct investment. In addition, Vietnam’s Trade Promotion Agency (VIETTRADE) will open a representative office in Hungary to assist businesses in their import-export activities.

Szijjarto confirmed that with its foreign policy of “opening to the East”, Hungary sees Vietnam as a strategic diplomatic partner and will boost cooperation with the country in various fields.

Hungary will back Vietnam in its negotiations for a Free Trade Agreement (FTA) with the European Union (EU), he said.

During the meeting, a number of agreements were signed, including a memorandum of understanding (MoU) between the Hungarian Investment and Trade Agency and VIETTRADE, a contract between Vietnam’s Ministry of Public Security and Hungary’s Pointsystem House Company and an MoU between the two Chambers of Commerce and Industry.

They agreed to hold their fifth session in Hungary’s capital Budapest.

Businesses seek out opportunities in India

A seminar was held in HCM City on October 31 to examine the impact and opportunities for Vietnamese businesses in India after the ASEAN-India Free Trade Agreement was implemented over two years ago.

The event was co-organised by the HCM City Department of Industry and Trade, the Vietnam Institute of Development Studies and India’s Consulate General.

According to experts, the ASEAN-India Trade in Goods (AITIG) has created favourable conditions for Vietnam to establish broader political and trade relations with India, including a new taxation scheme to increase its competitive edge, reduce input costs and attract Indian investment.

Meanwhile, India is committed to reducing import tariffs on key Vietnamese commodities such as garments, footwear, wood products, seafood, coal, rubber and steel.

Currently, issues such as local taxes, anti-dumping lawsuits and trade disputes have prevented enterprises from seeking and establishing partnerships.

However, Tran Quang Huy, a senior official from the Ministry of Industry and Trade, said that to overcome technical tariffs and seize opportunities with Indian partners, Vietnamese enterprises should participate in trade fairs and exhibitions, introduce their goods into supermarket chains and expect to allocate funds for advertising goods direct to consumers.

In addition, they should focus on well-known export items such as rubber, wood products, ceramics, agricultural products, canned fruits, various types of spices, and processed food.

At the seminar, India’s Consul General Abhay Thakur called on Vietnamese businesses to invest in fields such as construction, telecommunications, energy, transportation, car manufacturing, retail distribution, and consumer food.

India also shows strong demand for agricultural materials, wood pulp and iron ore, he said.

Agro, forestry and fishery exports reach US$22.5 billion

The total export turnover for agro, forestry and fishery products in the first ten months of the year touched US$22.5 billion, a 9.5 percent increase year-on-year, according to the Ministry of Agriculture and Rural Development.

The Ministry gives a brighter forecast for the global economy in the third quarter, which is a good sign for Vietnamese agro, forestry and fishery products.

Some agricultural products have maintained a stable growth in both volume and value, such as coffee and manioc. The billion dollar agricultural export industry includes seafood, rice, coffee, rubber, wood, cashew nut, and manioc.

For instance, coffee exports in the first ten months exceeded 1.4 million tons, bringing in revenues of about $3.02 billion, a 37.7 percent increase in volume and 32.7 percent jump in value compared to last year, as per figures from the Ministry.

Key markets for Vietnamese coffee are Germany and the US, which have seen a strong increase in exports. In addition, the Indonesian market also increased by 9.4 times in volume and 8.8 times in value, compared to figures last year.

The US, Japan and the Republic of South Korea still remain the largest consumers of Vietnamese seafood.

Manioc and its products have seen a drastic increase in markets like China, South Korea and the Philippines with volumes in ten months touching 3.6 million tons and revenues of about $1.13 billion, a year-on-year increase of 58.5 percent in volume and 38 percent in value.

However, according to the ministry, manioc exports will decrease due to a very limited supply.

Vietnamese rice and cashew increased in volume but its turnover slid. In ten months, 6.9 million tons of rice has been shipped for $3.14 billion, up 8.3 percent in volume but a year-on-year decrease of 8.7 percent in value.

The Ministry also forecast that in 2012, seafood exports from the Mekong Delta could reach a turnover of $6.5 billion. In nine months of the year, the region’s aqua exports reached $4.5 billion, a year-on-year increase of 4.3 percent.

The ministry said the region has had stable growth in aqua exports in recent years with volume of aqua products accounting for 65 percent in the entire country. Two main important exports of the region are shrimp and pangasius which maintained their top ten places among world exports.

As of now, 23 seafood enterprises have been approved to export to the EU market.

Big petrol price hikes but modest cuts: Official

Petrol prices in Vietnam have not yet sufficiently matched world prices, said Minister of Finance Vuong Dinh Hue.

Hue admitted at a National Assembly’s meeting on October 31 that the country had raised petrol prices far more than price cuts.

He explained that this is the result of Decree 84 which stipulated price adjustments for a 30-day period. When global petrol prices sharply increased, the government had to cut import taxes to support petrol traders.

“For a long time, we have maintained petrol import tax rates at zero percent and used the petrol price stabilisation fund. When the global prices fall, it’s time for us to offset this by applying price cuts lower than the latest price hikes,” Hue noted.

He said that the government had assigned the Ministry of Industry and Trade to co-ordinate with the Ministry of Finance and related agencies to amend and supplement Decree 84 on petroleum trading.

Last year, the State Audit of Vietnam had audited and made public the petrol price stabilisation fund. This year, the agency has conducted comprehensive inspection and auditing over the state-owned Vietnam National Petroleum Corporation (Petrolimex).

He proposed the NA and the NA’s Standing Committee consider assigning the NA’s Economic Committee or the NA’s Finance and Budget Committee to co-ordinate with the NA’s Council of Ethnic Groups and other NA’s committees to conduct a comprehensive inspection over price management, especially petrol prices in 2013.

The move is aimed to point out possible shortcomings and work out solutions to improve the efficiency of price management, he added.

Petroleum traders have applied five price cuts with a combined value of VND3,200 (USD0.15) per litre but six price hikes with a total value of VND6,050 (USD0.29) per litre since the beginning of this year.

Currently, a litre of 92 octane gasoline is sold VND23,650 (USD1.13).

Seafood industry unlikely to hit export target

Due to the total export value of seafood products staying at only VND5 billion in January-October, the seafood industry will have to bring home an additional US$1.5 billion in the next two months to achieve the year’s export goal of US$6.5 billion, the Ministry of Agriculture and Rural Development said.

In October, the seafood sector earned US$564 million in exports, taking the ten-month value to US$5 billion, a year-on-year rise of 1.7%. The U.S. and Japan have been the two largest seafood importers this year with their spending making up 19.78% and 17.53% of the whole industry’s export revenue.

However, local industry experts said it is unlikely that the sector will reach the export target.

Deputy Minister of Agriculture and Rural Development Vu Van Tam ascribed the current tough condition to the lax management over the export of aquatic products as well as unhealthy competition among local exporters, especially tra fish companies. These shortcomings have dragged down the export value of Vietnamese aquatic products, he pointed out.

According to the Vietnam Association of Seafood Exporters and Producers, seafood shipment volumes bound for foreign markets, especially overseas shipments of the country’s major products of tra fish and shrimp, will fall strongly until the end of the year.

As of the end of last month, Vietnam’s seafood exports to Europe only generated over US$847 million, dipping 14% year-on-year.

Production activities at home are affected by poor export demand and diseases. Statistics of the agriculture ministry show that local unprocessed supply only meets 60-70% of capacities of factories as many farmers have abandoned their jobs after suffering huge losses in recent times.

At the moment, the price of live tra fish in the Mekong Delta stays at VND20,000-22,000 a kilo for export products weighing 0.8-0.9 kilo each while lower-quality fish sells for VND18,000-19,000 per kilo only, a fall of VND1,000-2,000 a kilo compared to a month ago. With the present prices, farmers incur a loss of VND3,000-5,000 a kilo after expenses.

Sugar firms’ profits tumble

Many local sugar companies have released financial reports for the third quarter this year, with their profits falling sharply from the same period last year.

Kon Tum Sugar Company saw its business worsen, falling from a second-quarter profit of VND5.7 billion to a loss of VND420 million in the third quarter. In last year’s third quarter, the company earned a hefty profit of some VND11.5 billion.

The financial report of the company shows that the poor performance is due to declining consumption, with net sales staying at VND29.35 billion in July-September, 67% of the year-ago period’s figure. Management expenses of the firm rose nearly 37% while its financial costs grew more than 71%.

For the January-September period, the profit totaled VND21.3 billion, or 34% of last year’s figure.

Gia Lai Sugar Thermo-electricity JSC achieved more than VND11.6 billion in after-tax profits in the third quarter, down 44.7% year-on-year. However, its January-September profits were still a combined VND60 billion, realizing 72% of the year’s target.

Bourbon Tay Ninh also experienced a year-on-year decrease in the third-quarter profit, with after-tax profits of nearly VND42.2 billion, shrinking over 51% compared to the same period last year.

Bien Hoa Sugar Company (BHS) saw its revenue in the third quarter of 2012 surging by 26% against last year to VND654 billion thanks to strong consumption but its profits slumped 25% to VND28 billion due to lower sugar prices and rising management and sale costs. In the January-September period, the enterprise’s revenue rose 25% to VND2 trillion but its after-tax profit declined 10% to VND72 billion.

The sugar company Ninh Hoa in Khanh Hoa Province only earned after-tax profits of some VND7.6 billion in the same period even though they pocketed roughly VND48.3 billion in the same period last year. It is because its sales expenses jumped by around 1.8 times year-on-year and their management expenses climbed by up to three times.

Ninh Hoa’s sales in the third quarter was VND261.7 billion, 88% of last year’s figure,  which is ascribed to the fact that sugar prices dropped against the year-ago period. Besides, financial costs of the company also went up by over VND20.3 billion from last year, or 46.7%.

Firms urged to cash-in on ASEAN-India pact

Viet Nam is yet to take due advantage of the huge trade and investment opportunities that India presents in many areas, Indian Consul General Abhay Thakur said at a seminar held in HCM City yesterday.

Addressing the seminar that reviewed achievements gained over two years of implementing the ASEAN-India Free Trade Agreement yesterday, he said the services, construction, telecommunications, computer software and hardware, petroleum and natural gas were areas in which the two countries can strengthen their trade and investment ties.

India, which has a population of 1.21 billion and a stable political environment has great demand for paper pulp, iron ore and materials for agricultural production, he said.

ASEAN and India signed the Framework Agreement on Comprehensive Economic Co-operation at the 2nd ASEAN-India Summit in 2003. The Framework Agreement envisages the establishment of an ASEAN-India Regional Trade and Investment Area (RTIA) as a long-term objective.

Huynh Khanh Hiep, Deputy Director of HCM City Department of Industry and Trade said Viet Nam was selling rubber, plastics, electronics and computer coponents, pepper, coffee, cloth and footwear to India while importing pharmaceuticals, machinery and components, electronic components, and chemicals.

Hiep said that over last two years, Vietnamese businesses have taken advantages of commitments under the ASEAN-India FTA to boost exports to India.

Thakur said Viet Nam’s exports to India have registered higher growth than India’s to Viet Nam, adding that Viet Nam’s trade deficit with India has reduced from US$1.7 billion in 2008 to $792 million in 2011.

According to figures from HCM City Department of Industry and Trade, exports from the city to India rose to $156 million in 2011 and $172.8 million in the first nine months of 2012, compared to $135.3 million in 2010.

Meanwhile, imports from India to HCM City amounted to $607 million in 2011, a year-on-year increase of 73 per cent, including pharmaceutical products worth nearly $70 million.

In the first nine months of 2012, import of pharmaceutical products from India rose to nearly $60 million, up by 15.6 per cent compared with the same period last year.

Real value of condo a hanging question

Many local homebuyers over the past time have wondered if prices of apartments in the future will continue going down or not but they still have yet to find out the reply. Even housing developers differ over an agreeable level.

Many people believe that housing project owners are enjoying hefty profits and they insist that housing prices be lowered further. On the contrary, many others say it is impossible to assess the whole realty market via a number of discounted schemes as different housing projects target different segments with different investment rates.

Price cuts on low input costs

A large number of project owners have been cutting prices for their condos over the past time, which is made possible owing to their low input costs.

For instance, the Dai Thanh condo project developed by Private Construction Enterprise No. 1 Lai Chau is offered at VND10 million a square meter. However, other industry insiders affirmed that it is hard to make profits when developing a condo building with such a low price at this time.

Regarding the issue, representative of the Dai Thanh project developer explained that they was able to fix the price of VND10 million for one square meter as they had their own capital available and did not rely on bank loans.

Another advantage, according to the representative, is that the firm has land source available from 2008 when the land’s price was not so expensive.

Specially, the representative noted that thanks to over 30 years of experiences in the construction industry, the developer has subsidiaries in charge of all related processes helping it minimize expenses for the project.

“With the three advantages, we are completely able to earn profits when pulling the housing price down to VND10 million a square meter,” he asserted.

In the south, Hoang Anh Gia Lai Group also sent shock waves to the local housing market by launching the sale of discounted apartment projects. The group also had the same explanation as the aforesaid company about its sales, comprising the factors of low-value land sources and contribution of member enterprises from material supply to project designing and execution.

Nguyen Quoc Hiep, chairman and general director of Global Petroleum Investment Corporation (GP Invest), said it is wrong to equate all apartment projects of different levels to the same selling price. It is because each project is designed for a different market segment, he reasoned.

At a dialogue on the 2013 prospects of the real estate market in Hanoi last week, Hiep expressed his disagreement about the idea of certain companies active in the property sector saying the price of VND10 million per square meter is the real value of apartments at home.

The basic construction of an mid-end apartment building alone cost a developer up to some VND8 million a square meter, Hiep clarified. If other expenses are included, such as the coefficient rate of land use and infrastructure development expenses, the cost for one square meter will be about VND14 million, he said.

In the context of the current slackened housing demand, wise property enterprises should recoup investment capital by minimizing their profit margins, Hiep added.

In the meantime, Nguyen Van Duc, deputy director of Dat Lanh Real Estate Co., said the fact that local housing developers slash selling prices should not be considered an act of undercutting. This is a business strategy of industry players only, he said.

A lot of companies accepted losses to recover investment capital instead of keeping rising inventories, Duc said. Low-cost housing schemes in recent times all belong to companies specializing in the construction area, such as the Ehome project of Nam Long Investment Corp. or the Tan Mai project of Tan Binh Investment and Construction Corporation, he added.

Five banks lend US$140 million to PVEP

Ocean Bank, VIB, Military Bank, SeABank and LienVietPostBank on Monday signed an agreement to give a syndicated loan worth US$140 million to PetroVietnam Exploration and Production (PVEP).

The credit will help PVEP develop and exploit oil and gas at the lot No. 15-2/01 off Vung Tau City, which is expected to see the first oil flow in the second quarter of 2013. The credit has a term of seven years.

The syndicated loan facility is led by Ocean Commercial Bank. The five lenders have reached agreement in structure, term, disbursement time and other credit conditions of the facility to help secure success of the project.

PVEP, an affiliate of the Vietnam National Oil and Gas Group (PetroVietnam), is now running 44 oil and gas exploration and exploitation projects in Vietnam. It has also set up projects in the Middle East, Africa, Latin America and Asia.

Ministry asked to investigate fuel traders

Shortcomings in fuel management have hindered competition, so the Ministry of Public Security should investigate and clarify whether fuel traders’ possible collusion is harming the interests of consumers, said Deputy Le Thi Nga of the National Assembly (NA).

In a discussion on the 2012 socio-economic situation on Tuesday, Deputy Nga from Thai Nguyen said there were now 12 fuel wholesalers, with Petrolimex, Military Petroleum Co. and Saigon Petro holding a combined 90% market share. Petrolimex alone is occupying a market share of around 60%.

In the recent price hikes, fuel companies applied the same increase levels and raised prices at the same time. This goes against Article 13 of the Competition Law as the major players seem to collude with one another to fix prices, Nga said.

“Signs are there for the Vietnam Competition Authority to initiate an investigation into the abuse of dominant position in the market,” she stated.

She said Petrolimex and the Vietnam Competition Authority are both governed by the Ministry of Industry and Trade, so no investigation had been done.

Therefore, Nga, who is serving as vice chairwoman of the NA Law Committee, proposed the NA amend the Competition Law to have an independent competition management agency.

Regarding temporary import for re-export of fuels, Nga cited the Kyoto Convention and recommendations of the World Customs Organization saying that fuels are not included in the list of goods temporarily imported for re-export.

She wondered: “Does the fact that the Ministry of Industry and Trade allows temporary import for re-export of fuels accidentally legalize smuggling and lead to evasions of export and import duties and serious violations of the nature of transit goods?”

Imported fuels for re-export and those for domestic sale are often mixed together, and thus sometimes enterprises forget to re-export the goods in transit. In the period from 2009 to 2012, about two million tons of fuels were not re-exported as registered, Nga demonstrated.

“If enterprises temporarily imported fuels when the tax rate was zero and sold them in the local market where the basic price includes an import tax rate of 12%, they would gain hefty profits. Even if they were detected and obliged to pay taxes, tax payments were modest compared to their profits, but it is unlikely that they will be detected,” she stressed.

Therefore, she proposed the Government clarify the responsibilities of the Ministry of Finance and the Ministry of Industry and Trade in the fuel sector. In addition, she asked the Ministry of Public Security to investigate fuel traders and publicize the investigation results in a bid to restore order in the local fuel market.

Moreover, the finance ministry should remove special consumption tax on fuels and prevent fuel traders from offseting their losses by raising prices in order to reduce the burden on citizens.

(Vietnam Net)

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