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The Mekong Delta has seen a sharp jump in the Provincial Competitiveness Index (PCI), an indicator of economic governance and business environment performance, over the last three years.
The assessment was announced at a seminar held in the Mekong Delta province of Bac Lieu on April 9 by the Vietnam Chamber of Commerce and Industry (VCCI).
Experts and local authorities analysed the index and put forth measures to improve the business environment for better foreign investment while accelerating administrative reforms.
VCCI Vice Chairman Hoang Van Dung stressed the role of the Mekong Delta in the country’s economic strategy. He hailed the Government and local leaders’ efforts to change the region’s investment and business environment.
Mekong Delta provinces have topped the PCI list since the index was set up in 2006.
In the 2012 PCI, the Mekong Delta ranked first nationwide. Dong Thap, An Giang and Tra Vinh provinces took the lead while six other regional provinces were among the top 10.
Italian company to invest in Vietnam
Italy’s multinational catering and retail company, Autogrill will run 82 cafés at Vietnamese airports.
Autogrill managing director, Gianmario Tondato Da Rous, announced on April 9 that the company will set up a joint venture with the Vietnam Food and Beverage Service Co. Ltd.
The company is expected to earn around US$20 million a year.
Hanoi hosts Vietnam Expo 2013
The 23rd Vietnam International Trade Fair opened in Hanoi on April 10.
It is part of the national trade promotion programme aimed at boosting exports, developing the domestic market and accelerating the process of international economic integration.
The fair, themed “Vietnam – cooperation and development”, has attracted more than 400 businesses from 17 countries and territories in the world, including India, the Republic of Korea, Singapore, Hong Kong (China), Mongolia, Indonesia, and the host country.
On display are products in the fields of agriculture, electricity, electronics, information technology, industrial machinery, equipment, construction materials, decoration, trade and services.
The fair will last until April 13 creating the best possible conditions for domestic businesses to introduce their own products and find foreign partners.
Danang cooperates with Japanese city
The central city of Danang and Japan’s Yokohama city on April 9 signed a memorandum of understanding (MOU) on technical cooperation in a range of areas, particularly urban development.
Accordingly, the two sides will conduct joint surveys of investment environment and infrastructure in Danang.
The two cities also plan to work together to encourage Japanese businesses to invest in Da Nang’s hi-tech zones; develop the East-West Economic Corridor II; and accelerate the establishment of direct flights between Danang and Japan.
The two sides will also seek investment for infrastructural development in Danang such as subway construction, rubbish and waste water treatment and the second phase in upgrading Tien Sa port.
Yokohama, the second largest city in Japan with a 3.7 million population, is a prominent port and also a major commercial hub of the Greater Tokyo Area.
Coffee business gets Standard Chartered Bank loan
The Standard Chartered Bank (SCB) on April 9 signed an agreement lending US$24 million to the Daklak September 2nd Import-Export Co. Ltd (Simexco Daklak), the second largest state-owned coffee trader in Vietnam.
Simexco General Director Le Duc Thong said the loan will help the company to achieve its export revenue goal.
Meanwhile, Louis Taylor, General Director of Standard Chartered Vietnam, said that the Vietnamese coffee industry has seen a spectacular development over the past 20 years and has become one of the main drives for the country’s export. The strategic partnership between SCB and Simexco is evidence of the bank’s commitment to sustainable development in Vietnam.
Founded in 1993, Simexco Daklak has built up a dynamic purchasing network directly from farms and investing in modern coffee processing factories, staff training and quality control systems in key coffee growing areas of Vietnam.
Last year, the company’s revenue reached VND6,577 billion (approximately US$314.9 million), a year-on-year increase of 41 percent.
Wallonine-Bruxelles supports 28 ODA projects for Vietnam
The Wallonine-Bruxelles region has approved 28 non-refundable ODA projects capitalised at US$4.5 million for Vietnam in the 2013-2015 period.
This was announced during talks in Hanoi on April 10 between Minister of Planning and Investment Bui Quang Vinh and Wallonie–Bruxelles Governor, Rudy Demotte.
Both officials reviewed the results of previous cooperative projects with the Wallonie -Bruxelles region, discussed new projects to be implemented in the 2013-2015 period and devised strategies for future cooperation.
Both governments will priotize development areas such as science, agriculture, mechanics technology, transport, logistics, aerospace, the environment and green industries.
The Governor said that representatives from the Wallonie–Bruxelles region are keen to expand cooperation with Vietnam in culture and technical vocational training.
The 28 approved projects in the above mentioned period will focus on the eight cooperation areas - French language training, communications, cultural diversification, improvement of human resource capacities, health, vocational training, scientific research and the environment.
France to increase market share in Vietnam
Paris plans to double the market share of French businesses in Vietnam in the next four years, said French Minister of Foreign Trade Nicole Bricq.
The information was released on Radio France International after the French Minister’s visit to Vietnam.
Ms Nicole Bricq explained that French businesses’ market share in Vietnam was just 1 percent last year, compared to the average rate of 1.5 percent in the other South East Asian nations. She emphasized that with the average growth of 5 percent in recent years, Vietnam is an important market for French businesses but they rank second among European investors in the country.
During her visit to Vietnam earlier this week, the French minister officially launched the France-Vietnam Year, offering new prospects for bilateral cooperation, especially in the field of infrastructure such as plans to build a metro in Hanoi and develop small and medium-sized enterprises as well as major industrial groups.
Banks and businesses need mutual trust
Commercial banks are bearing the brunt of the economic slowdown, putting them in a paradoxical situation: they have an oversupply of money, but cannot lend it to businesses.Like many other economic sectors, the banking industry is struggling to weather the storm and support the national economy. Commercial banks are tipped to lower interest rates and reschedule debts, making it easier for businesses to access loans.
Despite their continued efforts to restructure, the banks’ operations have yet to meet expectations. Commercial banks experienced ‘negative’ credit growth in the first two months of 2013, and only recovered in March with a slight increase of 0.1 percent.
While credit growth is yet to recover, deposits rose sharply by between 22-36 percent. This means money continues to pour in, and as a result, the banks now have a huge amount of cash in stock.
However, they are now in a tight spot. On the one hand, they have to pay interest on these deposits, while on the other hand, they are required to establish reserve funds to guarantee unpaid bad debts owed by businesses.
Banks rely on clients’ deposits; they cannot refuse deposits or lower deposit interest rates far below the central bank’s benchmark in order to maintain their regular big clients.
Purchasing Government bonds with an annual interest rate of 8 percent is considered a solution to get over this stumbling block. Yet, all Government bonds have a maturity date of over five years while most bank deposits are short-term with an annual interest rate of 7.5 percent.
It is worth remembering that three or four years ago when businesses felt the economic pinch, they lobbied banks to take out loans. Now the situation has reversed. Despite low interest rates and promotions, banks find it difficult to woo business clients.
Nguyen Thi Kim Nu, director of the Thien Kim Steel Company in Da Nang, says bitterly, “When we performed well, our credit quota was set between VND15-17 billion. Now when we are in a fix, banks have decided to reduce credit limits and even cut the quota …. We had to sell some of our assets to pay debts, but then could not access new loans. How can we maintain production, pay our debts and seek new opportunities in such a situation?”
Trust is essential in corporate culture, and when a crisis of trust arises, time is needed to mend the gap. The credit relationship between banks and businesses has been worsening for a long time, and their trust cannot be restored overnight.
When businesses cannot access bank loans, they have no choice but to borrow high interest loans on the black market to pay back debts. As a consequence, many fall victim to the debt spiral and eventually declare bankruptcy. Statistics show that more than 400,000 businesses were dissolved last year, and capital shortages are one of the causes.
Businesses are now reluctant to take out new loans even though interest rates were recently slashed to between 12-15 percent. They reason there is no use expanding production when they have excess inventories and face a low purchasing market. The best solution, they think, is to wait for further moves from banks and the market.
Meanwhile, banks are also in a dilemma. They are hesitant to lend as their bad debts are equivalent to 20 percent of the country’s GDP. However, if they continue to support businesses, they will probably be bogged down in a financial quagmire.
Against efforts to settle bad debts, the banking industry’s overdue debts amount to a record high of VND260 trillion. Many banks say they have to wait for positive signals in the market to avoid a financial disaster.
Nguyen Ngoc Bao, chairman of the Board of Directors of the Vietnam Bank for Agriculture and Rural Development, says “It’s time we looked for feasible projects from clients who are able to pay their debts.”
Nguyen Phuoc Thanh, director general of the Bank for Foreign Trade of Vietnam (Vietcombank), echoes Bao’s view, stating “Our bank now has an abundant supply of capital. We even offered a lending interest rate of 6 percent for a number of business areas, but we have not found any eligible clients so far.”
If banks and businesses do not find common ground, the task of economic recovery seems to be a hard nut to crack.
Danang hi-tech Park construction starts
A ground-breaking ceremony for the Danang Hi-Tech Park was held in Hoa Lien commune, Hoa Vang district, the central city of Danang on April 6.
Built on an area of more than 341ha, the US$278 million park will follow the Silicon Valley model in the US and the Hsinchu Science Park in Taiwan (China).
It aims to attract domestic and international scientists, engineers and businesses in the information technology field, and to promote hi-tech training and education in local universities.
In the next decade, the park is expected to house some 100 businesses, create 25,000 jobs and generate US$3 billion in revenue.
Danang is the first locality in Vietnam where a foreign private group is allowed to build an IT zone’s infrastructure.
RoK aids Mekong Delta highway project
The Republic of Korea (RoK) has pledged a US$200 million loan to help Vietnam implement a highway project in the Mekong Delta region.
The Lo Te-Rach Soi highway will be built in southern Can Tho and Kien Giang provinces, connecting to the Vam Cong bridge and southern coastal belt.
An agreement to this effect was signed in Hanoi on April 5 by Deputy Minister of Finance Truong Chi Trung and Chairman of the Export-Import Bank of Korea, Kim Yong Hwan.
Under the agreement, the ODA capital will be channeled through the RoK Development Cooperation Fund (EDCF) with a preferential annual interest rate of 0.1 percent over 40 years.
The two governments have reached an agreement on providing loans from the EDCF in the 2012-2015 period. Accordingly, the RoK will grant credit loans worth a total of US$1.2 billion to help Vietnam implement infrastructure and climate change adaptation projects.
The EDCF has already provided US$1.7 billion for 43 projects in Vietnam, which is the largest amount allocated among the Fund’s 50 aid recipients.
Economic restructuring still slow going
The national economy has grappled with numerous challenges in the past five years since Vietnam joined the World Trade Organisation (WTO) in 2007.
A Central Institute for Economic Management (CIEM) report showed that annual economic growth averaged 6.5 percent between 2007–2011, much lower than the 7.8 percent figure recorded between 2002–2006 and also far below the 7.5–8 percent target.
Except for the agro-forestry and fishery sector, the construction-industry and service sectors failed to meet expectations. The industry-construction sector alone - the economic powerhouse that contributes up to 40 percent of the country’s total GDP – suffered a sharp fall in its growth compared to the pre-WTO period.
Under its economic restructuring plan, Vietnam hoped to raise the agro-forestry-fishery sector’s revenue to 15–16 percent of total GDP by 2010, industry-construction revenue to 43–44 percent, and services revenue to 40–41 percent. Contrary to expectations, the country has not fulfilled these major targets.
The disappointing results from these three major economic sectors slowed down the national economy in terms of both growth and quality. Many experts argued Vietnam was not well prepared for the challenges inherent in opening its economy to the world and thus suffered a number of shocks.
Former CIEM official Dr Pham Lan Huong blamed economic inefficiency for the slow economic restructuring, listing obstacles including low productivity and values, and small scale and scattered production.
In times of economic stagnation, Vietnam can usually rely on its traditional agricultural production. However, highly subsidised cotton planting and fruit and vegetable processing are revealing weaknesses. The country’s garment and footwear industries have yet to justify their leading industrial positions.
Economic expert Pham Chi Lan wondered whether Vietnam has properly capitalised on the opportunities arising from WTO membership. She said many policies are inconsistent and have yet to be evaluated in terms of their real impact on people’s lives.
The national economy is showing signs of recovery, backed by decreasing inflation, an improved trade balance, and increased currency reserves.
But CIEM Deputy Director Vo Tri Thanh warned the national economy has yet to address its perennial vulnerabilities, such as the inaccessibility of bank loans for businesses, low purchasing power, low investment, bad debts, and excess industrial inventories.
A number of policies have been introduced to ease the difficulties confronting businesses and stimulate the economy. Some of these policies have not delivered results.
Thanh said the crux of the matter is maintaining macroeconomic stabilisation, streamlining administrative apparatus, and reducing business bank loan interest rates. He underlined the need to settle bad debts, minimise tax, and stimulate investment and sales.
Considering the context of deeper international integration and in the interests of enhancing the national economy’s competitiveness, protection measures should be regularly substituted with development policies linked to value production chains.
The CIEM representative proposed that Vietnam accelerate administrative reform to foster a favourable business environment, encourage businesses to take advantage of the opportunities created by free trade agreements when expanding into overseas markets, and introduce policies that honour its international economic integration commitments.
Former Trade Minister Truong Dinh Tuyen believed Vietnam needs preventative measures to avoid the shocks threatening its agricultural sector when farm produce import tariffs are inevitably cut. Farmers need to cooperate with businesses to work according to closed production-processing and sales cycles.
Australia, Vietnam increase trade ties
The Australia–Vietnam Business Council (AVBC) held a get-together in Sydney on April 4 to foster trade ties between the two countries.
At the event, Vietnamese Ambassador to Australia Hoang Vinh Thanh affirmed that the two countries will continue reaping successes, especially in bilateral trade thanks to close cooperation.
Former Australian Ambassador to Vietnam Allaster Cox stressed that Vietnam is an important partner of Australia, adding that the two countries need to strengthen their partnership in an ever-changing world. However, he said bilateral trade is yet to match the two countries’ potential.
AVBC Chairman Laurence Strano said US$6 billion in two-way trade last year is an impressive achievement.
Australian companies expressed their satisfaction of doing business in Vietnam and hoped that two-way trade will continue to grow and flourish in the future.
Vietnam obtains trade surplus with Malaysia
Two-way trade turnover between Vietnam and Malaysia hit US$1.466 billion in the first two months of this year, of which US$781.7 million came from Vietnamese exports.Vietnam imported Malaysian goods worth US$685.07 million—mostly petrol, chemicals, plastics, and animal fat—and thus enjoyed a trade surplus of US$96.6 million.
Key exports to the Malaysian market included crude oil, computers, electronics and spare parts, telephones and components, and rubber products.
Malaysia’s 436 valid projects place it at eighth largest on the list of Vietnam’s 101 foreign investors. As of March 20, 2013, Malaysian projects were capitalised at a total of US$10.2 billion.
Vietnamese businesses are investing in nine projects in Malaysia with total registered capital of US$412.9 million.
Vietnam, Indonesia exploit untapped potential
Indonesia and Vietnam share several conditions that can help enhance our economic relationship, said Indonesian Ambassador Mayerfas at a business conference in Hanoi on April 4.
He mentioned huge populations, economic growth, rising purchasing power parity, geographical closeness and membership in ASEAN as potential for bilateral cooperation.
During the event, jointly held by the Vietnam Chamber of Commerce of Industry (VCCI) and the Indonesian Embassy, Indonesian business representatives heard about the host country’s investment policy as well as specific tax regulations.
Vietnam has become a new destination for Indonesian investors and several companies have been very active in exploring opportunities and completing deals with Vietnamese companies, the ambassador said.
He urged the Vietnamese business community to explore Indonesia’s investment and business climate and learn about the opportunities the market holds for foreign investors.
“While Indonesia is becoming more attractive to foreign investors, we sincerely look forward to Vietnamese entrepreneurs taking full advantage of what Indonesia has offered, both in terms of business and investment,” he said.
Bilateral trade and investment between the two nations have developed significantly over the past years, said head of VCCI’s International Relations Department Pham Quang Thinh, who added that the two business communities could bring the relationship to a higher level.
Dang Xuan Quang, deputy head of the Ministry of Planning and Investment’s Foreign Investment Agency, emphasized the importance of accelerating the two nations’ ties with a focus on speeding up trade and investment promotion and links between the two private sectors.
Last year, two-way trade turnover reached US$4.6 billion, with Vietnam’s export revenue contributing over US$2.35 billion.
Vietnam imported more than US$2.24 billion worth of goods from Indonesia, including paper, cooking oil and chemicals.
As of March, Indonesian investors had pumped US$285 million into 34 projects in Vietnam. In turn, Vietnamese businesses had seven projects worth US$107 million in Indonesia.
Government orders a lowering of lending interest rates and taxes
The government has requested the State Bank of Vietnam (SBV) to continue cutting lending interest rates, along with corporate income and value added taxes in an urgent measure to hasten the recovery of the national economy.
The government has requested that the State Bank of Vietnam to continue cutting lending interest rates
The SBV will also check the implementation of lending procedures at commercial banks to offer favourable conditions for enterprises.
Meanwhile, the Ministry of Finance has been asked to consider making a plan for slashing corporate income tax to 20%, as well as reduce value added taxes for the submission to the government in April.
Recently, Minister and Chairman of the Government Office Vu Duc Dam, cited a report from the Ministry of Planning and Investment as saying that up to 60% of the total number of businesses which halted operations last year have resumed this year.
The news remained mixed, however. He added that even though the number of newly-licensed enterprises saw a slight increase, those facing sluggish business remained high.
The government is also determined to stabilise the foreign currency exchange rates and keep tighter control over the value of the Vietnam dong.
The SBV was asked to cooperate with the Ministry of Construction to implement credit policies that would support families and individuals of low-income who wish to buy affordable houses of less than 70 square metres and priced below VND15 million (USD714.28) per square metre.
The Ministry of Construction will make proposals on revising policies to increase the number of people who are allowed to buy houses in Vietnam, including Vietnamese people living abroad and individuals and organisations in Vietnam.
Results of economic restructure fail to meet up to expectations
The country's macro-economy had not improved as much as expected after a year of restructuring and the process needed a strong boost, said economists at the Spring Economic Forum opened on April 5 in the central city of Nha Trang.
The two-day forum was aimed at reviewing a year of the country's economic restructuring and putting forward solutions.
Chairman of the National Assembly's Economic Committee Nguyen Van Giau told the forum that restructuring the economy would take a long time. It was only in its early phases and initial progress had remained insignificant, he said.
Director of the Vietnam Economics Institute Tran Dinh Thien said that no significant changes in the basic trend of the economy had been seen since 2007.
Thien said a slowdown in GDP growth had occurred over past years, adding that the volatility of the macro-economy remained high and there had been no signs of sustainable control.
Macro-economic management was still mainly based on administrative and short-term measures. These could be reasons for the lack of improvement in the economy in the first quarter of this year, Thien said.
He was pessimistic about the country's economic growth and macro-economic stability this year. He said credit growth remained low, the number of firms which had stopped operations was high and it would take time to deal with non-performing loans and the frozen real estate market.
Thien recommended that instead of short-term and administrative measures, the Government should take long-term action to create real changes in restructuring the economy.
He said the Government should give priority to paying basic construction debts for enterprises and should not give priority to investment from State budget.
The payment could help deal with a part of the non-performing loans and recover business confidence, he said.
Deputy director of the Central Institute for Economic Management Nguyen Dinh Cung said there had been no significant reforms in market and integration mechanisms.
Cung said that for the past year, restructuring had failed to encourage businesses, let alone create favourable conditions for firms and investors, to make them take risks and try new ideas, to restructure their business and production and to make better use of their human and financial resources.
Bui Tat Thang, from the Ministry of Planning and Investment's Institute for Development Strategies, said that confidence in the business and investment environment outlook had actually decreased as the economy faced a series of serious problems, including high non-performing loans and rising inventories. A number of firms had ceased or stopped operations.
Thang said the country's economy would continue to be negatively affected if investors did not retrieve their business motivation.
"Investors will not pump capital into the country and consumers will not spend, so it will difficult to improve the country's total supply and demand situation this year," Thang said.
Rector of the Economics University Nguyen Hong Son said that measures taken to date to deal with non-performing loans and mergers and acquisitions of weak banks remained slow, while there was also no change in the restructuring of State-owned firms.
As for the real estate market, rector of the Banking Institute To Ngoc Hung said, the Government should look at whether to tax property assets in a move to prevent speculation.
Pumping capital into the real estate market would create a bubble, which would cause the number of non-performing loans to increase, Hung said. The State Bank of Vietnam should maintain its tightened and cautious monetary policies to control inflation and stabilise the macro-economy.
The forum was jointly organised by the National Assembly's Economic Committee, the Vietnam Academy of Social Sciences and the Vietnam Chamber of Commerce and Industry.
The assessments, analyses and proposals made by researchers and economists at the forum would be submitted to the National Assembly.
VietJetAir opens Hanoi-Bangkok flight route
Vietnam’s leading low-cost carrier, VietJetAir, will officially open its Hanoi-Bangkok air route on June 1, starting with one flight a day.
Accordingly, the flight will take off from Hanoi at 10.50am and arrive in Bangkok at 12.40am, and then leave Bangkok at 1.35pm and land in Hanoi at 3.25pm.
VietJetAir will give free tickets to lucky guests flying from Hanoi and Ho Chi Minh City to Bangkok on the opening day.
Tickets are available for a special discount from April 10 to 20 to passengers booking their flights from April 15 to December 20.
Do Son Sea Tourism Festival 2013
A sea tourism festival will be held in Do Son District of the northern port city of Haiphong from April 28 to May 6.
The festival will serve as the framework for many cultural, sports, and tourism activities, including the Do Son Open tennis tournament, a cycling race, dragon boat racing, and a paragliding performance.
Do Son District will also host a sea fishing competition, inaugurate two pools for children, and organise a trade and tourism fair.
The local administration has improved the quality of tourism services by opening training courses for guides and drawing up plans for security and food hygiene and safety.
Do Son District currently has 135 accommodation facilities totalling 3,474 guest rooms—one four-star hotel, one three-star hotel, six two-star hotels, and 44 restaurants.
Along with Cat Ba, Do Son is one of Haiphong’s most popular destinations for domestic and foreign tourists.
Measures by banking system to put VN economy back on the ground
State Bank of Vietnam Governor Nguyen Van Binh assured that inflation this year is lower than last year, although there are many factors that inflation is likely to rise again.
He made this comment at a conference on implementing the bank's monetary measures to promote and support economic- social development co organized by the HCMC local Party Committee, People's Committee of Ho Chi Minh City and the SBV in HCM City on Apr 5.
The current levels of bad debts are hindering businesses from accessing bank loans. Consequently, the 12 percent credit growth target is still out of reach, the Governor said.
However, GDP is higher this year than in 2012, if inflation below 7 pct, the interest rate may be reduced to 7 pct per year and interest rates will stay at around 10pct, he stressed.
Exchanging in the meeting, To Duy Lam Director of the State Bank of Vietnam, HCM branch said the current 7.5 percent deposit interest rates will give commercial banks a good chance to rapidly reduce lending rates.
Not a few commercial banks are willing to reduce interest rates on loans down to 9 or 10 percent, despite low credit growth posing a huge challenge to the national economy, he added.
Commercial banks have attributed the failure of businesses to meet lending conditions as a pretext for not helping them access capital, a situation that has led to an environment of near-nil credit growth.
Conversely, Vietnam’s economy primarily depends on credit capital to maintain its growth. Therefore, a financial support package is needed to assist private businesses, farmers and household producers who are facing difficulties, Lam said.
Lam said that bad debts in the city is about VND 51 trillion, accounting for 5.98 pct of total loans. In particular, the creditors group 5 (or bad debt with the possibility of losing capital) accounted for 62.8 pct of total loans.
SBV Governor Binh agreed that factors such as input costs, interest rates, value added tax (VAT) and utility expenses have all impacted on production and growth.
Businesses should take into account these elements to maintain reasonable margins on their products while still meeting market requirements, he said.
Representative of the National Financial Supervision Committee (NFSC) cited slow credit growth in the first quarter as another stumbling block.
In the past three months, liquidity grew at a modest rate with interest rates on loans falling in tandem with inflation rates.
Interbank interest rates fell slightly compared to the previous quarter, along with several key interest rates, like the discount rate dropping to 6 percent and the Vietnam dong deposit rate to 7.5 percent.
The flow of capital into the production sector has remained weak for whatever it’s worth. By March 21, credit growth was just 0.03 percent while the amount of mobilized capital rose 3.86 percent compared to the late December level.
Government bonds are still considered to be an attractive investment channel for credit organizations because of low interest rates and small risks, according to Binh.
Duong Ngoc Minh, Chairman of Hung Vuong Seafood Company also expressed that if "credit policy” applied differently for each industry, thousands of companies would still be affected.
The influx of foreign goods at competitive prices is a challenge for domestic businesses when they are struggling to cope with the low purchasing power in the context of international economic integration, he complained.
If businesses could use available funding more effectively, they wouldn’t have to rely so heavily on bank loans, Minh supposed.
Tran Dinh Quyen, Director of Tin Thanh Electric and Gas Co. insisted on the State Bank of Vietnam to perform its role as a central bank by regulating the flow of capital and providing enough credit for domestic businesses to grow steadily in the long run.
Quyen said the SBV should lend to commercial banks based on its regulated interest rates which hover between 3-5 percent, making it easier for domestic businesses to pay interest rates on commercial loans even at 10 percent if necessary.
Lowering lending interest rates is the best solution to help businesses save their bacon in the current situation, Quyen stressed.
However, Governor Nguyen Van Binh argued that it is no easy task for the central bank to let commercial banks lower their interest rates on loans when it requires coordinated efforts to curb inflation and ensure the stable growth of the national economy.
The bottom line is the commercial banks need restructuring in the first place before pump priming, Binh said.
Most Vietnamese prefer domestic-made shoes
According to the Vietnam Leather and Footwear Association (Lefaso), a survey of behavior pattern of most Vietnamese customers revealed that they prefer purchasing mainly domestic-made shoes.
Almost two-third of Vietnamese consumers said that they will purchase local shoes while one-third said they would buy only imported brands.
Three well-known shoe brand names were preferred in the top ten list, namely, Biti’s, Thuong Dinh and Vinagiay.
Lefaso conducted a survey of more than 1,000 participants from Hanoi, the northern provinces of Hai Phong, Thanh Hoa, Ho Chi Minh City and the southern province of Binh Duong.
The survey will help enterprises to keep abreast of demand and develop strategies accordingly for product design, pricing and distribution.
Gov’t rules out nine low capacity cement projects
Prime Minister Nguyen Tan Dung has agreed with the Ministry of Construction to cancel nine cement projects with less than 2,500 ton capacity, namely, Ha Tien-Kien Giang, Truong Son-Ro Li, Hop Son, Ngoc Ha, Vinafuji Lao Cai, Thanh Truong, Son Duong, Quang Minh, and Cao Bang.
At the same time, Prime Minister gave the nod to extension of seven projects, namely, He Duong II, My Duc, Thanh Son, Tan Thang, Do Luong, Tan Phu Xuan, and Nam Dong, to after 2015. Only Xuan Thanh 2 Project in Ha Nam Province was listed in the category of cement projects that will be put into operation before 2015.
The Prime Minister entrusted the ministry to coordinate with relevant ministries and departments to closely watch the implementation of cement projects in accordance with adjusted progress plan and ensure future balance in cement supply and demand.
The PM asked the ministry to coordinate with the ministries of Finance, Industry and Trade, Vietnam National Cement Association, and Vietnam Cement Industry Corporation (Vicem) to draw solutions to increase effectiveness in export of cement and reduce losses to local cement producers.
According to Nguyen Tu Thanh, deputy head of Vicem’s Planning and Strategy Department, the country’s cement supply reached about 73 million tons per year by 2013 and met both industrial and civil demand.
However, domestic cement consumption was just around 50 million tons per year, leaving cement inventory at 20 million tons. If annual cement exports were around 10 million tons, there would still be a surplus of 10-13 million tons.
Vietnam sees substantial increase in rice exports in second quarter
Vietnam is eyeing a substantial increase in rice exports in the second quarter of the year with several new lucrative contracts, noted Truong Thanh Phong, chairman of Vietnam Food Association.
Mr. Phong was speaking at a conference in Ho Chi Minh City on April 4, to review status of rice exports from Vietnam during the first quarter of the year.
The Southern Food Corporation has received order contracts from the Republic of Guinea for export of 60,000 tons of rice, which is expected to increase to 140,000 by later this year.
Rice exports have also been good to other African countries, Malaysia and in particular China, which has been the largest rice importer from Vietnam since 2012. The country imported about 600,000 tons from Vietnam in the first quarter alone.
At present, businesses are about to deliver more than two million tons of rice and are also expecting further contracts to export another 2.2 million tons in the next few months.
As a result, the rice export volume is likely to top 2.2 million tons in the second quarter. This will take the total volume to 3.65 million tons in the first six months of this year, the highest in last several years.
VA offers promotional fares on domestic, int’l flights
Vietnam Airlines, the country’s national carrier, announced on April 5 a special promotional program to cover the coming holiday season called ‘Hello-Summer Vacation 2013’.
The Airline will offer passengers preferential fare rates on both domestic and international flights from April 8 to 21.
All one-way fares on domestic flights departing from May 5 to October 31 will cost either VND333,000(US$15.9) or VND666,000 ($31.8).
Similarly, return-fares on international flights starting April 22 to October 31 will be priced from VND189,000 ($9) to VND8,363,000 ($399).
The above fare rates exclude VAT and other surcharges. The promotional offer does not apply for flights during the Independence Day holidays from April 30 till May 1.
For more information, please see log onto www.vietnamairlines.com
Hanoi welcomes 5.12 million visitors in Q1
The capital city of Hanoi received 5.12 million tourists, including 615,000 foreigners, in the first quarter of 2013, representing a year-on-year increase of 17 percent.
According to the municipal Department of Culture, Sports and Tourism, in the second quarter, Hanoi’s tourism sector will increase the promotion of its image and improve the quality of tourism products, especially tours of traditional craft villages.
It will also create new products linking tourist sites and heritages.
In response to the National Tourism Year of Red River Delta-Hai Phong 2013, the sector will coordinate with the Vietnam National Administration of Tourism and the Vietnam Tourism Association in organising the Vietnam International Travel Mart (VITM Hanoi 2013) this month and a festival of trade villages in the Red River Delta in October this year.
Last year, Hanoi greeted 14.4 million visitors, including 2.1 million foreigners and 12.3 domestic tourists.
Peru, Vietnam bolster trade and IP relations
Vietnam and Peru have recently held an expert-level meeting in Hanoi, aiming at promoting bilateral relations in trade and intellectual property, among others.
The meeting was agreed upon by the two sides at the third session of the political consultation taking place last month in Lima.
In the context of the sound development between the two countries in recent years, Peru announced in March that it will open an embassy in Vietnam to enhance its ‘strategic presence’ in Asia-Pacific as well as to continue expanding politics-diplomacy, and trade ties with Southeast Asia.
Since the establishment of diplomatic ties in 1994, two-way trade between Vietnam and Peru hit 180 million USD in 2012, tripling the figure five years ago.
The Vietnam National Oil and Gas Group (PetroVietnam) and the telecoms group Viettel are implementing important projects in Peru.
Panama to talk double taxation avoidance with VN
Panama will soon negotiate a double taxation avoidance agreement and boost the exchange of customs information with Vietnam, the Panama Ministry of Economy and Finance has said.
The move is part of Panama’s efforts to build its legal system of international standards and improve its economy’s competitiveness.
Panama is currently carrying out 11 double taxation avoidance agreements with other countries, of which Singapore is the only signature in Southeast Asia.
It is also negotiating 18 other agreements, said the ministry.
According to the Vietnam General Department of Customs, two-way trade between Vietnam and Panama has seen a rapid growth in recent years, increasing from 50 million USD in 2005 to 244 million USD in 2012.
Last year, Vietnam’s exports to the Central American nation exceed 237 million USD.
Consumption slows following festival season
The Ministry of Industry and Trade (MoIT) reported that the commodity market has returned to its normal status after the Lunar New Year Festival and festive season.
It said both price and consumption of food and household commodities have fallen sharply while demand for raw materials has recovered.
Total value of retail and services in March reached VND211,3 trillion, a 0.64 percent decrease over the previous month.
An increase of over 15 percent was seen in restaurants, hotels and services, while trade rose just 10.74 percent and tourism only 3.96 percent.
MoIT has worked closely with relevant agencies and localities to implement measures to balance demand and supply as well as stabilise the market and curb inflation.
Accordingly, the ministry has directed 44 localities, enterprises and corporations to step up programmes to stockpile goods.
Besides, Departments of Industry and Trade in localities have focused on ensuring supplies of goods to the market, promptly meeting public demand, encouraging distributors' engagement in the programme "Vietnamese people prioritise Vietnamese goods", contributing to bringing goods to rural, remote and border areas as well as islands.
According to the Department of Domestic Market under the MoIT, the domestic economy will continue to face challenges including slow consumption. At the same time, production will also see difficulties. Bright signals have yet to be seen in the property market, but prices of essential products have increased slightly.
Rosy outlook for garment trade
The goal of 12-15 per cent export growth rate for the garment and textile industry this year is achievable, fetching between US$18.8-19.3 billion.
According to the Viet Nam Textile and Apparel Association (Vitas), the garment export value hit $4.2 billion in the first quarter of this year, a rise of 16 per cent over the same period last year.
Vitas vice-president Dang Phuong Dung said garment and textile enterprises had the advantage of nearly 100 per cent of workers returning to work after Tet (Lunar New Year) holiday.
Exports into traditional markets, such as Russia, Eastern Europe, the US, Japan and Europe saw stable growth while many enterprises penetrated new markets, such as South Korea, Turkey, Africa and Middle East countries. Some enterprises scored production orders until June.
Meanwhile, according to the deputy general director of the Viet Nam National Textile and Garment Group, Le Tien Truong, increasing input costs, especially petrol prices, may force up the price of goods and lower competitiveness.
This meant trying to save on the cost of raw materials and energy while increasing labour productivity, he said.
The association urged enterprises to penetrate niche markets by being flexible in meeting all demands.
Meanwhile, according to some economic experts, the garment and textile sector must increase the use of domestic raw materials in production rather than imported ones to improve growth.
Currently, the localisation rate of Viet Nam was at 48-50 per cent, low in comparison with 90 per cent in China and India.
It earned a turnover of $17.2 billion in 2012, an increase of 8.5 per cent over 2011.
In terms of turnover, the industry has led the field of export industries for five consecutive years.
Last year, the sector provided jobs for more than 2 million people. It expects to create job for an additional 200,000 people this year.
Housing conversion project raises doubts
As big apartments are divided into smaller ones to transform commercial housing projects into social housing, a move that aims to warm up the troubled domestic real estate market, experts question whether the conversion makes sense.
The market has over 20,000 houses unsold, according to the Construction Ministry, including about 4,000 low-rise buildings and 16,000 apartments with a total value of VND40.75 trillion (US$2 billion).
Most of the unsold houses are luxury housing; at the same time, demand at the other end of the spectrum is soaring.
The conversion of commercial to social housing would help investors sell their products, reduce inventory and quench the thirst for capital, which could then be reinvested elsewhere.
Last month, the Construction Ministry issued guidelines to adjust the structure and areas of the apartments in commercial housing projects so that they could qualify for the title of social housing.
About 20 investors expressed interest in doing so, according to the ministry, perhaps drawn by the incentives that investors in social housing can enjoy, which include lower taxes and land-use fees and preferential loans.
However, in Ha Noi, social housing has not sold as expected. For example, 946 apartments in Gia Lam District's Dang Xa 1 New Urban Area have been offered for sale 11 times – but have still not all been sold. In Dai Mo Urban Area in Tu Liem District, two buildings face a similar situation.
Moreover, the apartment division project could cause long-term problems for urban development. Subdividing apartments in this way would change the structure of the whole building in ways that could be unsafe, cautioned Tran Ngoc Phuong, Director General of Phuong Huy Construction Group.
He also warned that infrastructure such as roads and schools might not be able to deal with the higher population density – putting pressure on neighbouring areas.
Developers were not encouraged to divide finished apartments or to shift the label of completed products from commercial to social housing, said Construction Minister Trinh Dinh Dung.
Most of the shifted projects were new projects that were still only on paper or in the process of having land cleared for construction, according to the minister, so the changes in design and area of apartments would not affect the structure and safety of the building.
Ha Noi Architecture University former principal Tran Trong Hanh said that the goal should be to develop residential areas where people not only had houses to live but also had facilities to ensure a more comfortable life.
"We cannot just think about helping real estate firms and gamble with the living standards of other people," he said.
Highway loan deal signed with S Korea
A US$200 million loan agreement was signed last Friday for the Lo Te-Rach Soi highway construction project.
Signatories were Deputy Finance Minister Truong Chi Trung and Chairman of the Republic of Korea (RoK)'s Import–Export Bank Kim Yong Hwan.
The Lo Te-Rach Soi highway runs through the Mekong Delta provinces of Can Tho and Kien Giang and connects Vam Cong Bridge and Rach Gia bypass as part of the southern coastal corridor.
Addressing the ceremony, Trung said the official development assistance loan, provided via the Economic Development Cooperation Fund (EDCF), is part of a Viet Nam-RoK credit agreement for the period 2012-15 worth $1.2 billion signed in 2012.
The EDCF has so far financed 43 projects in Viet Nam with a total capital of $1.7 billion.
Sacombank strikes share debt deal with founder
Sacombank (STB) has signed an agreement with Dang Van Thanh, the bank's former chairman-cum-founder, and his son Dang Hong Anh to use nearly 80 million shares of their holdings to pay off around VND1.6 trillion (US$76.2 million) worth of loans provided to them and their affiliate companies.
The agreement was signed on December 5, 2012 but the transaction was only publicly announced on the HCM City Stock Exchange on Wednesday.
The bank explained that it had sent a report about the transaction to the HCM City exchange and the State Securities Commission on March 12, but the report had been lost.
Following the agreement, Sacombank has the sole discretion to buy, sell or dispose of the shares (equivalent to over 7.4 per cent of Sacombank's charter capital) to deduct from their loans and investments.
The largest amount is around VND678 billion ($32.3 million) worth of loans provided to the property developer Sacomreal (SCR), followed by VND329 billion ($15.7 million) worth of investment bonds in Sacomreal and VND192 billion ($9.1 million) worth of investment bonds in Thanh Thanh Cong Company.
However, because Dang Van Thanh and his son are still members of the bank's board of directors, these shares cannot be sold.
Sacombank will hold its shareholders' meeting on April 25, after which Thanh and his son will leave their positions and the shares will be sold.
According to Sacombank chairman Pham Huu Phu, the bank already had two individual buyers in place to purchase the shares at a negotiated price of VND20,900 ($1) a share.
"By May 31, Sacombank will have collected almost VND1.67 trillion ($79.5 million), including capital and interest on the amount lent to the companies related to Thanh and his family," Phu was quoted as saying by Nguoi Lao Dong (Labourer) newspaper.
STB shares are currently trading at over VND21,000.
According to the conclusion of inspectors from the State Bank of Viet Nam in January 2013, the total value of loans provided to Thanh Thanh Cong Company and other related companies was estimated at around VND7 trillion ($333.3 million), higher than regulated by law.
Thanh Thanh Cong Company is a large sugar company owned by Thanh's wife, Huynh Bich Ngoc.
The Law on Credit Institutions stipulates that a bank may not lend companies related to members of the board of directors more than 25 per cent of its charter capital. However, loans to companies related to Thanh's family came to over 50 per cent of Sacombank's charter capital.
The central bank has asked Sacombank to reduce the rate of lending to companies related to Thanh to 25 per cent of its charter capital by the end of December this year.
The Prime Minister accepted a proposal by the Ministry of Construction (MoC) to scrap nine low-capacity cement plant projects from the sector's master plan.
The Ha Tien – Kien Giang, Truong Son – Ro Li, Hop Son, Ngoc Ha, Vinafuji Lao Cai, Thanh Truong, Son Duong, Quang Minh and Cao Bang projects were supposed to produce less than 2,500 tonnes of cement per day.
The PM also agreed to extend the deadline for seven other cement projects to 2015.
Meanwhile, the Xuan Thanh 2 plant in northern Ha Nam Province joined the list of projects scheduled to be put into operation by 2015.
The PM asked MoC to co-ordinate with other parties to boost cement exports and minimise losses for domestic manufacturers resulting from inventory surpluses.
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