Int’l food, beverage expo opens in HCM City

More than 300 enterprises from 19 countries and territories are displaying their products at an ongoing international expo on food, beverages and technologies for processing and packaging in Ho Chi Minh City.

The event taking place from September 10-13 combines the 14th Vietfood and Beverage expo with the 18th PROPACK Vietnam expo.

The expo provides an opportunity for international and domestic businesses to create linkages and find trade partners, whilst showcasing new products.

As part of the event, seminars are held to exchange information and share experiences in improving food processing in Vietnam and abroad.

Vietnam sees slight rise in rice exports in August

Vietnam’s rice export volume totalled 627,089 tonnes in August, an increase of 1.87 percent compared to July and 1.4 percent compared to the same period last year.

According to the Vietnam Food Association (VFA), the average price during this period was 431.1 USD/tonne, representing a year-on-year increase of 6.47 USD per tonne.

The country exported 4.243 million tonnes at an average price of 431.38 USD per tonne during the first eight months of 2014, up 2.95 USD per tonne compared to the January-August period of 2013.

Vietnam’s largest customer in August was the Philippines, followed by African countries, China, Malaysia and Indonesia.

Rice growers in the country’s granary Mekong Delta had an outstanding summer-autumn crop harvest at a time when prices for rice were high, Huynh The Nang, General Director of the Southern Food Corporation (Vinafood II), said.

Nang also revealed that Vinafood II won a bid to export 500,000 tonnes of rice to the Philippines in the near future, affirming that the price for rice is expected to remain at today’s level.

According to VFA, Vietnamese rice producers aim to export 650,000 tonnes of rice in September. In the last 2014 quarter, they hope to export 1.4 million tonnes of rice, bringing the country’s annual rice export volume to 6.3 million tonnes.-

MPI urges for more support for SMEs

The State should further improve the business environment and implement policies that will enable companies, especially small- and medium-sized enterprises (SMEs), to achieve breakthroughs.

The insight came from experts attending a seminar in Hanoi on September 9 by the Ministry of Planning and Investment (MPI) and the Asian Development Bank (ADB).

Trinh ThiHuong, Deputy Head of the Small and Medium Enterprise Development Division of the MPI's Enterprise Development Department (EDD), cited a report of the EDD on the policies that have been implemented to support SMEs.

Huong said the policies had promoted the building of information pages on the internet, as well as the upgrade of content of the pages on the provincial and city state offices that enterprises have often been using.

She noted that the State offices had invested 2 million USD per year in the training of human resource for the SMEs, and policies were applied step-by-step to ensure more support from specific sectors for SMEs, including training in human resource and policies on all kinds of tax.

However, Huong added, implementation of these policies remained limited and no standards were set for 80 percent of these policies, whose effects on the enterprises could therefore not be measured.

Policy implementation was limited to Hanoi and Ho Chi Minh City and was not adjusted to the scale of different modes of enterprise, she noted.

"Implementation of these policies remains slow," Huong remarked. "For instance, information on support policies has been released to media for quite some time, but enterprises have yet to actually enjoy the support."

Huong cited a lack of connection among the policies that has made it difficult for the SMEs to receive support.

The report cited four reasons for this situation. First, six of the eight groups of support policies were not suitable to enterprises. Second, the policies were in conflict with the laws of various sectors.

Third, no breakthroughs were achieved in the implementation of these policies, and co-ordination among concerned ministries, sectors, provinces and cities was weak.

Fourth, the ability of State offices in the provinces and cities to provide support remained poor, and numerous departments of planning and investment had yet to set up a division that would take charge of supporting the enterprises.

Also, SMEs had not tried to approach concerned government agencies regarding the policies and updated themselves with enough information about those policies, Huong said.

The enterprises often had a short-term strategy for production and business and had not paid attention to reform and the raising of competitive ability among them.

Huong said the department recommended that the State management offices improve the business environment and build on specific policies.

Associations of enterprises should be a bridge between enterprises and the State management offices to improve efficiency in the implementation of these policies, she added.

Pham Thi Thu Hang, General Secretary of the Vietnam Chamber of Commerce and Industry (VCCI), said the policies had been partly successful in providing needed support to SMEs, but this was unfair to foreign-invested and State-owned businesses.

Complicated administrative procedures were still a challenge for the SMEs, and the support policies for SMEs had lacked synchronism, Hang added.

She urged the State to have specific support policies for SMEs but to refrain from excessively prioritising them.

Dairy industry urged to boost cattle numbers

The Vietnam Husbandry Association is urging the country's dairy industry to develop its cattle and use modern technologies so it could diversify and raise the quality of its products.

Nguyen Dang Vang, President of the Vietnam Husbandry Association, said the country was aiming to meet 60 percent of domestic demand for fresh milk for an anticipated population of about 113 million in 2045. To achieve this, the country must develop a herd capable of producing 5.65 million tonnes of milk per year.

The country's domestic fresh milk production in 2013 was 456,400 tonnes, equivalent to 5.1 litres per capita per year. This satisfied only 28 percent of the country's demand, with imported fresh milk satisfying the remaining 72 percent. Last year, the country's average annual per capita consumption of fresh milk was 18 litres.

From August 2007 to August 2008, Vietnam imported more than 5.7 billion USD worth of milk and dairy products, representing an annual increase of 14 percent. In 2013 alone, milk and dairy product imports were worth 1.089 billion USD.

By 2045, Vietnam will still have to import 2.25 million tonnes of milk worth 3.6 billion USD every year, to raise annual average per capita milk consumption to 50 litres, or just 60 percent of Japan's current consumption levels.

Vang said Vietnam should focus on developing large-scale dairy farms while using high-technology dairy farming techniques, and noted that small-scale dairy farms accounted for up to 66 percent of domestic production.

Figures from the Vietnam Dairy Association showed that as of April 1, the country had 200,400 cows, a 14-percent increase over that of last year and a 67-percent increase over that of 2010.

In recent years, several companies invested heavily in the development of dairy farms. The country currently has 15 farms with 1,000 to 5,700 cows, and five more are in the pipeline, altogether accounting for 30 percent of domestic fresh milk production.

However, Vietnam's dairy farming scale remains small. Figures from 14 provinces and four companies showed that in 2013, a farming household raised an average of 9.3 cows.

This is higher than that of Indonesia, with three cows per household, but is a far cry from that of Japan, with 72 cows per household; the United States, with 96 cows per household; and Taiwan, with 126 cows per household.

In addition, the productivity of the average cow in Vietnam remained low in comparison with that other countries and territories with the same dairy farming advantages. The husbandry association predicts that by 2045, Vietnam's cow productivity could reach that of Taiwan.

According to Nguyen QuocKhanh, Executive Director of Vinamilk, which holds 50 percent of Vietnam's milk market, dairy companies should provide farming households with training and support in modern techniques to ensure the development of dairy farming areas.

He said that investing in modern milk processing plants was also essential to ensure diversification and quality enhancement of products, as well as the upgrading of levels of competitiveness and capability to meet consumer demand.

Experts said the country also needed a national management system for dairy cattle and measures to protect domestic production, such as the application of import quotas.

Vu Ngoc Quynh, General Secretary of the Vietnam Dairy Association, said the dairy industry's development was in line with the Government plan to meet domestic demand while expanding in the world market.

Vietnam is one of a few countries in Asia that are earning from milk exports. In 2013, the country's export turnover for milk products reached 230 million USD, mostly from Vinamilk.

Second turbine at Vinh Tan power plant generates power

The second 622MW turbine of Vinh Tan 2 thermo-power plant in the central province of Binh Thuan has been successfully connected to the national grid with its maximum electricity-generating capacity hitting 82 MV, according to the Electricity of Vietnam Group.

The turbine will officially become operational at the end of December.

The coal-fired Vinh Tan 2 power plant, built at an investment of 23.5 trillion VND (1.2 billion USD), has two turbines with a capacity of 622MW each.

The first turbine joined the grid in January this year.

The plant is projected to be completed and start working in 2015, generating some 7.2 billion kWh of electricity per year. Once fully operational, it will contribute to ensure power supply for the southern region and ease the national grid’s dependence on hydro power as well as boost the province’s socio-economic development.-

Automobile sales increase for 17 consecutive months

August marked the 17 th month in a row of automobile sales growth, with 12,562 cars sold, a 59 percent year-on-year increase, according to the Vietnam Automobile Manufacturers’ Association (VAMA).

Compared to the same period last year, the sales this month of domestically-assembled cars rose slightly by 0.1 percent to surpass 9,700 units, while the figure of imported cars dropped 2 percent with the number hitting 2,834.

Despite the increase in August sales, there are signs the growth rate has slowed down, with sales agents attributing this to consumers’ habit of spending more at the beginning and the end of the year and less during the year.

Total sales for the full year of 2014 is forecast to be 130,000, a 18 percent growth in comparison with last year.

Vietnam’s rubber exports decline

This year’s rubber exports are estimated to reach 1 million tonnes, worth 1.8-2 billion USD, marking a decline of 10 percent in volume compared to 2013, the Department of Processing and Trade of Agricultural, Forestry, and Fishery Products and Salt Production reported.

The main reason for this is the combination of a drop in global demand with an increase in supply, as countries expanded their cultivation areas in response to the 2012 period of high rubber prices.

According to Nguyen Trong Thua, Director of the department, the price of rubber might continue to face a downward trend in the years to come. Competition between export countries will become fiercer, thus ultimately improving the overall quality of rubber.

Due to its low quality, the price for Vietnamese rubber is significantly lower than in other countries in the region exporting rubber, such as Thailand, Indonesia, and Malaysia.

Export prices for all kinds of rubber, including high-quality rubber, have decreased.

Vietnam’s domestic rubber production output for 2014 is forecast to total 980,000 tonnes, up by 3.2 percent compared to last year.

During the first 8 months of the year, 548,000 tonnes of rubber were exported, worth 989 million USD, marking a 9.8 percent decline in volume and a 31.9 percent decline in value compared to the same period last year.

China and Malaysia remain the two biggest consumers of Vietnam’s rubber, despite the drop in their import volume and value.

Vietnam expects to increase litchi, longan exports to US

Leading market analysts are forecasting Vietnamese exports to the US of litchi and longans to soar to over 1,800 tonnes annually, radio The Voice of Vietnam (VOV) reported on September 9.

The Department of Agriculture's Animal and Plant Health Inspecition Service has issued a final rule that, effective October 6, will allow imports of litchi and longan fruit from Vietnam into the US.

Specifically, they must be grown at registered location and monitored by the Plant Protection Department and each batch of product must be accompanied with a certificate issued by the Plant Protection Department.

Most importantly, these fruit must be in strict compliance with regulations governing levels of pesticides.

Litchi and longans are Vietnam’s key fruit products for exports, along with dragon fruit, bananas, mangos, star apples, rambutan and grapefruit.

Vietnam expects to earn 1.2 billion USD from fruit and vegetable exports in 2014.

Infrastructure, power projects lead to greater ODA disbursements

The accelerated construction of many big infrastructure and power projects has led to larger disbursements of official development assistance to Vietnam, the Vietnam Investment Review said on September 9.

The Ministry of Planning and Investment (MPI) reported that disbursement of official development assistance (ODA) and concessional loans in this year’s first half reached 3.1 billion USD, including over 3 billion USD worth of loans and about 84.48 million USD in grants.

Disbursement soared 41 percent up on the 2.2 billion USD released during last year’s corresponding period.

The disbursed sum included 1.088 billion USD from Japan International Cooperation Agency (JICA), 923 million USD from the Asian Development Bank (ADB), 717 million USD from the World Bank, 110 USD million from German government-owned development bank KfW, 67 million USD from Korean Eximbank and 90 million USD from the French Development Agency (AFD).

Among major disbursements are a 250 million USD disbursement from the World Bank’s Economic Management and Competitiveness Credit for Vietnam Programme, which is aimed at helping the country with economic management reforms for higher productivity and competitiveness and the AFD’s support programme to respond to climate change in Vietnam.

“Notably, faster-paced construction of major transport infrastructure and energy projects has contributed to this six-month ODA disbursement,” said Minister of Planning and Investment Bui Quang Vinh.

According to the MPI, some 105 million USD funded by JICA has been disbursed for the project to build the second terminal at Hanoi’s Noi Bai International Airport. Some 27 million USD has been spent on a World Bank-funded project to build traffic infrastructure in the Mekong Delta and 15 million USD has been disbursed for the ADB-funded Ho Chi Minh City-Dau Giay express way.

In the energy sector, 125 million USD has been disbursed for JICA-funded projects including the O Mon thermal power plant and power transmission grid for the Mekong Delta, as well as the Nghi Son thermal power plant (37.4 million USD). Also within this sector, there were disbursements for the ADB-funded Mong Duong thermal power plant (94 million USD), and the World Bank-funded power distribution efficiency project (72 million USD).

In mid-August, Prime Minister Nguyen Tan Dung clinched a decision on allocating an additional 3.6 trillion VND (171 million USD) in counterpart-funding for ODA projects. He also ordered central and local authorities to arrange enough reciprocal funding for ODA projects next year, with the aim of boosting disbursement of ODA nationwide.

Local logistics service providers need to improve capacity building

Most of the domestic logistics enterprises in Vietnam in general and in Hanoi in particular lack comprehensive development, professionalism as well as the application of modern technology, Deputy Director of the Domestic Market Department under the Ministry of Industry and Trade (MoIT) Tran Nguyen Nam was quoted by the Vietnam Business Forum Magazine (VBF) as saying.

According to the Hanoi Department of Industry and Trade, most of the logistics service providers (LSP) are small and medium-sized, with the average capital of 18.6 billion VND. More than 60 percent of the LSPs in Hanoi are branches of LSPs in Ho Chi Minh City .

Another drawback of the LSPs in Hanoi is that up to 90 percent of them have not applied information technology into their operations. The linkage among the LSPs is weak. Many regulations are lax, impractical and not clear enough to support the businesses.

There is a big development gap between domestic LSPs and foreign ones, said Deputy Director of the Hanoi Department of Industry and Trade, Tran Thi Phuong Lan, in a recent seminar on developing logistics industry and trade inspection in Hanoi.

The number of foreign LSPs accounts for only 2 percent but their market share is up to 80 percent. They mainly provide international transport services and value-added services such as consulting, cross-docking, and order tracking.

Nguyen Tuong, Head of Representative Office of the Vietnam Logistics Association, said that the current competitiveness of the Vietnamese state-owned LSPs and private ones is so weak compared to other foreign companies. They are not capable of providing high quality logistics services. Furthermore, Tuong indicated that the current network of transport and urban infrastructure is not consistent and does not meet the needs of shippers.

Tuong suggested that Hanoi should establish a steering committee managed the Department of Industry and Trade to deal with problems that arise in the logistics industry.

Besides, logistics enterprises should improve their quality of service to compete with foreign businesses and gain the trust of customers.

Dong Nai sees peak in start-up businesses

As many as 1,340 new companies were established in the southern province of Dong Nai in January-August, up 25 percent from the same period in 2013. They registered a total capital of over 5.3 trillion VND (254 million USD), reported the provincial Department of Planning and Investment (DPI).

The spike in newly registered business capital, along with additional capital from the operating businesses, increased the province’s total investments to over 12.69 trillion VND (604 million USD). This represented a rise of 97 percent compared to the same period last year and met the target set for 2014.

The new figures brought the number of companies set up in Dong Nai to date to 19,680, with a total registered capital of 121.14 trillion VND (over 5.7 billion USD), as registered on the National Business Registration Portal.

In August alone, four enterprises were dissolved and no enterprises temporarily suspended their operations, said Bo Ngoc Thu, DPI Director.

Sixty-six companies went out of business during the 8-month period, with an additional 46 businesses suspending their operations temporarily, up by 56.1 percent and 95 percent, respectively, Thu added.

The main cause for business dissolution and operation suspension is inefficiency. Most of the affected are small and medium sized private enterprises.

The locality is implementing a number of measures to support small and medium enterprises to expand their export markets and generate profit.

M&A in banking sector aims to make changes in management, risk control

Mergers and acquisitions (M&A) in the banking sector in 2014 are not as common as in previous years when most of the M&A cases involved smaller banks merging into larger banks. This year a number of leading banks merged to create greater strength, the Vietnam Economic News reported.

Since the credit institution restructuring plan for the 2011-2015 period was kicked off almost four years ago, all M&A cases in the banking sector were implemented on a voluntary basis.

According to the State Bank of Vietnam, all the weaker banks that were restructured via M&As operated more effectively than previously. Their operational safety indexes and solvency improved. They attracted more deposits. Problems of bad debts were minimized, while violations related to stake holding rates of major shareholders and credit provision were being dealt with, and the banks’ organization and operations were strengthened.

Since early this year, there have been many M&A cases in the banking sector. Small commercial banks merged with each other or merged into larger banks. Well-known cases included M&As at Southernbank, DongAbank, Sacombank and Eximbank.

KPMG Vietnam and Cambodia Chairman John Ditty said at a recent M&A forum that finance, fast-moving consumer goods, insurance and telecommunications remained the core of M&A activities. If the economy grows strongly, M&A will become busier, the scale of M&As in the banking sector would change and provide more opportunities for investors, John Ditty was quoted as saying.

The second wave of M&As hasn’t only seen weak banks merge, larger banks have merged to create joint strength. M&As between non-banking institutions, such as finance and financial leasing companies will be promoted in the coming time. Experts have predicted that the second wave of M&As in the banking sector will become busier in the coming time to make changes in management and risk control.

Keith Pogson, Managing Partner, Asia Pacific Financial Services at Ernst & Young said that M&As will remain an unavoidable trend because the number of Vietnamese banks is bigger than that in other countries in the region. There are two motives for M&As in Vietnam: The government allows large commercial banks to acquire smaller banks or merge into other leading banks to create powerful financial institutions in Vietnam and the region as a whole. Relevant state authorities should further improve the legal framework to promote M&As between commercial banks, Keith Pogson was cited as saying.

According to Nguyen Thi Vinh Ha, Deputy General Director of Grant Thornton Vietnam, leading groups would withdraw capital from commercial banks and commercial banks will take the initiative in finding foreign strategic partners; a number of large banks could be merged according to guidelines and instructions of the State Bank to become powerful, regionally-competitive commercial banks.

Hanoi promotes electronic tax declaration

The Hanoi Department of Taxation has focussed on tax administrative reforms following the Prime Minister’s direction to improve the tax system.

The department has worked with relevant agencies to improve procedures and regulations, and enable tax payers in the city to pay their taxes online.

According to the department, a number of small enterprises are still hesitant to embrace the new tax procedures, with some still filing traditional tax declarations, since electronic tax declaration is currently not compulsory.

By the end of August, Hanoi had 95,346 online tax payers, accounting for 87 percent of the city’s businesses, with 95 percent of online declarations being completed successfully.

The department aims to increase the proportion of businesses using the online tax declaration service to 95 percent by the end of 2014.

Gov't to cut number of prohibited sectors

The Government has proposed a reduction in the number of prohibited sectors, from 51 to eleven in a bid to provide favourable conditions to businesses.

The list, regulated under the draft amendments to the Investment Law, includes military weapons, drugs, firecrackers, prostitution, human and organ trafficking, certain chemicals and wildlife products.

Business activities relating to asexual reproduction, genetically modified animals, products that endanger national security and social ethics, counterfeit products or products that pose a threat to human health and life will also be banned under the draft revision.

The list will be subject to ongoing discussion and will be adjusted in a bid to balance the rights of businesses, individuals and State oversight.

The draft revision of the Investment Law also seeks to reduce the number of conditional business sectors, from 386 to only 326.

At a Government meeting last month, Prime Minister Nguyen Tan Dung asked the Ministry of Planning and Investment to provide consultations and review the list so it could be presented at upcoming meetings of the National Assembly and the NA Standing Committee.

He said that in line with regulations on people's rights to do business, any limitations on these rights must be regulated and stated clearly in the law.

He also said that the creation of the list and the crafting of relevant regulations must ensure the improvement of the country's business and investment environment and enhance the nation's capability to compete in the world market.

The list and regulations must also improve the effectiveness of State management and administration reform by ensuring transparency in implementation, to prevent wrongdoing and corruption, he added.

Work begins on southern oil refinery

The Vung Ro Oil Co. Ltd. (VRP) began site leveling for construction of the Vung Ro Oil Refinery & Petrochemical project yesterday morning.

With total investment of US$3.2 billion, Vung Ro Refinery & Petrochemical project will be built in Hoa Tam Industrial Park in the Southern Phu Yen Economic Zone, in Hoa Tam Commune of Phu Yen Province's Dong Hoa District.

Vung Ro refinery is located on an area of 538ha, including 134ha for construction of the Bai Goc Port, which will have an annual handling capacity of over 17 million tonnes of cargo.

The oil refinery and petrochemical project was also licensed to use 500-1,300 ha of sea water surface.

A representative of the Phu Yen People's Committee said over 134ha of Ban Goc Port had been handed over to the investor VRP.

Construction is scheduled to start this year and it is expected to open in 2018.

When completed, the refinery will have a capacity of 8 million tonnes of oil products per year.

The refinery will process LPG, gasoline research octane number (RON) 92, gasoline Ron 95, jet fuel, diesel, fuel oil, and petrochemical products, including benzene, toluene, mixed xylenes, polypropylene and sulphur.

Gasoline and diesel processed at the refinery will meet the Euro-V specification, while the other products will meet the existing Vietnamese specifications and international standards.

The project is expected to generate 1,300 jobs and contribute $111 million a year to state coffers.

Speaking at the ground-breaking ceremony, Kirill Korolev, general director of VRP, said the Vung Ro Oil Refinery would create an (economic) impetus for Phu Yen Province.

He said that it would have a positive socio-economic effect on the province, helping to improve Phu Yen residents' living standards.

PM greenlights plan to grow wind power sector

Prime Minister Nguyen Tan Dung has approved a list of projects that will develop wind power in Viet Nam.

The projects, largely to be funded by Official Development Assistance (ODA) from Germany, propose several approaches to improve Viet Nam's capacity to harvest the potential of wind energy.

They range from building databases, to planning wind power infrastructure at both local and central levels, to improving the management of wind power investment.

To be implemented between 2014 and 2018, these projects will utilise a total investment of 3.7 million euros (US$4.7 million). Germany's non-refundable development assistance package offered 3.6 million euros ($4.6 million) of the required investment and Viet Nam's corresponding contribution satisfied the remaining 100,000 euros ($129,300).

PM Dung assigned the Ministry of Industry and Trade with the responsibility of allocating the funds to ensure the implementation of the projects.

Techcombank eyes sale of $33.8m in bad debts

The joint-stock Techcombank has been using all channels to improve its bad debt problem, and has sold VND800 billion (US$33.8 million) to the Vietnam Asset Management Company (VAMC) this year, according to a bank official.

Acting CEO Do Tuan Anh told Viet Nam News he targeted selling up to VND1.5 trillion ($71.4 million) of the debt to VAMC this year.

"We, however, had set up a team specialising in bad debt handling, working directly with our customers to restructure the debts," said Anh, adding that another VND400 billion have been handled this year.

Currently the bank's bad-debt ratio is over 3.7 per cent, which is expected to gradually come down to the safe level of 3 per cent regulated by the State Bank of Viet Nam.

According to SBV, the average ratio of Vietnamese banks was 4.17 per cent at the end of the second quarter.

Anh said by July his bank's total asset value had reached VND170 trillion and it had gained VND955 billion in pre-tax profit, completing 85 per cent of the year's target.

Lam Dong export earnings up by 76% in first eight months

Exporters from the Central Highland province of Lam Dong grossed over US$332 million in earnings from January to August, a year-on-year increase of 76 per cent.

In August alone, exports rose 116.6 percent to hit $44.3 million, driven by farm produce. Coffee was the biggest contributor. It accounted for 45 per cent of the total turnover, according to the provincial People's Committee.

In the past eight months, 68,000 tonnes of coffee were sold abroad, up 31.2 per cent. Buyers were mainly the EU, the Middle East and some Asian and Latin American countries.

Produce such as fruit, vegetables, tea, cashew nuts, and fresh flowers registered encouraging growths of 26.9 per cent, 12.1 per cent, 27.3 per cent, and 15.1 per cent in volume, respectively.

The province exported more than 258,000 tonnes of aluminium in the reviewed period for $81.3 million, about one quarter of its exports.

Kamui opens new $9m plant in central industrial zone

Japan's Kamui Company opened a plant making heat exchangers in the central city's Hoa Khanh Open Industrial Zone on Monday.

The $9-million plant, the third in Asia after Japan and China, was built on an area of 11 hectares.

Director of the company Mikio Juaman said the Da Nang-based plant would produce about 2,600 products per year.

He said the plant would supply Japanese and Vietnamese enterprises, gradually replacing imported products.

The city has developed a 100-hectare, US$150-million industrial park for Japanese businesses, aiming at large investments from Japan.

Japan has 60 projects worth $350 million in Da Nang. Japanese exports account for 37 per cent of the city's total imports, while 30 per cent of the city's industrial production value comes from Japanese FDI projects.

Brokerages: Investors follow ETF changes

Securities firms predicted investors would be watching the rebalancing activity of exchange trade funds (ETFs) this week to seek opportunities for their portfolio restructuring after the main index continued sliding at the final session of last week.

Last Friday, the VN-Index moved sideways as buyers quickly absorbed supply from profit takers before closing slightly in the red at 638.65, down 0.2% from a session earlier. Market breadth was broad with advancers outnumbering laggards nearly 2-to-1, but large caps GAS, MSN and VIC took a hefty 3.98 points from the index.

The HNX-Index, however, was up 1.19% at 88.54 as PVS, VCG and PLC continued their uptrend and contributed 0.52 points to the index of the northern bourse. Foreigners net sold VND177 billion, the highest amount in four days.

According to Viet Dragon Securities Company (VDSC), the number of FTSE Vietnam ETF’s outstanding shares lost 280,000 units to 13.21 million units last Wednesday. However, the fund’s capital withdrawals left little impact on the market.

The difference between price and net asset value (NAV) represented a premium of 2.08%, suggesting that further capital withdrawal by FTSE Vietnam ETF in the short term would hardly occur.

Changes to the DB FTSE Vietnam Index were also announced last Friday with KDC and FLC replacing DIG and GMD as constituents, with the two latter stocks failing to meet criteria.

DIG did not meet the requirement for liquidity as the stock’s turnover ratio was only 15% of FTSE Vietnam Index, lower than the 20% threshold. GMD was rejected since the stock’s foreign room fell to 0% (versus the 2% threshold) after the company’s foreign room limit was adjusted to account for convertible debts held by a foreign fund.

FTSE is expected to sell around 4.7 million shares of GMD and 6.4 million shares of DIG while buying around 7.6 million shares of KDC and 11.3 million FLC shares, VDSC said.

After FTSE Vietnam ETF’ announcement, VNM ETF will also release rebalancing results late this week. As estimated by VDSC, GMD will be excluded due to the same reason of FTSE.

“On the other hand, we think IJC could be included because this ticker now has sufficient conditions to add to the ETF such as size, liquidity and free-float ratio. We leave the door open for FLC because selection depends on balancing between inclusion and exclusion and outstanding shares of FLC (FLC has been approved by FTSE),” the brokerage said.

“In this review, our analysts predict the selling side will be stronger than the buying side. For inclusions like KDC, FLC, IJC, the rally prospect thanks to ETF trading is not high. Meanwhile, for exclusions, investors should consider accumulating GMD shares if this review sends its price down below VND30,000 each,” VDSC added.

HSBC: Central bank likely cuts OMO rate further

HSBC Bank has predicted that the central bank would mull another cut of the open market operations (OMO) rate to beef up domestic demand and growth thanks to low inflation this year.

In a macro economic report released on September 4, HSBC said Vietnam is in the slow lane towards economic recovery.

After expanding solidly since September 2013, the HSBC manufacturing PMI index eased markedly in August to 50.3 and the bank forecast next month’s performance to be lackluster as inventories are high and orders are weak.

Headline inflation decelerated further to 4.3% year-on-year on low domestic demand. With the exception of food, price pressures subdued and core inflation slowed to 4.2% year-on-year in August from 5.1% in July.

Credit growth slowed to 10.3% year-on-year in August from 10.6% in July. The central bank already reduced the OMO rate by 50 basis points to 5% to support domestic demand.

“Should inflation stay below 4.5% in September, the central bank may deliver another rate cut to the OMO rate to shore up domestic demand,” the bank said.

Meanwhile, the Ministry of Finance is also doing what it can to help the business community. The corporate tax rate was cut to support businesses and attract manufacturing foreign direct investment (FDI) capital, especially high-tech firms.

In January this year, the rate was reduced to 22% from 25% and by 2016, it will be lowered to 20%.

Foreign-invested enterprises in prioritized sectors and regions get even more advantageous rates. Tax incentives coupled with slowing gross domestic product (GDP) growth heightened concerns over Vietnam’s fiscal position.

In 2013, the budget deficit widened to 5.5% of GDP from 5.4% in 2012. The concern is not over the Government’s reported deficit but the lack of clarity about what is the “real” nature of the Government’s liability, leading to a wide range of debt estimates.

The report also mentioned Vietnam’s fiscal accounting to identify key weaknesses and strengths. The primary difference between the Government’s method of accounting and the international standard method is the definition of what qualifies as expenditure and revenue.

For example, the inclusion of principal payment in expenditure has led to higher deficit estimates by the Government. As a result, estimates of the debt stock also vary, skewing on the upside.

In general, HSBC said Vietnam’s budget is quite comprehensive, with some issues remaining regarding carry-over, extra-budgetary funds, off-budget capital spending and State-owned enterprises (SOEs), obscuring the true picture of Vietnam’s fiscal health.

By category, corporate, customs and oil revenues are the key contributors. This year, Vietnam’s revenue collections have bounced back. With expenditures sticky, the fiscal deficit will likely stay on track, if not surprise on the upside, the bank commented.

Nuclear power development communications receive a boost

The Vietnam Department of Atomic Energy and the International Atomic Energy Agency (IAEA) on September 10 jointly held a seminar on opportunities and challenges for communications in disseminating nuclear power development in Vietnam.

Addressing the event, Hoang Anh Tuan, director of the Department Atomic Energy, stressed Vietnam has introduced a nuclear power development policy and is currently building infrastructure for nuclear power plants Ninh Thuan 1 & 2 in the central region.

During a fact-finding trip to Vietnam in 2012, IAEA experts made seven recommendations concerning nuclear development in the country, including communications, considering a big challenge for the country.

He expressed hope that experts from IAEA, the US, Spain and other countries will update Vietnam on nuclear power development trends in the world and help the country improve communications in the field.

Brenda Pagannone from IAEA Department of Nuclear Energy underlined the need to have an open and transparent communication strategy from nuclear power plant stakeholders to win local residents’ trust in the safe operation of the plant in the future.

Providing the public with adequate information is a decisive factor in receiving their agreement and support in building Ninh Thuan plants in Vietnam, she said.

Increasing machinery imports signal strong investment activity

A significant jump in machinery and equipment imports in the first months of the year shows businesses are picking up the pace of modernising production facilities.

In recent years, Vietnam has principally imported machinery and equipment from China, the Republic of Korea (RoK), Japan, Taiwan, and Germany, with China topping the list of suppliers.

Vietnam Customs statistics show in the first 7 months of the year, machinery and equipment imports from China reached US$4.38 billion, Japan (US$2 billion), the RoK (US$1.73 billion), Taiwan (US$808 million), Germany (US$652 million), the US (US$483.5 million), Italy (US$227 million), Malaysia (US$245 million), Singapore (US$176 million) and Thailand (US$359 million).

Import values from these countries have been on a steady but gradually uptrend. For instance, imports from China alone experience growth of more than US$1 billion on-year.

Increasing imports of machinery and equipment are directly attributable to a concurrent rise in demand for technological renovation of domestic businesses and a corollary accretion of foreign direct investment (FDI) inflow into Vietnam.

The Ministry of Planning and Investment (MoPI) reports in the first eight months of the year, the RoK ranked first among foreign investors in Vietnam with total registered capital of US$3.22 billion, accounting for 31.5% of total foreign capital into the country, following by Japan with US$1.27 billion (comprising 12.5%).

The movement to install advanced technologies in all stages of production across all sectors has also driven machinery and equipment imports up. Currently, import markets for both new and used machinery and equipment have expanded.

On the one hand, new technological products generally have preeminent features such as energy saving, smaller size and improved automation, but on the other hand are more costly than used equipment.

In emerging countries, businesses tend to choose second-hand machinery and equipment as the increased cost of the brand-new doesn’t outweigh the benefits.

Businesses must be cautious when importing second-hand equipment. Imports are bound by regulations and in particular environmental regulations. Legal guidelines on importing second-hand equipment are being promulgated, so importers should exercise due caution.

Nguyen Chien Thang, Director of the Scansia Pacific Company, says China manufactures machinery and equipment for the timber processing sector. Compared to developed countries, it is closer to Vietnam in proximity so maintenance, repair and replacement services can be done more quickly.

This is one of the advantageous factors domestic businesses often choose Chinese partners as main suppliers, Thang says.

Local businesses have many choices. In addition to acquiring new machinery and equipment from regional suppliers, they can optionally import equipment purchased, oftentimes at bargain basement prices, from businesses in other countries that are going out of business and closing their doors.

A case in point is the situation in Italy. There are now huge imports coming into Vietnam from Italy. Due to economic difficulties, many Italian businesses are closing and there are exceptional deals on equipment as a result.

One of the complaints lodged against domestic machinery and equipment is that it has a high price and the quality is not consistent. Thus most domestic businesses are choosing to import machines and equipment, instead of purchasing locally.

Do Phuoc Tong, Vice President of the Ho Chi Minh City Association of Mechanical Engineering, says most local mechanical engineering businesses are small and medium in scale.

The lower quality in domestic machinery and equipment results from the fact the local engineering firms have insufficient funds to invest in newer technology, Tong says.

Compounding the problem for domestic engineering is that materials, components, and tools for mechanical engineering production are subject to higher Vietnam import taxes, making it impractical if not impossible for them to effectively compete.

WB, Vietnam partner to tackle sustainable development

A Vietnam Development Report aiming to provide an insightful window into the opportunities available for the country to develop rapidly and sustainably through 2030 and beyond is anticipated to be completed by late 2015.

The report, a joint project being carried out by the World Bank and the Vietnamese Government, focuses on finding a way forward for the nation so partner efforts can be harmonised, said Deputy Prime Minister Vu Duc Dam and WB Vice President Axel van Trotsenburg, at a meeting in Hanoi on September 9.

A WB report showed that over the past 20 years, Vietnam has obtained an average economic growth rate of 5.7% annually. If Vietnam wants to catch up with economies like the Republic of Korea, and Taiwan (China), it must sustain an average growth rate of 9% annually over the next 20 years.

If average growth remains feeble at only 5-6%, the nation will be caught in the so called middle income trap, it warned.

The most pressing issue facing the country in its bid to shore up its economic growth is to overcome complacency and raise the nation’s capacity to compete on an equal footing in the global marketplace.

Raising the nation’s competitiveness is critically important and imperative if the economy is to grow rapidly and develop sustainably for the socio-economic benefit of its citizens.

Early this year, Deputy PM Dam directed the Ministry of Planning and Investment (MoPI) and the National Council on Sustainable Development and Competitiveness Capacity to coordinate with the WB and international organisations to devise a list of key tasks and incorporate them into Government Resolution 19.

He instructed the key tasks should zero in on practical solutions to improve the business environment and in turn improve the national competitive capacity and facilitate the ironing out of administrative snags hindering business.

Experts at the meeting predicted that if Resolution 19 is strictly adhered to and carried out effectively, Vietnam will enjoy billions of US dollars of economic benefit.

Deputy PM Dam urged the MoPI to establish a website to gather opinions from leading domestic and foreign experts to insure a high quality report and to obtain useful ideas and thought for making development policy in coming years.

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