Corporate law focuses on SOEs

The draft amendment to the Viet Nam Law on Enterprises 2005 focuses on the practices of State-owned enterprises (SOEs) together with the rights, obligations of ownership and managerial process.

The draft reflects the growing pressure to restructure this driver of the economy. According to the new chapter proposed by the Ministry of Planning and Investment (MPI), the amended law would identify the roles and missions of all SOEs and also each SOE in particular.

The proposal legalises principles to secure and develop State capital in commercial operations.

In terms of ownership rights and obligation implementation, the draft proposes to separate the practice of ownership rights from other practices.

Every enterprise must have a representative body which takes responsibility before the Government and the National Assembly for State ownership practices in the enterprises. However, the body would not directly issue administrative orders or interrupt the enterprise's commercial operations.

The draft also regulates disclosure of periodic reports and requested information from SOEs.

Moreover, the Law on Enterprises 2005 has a lot of inadequacies, especially in business line registration and business establishment registration that confuse the administrative and practical processes, said Mai Dinh Manh, general secretary of the Viet Nam Electro-technical Industry Association (Velina).

Nguyen Dinh Cung, acting director of the Central Institute for Economic Management (CIEM), cited by Securities Investment, said that in the draft to amend the Law on Enterprises, enterprises would not have to register business activities in the Business Register Certificate.

Under the current law, enterprises must register business activities and would be violating the Law on Enterprises if they carry out business activities not mentioned in the Business Register Certificate.

Experts said that enterprise registration is a formality required to start an enterprise. But how the enterprise operates or invests is the part of the process of developing that idea.

"The change would help implement a principle mentioned in the Constitution, that is, people are allowed to do business which the law does not ban," said Cung.

The draft also makes clear about the business registration procedure and certificates for conditional business status.

When entrepreneurs want to set up a business in any field, they will apply for the Business Register Certificate at a competent business registration agency. Afterward, if their businesses are assigned conditional business status, they must satisfy the requirements of specialised management agencies.

Mining exhibition to highlight VN potential

The second international mining and minerals recovery exhibition and conference, Mining Viet Nam 2014, will be held from March 11-13 at the International Centre for Exhibition (ICE) in Ha Noi.

The event this year will include more group and country pavilions as well as technology displays, consolidating its position as a dedicated mining-technology marketplace for industry stakeholders in Viet Nam and beyond.

"Whilst Viet Nam's mining industry has been affected by global events, mining pioneers are still seeing opportunities in Viet Nam as evolving legislation has made the operating environment a little more promising in the past few months. Advantages will come to the first movers into this market," said BT Tee, representative of Allworld Exhibitions Viet Nam.

This year, the exhibition continues to receive support from the ministries, local industry associations and trade promotion boards.

"We believe that with the expansion of our outreach programmes across Indochina, Mining Viet Nam will serve the region as a one-stop technology marketplace for mining technology and services," said BT Tee.

The first Mining Viet Nam was organised in 2012 with 3,290 industry attendees from 26 countries.

Brand name development needed for tourism boost

Building and developing a brand name for the Vietnamese tourism market is a key solution to help the sector reach this year's target of welcoming 8 million foreign and 40 million domestic tourists, and earning VND220 trillion (US$10.34 billion), a domestic tourism manager has said.

According to Deputy General Director of the Viet Nam National Administration of Tourism (VNAT) Nguyen Manh Cuong, attention should be paid to improving tourism infrastructure and developing the tourism workforce and brand name, in order to boost the growth of Viet Nam's tourism market.

Although Viet Nam possesses a large number of tourism and heritage sites recognised by UNESCO, levels of foreign tourists coming to Viet Nam have only risen modestly in recent years, which was attributed to the nation's poor transport facilities, added Cuong.

As many as 80 per cent of foreign travellers arrive in Viet Nam by air, he noted, suggesting that the transport system should be upgraded to facilitate the growth of the sector.

EVN to ensure stable power supply

Electricity of Viet Nam (EVN) plans to operate more hydropower plants during the dry season to prevent further power cuts, according to a company report.

Last month, the country's total power demand was 9.2 billion kWh, a rise of 1.5 per cent over the same period in 2012.

Demand is expected to reach 9.75 billion kWh this month as many companies resume operations after the Tet (Lunar New Year) holiday.

To ensure stable electricity supply, EVN plans this month to commission turbines 1 and 2 of Song Giang 2 hydropower plant; turbine 2 of Dak Ring plant; and turbines 1 and 2 of Dong Nai 2 plant.

All the turbines will have a combined capacity of around 170MW.

Last month, the first turbine of Vinh Tan 2 thermal power plant in the central province of Binh Thuan was connected to the national grid.

With a capacity of 622MW, the plant is expected to help reduce power transmission from the north to the south.

On Saturday, the EVN began construction on the Thai Binh thermal power plant with a combined design capacity of 600MW and an annual electricity of production of 3.6 billion kWh in the northern province of Thai Binh.

Covering an area of 115ha, the $1.27-billion project consists of two turbines. The first turbine is scheduled to begin generating power in 2017, and the second in 2018, according to EVN.

The Ministry of Industry and Trade said that EVN would begin construction on four other large power plants with a combined capacity of more than 2,500MW, including Vinh Tan 4 and Da Nhim. The Duyen Hai and Thac Mo hydropower plants will also be expanded.  

Checks on cattle imports tighten

The Vietnam Customs has ordered local offices to strengthen the management of imported live cattle.

It said that all live cattle arriving in the country must be checked to ensure they carried the correct paperwork, including quarantine papers.

Customs offices and teams in provinces were told to make sure that there were no cattle smuggled in from neighbouring Laos and Cambodia and that they strictly punished illegal carriers and traders.

Customs offices were also told to join hand with border guards, police, cattle quarantine offices and local authorities to achieve better results.

Dang Cong Hoan, chief of Nghe An Customs' secretariat, said that so far no provinces and cities had reported any cattle epidemics thanks to strict checks.

In some provinces, such as Nghe An and Ha Tinh in the central region, vaccinations against cattle diseases were slowly implemented due to a shortage of veterinarians, said Hoan.

Most districts arranged only one injection a year, but regulations called for two.-

Plan hoped to boost Central Highlands’ development

The Central Highlands region is set to record an average annual GDP growth rate of 7.9 percent in the 2011-2015 period and 8.7 percent in the 2016-2020 period.

The target was included in a plan issued by the Prime Minister on February 24, aiming to continue realising the Politburo’s resolution on the socio-economic development of the region in the 2011-2020 period.

According to the plan, the per capita GDP in the region will reach about 24 million VND (1,128 USD) by 2015 and 46 million VND (2,162 USD) by 2020.

Agriculture will account for 43.6 percent of the economic structure by 2015, falling to 34.7 percent by 2020. Industry and services will make up 29.2 percent and 27.2 percent by 2015, and up to 35 percent and 30.3 percent respectively by 2020.

The region is set to record an annual export growth rate of 17 percent in the 2011-2015 period and 15.5 percent in the 2016-2020 period, according to the plan.

The yearly population rise is expected to drop by about 1.5 percent by 2015 and 1.4 percent by 2020, so that the region’s total population will be 5.8 million in 2015 and about 6.4 million people in 2020, the plan points out.

The Central Highlands is aiming to decrease the level of malnutrition in children under the age of five to below 16 percent, while expanding the universalisation of secondary school education for children in about 50-60 percent of communes.

The unemployment rate in urban areas is expected to stand below 3 percent, while the number of trained workers is hoped to account for 50-55 percent of the region’s labour force, it says.

The plan also aims to raise forest coverage to about 59 percent.

The region will make full use of its advantages and strengths, boosting international integration, especially in the Vietnam-Laos-Cambodia development triangle, and strengthening the connectivity among regional localities and the rest of the country.

It will mobilise all resources for rapid and sustainable development, narrowing its socio-economic growth gap with other regions, says the plan.

In addition, regional localities will focus on developing key industries, especially agricultural and forestry product processing.

A number of rubber and coffee processing factories will be built to regional and international scale, it adds.

The plan also targets stability in political security and defence, social order and safety as well as firm solidarity among ethnic groups and the maintenance of their cultural identities.

The Central Highlands region covers the provinces of Dak Lak, Dak Nong, Lam Dong, Gia Lai and Kon Tum.-

Trans-Pacific Partnership in the eyes of domestic insiders

Trade ministers of countries involved in the Trans-Pacific Strategic Economic Partnership (TPP) Agreement are gathering in Singapore from February 22-25 to iron out disagreements, hoping to put the pact into effect later this year.

The TPP agreement, a free trade pact with high standards, is considered a model deal in the 21st century with the participation of Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US, and Vietnam.

The TPP has concluded 19 rounds of official negotiations and begun vital negotiations on opening the goods markets, rules of origin, government purchasing, state-owned enterprises, and e-commerce. Vietnam has completed negotiations with Japan and is pursuing negotiations with the Republic of Korea, radio The Voice of Vietnam (VOV) reported.

Joining the TPP will help Vietnam balance its trade relations with key markets and avoid over-dependence on a particular market. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry, said that in order to effectively take advantage of the TPP, it’s necessary to review the economy’s strength, identify investment targets, and attract foreign investment.

“The TPP will impact Vietnam’s economy and its markets. It will influence institutional reorganisations and business environment reforms. The combined impacts will create new momentum for economic growth. We can seize opportunities if we have effective internal reform at the macro level and enterprises make an effort to improve their competitiveness," Loc was quoted by VOV as saying.

Tran Quoc Khanh, Deputy Minister of Industry and Trade and head of the Government’s negotiation delegation on international economics and trade, said a visible opportunity for Vietnam from the TPP is to access the US market, the world’s biggest consumer market, at zero tariff. Besides the export benefits, Vietnamese-foreign invested service companies will enjoy a more transparent and predictable business environment when Vietnam implements its TPP commitments.

“Our biggest opportunity is to restructure our import and export markets," Khanh said. "We can open new foreign markets if the tax rate is zero percent. It will be a strong driving force for Vietnamese exports in some markets and we can get involved in regional and international production chains. TPP accession will create favorable conditions for economic and growth model reform.”

Besides positive factors, the TPP will also create pressures on market openings and the competitiveness of Vietnamese enterprises. Some agricultural, industrial, and service sectors have not caught up with development demand. There are requirements of legal revisions and human resources.

For example, the garment and textile sector will have opportunities from other TPP member countries including the US, Japan, and Australia.

Le Tien Truong, Deputy General Director of the Vietnam Garment and Textile Group, said the biggest obstacles are to meet the rules of origin and deal with the imbalanced development of the garment support industry.

"This is an opportunity to expand markets with better conditions. There are challenges including how to meet the requirements of the agreement, markets, quality, quantity, and other non-tariff issues," he said.

According to Khanh, pressure from competition is unavoidable, but Vietnam will try to control the competitive pressure under a certain roadmap. Vietnamese enterprises can overcome these difficulties because they have prepared in recent years.

Later this year, negotiations are scheduled to finish and the TPP will come into effect. TPP member countries will comprise one of the world’s biggest trade areas, making up 40 percent of the world’s gross domestic product (GDP) and one-third of the global trade revenue.-

Transport sector focuses on BOT, BT, PPP investment

The transport sector has mobilised resources to invest in Build-Operate-Transfer (BOT), Build-Transfer (BT) and Public Private Partnership (PPP) projects in various fields.

According to Le Anh Tuan, head of the TPP Department under the Ministry of Transport (MOT), the ministry has so far managed 56 projects of these kinds with a total investment of 165 trillion VND (nearly 7.82 billion USD).

Of those, 14 have been put into use, 34 others are underway and the remaining will be soon implemented, he said.

PPP invested highway projects such as Dau Giay-Phan Thiet, Ninh Binh-Thanh Hoa-Bai Vot (Ha Tinh province) and Trung Luong-My Thuan highways are facing difficulties in mobilising funds due to high costs and the need for government contributions.

Meanwhile, the air, rail and river transport sectors have yet to mobilise capital for infrastructure construction as well as have payback policies and methods.

To solve these problems, Tuan said the MOT has focused on promoting key BOT projects on the national highways 1 and 14 by accelerating the completion of procedures related to investment licence and signing of project and credit contracts.

The PPP projects will be divided into phases with the first one prioritised while BT infrastructure projects will be refunded by using land or operating other projects in combination with the local economic development, he noted.

The ministry has directed its agencies to further promote investment and provide adequate and prompt information on BOT, BT and PPP projects. The State will continue collecting road fees or selling this right to get money to refund loans.-

Association aids Vietnam-Russia business linkups

The Vietnam Business Association (VBA) has put forth a number of suggestions for Vietnamese companies operating in Russia to boost their performance during a meeting in Moscow.

At the February 22 conference reviewing the VBA’s 2013 performance and outlining this year’s tasks, the association discussed challenges facing Vietnamese enterprises in the nation this year. High on the agenda is Russia ’s reduction in import taxes following its accession to the World Trade Organisation (WTO), which will provide serious competition to businesses working inside the country.

Delegates also mentioned the depreciation of the rouble, which will potentially damage Vietnamese businesses in Russia.

Speaking at the event, Vietnamese Ambassador to Russia Pham Xuan Son praised the effective connection between the association’s chapters last year.

Thanks to its close collaboration with the Vietnamese Embassy, the VBA protected the legal rights of the Vietnamese business community in the country in the face of economic difficulties in 2013, he said.

The VBA serves as a bridge for economic, trade, tourism and investment activities between Vietnam and Russia while protecting the legitimate interests of Vietnamese businesses in the country.

VN veggie growers go hi-tech to resume exports to EU

After the door to penetrate the EU market was closed to them in 2012, some vegetable growers and exporters adapted hi-tech cultivation methods to find their way back to the lucrative market, a challenge they eventually defeated more than a year later.

In early 2012, five types of Vietnamese-grown vegetables, including basil, sweet pepper, celery, bitter gourd, and coriander failed to meet EU food hygiene and safety regulations.

The EU side announced that they would stop importing Vietnamese produce if five more batches of exports were found violating regulations.

The Plant Protection Department thus decided to temporarily suspend issuing quarantine certificates for other exports of such produce, in order to avoid having other fruit, such as blue dragon or grapefruit, added to the EU’s blacklist.

Following the suspension, the plant protection department and businesses have rushed to find a solution to resume exports as soon as possible.

Applying technology and adapting new cultivation methods was the final resolution, and the Center for Post-Entry Plant Quarantine together with two vegetable growers in Ho Chi Minh City were chosen to participate in an experimental project.

One of the selected businesses, Rong Do Co Ltd, stopped growing its produce in outdoor fields, but set up a greenhouse and equipped it with an automated drip irrigation system. It also reviewed all procedures, from selecting seeds and fertilizer to harvesting.

Company director Mai Xuan Thin admitted that the new method required its employees to work much harder compared to the traditional one.

But the result was rewarding. In mid-2013, the company exported its first batch of sweet pepper back to an EU country and passed all requirements regarding quarantine and pesticide residues.

Meanwhile, Thinh Cat Co Ltd, which used to export green produce to the EU and many other strict markets, opted for quite a different approach to return to the EU.

After consulting the Center for Post-Entry Plant Quarantine, the company invested in a one-hectare farm in the outskirt district of Cu Chi and made it into a “non-epidemic zone,” said director Dong Dang Huan.

“This was to make sure that no pests or diseases could enter our farm,” Huan said.

In mid-2013, Thinh Cat exported 300kg of basil to the EU, and received positive responses from its European partners.

Six months later, the company continued to ship its coriander, grown under the same method at its non-epidemic zone, to the EU.

The company has also managed to sign contracts on stable shipments for their European customers. It is exporting 500kg of basil, 150kg of coriander, and 50kg of sweet pepper to the EU on a weekly basis.

Proposed changes in enterprise registration certification could help improve Vietnam’s business climate.

Minister of Planning and Investment Bui Quang Vinh said under the latest draft revised Law on Enterprises, which will replace the existing legislation issued in 2005, the freedom for firms to do business would be maximised, in line with the country’s new Constitution which states that all people are entitled to freely engage in business in sectors and professions that are not banned according to the law.

Specifically, according to the draft compiled by the Ministry of Planning and Investment (MPI), the existing enterprise registration certificate would be changed to allow wider freedom for firms to pursue business opportunities.

Under the first proposal, names of business sectors and professions would no longer be included in the certificate and enterprise registration dossier.

In another proposal, the certificate would only include a list of business sectors and professions subject to conditions. The founders of the firm would have to write the sectors and professions in their enterprise registration dossier if they wanted to engage in such sectors and professions.

Currently, enterprises have to register which business sectors and professions they want to operate in. However, if they engage in other sectors and professions not banned by law without adjusting the certificate, the firm would be defined as acting illegally. Meanwhile, the constitution states that all people are entitled to freely engage in any business activity that has been legally prescribed.

“The MPI proposes that the second scheme be selected, because it is a big breakthrough in realising the right to do business as outlined in the constitution,” Minister Vinh said. “If firms want to do business in sectors and professions subject to conditions, they will have to meet certain criteria.”

Local economist Huynh Buu Son said it would be very good news for enterprises if the registration of business sectors and professions was removed. “Enterprises should be allowed to do any business not banned by the law. If this regulation comes true, enterprises would face fewer administrative procedures, which could save time and cash,” he said.

The Central Institute for Economic Management’s head Nguyen Dinh Cung, also chief author of the draft, said “Due to the current regulation, many enterprises have missed out on business opportunities because if they want to do more business, they have to have their business registration certificate amended, and this can be a long and arduous process,” .

However, Viet Steel Company’s general director Do Duy Thai said the government would need to do more to remove the burdens facing enterprises.

“Besides the removal of registration of business sectors and professions, the government needs to pursue administrative reforms and remove many other types of sub-licenses,” he said.

Bond issues to follow interest rate dip

A slew of major firms are contemplating large scale corporate bond issues in the first half of this year thanks to lower interest rates.

Vinacomin, the country’s largest mining group, plans to raise VND3 trillion ($142.8 million) via corporate bonds, a source close the deal told VIR.

Following a Ministry of Industry and Trade agreement in principle, the group is working with its advisors and awaiting its financial statement to be published to prepare for the issue.

The sale is expected to help the group partly lessen its debt repayments of VND35 trillion ($1.66 billion) which were due on June 30 last year.

Vietnam’s major food producer, the Masan group, is also preparing a large-scale corporate bond issuance worth millions of dollars. However, further details remain vague.

“The market would welcome major corporate bond issues. I think that there will be a rash of bond issues late in the first quarter or early second quarter of this year,” said Pham Xuan Anh, head of Investment Banking Department at BIDV Securities Company (BSC).

Many firms are looking to take advantage of interest rates which are at a 3-4 year record low. Specifically, the lending rate is now at only 11.5-13 per cent for the long and medium term, a significant fall on the 15-18 per cent or even higher two to three years ago.

Thanks to lower lending rates, enterprises also saw a reduction in their coupon rates. The coupon rate for Vinacomin’s bonds decreased from 14.5 per cent in late 2012 to 11 per cent per annum in the third quarter of 2013 and the margin rate also reduced slightly from 3.5-3.6 per cent to 3.3 per cent per annum.

The source close to the Masan deal also expected that if the group issued corporate bonds at this time, the coupon rate was likely to fall below the 11.5 per cent level registered in its previous issuance of VND2.2 trillion ($104 million) in the third quarter of 2013.

Many market observers predicted lending rates may fall further in the first half of this year, after the news that the inflation rate stayed at only 0.69 per cent in January, much lower than the level of 1.32 per cent during the same period last year.

“Corporate bond supply will be plentiful due to high demand for long and medium term capital among firms. This will especially be the case as interest rates are expected to stay low in the first half of 2014, we think many enterprises will seize the opportunity to borrow capital at low costs,” said Vietcombank Securities in its report.

The Finance - Banking Department under the Ministry of Finance (MoF) forecasts there will be VND30-35 trillion ($1.4-1.67 billion) in corporate bonds to be issued to the market in 2014. However, the actual figure will depend on the needs of businesses and their ability to raise capital through other channels, including shares and bank credit.

Last year, the corporate bond market boomed with VND33.6 trillion ($1.6 billion) of corporate bonds issued, VND33 trillion ($1.5 billion) more than the 2006-2010 period. The ratio of outstanding corporate bonds per GDP in 2013 hit 5.5 per cent, dramatically up on the meagre 2012 and 2011 levels of 1.95 per cent and 3.31 per cent, respectively.

Motorcycle makers fear anti-congestion rumours

Vietnam’s biggest motorcycle manufacturers have expressed concern over the threat of future policy limiting the proliferation of the vehicles in the country’s major cities.

Masayuki Igarashi, general director of Honda Vietnam, has expressed concern over the potential for government policy limiting motorcycles in Vietnam. Other issues worrying the head honcho include a lack of transparent statistics on the current number of motorcycles in the country, leading to uncertainty over the future of the world’s fourth largest motorcycle market.

According to the prime ministerial Decision 356/2013/QD-TTg issued last February, the government predicted the number of motorcycles in the country would reach 36 million units by 2020. However, latest statistics from the Ministry of Transport show that the number of registered motorcycles has already surpassed 38 million units, yet many more remain unregistered.

“We wonder whether the Vietnamese government will limit the number of motorcycles in any way, and how such a limitation could be implemented,” said a representative of Piaggio Vietnam at a meeting at the Ministry of Planning and Investment last week.

Tran Quoc Khanh, Vice Minister of Industry and Trade, at the Vietnam Business Forum (VBF) held in Hanoi last December advised motorbike makers to prepare to change their business strategies, as big cities like Hanoi and Ho Chi Minh City intend to issue measures limiting the number of motorbikes to ease transport congestion. No limitation measure in Hanoi and Ho Chi Minh City has been issued so far.

“If the local authorities limit motorcycles in big cities to ease congestion, we will have to focus on rural markets. This means pulling back on state-of-the-art products with advanced technology,” said Igarashi.

In reality, even without government policy limiting the manufacture or purchase of motorbikes in the country, the market has been in decline for the last three years.

Statistics from the five biggest manufacturers including Honda, Yamaha, Suzuki, Piaggio and VMEP Vietnam show their sales declined from 3.4 million units in 2011 to 3.11 million in 2012 and 2.79 million last year.

The downward trend of the market forced Honda, the market leader, to delay the inauguration of its third factory in the northern province of Ha Nam in 2011.

Wang Chinh Tung, general director of VMEP Vietnam, confirmed that 2014 remained a tough year for the motorcycle market and was pessimistic about sales this year.

Just last week, the five biggest motorcycle manufacturers formed the Vietnam Association of Motorcycle Manufacturers in an effort to help them influence government policy. The association expects to be able to communicate directly with Vietnamese government bodies to discuss policies related to the motorcycle market.

The experts Vietnam, Laos, the Philippines, Georgia, Tajikistan, Sri Lanka and the Netherlands gathered in Hanoi on February 24 and 25 to share their expertise to help vulnerable people to have access to microfinance.

The microfinance sector in Vietnam is still developing at a healthy pace. Not only is the sector still growing, but the microfinance institutions of Vietnam are increasingly looking for better ways to reach marginalized and poor communities.

According to Sebastian Dinjens, director of INFI, an exchange network or microfinance professional across the Asia, the sector is looking for ways to reach more clients that may be difficult to access.

“But to be able to do that, they need to professionalize more on Social Performance Management, and design their products to fit specifically with the needs of marginalized people,” said Dinjens.

Dinjens was speaking at the conference “Balance in microfinance - seeking harmony between social and financial performance” held on February 24 in Hanoi, aims to equip the development projects and microfinance institutions with Social Performance Management and seeking for the balance in their microfinance practice.

The Social Performance Management Standards respond to an industry concern that institutions have lost focus on their clients.

Most institutions claim to improve client welfare, but for the last two decades many institutions have focused more on financial sustainability than on the needs of clients. Many of these institutions are driven by financial outcomes because they only manage financial performance.

Institutions with a social purpose must also manage their social performance. By defining and promoting strong SPM, these Standards contribute to refocusing institutions on the client.

Therefore, the introduction and applying of SPM is a solution for these issues.

INFI is an exchange network for microfinance professionals across Asia. The initiative was started by international organization MCNV that has been working in development in Vietnam for 45 years.

There is a lot of experience in Vietnam and across Asia on how to reach marginalized groups more effectively. The key is to get that expertise from all over the world and use it to enrich the Vietnamese microfinance sector.

Many of the organisations in Vietnam are working with people with a low level of education, sometimes even not entirely literate.

These groups often live in rural areas where agriculture is the main market. Increasing trade with other countries is creating many opportunities, but these people lack the capital to produce on a scale that can serve the market.

Dinjens explains that what he often sees is that these people are very able to manage their finances on a small scale.

“They spend, produce and save money just like anybody, and often can create a regular income to help them survive. But what they are able to save is often not enough to invest in their own business. This is where microfinance services can help. By giving these people a loan for their business, they can invest to grow their business without too much risk. But it requires microfinance organizations to be knowledgeable about the needs of their clients, and willing to invest in the small businesses of rural Vietnamese,” he said.

Vietnam economic outlook better in 2014-15

The country’s economic picture could turn rosy this year or next if the Government continued its efforts to stabilize the macro economy and deal with structural weaknesses.

This view was shared by National Assembly deputies and economic experts at a seminar on issues and solutions for the nation’s economy in 2014, which was held in HCMC last Friday.

Tran Du Lich, deputy head of HCMC’s National Assembly deputies delegation, said, “There are factors making us believe that the economy could regain high growth, market confidence could improve and businesses could grow in a more sustainable way.”

High inflation has persistently dogged the economy over the past 5-6 years but it is now under control, he said, and the banking sector is still facing challenges but risk of a couple of poor-performing banks collapsing is almost over.

The World Bank chief economist in Vietnam, Sandeep Mahajan, said Vietnam’s medium-term economic prospects are good despite risks. The country would be able to achieve GDP growth of 5.5% next year provided the Government continues its prudent macroeconomic policy, tapers its fiscal stimulus and focuses more on economic reforms, he said.

Foreign investors’ business confidence remains stable as proven by a rise in incoming remittances from overseas Vietnamese, a steady improvement in foreign direct investment and a stable exchange rate, Lich said.

He noted fiscal policy, monetary policy and spikes in prices of public services and essential goods should be coordinated in a way that wards off inflation risk.

The deputy head of the Vietnam Institute for Economic Management, Vo Tri Thanh, said it was hard to lower interest rates further since expectational inflation still hovers around 7%, the Government will increase bond selling, and huge bad debt remains to be settled.

Thanh noted a spike in budget overspending and additional bond issues designed for raising funds for investment would help economic and export growth. “However, associated risks such as higher inflation and trade deficit are high.”

Economic expert Le Xuan Nghia informed the seminar that the central bank had settled around one-third of bad debt in the banking system and that the Government was centering on bad debt settlements in a bid to revive credit for the economy.

Net credit growth is much lower than the 12% plus which the central bank reported late last year, Nghia said.

Thanh of the Vietnam Institute for Economic Management said Vietnam could pin high hopes on the Trans-Pacific Partnership agreement between 12 countries in the Pacific Rim, the ASEAN+6 Free Trade Area agreement between  the 10 Asean members and their FTA partners, namely Australia, China, India, Japan, New Zealand and South Korea, and the FTA agreement between Vietnam and the EU.

But the Government should be consistent in policy making to stabilize the macro economy, proceed with institutional reforms and restructure the economy, he said.

New administrative center boost to Binh Duong property market

Property firms in the southern province of Binh Duong can now expect an improvement in the property market there as the provincial government has successfully relocated its administrative center to Binh Duong New City.

The 1,000-hectare Binh Duong New City is an economic, political and social center of Binh Duong Province with facilities and services serving around 125,000 residents and 400,000 migrant workers.

Hoang Anh Tuan, general director of Tac Dat Tac Vang Joint Stock Company, expects the new city to give a much-needed boost to Binh Duong’s lackluster property market.

The new city will be busier as more people will come to the administrative center for business, Tuan said. Stores and services facilities will be going up to meet demand of people there.

Property firms must be pinning high hopes on those projects located near the city center.

According to Tuan, the number of customers calling his company to ask for information about real estate projects in Binh Duong has surged over the past few days. His company on Sunday took customers to some projects in Binh Duong New City.

Tac Dat Tac Vang is offering townhouses in the Prince Town project near the city center. The project consists of some 130 houses having an area of around 100 square meters each and priced at VND4-5 billion per unit.

The firm is also distributing land lots of the ijc@vsip invested by Becamex and VSIP in Binh Duong New City. Land lots for townhouses in this 128-hectare project cost VND3.5 million per square meter. The company sold around 300 land lots in the last three months of last year.

Just in the city’s central area, the Tokyu Binh Duong Garden City project involving Tokyu of Japan and Vietnam’s Becamex IDC is under construction.

Tokyu Binh Duong Garden City covers around 110 hectares and needs a total investment of some VND25 trillion, or US$1.2 billion. Upon completion, the project will supply over 7,500 apartment units in addition to commercial center and office space for lease.

The first component of this huge project is the Sora Gardens apartment block with 404 units of 67-103 square meters each and the retail section for lease. Sora Gardens apartments are quoted at some VND21 million per square meter, or VND1.5 billion per unit.

Tokyu said it would coordinate with the provincial authorities to open a couple of bus routes connecting Binh Duong New City and neighboring areas.

Dang Thi Kim Oanh, general director of Kim Oanh Real Estate Joint Stock Company, said constructing a central administrative center in Binh Duong New City was a strategic step for the province’s socioeconomic development in the future and opened a new window of opportunity to add value to land.

At this point of time, the traffic network in Binh Duong Province is almost complete, enabling it to connect to neighboring areas like HCMC and Dong Nai Province. This helps the province attract local and foreign investments as well as residents from other places to live and work.

Compared to other provinces and cities, land prices in Binh Duong Province are quite low, with a townhouse lot costing VND200-400 million. Therefore, investors consider the province a potential market.

According to Oanh, there are more customers buying land in Binh Duong Province. The company is recruiting an additional 200 employees, taking its total to 700, to cope with a pickup in business.

Kim Oanh Real Estate has launched a sale of 100 lots in the Spring City project’s first phase in Ben Cat Town at a price starting from VND1.3 million per square meter. Besides, 100 lots of the StarLight City project, also in Ben Cat, will be offered for sale next week at a minimum of VND1.7 million.

Property firms in Binh Duong Province hope that in addition to the operation of the new administrative center, a new regulation that allows land owners to build their own houses in projects with sufficient infrastructure will help drive up the property market in the coming time.

Central bank admits higher bad debt ratio

After Moody’s recently issued a report on Vietnam’s banking sector prospects for this year, the central bank has released a new bad debt ratio which is four percentage points higher than what was announced earlier.

Last Tuesday, Moody’s put the ratio of bad debt in the banking sector at 15%. Three days later, the central bank rejected this figure in a post on its website at www.sbv.gov.vn, saying that according to banks’ reports, bad debt accounted for only 4.73% of total outstanding loans by October last year and this ratio dropped to 3.63% by the end of last year.

However, the central bank said in the same post on the web that even if those loans rescheduled in line with the central bank’s Decision 780 on debt classification were taken into account, the bad debt ratio could rise to just 9%.

Decision 780, which came into force in April 2012, specifies local banks and foreign bank branches do not have to put into the bad debt category those loans already rescheduled or extended given borrowers’ proven ability to repay.

Explaining this about-face, the central bank said, “Due to the lack of consistent standards for debt classification, different agencies and organizations can produce different bad debt figures for a single entity. This is normal.”

The general director of a joint stock bank, who requested anonymity, said the central bank’s latest move could rattle the banking market as no one could comprehend why the ratio shot up while there were no clear grounds for calculation or assessment.

“This is clear proof that we don’t know an exact ratio of bad debt. What percentage should we cope with, 9%, 4% or 3%? If we did not diagnose an illness accurately, we could not treat it no matter how hard we tried,” he said.

A deputy general director of a seafood processing firm in the Mekong Delta said his company did not rely much on lender banks under the current circumstances. In the good old days, he noted, his enterprise had business links with nine banks but the current number is only two.

HCMC leader pledges support for businesses

Chairman of the HCMC People’s Committee Le Hoang Quan has reaffirmed the city’s commitment to lending a helping hand to businesses, particularly foreign-invested enterprises, to ensure the efficiency and profitability of their operations.

This was one of the top priorities Quan mentioned at a meeting with representatives of foreign and domestic enterprises organized by the European Chamber of Commerce in Vietnam (EuroCham) in HCMC last Friday.

“HCMC will make every effort to help enterprises of all economic sectors operate efficiently so that they will contribute to the city’s development and state budget,” Quan said at the meeting with more than 70 representatives of domestic and foreign companies.

By December last year, the number of active foreign-invested projects in the city had reached over 4,920 with total registered capital of US$35.5 billion.

At the meeting held by EuroCham, Quan stressed a win-win situation for HCMC and investors. “We have responsibilities for creating favorable conditions for each other,” Quan said.

He reiterated that regulations, policies and procedures regarding investment would be implemented transparently and responsibly.

Preben Hjortlund, chairman of EuroCham, told the Daily after the meeting that a level-playing field was one of the concerns for European companies currently operating in Vietnam in addition to the issue on work permits.  

EuroCham’s Business Climate Index for the fourth quarter of 2013 showed that business confidence and outlook among European businesses in Vietnam stagnated at 50 of the 100 point scale, the same as in the second and third quarters of last year.

European members that participated in the survey remained worried about the impact of future legal changes. However, investment plans and business orders were expected to increase, which in turn positively impacted recruitment plans.

Another positive development was an expectation of less impact of inflation on business, according to the survey.

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