Business In Brief 9/3 Estates

When buying high and selling low makes sense. Twenty-three Vietnamese fish plants eligible to export to US, Malaysia imposes temporary anti-dumping duties on Vietnamese rolled steel, Experts bullish on property prospects, India hits VN with anti-dumping duty. Even though the Vinalines and Vinashin cases have ended and the guilty sentenced, the scandal continues to play out. In 2007, former Chairman of Vinalines Duong Chi Dung spent USD9m on buying a floating dock which had been removed from active service by the Russian Maritime Register of Shipping. About USD5.1m was spent on repairing the dock but it remained unfit for use.

Business In Brief 9/3

In February, Vinalines proposed to sell the dock to recoup some of the losses. However, due to it deteriorating condition and low steel prices, the dock now only worth USD1.6m. Vinalines suggested holding an auction to sell the dock as soon as possible.

There are many sayings about buying high and selling low being the description of unskilled or unlucky businesspeople. While the original purchase may have looked foolish on the surface, it can be argued it was a wise calculation because the buyers were able to embezzle state money due to the unrealistically high high price for the obsolete dock.

At the hearing for Duong Chi Dung, it was disclosed that the dock's real price at that time was only USD2m. If Dung had bought the dock at that price then even with USD2.4m of repairing and maintenance fees added to the sum, the losses would not have been too unbearable. But instead Dung wrote off USD9m just to buy the dock.

Even though Dung and his accomplices caused huge losses to the state budget, they have failed to provide anywhere near adequate compensation. Dung and his accomplices were asked to return nearly VND359bn (USD17.1m). The court also decided to seize Dung's three houses in Hanoi and former General Director Mai Van Phuc's house in Quang Ninh.

However, as of last August, only VND13.4bn have been repaid, of which Dung paid VND5.2bn, Phuc paid VND3.9bn, Tran Huu Chieu, former deputy general director of Vinalines, paid VND340m and Tran Hai Son, former director of Vinalines, paid VND4bn. This is well short of the figures involved and their assets will not cover the debt.

In 2012, the former Vinashin executive was blamed for losses of more than USD43 million, most of which came from the illegal procurement of an Italian-made high-speed passenger vessel and two electric generators. Former chairman Pham Thanh Binh was asked to repay USD23.8m and pay USD31,000 court fee but he said flat out that he did not have the money. Based on these kinds of issues and the way in which state agencies work, it's no wonder that the country has incurred rising bad debts. Hopefully cases such as those involving Vinalines and Vinashin will never happen again.

I. Increased post-Tet strikes blamed on new minimum wage

Le Dinh Quang, deputy head of the labour relationships department under Vietnam's Federation of Labour said the rising number of strikes after Tet is a result of firms avoiding higher minimum wages. On February 20, around 3,000 workers at Nissey Vietnam in HCM City took part in a strike to complain about new wage levels. The worker's wage was about VND4m (USD180) a month and VND1m in allowances, such as housing and health hazard allowances. When the government raised the minimum wage, Nissey raised its base wage by VND200,000 then deducted the same amount from the allowances.

In February, thousands workers at Pouchen Company in Dong Nai Province held a strike over a new work evaluating system which may affect allowances and bonuses. Unofficial statistics show that over 30 strikes occurred before and after the Tet Holiday, in which 20 strikes are related to minimum wages. The strikes which involve hundreds of workers often occur in HCM City, Dong Nai and Binh Duong provinces.

Le Dinh Quang, the deputy head of the labour relationships department said while in previous years, most strikes were held before Tet and over end-year bonuses, the strikes this year have occurred after Tet and the number has been on the rise. Resolution 122 stipulated that starting from January the monthly minimum wage would be increased from VND2.4m to VND3.5m, depending on regions. However, many companies didn't apply the new wages right away and some companies tried to find loopholes.

Quang said. "Unions at localities must work with businesses to deal with disputes quickly. However, there are several unions that haven't worked hard to protect their members." Quang said unions at localities should improve to better connect employees with employers during the integration process and when Vietnam was joining in free trade agreements. He also warned that enterprises should treasure their relationship with workers more. "Authorities must conduct more inspections to make enterprises abide by the law," he said.

II. Twenty-three Vietnamese fish plants eligible to export to US

The US Department of Agriculture (USDA) on March 3 announced a list of foreign catfish plants from four countries eligible to export their products to the US under the USDA inspection programme for Siluriformes fish including tra and basa fish. The list defines 23 qualified fish establishments including 19 from China, 13 from Myanmar, seven from Thailand and 23 from Vietnam.

The 23 Vietnamese plants showing the equivalence of their Siluriformes inspection system with that of the US include Workshop 3 under Vinh Hoan Corp, Workshop 2 under Vinh Hoan Corp, Bien Dong Seafood Co, Goldenquality Seafood Corp, Van Duc Tien Giang Food Export Co, Southern Fishery Industries Co, NTSF Seafoods JSC, CADOVIMEX II Freezing Factory No.1, Thuan An Production Trading and Service Co, Tan Thanh Loi Frozen Food co, Ben Tre Aquaproduct Import and Export JSC, Viet Phu Foods & Fish Corp, Asia Commerce Fisheries JSC, C.P.Vietnam Cor - Ben Tre Frozen Branch, Hung Vuong Corp, Factory 7 under An Giang Fisheries Import-Export JSC, Factory 8 under An Giang Fisheries Import-Export JSC, Frozen Factory AGF 9, Agifish Food Processing Factory, Hung Vuong Cor - Workshop II, Europe JSC, GEMPIMEX 404 Co and Vinh Hoan Corporation.

The inspection programme for Siluriformes fish took effect on March 1, 2016 and has a 18-month transitional period. By the end of the transitional period on September 1, 2017, the programme will be fully applied. During the 18-month transitional period, the USDA’s Food Safety and Inspection Service (FSIS) will re-inspect and conduct species and residue sampling on imported Siluriformes fish shipments at least quarterly at US import establishments on a random basis. After the transitional period, foreign countries seeking to continue exporting such products to the US must submit adequate documentation showing the equivalence of their Siluriformes inspection system with that of the US.

III. Malaysia imposes temporary anti-dumping duties on Vietnamese rolled steel

Malaysia’s Ministry of International Trade and Industry has announced a preliminary decision on the anti-dumping investigation regarding cold rolled steel imported from Vietnam, thus imposing dumping tax rates of 4.58-10.55% on Vietnamese steel. The information was released by the Vietnam Competition Authority under the Ministry of Industry and Trade on March 3. The investigation was initiated on August 27, 2015 into the alleged dumping of alloy and non-alloy cold rolled 0.2-2.6mm thick and 700-1300mm wide steel exported to Malaysia from Vietnam, China and the Republic of Korea (RoK).

The preliminary investigation results showed that the imports of such steel products from the three countries have caused significant damages to the Malaysian steel industry and domestic market. Therefore, Malaysia has decided to impose temporary anti-dumping duties ranging between 4.58-10.55% on Vietnamese steel, 8.32-21.64% on RoK's steel, and 23.78% on Chinese steel. One steel enterprise from the RoK and two enterprises from China were found to have escaped anti-dumping duties, thus avoiding taxes. The final decision on the case will be issued within 120 days from January 25, 2016.

IV. Demand for GM corn varieties seen good

Suppliers of genetically modified (GM) corn varieties including Syngenta and Monsanto have described demand for such varieties in Vietnam in the coming years as good given the fast expansion of the GM corn growing area in the nation. The corn acreage in Vietnam has expanded to 5,000 hectares one year after mass production of GM corn was allowed in the country.

Syngenta said after GM corn variety NK66 Bt/GT was commercialized, the company got good feedback from farmers with more than 3,000 hectares grown in the first season. Nguyen Hong Chinh, an executive at Monsanto in Vietnam, said the farming area of GM corn varieties sold by the company has neared 2,000 hectares.

According to farmers, planting GM corn helps them save VND2-4 million from the use of herbicide and pesticide. Many of them said they will grow such corn varieties in the next crop. Chinh said Vietnam will have three more corn crops this year and forecast GM corn would account for 10% of the total acreage by the end of this year.

Syngenta is optimistic that GM crop will continue developing as the Government has issued Decision No. 11 supporting an increase in the area under GM corn farming by 30-50% in 2020. The company said the expansion target is obtainable. Therefore, Syngenta and Monsanto will introduce more GM corn varieties.

According to the Department of Crop Production under the Ministry of Agriculture and Rural Development, last year’s corn farming area was estimated at 1.1 million hectares, down about 80,000 hectares year-on-year due mainly to drought. Corn output was about 5.1 million tons in 2015, down 90,000 tons compared to 2014.

GM crops, especially corn, are still a controversial issue in Vietnam. Supporters said GM corn helps farmers cut costs on herbicide and insecticide, while protesters cite issues relating to the environment and social ethics to call for people not to use GM products. The ministry said GM corn is a significant addition to material supply used to process animal feed as the current supply can only meet 50% of demand. The country has to import the remainder with 90% from Brazil and Argentina.

V. Brunei goods bound for Viet Nam

Brunei firm SAHAMADA Corporation Sdn Bhd, a local company, yesterday signed a Memorandum of Agreement with the Halal Vietnam Trading Construction Import Export Company Limited (IMEX). Mohd Nur Khalid Hj Ilias (L), Managing Director of Sahamada Corporation Sdn Bhd and Domalux, General Director of Halal Vietnam Trading Construction Import Export Company Limited after signing the Memorandum of Agreement. -  Picture: Courtesy of Abdul Rashyid Hj Osman

With the signing of the MoA, IMEX will become the distributor for Sahamada's different chili sauces and crackers under the brand of ‘CINTA' in Viet Nam for three years. In an interview with The Brunei Times, Mohd Nur Khalid Hj Ilias, Managing Director of Sahamada, said they decided to explore the opportunity of penetrating the market in Viet Nam due to the potential of a high demand for their products and a higher chance of them going into other markets from Viet Nam.

"Vietnam is growing in terms of industry and it's also easier to penetrate the market around the region. From Viet Nam, the company can bring its products to the neighbouring countries like Laos and Myanmar," he said. Sahamada will start exporting its products to Viet Nam sometime in April, starting out with one container, equivalent to 30,000 bottles of chili sauce and this supply will increase in the following months depending on market demand.

Mohd Nur Khalid said that while they plan to export to Japan in the future, they need to work on upgrading their packaging and producing more innovative products in order to compete with the market in Japan. "We're now in discussions with a company in Indonesia, we hope to be able to start exports in the near future but we're still sorting out the details. It seems like a viable market because of the population size and the food is quite similar to ours," he said.

Abdullah Abdul Rahman, Director of Syariah at IMEX said that they hope the signing of the MoA will motivate other SMEs in the country to tap the market in Viet Nam as there is a huge demand of Halal products.

"Even non-Muslims prefer Halal products now because of the cleanliness that it guarantees," he said. Signing the MoA between Sahamada and IMEX was Mohd Nur Khalid Hj Ilias, Managing Director of Sahamada and Domalux, General Director of IMEX, witnessed by Siti Norhamidah Hj Ilias, Marketing Director of Sahamada.

A second MoA was signed between Sahamada and Golden Corporation Sdn Bhd, under which Golden Corporation will supply raw materials such as blue shrimps and fish for the production of different flavours of crackers to be sold in Vietnam under the brand ‘CINTA'. The Golden Corporation was represented by Chuang His San, Managing Director and witnessed by Karen Yap.

VI. GS E&C, Kumho E&C seek major construction deal

Two major South Korean investors are looking to boost their investment portfolios in Vietnam as they seek an opportunity to build a large-scale water treatment system in the northeastern province of Quang Ninh. Nguyen Duc Tiep,  deputy head of the Quang Ninh Investment Promotion Agency’s Investment Promotion Division, told VIR that South Korea’s GS E&C and Kumho E&C had been working with the agency on constructing a major water treatment system, with the total investment capital expected to reach more than $100 million, in the province.

“GS E&C met with the agency last week, stressing that they want to start this project as soon as possible,” Tiep said. “But Kumho E&C is also co-operating with another South Korean firm, Kuhwa, in a bid to build this project. Kumho E&C has met with the local authorities on several occasions.”

The local authorities have asked GS E&C and Kumho E&C to make official investment proposals for this project in the form of either build-lease-operate-transfer or build-operate-transfer, or any kind of public-private partnership model. The potential investors can also base their proposals on the project’s construction time, as the project has been listed by the Quang Ninh People’s Committee as one which is “in critical need of construction”.

“The two investors have said that they would submit their investment proposals to provincial officials soon. Officials will then make a decision,” Tiep said. “In the case whereby the proposals are equally attractive, the province will organise a public tender to select an investor.”

This project includes many sub-projects to be built in the province’s cities of Cam Pha and Uong Bi, and Van Don district. Specifically, the project will cover two water treatment plants with a total daily capacity of 63,000 cubic metres in Cam Pha, a 52,000 cubic metre per day plant in Uong Bi, and two plants in Van Don with a total daily capacity of 61,000 cubic metres.

According to the Quang Ninh People’s Committee, upon implementing this project, the investor will be given special investment incentives, including in terms of corporate income tax. The province will also support the investor in site clearance, provision of water and electricity, and employee recruitment, as well as in the processing of administrative procedures.

In Vietnam, GS E&C has been participating in many infrastructure projects, such as Tan Son Nhat-Binh Loi expressway, Ben Thanh-Suoi Tien metro line, and several urban areas in Ho Chi Minh City. The company is also the engineering-procurement-construction contractor of Nghi Son oil refinery in the north-central province of Thanh Hoa, and LG Electronics’ manufacturing complex in the northern port city of Haiphong.

Meanwhile, Kumho E&C, a subsidiary of South Korea’s Kumho Asiana Group, has also been actively operating in Vietnam with several infrastructure projects, such as Kumho Asiana Plaza in Ho Chi Minh City. It has also constructed a number of water treatment facilities across the nation.

VII. Proposed lending changes threaten market recovery

Property experts are warning that the draft amended Circular 36 of  the State Bank of Vietnam on credit tightening could have a detrimental effect on the real estate sector, which is still undergoing a process of recovery.

The SBV’s draft proposal to tighten bank loans is an effort to curb the risk of a property bubble, however, it has been widely criticised According to this draft, loans pouring into the real estate sector are expected to be tightened so as to prevent the sector’s robust growth from turning into a real estate market bubble.

A draft document issued by the central bank (SBV) stated that the risk index of receivable lending for real estate and securities would be raised from 150 per cent (the lowest level), as stipulated in the existing Circular No.36/2014/TT-NHNN on limits and ratios to ensure safety in operation of credit institutions and foreign banks’ branches, to 250 per cent. The maximum ratio of short-term funds used for medium- and long-term loans would also be adjusted down to 40 per cent, from the current 60 per cent.

The Vietnam Real Estate Association (VREA) has warned that this draft document, if realised, could derail the smooth recovery of the real estate market. A VREA representative noted that hard lessons were learned in the past when certain adjustments negatively impacted the real estate market. These adjustments also upset investors and buyers, and created stockpiles in the market.

Pham Sy Liem, former Deputy  Minister of Construction said that the adjustment of the risk index should be carefully considered. “Some segments of real estate market such as residential, hospitality, and second-homes currently have high consumption rates. So, why should we tighten credit to these areas?”

According to Phuoc Vo, director of valuation & research at Cushman & Wakefield Vietnam, if this draft circular is approved, it would immediately have an impact on the real estate market for 2016 and subsequent years for all involved in the sector.

“On the positive side, the SBV will manage the credit flow to minimise the risk of a real estate bubble and reduce the fever of the current market, as well as preserve a healthy financial status for the market. For these reasons, only prestigious developers will be given access to financial resources,” Phuoc said.

This adjustment, Phuoc added, would unfortunately halt the majority of real estate developers (who are implementing their projects with the use of loans) due to a lack of capital flow. Therefore many projects might have to extend their schedule or more seriously – might have to halt their projects entirely. “Buyers will also face greater difficulty in obtaining loans to purchase properties.”

“The risk index should be applied differently to each segment of the real estate market, as each segment has its own level of risks,” he added. David Blackhall, managing director of real estate company VinaCapital, also argued that any restriction on bank lending to the real estate sector during 2016 would significantly slow the rate of recovery that the real estate market experiences, which has only just begun to yield returns for buyers and developers.

“If liquidity is limited, then this will hinder growth and there will be a loss of confidence in the market. Real estate investment and growth are the key factors for overall economic growth, and the real estate, construction, and construction material sectors are some of the largest employers of liquidity,” Blackhall told VIR.

Meanwhile, Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, requested that the implementation of the draft  be delayed. Chau claimed that the real estate market was currently in a healthy position with high liquidity and stable development. “The risk of a real estate bubble is unsubstantiated as yet, so we should maintain our current market condition to allow the real estate sector to continue developing,” Chau said.

To counteract speculation, which could cause a real estate bubble, the government should take effective measures such as taxation against speculative activities, financial and credit tools, and other housing development plans in order to ensure that the market remains stable, Chau added.

Banking expert Nguyen Tri Hieu, however, supported the central bank’s proposal. “I personally supported the lowering of the ratio of short-term capital used for medium- and long-term lending, at the ratio of 30 per cent as before.

“A year ago, when the SBV decided to lift the ratio from 30 to 60 per cent, I was not in agreement with it… because bank liquidity is very important. Banks that have used up to 60 per cent of their short-term capital for medium- and long-term loans may hurt their liquidity. This is very dangerous. So I think trimming down the ratio is appropriate,” Hieu added.

The Ministry of Construction’s Department of Housing and Real Estate Market Management reported that as of November 2015, outstanding loans invested in the real estate market were as high as VND375 trillion ($16.67 billion), a surge of 20 per cent compared to the same figure in December 2014. This is a result of Circular No. 36 which came into effect on February 1, 2015.

VIII. Experts bullish on property prospects

Foreign developers are looking to secure their foothold on the back of the voracious appetite seen in the local real estate market. Linson Lim, president of Keppel Land Vietnam, told VIR that with its improving economy, Vietnam was poised to be one of the best-performing countries in ASEAN over the next few years.

The country, particularly Ho Chi Minh City, continued to attract foreign direct investment capital. This, coupled with a young and dynamic population, and a growing middle-class, would continue to drive demand for quality homes and investment-grade offices.

“Thus we remain confident in the long-term growth potential of Vietnam’s property market, which is one of our key growth markets, with a focus on Ho Chi Minh City, covering upper-middle to high-end residential and integrated mixed-use developments,” Lim said.

In tandem with the strategy to further expand its commercial portfolio, Keppel Land has advanced with the development of Saigon Centre phase 2 to meet the demand for prime office and retail space in Ho Chi Minh City.

According to Lim, when fully completed, Saigon Centre phase 2 will comprise 40,000 square metres of premium Grade A office space, seven levels of 50,000sq.m in retail space, and about 200 units of luxury serviced apartments. The retail mall is fully committed and is scheduled to open in the third quarter of 2016. Construction works for Saigon Centre Phase 2 office tower is also progressing on track.

In addition, the sales for Keppel Land’s projects, Estella Heights phases 1 and 2 and Riviera Point, have been encouraging. The company sold about 930 units in 2015, more than five times the 164 units sold in 2014. He went on to state that the positive take-up of its homes reflected homebuyers’ and investors’ confidence in the Vietnamese economy and in the developments’ strong attributes and value offerings, as well as in Kepple Land’s products. The company was confident that they would continue to see healthy demand and were planning to launch the next phase of Riviera Point in District 7 and South Rach Chiec in District 2 later this year.

Another developer, Sapphire, has a strong project pipeline and is actively seeking well-located, medium- to large-scale projects for office, industrial, residential apartments and houses, as well as mixed-use developments in Vietnam. The group is willing to acquire land or form joint ventures with land owners. Together with established investor relationships, Sapphire is supported by Sakkara Group in Australia, whose global experience spans 86 projects valued at more than $2.5 billion since 1997.

Since the beginning of the real estate market’s strong recovery a year and a half ago, Sapphire has launched the first of its prestigious villas at HOLM – a residential community in Thao Dien area in Ho Chi Minh Cit, and has also commenced selling units in the second phase of Sanctuary Resort, a luxury beachfront residential community in Ho Tram in the southern province of Ba Ria-Vung Tau.

Recently Sapphire has divested its minority shareholding in both Refico Real Estate Group and in the City Garden Apartments joint venture. “As our business grows, we recognise that when we are a meaningful shareholder and are able to manage the project, the outcome is better,” said Sapphire joint managing director David Bedingfield.

Meanwhile, VinaCapital continues to capitalise on the upswing in the property market by selling off the last of its remaining units in Danang-based projects The Point and Azura. In addition, they are launching a new 381-villa project in Saigon South called Nine South Estates.

IX. Cracking down on cross-ownership of banks

Commercial banks are actively reducing cross-ownership in other credit institutions by selling cross owned stakes or restricting the buying of stakes in accordance with the State Bank of Vietnam's circular No.36 on safe ratios in operations of credit institutions. According to the circular issued in late 2014, commercial banks owning shares in more than two credit institutions must have carried out disinvestment to abide by the rules before February 1, 2016. It also regulates that a commercial bank can only hold shares in no more than two credit institutions except its subsidiaries. In addition, the circular limits a bank's holdings at 5% of a credit institution's stakes, except for special cases.

There remain several commercial banks under pressure of disinvestment to obey the regulations on ownership limits including Vietcombank, Eximbank, Southernbank, Saigonbank, and MaritimeBank among others. Maritime Bank sold 64.2 million shares in Military Bank to Dragon Capital on February 19, 2016 to earn nearly VND1 trillion (US$45 million), reducing its ownership in Military Bank to 4.96% instead of 8.97% , congruent with the rules on ownership limits.

Maritime Bank invested in Military Bank shares at a rate of 8.86% since 2011. At the same time, it owned a 10.16% stake in Mekong Bank and an 11% stake in the Textile Finance Company. The mergers of Mekong Bank with Maritime Bank addressed cross-ownership issues at the banks. Meanwhile, Eximbank owned a 9.6% stake in Sacombank and the rate was reduced to 8.76% in late 2015. The bank will continue to carry out disinvestment in Sacombank to lower its ownership to below 5%.

After more than a year implementing the circular No.36, many banks are now in breach of the Central Bank's rule and have yet to disinvest as regulated. Vietcombank is an example, which is holding stakes in four banks and a financial company. Vietcombank is holding more than a 9.6% stake in Military Bank; 8.24% stake in Eximbank; 5.07% stake in Orient Commercial Joint Stock Bank (OCB); 8% stake in Saigonbank and 10.9% stake in Cement Finance JSC.

The stagnant disinvestment was attributed to the bleak stock market, declining prices of banking shares, high non-performing loans and high provisions, resulting in heavy losses if carrying out divestment. The ownership cap of 5% was set to restrict large shareholders, cross-ownership and the manipulation of bank operations. However, it has been shown that bank shareholders can break the ownership rules by transferring their stakes to other organisations or individuals to ensure the ownership rate under 5% for their benefits. Whether bank stakes are being sold transparently or not has been a question raised during the disinvestment process.

State Bank Deputy Governor, Nguyen Phuoc Thanh said that the State Bank would crack down on cross-ownership in the future, advising weak banks to seek partners to carry out mergers to erase cross-ownership.

X. Liquidity rises in banking system

Liquidity in the banking system has improved over the past two weeks as residents and businesses have deposited more money at banks. Banks said they have attracted more corporate and individual depositors after the nine-day Lunar New Year holiday (Tet). This is why their liquidity has been rated as good after the nation’s longest holiday, which ended on February 14.

As a result, open market operations (OMO) were seen quiet last week as a few banks borrowed via this channel. The State Bank of Vietnam (SBV) did not inject money into the system via OMO but some VND48.28 trillion (US$2.15 billion) fell due, leaving a net withdrawn amount of VND48.02 trillion, the highest in months.

The central bank did not issue treasury bills in the past 11 weeks. Interest rates for Vietnam dong loans of different tenors continued dropping sharply on the interbank market after Tet. Last week saw the rate of overnight credit dipping to 1.79% per annum, one-week tenor to 2.27% per annum and two-week tenor to 2.69% per year, falling by 1% each against the week earlier.

To tap into good liquidity in the banking system, the State Treasury issued large volumes of three-year, five-year and 15-year Government bonds. Notably, all G-bonds offered for sale were snapped up. Money dealers said such good liquidity at banks is a supporting factor for the issuance of G-bonds to raise capital for the State budget in the next few weeks. Lenders registered to acquire large volumes of bonds last week so bond yields are expected to inch down 0.1 percentage point for all tenors next week.

On the secondary bond market, bond yields of all tenors contracted slightly last week. According to Bao Viet Securities Company, the respective coupons of one-year, two-year, three-year and five-year bonds declined to 4.864% per year, 5.143% per year, 5.583% per year and 6.365% per year. Seven-year, 10-year and 15-year bonds carried coupons of 6.858% per annum, 7.108% per annum and 7.7% per annum respectively.

XI. Jan-Feb capital mobilization in city up 18% y-o-y

* Total capital mobilized by banks in HCMC exceeded VND1,579 trillion (US$70.5 billion) in the first two months of this year, up nearly 18% year-on-year, according to the HCMC government.

A report on the city’s socio-economic performance in January-February released by the city government on February 29 showed that deposits in the Vietnam dong at banks increased and accounted for 85% of the total.

Total outstanding loans in HCMC had amounted to VND1,247 trillion by end-February, up 15.44% from a year earlier. Of the amount, medium- and long-term outstanding loans made up 57.5% and short-term credit the remainder.

The city government said short-term outstanding loans for the five priority sectors of agriculture and rural development, export goods production, small- and medium-sized enterprises (SMEs), supporting industries and high-tech enterprises had totaled VND144 trillion in the year to February, with SMEs accounting for 60%.

In the next three months, the city government will draw up programs to support local businesses to boost production and deal with difficulties, and improve the investment environment to attract more domestic and foreign investors.

The city government will find solutions to do away with red tape to back enterprises, organizations and investors in the city.

XII. HCM City seen kicking off breakthrough programs in July

The HCMC government plans to start implementing seven breakthrough programs in July to boost growth, heard a meeting of the Office of the HCMC People’s Committee on February 29. Vo Van Hoan, head of the office, told the meeting that departments and agencies in the city have prepared the action plans for the programs, which are expected to be approved no later than the end of March.

Earlier, deputies of the 10th meeting of the city’s Party Congress for the 2015-2020 tenure approved the seven breakthrough programs for human resource development, administrative reform, growth quality, competitiveness improvement, traffic congestion and flooding control, and cityscape rehabilitation.

The programs will benefit local residents and businesses as they will deal with pressing issues like flooding, traffic congestion, seawater intrusion, air pollution and bureaucracy. Hoan said HCMC’s leaders will meet domestic enterprises and join a meeting with foreign firms in March to discuss supporting measures for them. He noted that businesses could make proposals to remove specific hindrances and the city will find solutions to cope with firms’ difficulties.    

Departments and agencies in HCMC will have to meet to find ways to improve the competitiveness of retail enterprises given Vietnam’s signing more free trade agreements. Hoan said if the city’s retail sector is not strong, foreign companies will gain a bigger market share and this will leave negative impact on domestic enterprises. In March, the city will find ways to expand the retail system here and in other provinces, and consider purchasing some projects of retail businesses based in the city.  

Hoan said the city’s consumer price index (CPI) was up 0.05% in February versus the previous month, much lower than the country’s average of 0.46%. February saw HCMC’s industrial manufacturing index falling by 27% month-on-month as firms suspended operation for the week-long Lunar New Year holiday (Tet). In the first two months of this year, the index edged up 5.7% against the same period of 2015. Enterprises resumed operation and have stable production plans in the coming months. The city’s total retail sales of goods and services in February were estimated at VND56.2 trillion (US$2.5 billion), down 13.2% against January but up 10.5% year-on-year.

XIII. Pepper prices decline sharply

Pepper prices plunged to around VND150,000 per kilogram on February 29 from nearly VND200,000 in September last year due to more supply on the domestic market. The director of a major pepper exporting firm said the price has dropped quickly after Vietnamese authorities announced that the pepper growing area has reached almost 100,000 hectares, two times higher than zoned and well above the acreage previously forecast by the Vietnam Pepper Association (VPA).

He noted when Vietnam only had 50,000 hectares of pepper, Vietnam’s pepper output accounted for 30% of global output and up to 50% of total pepper volume traded on global markets. With 100,000 hectares of pepper and average yield of 2.6 tons per hectare, experts calculate that Vietnam can produce at least 200,000 tons. This piles pressure on prices on global markets.

Another reason, according to the director, is that Spain has recently warned that Vietnamese black pepper contains a higher-than-permitted residue of Carbendazim fungicide. Although this European country has taken measures to control it, instead of suspending its import, this is a reason for importers to force Vietnamese exporters to reduce prices.

Do Ha Nam, chairman of the Vietnam Pepper Association (VPA), told the Daily that local pepper growers usually store the commodity when prices fall to prevent further drops. Farmers and enterprises will sell it when it is profitable. Nam said pepper growers have earned much in the past years thanks to high prices, so they are not under pressure to sell the product when the price falls.

Pepper prices started to increase strongly from the second half of 2010 to VND80,000 per kilogram in October of 2010 and VND200,000 in September last year. As a result, pepper export revenue shot up from US$419 million in 2010 to US$1.26 billion last year.

XIV. New rule for goods sales through mobile apps

Organizations and individuals selling products and services online through mobile apps will have to register with the Ministry of Industry and Trade from the end of March, according to the ministry’s Circular No. 59/2015/TT-BCT.

Mobile apps are those installed on mobile gadgets like smartphones and tablets, and allow users to access the database of merchants, organizations and individuals to buy and sell goods, supply or use services. Mobile apps include those involving e-commerce services.

The circular on management of e-commerce through mobile apps regulates that enterprises owning mobile apps with features similar to online sales will have to send their notifications to the Ministry of Industry and Trade.

At the same time, enterprises managing e-commerce apps will have to register as e-commerce platforms. The ministry applies the online form of notice or mobile apps registration so that businesses can register once for each version of sales mobile apps or apps offering various e-commerce services.

Some e-commerce firms said the method for notification and registration of e-commerce mobile apps is virtually similar to those applicable to e-commerce websites, e-marketplaces, auction and promotion websites operating through the portal of e-commerce operations management ( of the industry-trade ministry.

However, companies must clarify which types of information their mobile apps collect (customer name, address and bank account) and ensure safety information relating to business secrets of traders, organizations, individuals and personal information of consumers.

The circular specifies owners of sales apps must be responsible for notifying consumers which kind of information these apps will collect when installed on a mobile device, and at the same time they have to remove information about banned goods and services from the apps in accordance with the prevailing regulations.

Registration of mobile apps set up and operating before the circular takes effect is required within 60 days from the date the circular comes into force. Therefore, businesses in the industry will have to complete registration with the ministry by the end of May. The list of registered mobile apps will be published on the website after firms get certification from the Ministry of Industry and Trade.

XV. Fewer Cambodians visit Vietnam

The number of tourists from Cambodia, one of Vietnam’s top 10 source markets, declined sharply in the second month of this year as shown by data of the Vietnam National Administration of Tourism (VNAT). In February, Cambodian arrivals numbered fewer 10,000, dropping 71.5% year-on-year. Overall, the number of visitors from the neighboring country totaled 23,000 in the January-February period, down 64% from the same period last year.

In 2011, 423,440 Cambodians traveled to Vietnam, rising by 66.3% against the previous year. However, the number has dipped sharply since 2012. Most Cambodians come to Vietnam in their own trips through Moc Bai border gate in Tay Ninh Province. According to some travel firms in HCMC, some of them travel to Vietnam for medical treatment.

In recent years, more travel firms have dropped tours for Cambodian visitors due to low profit, and price undercutting. Lack of Cambodian-speaking tour guides, tourism promotion programs and tourism products is also to blame. On the contrary, more Vietnamese have traveled to Cambodia in recent years. Vietnam is one of the top markets for Cambodia with more than one million visitors a year.

Also according to VNAT, except for the strong fall in Cambodian visitors, February saw good growth in many other markets. For instance, Chinese arrivals rose by 72.6% year-on-year to 219,000, Korean visitors over 33.9% to more than 142,000, Taiwanese tourists by 29.5% to 52,000, and Japanese travelers by 11.4% to 59,000.

In all, Vietnam welcomed around 834,000 foreign visitors last month, up 20% from a year earlier. The number in the first two months of this year was more than 1.63 million, a year-on-year increase of 16%.

XVI. Relaxing tra fish decree faces difficulties

The Government last year gave the green light for relaxing some requirements in Decree 36 on tra fish to support enterprises, but experts said revising the decree is facing difficulties due to the strict U.S. Farm Bill. Last September, the Government approved amendments to Decree 36/2014/ND-CP on tra fish farming, processing and exporting, and assigned the Ministry of Agriculture and Rural Development to make the revision based on comments of ministries, agencies and those directly impacted by the decree.

In a document issued last September, the Government agreed to consider the replacement of the rule on maximum water content and ice-to-fish ratio with enterprises providing information about product ingredients and quality. Earlier, the agriculture ministry proposed the Government maintain such a rule, which sets the water content and ice-to-fish ratio at no more than 83% and 10% respectively, but lengthen the road map for implementation.

In particular, the respective highest ice-to-fish and water ratios of 20% and 86% will be applied until December 31, 2018 and the 10% and 83% will be introduced from 2019. The deadline for tra fish farming sites to apply and be certified VietGAP standards is also expected to be delayed from December 31, 2015 until December 31, 2016. In addition, the agriculture ministry proposed loosening some export requirements.

That the Government agreed to revise Decree 36 is regarded as a positive move to help enterprises overcome difficulties. However, some said the drafting of a new decree to supplement or replace Decree 36 would not be as simple as thought because the U.S. Farm Bill contains stricter requirements than Decree 36.

A source who wanted to remain anonymous told the Daily that if the tra fish decree is amended, Vietnam would loosen its quality standards while the Farm Bill does otherwise. As a result, Vietnam should stop revising Decree 36 to avoid trouble and promote the quality of Vietnam’s tra fish, he said.

However, Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP) said there is no relation between the amendments of the decree and the Farm Bill. Vietnam is still striving to meet requirements of the Farm Bill. According to Hoe, the agriculture ministry is working to increase the quality of tra fish and request a road map extension to improve the decree.

XVII. Transport ministry’s nod sought for hospital equitization

The Health Department under the Ministry of Transport has proposed the ministry’s leaders approve an equitization plan for Nam Thang Long general hospital in Hanoi’s Bac Tu Liem District. As of June 30 last year, the district-level hospital had had a book value of VND22.5 billion (over US$1 million) but its value after assessment was put at VND29.5 billion, including VND11.8 billion held by the State.

According to the equitization plan, the hospital will sell part of its State capital and issue shares to increase its chartered capital. After equitization, the hospital’s chartered capital will rise to VND30 billion. The State will hold a 30% stake while another 17.3% will be sold to staff at preferential prices and the remainder to strategic shareholders or auctioned.

In specifics, 780,000 shares will be sold to strategic shareholders, making up 26% of chartered capital, and 799,000 shares (26.6%) will be offered for sale through an public auction at the starting price of VND10,000 per share.

As such, investors can become strategic shareholders of Nam Thang Long hospital and buy more shares of the hospital at the auction to increase their ownership. The real value of Nam Thang Long is not high but as the hospital is a district-level hospital and opening a new hospital at this level requires the investor to spend big and meet a series of strict conditions, the health department has set conditions for the equitization of the hospital.

Accordingly, enterprises wanting to invest in the hospital must operate in the healthcare sector and run a business having the same scale as Nam Thang Long, which has 120 beds. Besides, the investors should have equity of at least VND50 billion, post a rise of at least 10% in pretax profit, and had not incurred losses by the end of last year.

In case the investors do not operate in the healthcare sector, they would be required to have equity of no less than VND200 billion and gain pretax profit growth of at least 10%. So far, four enterprises have registered to buy shares of the hospital, including Him Lam Co Ltd.

In October last year, the transport ministry sold 70% of shares at Vietnam Central Transportation Hospital at VND26,000 per share at auction. The remaining 30% was acquired by strategic shareholder T&T Group at half the price at auction.

XVIII. India hits VN with anti-dumping duty

India has decided to impose anti-dumping duties on plastics processing machines, or injection moulding machines, imported from Viet Nam, Taiwan, Malaysia and the Philippines. The Viet Nam Competition Authority said on February 29 that the decision was made by India's Directorate General of Anti-Dumping and Allied Duties (DGAD) after finding that they were being sold low cost machines. Viet Nam will be levied duties at 23.15 per cent, while Malaysia, the Philippines and Taiwan will be taxed at 44.74 per cent, 30.85 per cent and 27.98 per cent, respectively.

DGAD said they did not receive detailed answers for their questions from exporters in Viet Nam, the Philippines and Malaysia. Therefore, they used available data to identify violation levels for the businesses. There were two Taiwan-based manufacturers who enjoyed a favourable tariff from 0 per cent to 6.06 per cent for submitting complete financial information to prove their cases.

DGAD's investigation was conducted from April 2013 to March 2014 after it received complaints from the Plastics Machinery Manufacturers Association of India, saying that the mentioned countries and territories had exported low cost plastic processing machines to India, causing considerable damage to the Indian industrial sector. The damage to India's domestic machinery industry due to dumped imports from Asian manufacturers was counted in the period between 2010 and 2014.

XIX. ADB, SHB, HDBank sign TFP deal

Asian Development Bank (ADB), HCM City Development Bank (HDBank), and Sai Gon-Ha Noi Commercial Joint Stock Bank (SHB), signed mutually beneficial agreements yesterday. These agreements enable the trade finance programme (TFP) to provide guarantees of up to US$100 million per year. The beneficiaries are exporting and importing companies, including small and medium-sized enterprises in the country, Steven Beck, ADB's head of trade finance, said at the signing ceremony held in Ha Noi. "The agreements will help increase economic growth and create jobs," Beck said.

HDBank Chairwoman Le Thi Bang Tam said joining the ADB's TFP programme was part of her bank's determined effort to improve its financial management capacity and service quality. "This is a golden opportunity for HDBank to expand its business into the world market," Tam said. TFP's loans and guarantees will be complemented by workshops and seminars to increase knowledge and expertise on trade finance, resulting in more support for export and import companies in Viet Nam.

Previously, ADB had signed onto the programme with nine other Vietnamese banks, including Military Joint Stock Bank, Viet Nam Export Import Commercial Joint Bank and Sai Gon Thuong Tin Commercial Joint Stock Bank. ADB's TFP has been operating in Viet Nam since 2009. The programme has conducted more than 4,300 transactions and supported $6.5 billion in trade in the country.

Across Southeast Asia, the TFP has supported more than 6,000 small and medium-sized enterprises since 2009, through some 10,000 transactions valued at over $20 billion in sectors ranging from commodities and capital goods to medical supplies and consumer goods. HDBank has more than 20 years of experience in the banking sector and has total assets worth more than VND100 trillion ($4.47 billion), with 220 offices nationwide. SHB had total assets worth VND205 trillion as of December 31, with 7,000 employees in Viet Nam, Laos and Cambodia.

XX. VN-Korea FTA support centre opens

The Korea Trade-Investment Promotion Agency (KOTRA) inaugurated the Viet Nam-Korea Free Trade Agreement (VKFTA) Support Centre in Ha Noi yesterday. The centre aims at disseminating areas related to the FTA as well as supporting businesses of the two countries to make use of the FTA, which came into effect on December 20, 2015, to boost commercial transaction and investment.

The VKFTA covers many areas including certificate of origin, trade protection, hygiene and food safety, and plant quarantine, apart from technical barriers to trade and service, investment, intellectual property, competition and other legal issues. The centre will consult and provide accurate and detailed information on FTA for businesses and help them solve difficulties related to non-tariff barrier and granting of certificate of origin.

Speaking at the opening ceremony, Deputy Minister of Industry and Trade Do Thang Hai said VKFTA had opened opportunities to embrace economic co-operation and investment in the two countries. In the last 10 years, trade turnover between Viet Nam and South Korea reached an average growth rate of 23 per cent per year. In 2015, South Korea continued to be one of the three biggest trade partners of Viet Nam with a bilateral trade turnover of US$34.3 billion, more than 29 per cent higher than that of 2014.

The South Korea mostly shipped to Viet Nam computers, electronic products and accessories, equipment and machines, and various kinds of fabric. Meanwhile, Viet Nam's main export products to South Korea are garment and textile products, crude oil, and seafood, and wood and wooden furniture.

Kim Jae Hong, KOTRA president said the centre would help companies from the two nations apply the VKFTA with flexibility and bolster their exports to China, the United States and the European Union. Vice Chairman of the Viet Nam Chamber of Commerce and Industry (VCCI) Hoang Quang Phong said South Korea had advantage in technology, investment capital, production process and modern management experience.

He said the centre would be a reliable and useful address for businesses of the two countries during the co-operation and business development process. The centre can co-ordinate with the VCCI's WTO and Integration Centre to build programmes and solutions to give best support to businesses of the two countries, Hai said.

At the ceremony, KOTRA and the Viet Nam Directorate for Standards, Metrology and Quality inked a Memorandum of Understanding to simplify administration procedures that Korean companies have to go through when exporting to Viet Nam. The Korean side also agreed to transfer technology in safety evaluation to Viet Nam.


Business In Brief 9/3 Estates

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