BUSINESS IN BRIEF 19/5

BUSINESS IN BRIEF 19/5

BUSINESS IN BRIEF 19/5

Vietnam Motor Show 2013 will take place at Saigon Exhibition & Convention Center (SECC) in HCMC’s District 7 from October 23 to 27, 2013, with the participation of 14 auto brands, said the Vietnam Automobile Manufacturer’s Association (VAMA).
Vietnam Motor Show 2013 will take place at Saigon Exhibition & Convention Center (SECC) in HCMC’s District 7 from October 23 to 27, 2013, with the participation of 14 auto brands, said the Vietnam Automobile Manufacturer’s Association (VAMA).

VAMA members including Ford, GM, Hino, Honda, Mercedes-Benz, Suzuki, Toyota and Vinastar will showcase products at the event, alongside imported brands such as Audi, BMW, Land Rover, Nissan, Lexus and Renault, according to the organizers.

A wide range of products and services in the supporting industry, banking, and insurance will reach consumers at the exhibition.

This year, the exhibition continues to attract the participation of the most prestigious automobile brands available in Vietnam, which promises to bring consumers various choices.

Vietnam Motor Show 2013 is the much-expected automobile event of the year, introducing to customers the products and latest technologies in the automobile industry.

Market for children’s goods, services exceeds US$5 bil./year

The market for goods as well as education and entertainment services for children in Vietnam is estimated to reach around US$5.2 billion a year, according to research findings by Nkind Trading Service Co.

According to Thomas J. Ngo, general director of Nkind, Vietnam currently has around 20.8 million children aged up to 12. The goods and services market for children is quite huge but has yet to be fully tapped.

He said the market for children was divided into three main groups, with the first two for education and healthcare and the last for all products produced for children.

Among these, the last group reaches US$3.1 billion per year, with milk and nutritious food products accounting for up to US$1.2 billion, other products such as clothes, diapers and hats around US$1.1 billion and entertainment services US$700 million.

Parents spend an average of around VND800,000 per month on products and services for a child. Meanwhile, the average spending recorded in HCMC almost doubles the country’s average with VND1.4 million per month.

Vinacomin stands firm on bauxite projects

Vietnam Coal and Mineral Industries Group (Vinacomin) on Thursday stressed its determination to continue Nhan Co and Tan Rai bauxite mining projects in the Central Highlands, saying that the projects would fetch profits in long term despite much concern on their economic efficiency.

Speaking at a press briefing in Hanoi on Thursday, Nguyen Tien Chinh, head of the Department of Science and Technology of Vinacomin, said that the investor has calculated all possible costs. Besides, economic efficiency of the projects has been estimated in the 30-year outlook.

Chinh said that the group’s latest review confirms that the Tan Rai and Nhan Co project will see capital returns in the next 12 and 13 years respectively, adding that Vincomin will bear all responsibility before the Party and the State if the two projects fail to bring socio-economic benefits.

However, Chinh admitted that the projects will suffer losses in the first three to five years due to depreciation, loan interest payments, economic slowdown and low sale prices at the start. The projects will then turn profitable given higher alumina prices in the coming time.

Over the past years, the two bauxite projects have drawn much criticism due to concerns on their adverse environmental and economic impacts. The total investment for the Tan Rai project in Lam Dong Province has jumped from VND11.3 trillion to over VND14.9 trillion while that for Nhan Co in Dak Nong Province has increased from VND11.6 trillion to VND16 trillion.

Chinh said Vinacomin has signed principle alumina consumption contracts with Japan’s Marubeni and China’s Yunnan Alumina. Chinh declined to tell about sale prices, saying that announcement of sale prices at the moment will cause disadvantages in negotiations with customers.

More staff recruited by realty brokerage firms

Regardless of the current woes faced by the real estate market, many realty brokerage firms are racing to recruit more staff to expand operations and deploy new business plans to approach customers and market products more effectively.

Since early this year, several property brokerage companies have focused on recruiting employees to execute new business plans.

For instance, Kim Oanh Real Estate Joint Stock Company has employed 150 more staff, taking its personnel to 550 persons. Similarly, Hung Thinh Real Estate Trading Floor Joint Stock Company (Hung Thinh Land) already raised its work force to 400 when recruiting an additional 150 people.

These businesses fared well with multiple low-cost condo and land lot projects last year and they are actively opening more branches and trading floors in major cities like Hanoi, Danang, Dong Nai and Nha Trang.

Following the same move, Phuc Khang Real Estate Joint Stock Company (PhucKhang Land), a subsidiary of Phuc Khang Investment and Construction Corporation, also joins the race to hire more employees. The firm organized an employment fair to seek 250 workers who are mainly sales executives for its trading floors. Finally, around 120 candidates were selected for the firm’s training and probation out of nearly 300 applications at the event.

Despite lower labor demand, a number of other realty brokerage enterprises are also present in the employment race, with Ocean Land trading floor in need of 30 more sales staff and Thang Long Real Estate Joint Stock Company 30 more.

In fact, a survey at companies posting recruitment demand shows that salaries, bonuses and commissions of the property industry remain almost unchanged from a couple of years ago. However, these entities offer higher commissions while setting stricter employment requirements, targeting those with wealthy experiences in the industries of property, automobile, banking or insurance.

MVCorp cancels music download fee deal

MV Joint Stock Corporation (MVCorp) has cancelled the contract it signed with the Recording Industry Association of Vietnam (RIAV) to collect online music download fees in a bid to protect music copyright.

Truong Thi Thu Dung, vice chairwoman of RIAV, on Monday confirmed that the contract has been cancelled after MVCorp presented various reasons for its decision.

“After liquidating the contract with MVCorp, RIAV is seeking qualified partners to join its online music download fee collection bid,” Dung said.

Earlier, RIAV picked MVCorp as its only partner to manage song copyright on music websites in the past three years. MVCorp had cut deals with popular websites such as Zing.vn, Nhaccuatui.com, Nhacvui.com, Socbay and Nghenhac to collect download fees at VND1,000 each song.

Phung Tien Cong, deputy general director of MVCorp, has also confirmed its withdrawal from this project but refused to give reasons.

Speaking at a seminar, MVCorp once complained that fee collection was very difficult because user awareness is still low and online payment in the country remained underdeveloped.

Despite MVCorp’s withdrawal, other digital music service providers such as Zing and Nhaccuatui said that this will not influence their scheme. Fee collection will keep moving on and they will work with RIAV instead of MVCorp like before.

RIAV said that the local recording industry has incurred heavy losses due to free music downloads. Disc production of the association has slumped over 80% in the past five years, preventing producers from investing in new music projects.

Qualcomm advises Vietnam to soon advance to 4G

Vietnam should get prepared for the fourth generation (4G) mobile network since the 3G bandwidth is now under a great pressure, said Qualcomm.

The demand for connection between mobile devices is surging in line with smartphone and tablet boom, posing a big challenge for Vietnam’s 3G infrastructure and service quality, said Trieu Phuong Nam, general director of Qualcomm in Indochina.

In 2020, the volume of data transmitted around the world would be 1,000 times larger than the current figure, Qualcomm forecast. Therefore, wider network coverage will be needed to ensure 3G service quality when users are traveling around the world.

This exerts an enormous pressure on mobile network operators, including those in Vietnam, and requires them to optimize their infrastructure and improve their bandwidth to satisfy the greater demand.

“To improve 3G service quality and meet the strong demand for data transmission in the future, network operators should think about 4G,” said Nam.

It is not too soon to mention 4G now. The problem is how mobile network operators fully utilize 3G and successfully deploy 4G, according to Qualcomm.

In addition, investment is an important issue. To lure subscribers, 4G service quality must be really good.

Recently, Nielsen in collaboration with Buu Dien newspaper has conducted a survey on 3G users in Hanoi, HCMC and Danang.

Some 60% of the surveyed say they use 3G services every day, up 18 percentage points compared to the 2011 survey. Up to 90% use 3G as a tool for Internet connection anytime and anywhere.

Despite a rapid increase in the number of 3G subscribers, customers’ satisfaction with 3G services declines to 64 points on a 100-point scale in 2012 from 71 points in 2011. This is ascribed to the decreasing data transmission speed and unsatisfying service packages.

Fecon Mining debuts on HOSE

Fecon Mining Joint Stock Company on Wednesday floated 26.8 million shares on the Hochiminh Stock Exchange (HOSE) at the reference price of VND24,000 each.

Ha The Long, chairman of Fecon Mining, said that listing on HOSE will help the enterprise mobilize capital to expand its business to mining, supplying of pre-stressed concrete piles, sand and stone for big projects such as Thai Binh thermal power plant, Formosa steel complex and Nghi Son petrochemical project.

This year, the enterprise targets to obtain VND850 billion in revenues, 3.2 times higher than 2012, and VND94 billion in after-tax profits.

Long said Fecon Mining has plans to become the leading pre-stressed concrete pile supplier in the country.

Established in 2007, the enterprise has a charter capital of VND268 billion. Earlier, it has supplied pre-stressed concrete piles for Nghi Son 1 thermal power plant, Honda 3 factory, Dung Quat oil refining plant and Haiphong Port.

BTMU completes payment for VietinBank shares

The Bank of Tokyo Mitsubishi UFJ (BTMU) last Friday completed payment of US$734 million, or nearly VND15.5 trillion, to acquire a 19.73% stake in Vietnam Bank for Industry and Trade (VietinBank).

BTMU bought more than 644 million shares from VietinBank at VND24,000 per share. Thus, it officially becomes a strategic partner of VietinBank and gains two seats in the board of directors of the Vietnamese State-run bank.

The transaction between VietinBank and its Japanese partner is considered the largest stake transfer deal in the history of Vietnam’s banking sector. Following the completion of this transaction, VietinBank’s charter capital increases to over VND32.6 trillion and its equity capital rises to some VND49 trillion, the highest numbers in the banking system.

As per the plan revealed at the 2013 shareholders’ meeting, VietinBank will issue more shares to BTMU and other shareholders to spur its charter capital and equity capital to around VND37.2 trillion and VND52 trillion respectively within this year. The bank aims for VND80 trillion in equity capital by 2015.

With technical support from BTMU, VietinBank will be able to improve its financial capacity and enhance safety and operational efficiency. When the agreement on comprehensive cooperation in commercial banking, investment banking and retail banking is realized, VietinBank can boost its capacity for governance, risk management, product development, technology innovation and human resource development.

In mid-April, a senior leadership delegation led by VietinBank chairman went to Japan for a meeting with senior leaders of MUFG, the parent company of BTMU. At the meeting, the two sides discussed ways to realize their agreements on strategic partnership and technical support and sought chances for further cooperation.

Many Japanese companies currently investing in Vietnam are clients of BTMU and the number of such firms is forecast to grow quickly in the coming time. VietinBank and BTMU will have a great chance to attract this group of clients.

The partnership with VietinBank is part of BTMU’s strategy for expanding its operations in Asia. The Japanese bank wants to provide financial services in potential markets like Vietnam and assist Japanese businesses currently operating in Vietnam.

Following the deal with BTMU, VietinBank’s ownership structure significantly changes. The central bank remains the dominant shareholder with a stake of 64.46%, followed by two foreign partners, BTMU and IFC, holding respective stakes of 19.73% and 8.03%. Other shareholders hold a combined 7.78% stake.

Views differ over financial supervision role

The national financial system is in trouble but an upgrade of the National Financial Supervisory Commission (NFSC) intended to cope with this is deadlocked.

State officials, deputies of the National Assembly (NA) and economists were split over NFSC while they were meeting at a seminar themed “Vietnam’s Financial Supervision Architecture: An Overview and Recommendations” held in Hanoi on Thursday.

The financial market has undergone big changes over the last five years. Now, many risks beyond control have emerged, according to NFSC.

For example, rising bad debt and property inventory have delivered a blow to the banking system, while banks have been venturing in a variety of sectors without due supervision.

MFSC vice chairman Ha Huy Tuan said: “Cash is coming in and out of the financial market, and it is hard to track the flow to see if it is safe for consumers.”

Five different agencies are currently in charge of financial supervision. They are NFSC, the Bank Supervision and Inspection Agency under the State Bank of Vietnam, the Supervision and Enforcement Department of the State Securities Commission, the Insurance Supervisory Authority of the Ministry of Finance, and Deposit Insurance of Vietnam.

Daniel Zuberbuhler, senior financial consultant of KPMG, suggested merging NFSC with the four other agencies. Many countries did something similar during the global economic crisis in 2008, he said.

Nguyen Dai Lai, a financial-banking expert, said that since NFSC was seen as an advisory and consultancy agency, it does not have the right to issue a rule.

Sharing this view, To Ngoc Hung, director of the Banking Academy, said NFSC should be turned into a State agency responsible for financial supervision.

However, State officials did not agree with these experts.

Nguyen Huu Nghia, head of the Bank Supervision and Inspection Agency, said: “Prudence is needed. No one can tell for sure that the consolidated supervision framework is a step Vietnam should take.”

The banking system is not only to blame for bad debt, he said, adding enterprises and the economy as a while have been mismanaged.

Bui Duc Thu, member of the NA Finance and Budget Committee, deemed it impossible to merge all financial supervisory agencies into one to boost its power. The current legal system does not allow this, he noted.

Echoing this view, President Le Xuan Ba of the Central Institute for Economic Management said such a merger could never take place in Vietnam. “Who would be strong enough to take over the right of supervision from the central bank and the finance ministry?” he questioned.

Economist Le Dang Doanh said the financial-banking system was facing a stressful situation, yet the supervisory agencies had not made any specific move.

“A fast car must have good brakes, but Vietnam is running too fast while there isn’t any brake, and even if there was, the driver did not want to put the brakes on it,” he said.

NFSC Chairman Vu Viet Ngoan did not give a conclusion on the arguments. Still, he admitted the financial market had been running wild and the economy had felt the impact of that in the past five years.

Earlier, at a conference to review the five-year performance of NFSC held in January, Deputy Prime Minister Vu Van Ninh said the financial-banking system had witnessed unexpected volatility. He asked NFSC to enhance supervision of the local financial-banking system.

He remarked the model of the State Bank of Vietnam is like no other because the governor is a member of the Government. The State Bank of Vietnam performs the functions of both a central bank and a State management agency.

VN Air launches daily HCMC-Thanh Hoa services

Vietnam Airlines Corporation (VNA) has launched daily air services between HCMC and the north-central province of Thanh Hoa, instead of five flights a week as before, according to an executive of the national flag carrier.

Given rising travel demand between Thanh Hoa and HCMC, Vietnam Airlines has decided to run daily flights between the localities. The flights depart from HCMC at 11a.m. and from Thanh Hoa at 1:50p.m, taking one hour and fifty minutes each.

The air carrier offers many promotions for the route, including allowing first customers to buy air tickets at good prices from VND800,000 to VND1.35 million each until March 31, 2014 or launching the “buy one get two” program.

The HCMC-Thanh Hoa link before had only five flights a week using 184-seat Airbus A321 airplanes on Monday, Wednesday, Friday, Saturday and Sunday. However, as the number of passengers traveling between the localities is surging, the airline has increased the flight frequency earlier than the initial schedule slated for July 1.

The government of Thanh Hoa Province in the meantime has petitioned VNA to open new routes connecting the province with Danang and the Central Highlands region.

VNA has used Airbus A321 airplanes for the flights between HCMC and Thanh Hoa since Tho Xuan Airport was put into service on February, 2013. The average seat occupancy on the route has been over 85% over the last three months.

More borrowers accessing VND30-trillion package

The VND30-trillion home loan package will be available for more borrowers, as per a draft circular on conditions for borrowing loans to purchase low-cost condos in response to the Government’s Resolution 02.

Not only those in need of renting low-cost apartments or commercial homes converted into low-cost condos, but those wanting to buy such homes will also be able to access the preferential credit package, said Nguyen Viet Manh, director of the Credit Department under the central bank.

In addition, the estimated interest rate of 6% per annum will be the highest level during the ten-year lending term. If the market lending rates drop sharply, the preferential rate could be lowered, said Manh.

Such a lending rate is reasonable, he remarked, because it is 50% less than the current market rates, hovering around 11-14%. The lending term is also extended, giving borrowers more time for repayment.

He said the draft circular was quickly revised after Resolution 48 had been released.

The resolution requires the central bank to join hands with the Ministry of Construction to draw up guidelines and implement the preferential credit policy for those in need of low-cost condos. Moreover, they are asked to ease lending conditions and give credit access to a wider range of borrowers.

In accordance with Resolution 02, low-interest loans will also be provided to those wanting to buy commercial homes of less than 70 square meters each, which are priced below VND15 million per square meter.

Low-cost homes are available for civil servants, workers at industrial parks and low-income households in urban areas, who are not subject to personal income tax or are living in housing with less than five square meters per person.

While commercial home owners can freely sell their homes, low-cost home owners cannot. Owners of low-cost condos are not allowed to transfer their homes within ten years from the date of purchase contract signing, and they can only sell homes to the State or other people who are also eligible for low-cost homes.

HCM City eyes more JICA support

The HCMC government expects to receive more backing from the Japan International Cooperation Agency (JICA) for infrastructure projects after it supported the city’s East-West Highway and water improvement projects.

At a meeting at City Hall with Tsuno Motonori, chief representative of JICA in Vietnam, who said goodbye as he has finished his four-year office term in Vietnam, HCMC chairman Le Hoang Quan proposed JICA consider assisting the city in improving Doi, Te, Tan Hoa-Lo Gom and Tham Luong-Ben Cat canals.

Chairman Quan on Tuesday granted the city’s badge to Motonori to recognize his great contribution during his tenure in Vietnam.

Contractors pledges to complete expressways by year-end

Several contractors have just signed letters of commitment with the Ministry of Transport to complete three expressway projects late this year after these projects have fallen behind schedule for years.

According to the management unit of HCMC-Long Thanh-Dau Giay Expressway, after three years of construction, the project’s package 1A has been finished while the implementation of other packages is still underway.

Under the commitment signed by the project’s contractors, the HCMC-Long Thanh section will open to traffic late this year while the entire expressway 55 kilometers long and running through HCMC and Dong Nai Province will be finished late next year.

At the signing ceremony, Mai Tuan Anh, general director of Vietnam Expressway Corporation (VEC), said that the remaining workload was huge. To ensure the implementation progress, the contractors has to make greater efforts to cover the workload falling behind schedule, he added.

The HCMC-Long Thanh-Dau Giay Expressway has total investment of VND20.6 trillion sourced from official development assistance (ODA) loans.

This expressway section is an important part of the north-south expressway. Besides, it connects localities in the southern key economic zone, shortens the route from HCMC to Dong Nai and Ba Ria-Vung Tau provinces and facilitates the goods transport to Cai Mep-Thi Vai port complex.

Early this month, contractors of Noi Bai-Lao Cai Expressway have also committed to finish the project late this month with the transport ministry. Currently, some 60% of the project’s eight main packages have been completed.

After several times of directly supervising the project, Transport Minister Dinh La Thang said the ministry would not give any extension for the project’s completion deadline.

According to VEC, although the Noi Bai-Lao Cai Expressway project is still facing many problems, the road will open to traffic by December 31 as many difficulties have been removed.

The Noi Bai-Lao Cai Expressway going through Vinh Phuc, Phu Tho, Yen Bai, Lao Cai provinces and Hanoi City will be 245 kilometers in length in the first phase. The project costs an investment of nearly VND20 trillion. After completion, the time needed to run from Hanoi to Lao Cai will be reduced to three hours only instead of some eight hours now.

In addition, the Hanoi-Thai Nguyen Expressway’s contractors have pledged to finish 30 among its 61.3 kilometers next month. The project worth VND10 trillion is funded by Japan’s ODA loans.

In related news, the Danang-Quang Ngai Expressway project will officially be kicked off this Sunday, according to the ministry.

Having a length of 139 kilometers, the expressway starting from Danang’s Hoa Vang District and ending in Quang Ngai Province’s Quang Ngai City will have six lanes and a designed speed of 120 kilometers per hour.

The project costs nearly VND28 trillion sourced from the World Bank, the Japan International Cooperation Agency (JICA) and the State budget.

Vietnam, Russia partner for railway construction

Vietnamese companies will join hands with a Russian partner to develop a railway running from Binh Phuoc to Ba Ria-Vung Tau to facilitate transport of minerals and agro-forestry products.

An agreement on this partnership was signed this Tuesday between Vietnam Railways Corporation, An Vien Group and Russian Railways Joint Stock Company at the office of Russian Prime Minister under the witness of the prime ministers of the two countries.

Involved parties will conduct study and make report on the 170-km railway from Binh Phuoc to Ba Ria-Vung Tau, and consider building an 80-km section linking Binh Phuoc with Dak Nong. This project will make it easier for transport of minerals and agro-forestry products from Binh Phuoc to the seaports in Ba Ria-Vung Tau and transport of fuels, materials and consumer goods to the Central Highlands.

Earlier, Vietnam Railways Corporation and An Vien Group received nod from the Prime Minister to conceive a railway project running from Binh Phuoc to Ba Ria-Vung Tau. The two firms decided to invite Russian Railways Joint Stock Company to join the project.

Cat Lai Overpass not yet accepted due to defects

Cat Lai Overpass has not officially been accepted yet because some defects are still being remedied, although the State Appraisal and Acceptance Council has permitted it to open to traffic.

Since many traffic accidents involving container trucks have occurred on Cat Lai Overpass in HCMC’s District 2, the Urban Traffic Management Unit 2 under the HCMC Department of Transport stated the details of the overpass had not met the design.

For example, the HCMC Management Board of Urban Traffic Project Construction has found that the roughness of the overpass surface has not satisfied the requirement.

The Urban Traffic Management Unit 2 suggested replacing the 3-cm asphalt layer with a polymer concrete layer of the same thickness. In addition, plastic stakes currently used to divide traffic lanes should be replaced by solar-powered reflective nails.

The total cost of adopting this suggestion is VND1.7 billion, which will be sourced from the municipal fund for urgent traffic works.

In addition, the Urban Traffic Management Unit 2 suggested spending VND70 million testing an adjusted plan for vehicular speed. This test plan will be deployed within this month.

There are also several other suggestions, such as installation of a vehicle speed tracking camera system on the overpass.

Transport export Pham Sanh ascribed the recent traffic accidents on Cat Lai Overpass to design errors. The curved overpass is too steep, he told the Daily.

Cat Lai Overpass is designed with two auto lanes for vehicles to transport from Rach Chieu Bridge to Cat Lai Port. The first lane is 4-5.1 meters wide designed for cars, passenger buses and trucks under 3.5 tons, while heavy trucks have to travel on the second lane that is four meters wide.

Eight traffic accidents involving container trucks have occurred since Cat Lai Overpass was put into use. Perhaps, these vehicles have traveled at a higher speed than allowed (30 kilometers per hour), said the management unit.

Cashew products head to U.S. stores

Processed cashew nut products will be sold directly to supermarkets in the U.S. in the near future, marking the first time local cashew brands are on the shelves of American retailers.

Dang Hoang Giang, general secretary of the Vietnam Cashew Association (Vinacas), said U.S. giant retailer Kroger would buy 100 containers of cashew nuts, salt roasted cashew or bee honey soaked cashew from Vietnamese suppliers for distribution at its supermarkets and retail stores stateside annually.

As Vietnamese firms have mainly exported unprocessed cashews to the U.S., the export of local processed cashew products with more added value stateside is expected to make the country’s brands popular among American consumers, Giang said.

Vietnam exports at least 150,000 tons of cashew products to the U.S., China and Europe annually but most products are raw materials only, while processed cashew products of local companies have been struggling to enter supermarkets in foreign markets.

Vietnam, Russia aim for US$7 billion two-way trade

Prime Minister Nguyen Tan Dung and his Russian counterpart Dmitry Medvedev on Monday discussed workable measures to raise the two-way trade to US$7 billion by 2015.

On his official visit to Russia, Prime Minister Dung had a meeting with the Russian Prime Minister on Monday. The two leaders signed a number of agreements with an aim of improving the strategic partnership in politics, national security and defense, economics and trade, education and trading, among others.

In addition, they discussed ways to boost cooperation in nuclear energy and further operations of Russian oil and gas firms on Vietnam’s continental shelf, consistent with the United Nations Convention on the Law of the Sea.

The two-way trade between Vietnam and Russia totaled US$3.6 billion in 2012, up 20% against 2011. In the first three months of 2013, the two-way trade reached US$734 million, in which Vietnam exported nearly US$418 million and import US$216 million worth of products from Russia, according to the Ministry of Foreign Affairs.

The two countries set a target for a two-way trade turnover of US$7 billion by 2015.

Currently, Vietnam is carrying out 16 projects with total investment of over US$1.7 billion in Russia. Meanwhile, Russia has 93 projects worth more than US$2.07 billion in Vietnam.

Speaking on Russian online newspaper Inforos, Pham Xuan Son, Vietnam’s Ambassador to Russia, said Vietnam is in talks with the Customs Union grouping Russia, Belarus and Kazakhstan over a free trade agreement (FTA), covering eight important areas, from trade, investment to workforce shifting and intellectual property.

“The negotiators are striving to conclude the agreement in late 2014,” said Son.

Prime Minister Nguyen Tan Dung arrived in Moscow, Russia this Sunday and met with officials of the Vietnamese Embassy in Russia and Vietnamese businessmen and people in Russia.

On Monday, he paid a visit to Kaliningrad Oblast, where the first 636 Kilo submarine of Vietnam is being tested. The prime minister sent his encouragement to the crew and examined the progress of submarine testing.

The submarine is the first of the six Kilo-class submarines to be manufactured under a contract signed during the official visit of Prime Minister Dung to Russia in 2009, according to the Government web portal chinhphu.vn.

FDI sector continues robust export growth

Regardless of economic difficulties, foreign investment enterprises (FIEs) have constantly posted strong export growth, with year-on-year growth of 31.1% in 2012 and 21.1% in the first quarter this year, according to the Import-Export Department under the Ministry of Industry and Trade.

At a meeting with FIEs in Hanoi on Tuesday, Tran Thanh Hai, deputy director of the Import-Export Department, said export value of the foreign direct investment (FDI) sector, exclusive of crude oil export, amounted to US$64 billion in 2012, rising 33.8% year-on-year and representing 55.9% of the country’s total exports or roughly US$115 billion. In January-March, the FDI sector’s export revenue accounted for 57.9% of the total, which is put at 64.2% if crude oil export is taken into account.

Some 2,840 FIEs reported export value of US$1 million or above in 2012, a pickup of 30% year-on-year. Notably, Samsung Electronics Co. Ltd alone achieved year-on-year export growth of 77.8% to US$10.9 billion last year.

FDI companies have played a major role in the nation’s exports, especially in the export processing industry with the highest rate of 75% and the fastest growth in the structure of export items.

Many products exported by FIEs have posted the highest growth of that total, including computers, electronic products and components and mobile phones with 95% and machinery, equipment and spare parts with 91%. Items where FDI companies have pocketed big export revenue are mobile phones and components with around US$12.3 billion, apparel items with US$9 billion and computers and components with US$7.5 billion.

It is obvious that FIEs have imported considerably for exports with such huge value. In 2012, the FDI sector imported nearly US$60 billion, jumping 22.7% year-on-year, resulting in a trade surplus of US$4.1 billion by the sector in all of 2012, making a trade surplus of US$781 million for the country.

FIEs contributed as much as 20% to total investment capital at home and paid up to US$3.7 billion to the State budget via taxes and other financial obligations last year.

The FDI sector has still contributed the most to the nation’s trade surplus when marking a trade surplus of up to US$1.8 billion in the first quarter, taking the national trade surplus to US$278 million in the period, the industry ministry reports.

BR-VT builds industrial zone to attract Japan tenants

Dong A-Chau Duc Joint Stock Company obtained a license on Wednesday to develop infrastructure for Da Bac Industrial Zone in Ba Ria-Vung Tau (BR-VT) Province and also began construction of the project that targets Japanese investors.

According to the investment plan, the zone’s cleared land and workshops will be ready for Japanese investor in this year’s fourth quarter. Da Bac IZ covers 75 hectares in Chau Duc District.

This is the first industrial zone in BR-VT that targets Japanese investments. Vung Tau City has also called for investments from enterprises in Japan’s Kawasaki City into this industrial zone.

Da Bac IZ is part of the province’s plan of developing specialized industrial parks and industrial zones for supporting industries, focusing on attracting Japanese investors.

According to this plan, another IP project for supporting industries is Phu My 3 Industrial Park invested by Thanh Binh Phu My Joint Stock Company and covering a total area of 999 hectares.

Located in Tan Thanh District, Phu My 3 Industrial Park will consist of four functional areas for supporting industries, heavy industries, port and housing. The park will have 120 hectares of cleared land ready for investors in the fourth quarter.

BR-VT has signed a memorandum of understanding on cooperation with Kawasaki City and another memorandum on opening a representative office in Japan to promote investment into the province’s supporting industries.

The sectors which are in need of investments are metalworking, mechanical processing, plastic component production, electrical and electronic components and software for other industries.

Last year, the province held several conferences and made promotion trips to introduce its investment potential to Japanese investors. There have been 14 groups of enterprises from Japan visiting and studying business conditions in the province.

The implementation of the plan of building specialized industrial parks started last year after the plan received approval from the provincial government, and Japanese investors are regarded as strategic partners, according to the provincial Department of Planning and Investment.

With the development plan for supporting industries, BR-VT is under preparation for making itself the country’s center for supporting industries. Supporting industries are expected to help BR-VT integrate more effectively and develop faster in the coming years.

According to statistics of the department, BR-VT has granted investment licenses to 323 industrial projects having total registered capital of over US$17.7 billion, 99 of which are in supporting industries and worth a combined US$1.7 billion.

Japanese investors keen on service sector

A group of Japanese enterprises operating in the service sector on Tuesday met Vietnamese firms to sound out investment and business opportunities.

At the gathering held by the Vietnam Chamber of Commerce and Industry (VCCI) and the Japan External Trade Organization (JETRO), Japanese service enterprises expressed an interest in cooperating with Vietnamese companies.

According to Japanese firms, which are involved in the fields of hotel, education, wholesale, retail, beauty care, fitness and catering, Vietnam is still an attractive destination thanks to its abundant human resources and income, regardless of current economic difficulties.

Shinichi Muramoto, board chairman of Muramoto Suisan, a firm specializing in catering service and seafood processing, told the Daily that he chose Vietnam to expand business as Japan’s population is aging.

“We will firstly focus on those with high incomes and then shift to medium and low-income earners for two to five years after that,” Muramoto said.

Education is an attractive field to Japanese enterprises as well.

A representative from the education service company I-Cube said that I-Cube would hire Vietnamese laborers to accelerate the adaptation process of the company in the Vietnamese market.

Japan is a huge investor in Vietnam but mainly in the manufacturing and processing sectors. Therefore, Japanese enterprises are now looking to Vietnam’s service sector.

Two urgent tasks to rescue economy

Two urgent tasks were given in the report on socioeconomic performance in January-April delivered at the 18th meeting of the Standing Committee of the National Assembly (NA) on Tuesday in a bid to prop up the economy.

First, disbursement of investment funds from the State budget must be accelerated to stimulate aggregate demand for the economy.

The national asset management company should be established soon. Prices of the items subject to the State management should be adjusted reasonably.

Funds for capital construction, especially those from the State budget, government bonds and ODA, must be disbursed at a faster speed.

Secondly, all-out efforts must be made to promote production and boost demand without causing macro-economic instability and inflation.

Corporate income tax should be lowered to 20-22% and value-added tax should be reduced in a definite time, according to the Government web portal.

In the first four months, economic growth was 4.89%, which was higher than this time last year; inflation was well restrained and the market was quite stable. However, the economy struggled with bad debts and the frozen real estate market.

If the above problems are not resolved, it will be difficult to obtain a GDP growth of 5.5% as targeted by the NA, said Minister of Planning and Investment Bui Quang Vinh.

Vice State President Nguyen Thi Doan remarked that credit flow was stagnant and enterprises could not access loans for business development. This bottleneck should be removed as soon as possible, she said.

Meanwhile, NA Vice Chairwoman Nguyen Thi Kim Ngan said businesses did not really want to borrow loans in the context of high inventory and poor consumption. The consumer price index has been falling, indicating very weak purchasing power, she noted.

Vietnam’s medium-term GDP grows 6.5%: Ernst & Young

Ernst & Young, a global assurance, tax and advisory services firm, has forecast Vietnam’s average gross domestic product will grow at least 6.5% between 2013 and 2016.

“With the growing internal marketing boosting FDI, tourism and agricultural exports helping to finance industrial upgrades, and new power plants ending the perennial energy shortages, GDP growth of at least 6.5% remains sustainable in the medium term,” Ernst & Young said in its latest Rapid-Growth Markets (RGM) Forecast.    

Ernst & Young Vietnam released the report on Wednesday in collaboration with Oxford Economics to meet the need for practical and accessible economic forecasts and insights into the development of 25 rapid-growth countries around the globe.

According to the report, Vietnam’s economy grew 5% last year. This rate is slightly lower than the 5.03% that the Government confirmed at a meeting of the Standing Committee of the National Assembly in Hanoi on Tuesday, and this was the lowest GDP rate since 2000.

The Ernst & Young RGM Forecast contains projections for Vietnam’s real GDP growth at 6.9% next year, 7.1% in 2015 and 6.6% in 2016. The country’s economy is projected to expand by 5.5% for this year due to a slew of macroeconomic problems.

The country’s inflation is put at 7.7% this year, before going down to 6.4% next year, 4.8% in 2015 and 4.5% in 2016.

“Last year’s inflation slowdown will enable monetary and fiscal relaxation in 2013. This should lift (GDP) growth from about 5% last year toward the 6.5%-7% target range by 2014,” the report said.

Vietnam saw the consumer price index last year increase by 6.81% compared to late 2011, which was lower than the Government’s target of around 7%. Again, this number was more than two percentage points lower than the calculation in the report.

Ernst & Young warned of the risk for a high inflation comeback if the Government opted to promote exports by depreciating the local currency. Therefore, the dong is forecast to be devalued to just over 21,402 against a U.S. dollar this year from 20,858.9 last year.   

But, the report noted that “the requirement to service foreign debt and the import needs of industry will keep monetary policy focus on currency stability.” This matches the International Monetary Fund’s projection for exchange rate stability for Vietnam dong against the greenback.

Outstanding debts and their impact are also the concerns raised in the Ernst & Young RGM Forecast.

“… an overhang of bad debt will hold back the pickup in private sector credit, tilting the recovery toward public sector investment and sharply reducing export growth. The consequent return to current account deficit in 2014 will leave growth more dependent on the recovery of inward investment,” the report said.

Ernst & Young assumed that inward investment would revive fast to finance the re-opening current account deficit in 2015. “But to attract investors, the Government must upgrade infrastructure and skills to promote higher-tech industry, as textile and basic assembly FDI shifts toward lower-cost neighbors,” the report said.

In a review of the RGM Forecast, Ernst & Young pointed out more impact of the yen depreciation on the Asian RGMs having close trade links with Japan. In fact, Vietnamese firms are feeling the impact, as made-in-Vietnam goods have become more expensive and less competitive when they are shipped to the major export market of Vietnam.

Ernst & Young also quoted Oxford Economics as projecting that Vietnam’s nominal GDP would expand from US$139.2 billion last year to US$154.2 billion this year, US$170.7 next year, US$187.3 billion in 2015 and US$204.9 billion in 2016. The country’s GDP per capita would increase from US$1,552.6 last year to US$1,702.1, US$1,865.2, US$2,025.9 and US$2,197.8 in those years respectively.

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