BUSINESS IN BRIEF 12/4
Deal pushes forward Vietnam – Italy entrepreneurship
The Association of Vietnamese Entrepreneurs in Italy (ASSOEVI) and the Italy –Vietnam Chamber of Commerce (CCIV) signed a cooperation agreement in the northern Italian city of Milan on April 8.
The deal was inked by ASSOEVI Chairman Pham Van Hong and CCIV representative Fulvio Albano, under which both sides will serve as a bridge for Vietnamese and Italian firms via information update, legal assistance and market survey.
At the signing ceremony, member of the European Parliament (EP) and head of the delegation of the Italian Democratic Party’s parliamentarians at the EP Patrizia Toia said Vietnam is a potential market and an increase in the visits by high-ranking Italian leaders recently reflects the country’s interest in Vietnam.
She also pledged to push joint work with ASEAN in general and Vietnam in particular.
Vietnamese Ambassador to Italy Cao Chinh Thien said Vietnamese and Italian governments identified economic cooperation as a pillar in bilateral ties, and hoped that Italy will offer practical assistance to the two countries’ businesses in the foreseeable future.
Last year, two-way trade between Vietnam and Italy hit 4.3 billion USD. Vietnam is currently Italy’s largest trade partner in ASEAN.
March automobile sales hike 112 percent
Vietnam’s automobile sales in March shot up 112 percent from the previous month, amounting to some 24,802 units, the Vietnam Automobile Manufacturers’ Association (VAMA) announced on April 8.
In the month, the number of passenger cars sold revved up 105 percent against February to 13,246 vehicles. Commercial cars increased 100 percent to 9,206 units and special-purpose cars sales expanded 249 percent to 2,350 units.
Nearly 20,000 domestically-assembled cars rolled out from outlets and showrooms over the month, 116 percent higher than February. Meanwhile, the industry recorded a 94 percent rise in the purchase of imported cars with 4,807 units.
According to the VAMA, the Truong Hai Automobile Joint Stock Company took the lead in automobile sales in the month with 10,366 sold units, followed by Toyota Motor Vietnam with 4,693 units and Ford Vietnam with 2,392 units.
In the first quarter of the year, automobile turnover stood at 59,685 cars, rising 23 percent from the same period last year. The sales of passenger cars, commercial cars and special-purpose cars soared 6 percent, 55 percent and 57 percent.
Vietnam calls for India’s increased connectivity with ASEAN
Vietnamese Ambassador to India Ton Sinh Thanh has called for accelerating overland, railway, waterway and airway connectivity between northeast India and ASEAN countries as well as facilitating Indian trade with its neighbouring countries.
He made the call during a conference on bilateral economic connectivity, the first of its kind, held in Imphal, the capital of the northeastern Indian state of Manipur on April 7-9.
Thanh spoke highly of northeast India’s potential in oil and gas, hydropower, biodiversity and workforce quality, and affirmed that Vietnam welcomes and always backs India’s Act East policy.
He said if more incentives are made available, the region will draw more direct investment at home and abroad, including those from ASEAN and Vietnam in particular. It is considered India’s gateway to ASEAN.
During the 13th ASEAN – India Summit in Kuala Lumpur last November, Indian Prime Minister Narendra Modi announced a 1 billion USD line of credit to support physical and digital connectivity with ASEAN.
The Indian government recently embarked on several connectivity improvement projects, including the Kaladan multi-modal transit transport and the India-Myanmar-Thailand expressway.
On the occasion, Ambassador Thanh and his ASEAN counterparts toured the India-Myanmar border gate, where the Friendship Bridge connecting India’s Moreh and Myanmar’s Tamu is located.
Italian firms learn about Vietnam’s market potential
Italy will benefit most from the EU-Vietnam free trade agreement (EVFTA), former Italian Prime Minister Enrico Letta commented at a seminar held recently in the northern Italian city of Milan.
He suggested Italian firms change their business approach by not only focusing on manufacture in Vietnam for export to Europe but also gearing towards consumption in the country.
Sharing the same view, President of the Lombardy Industrial Federation (Assolombarda) Gianfelice Rocca said the EVFTA will bring many benefits to Italian businesses in both Vietnamese and ASEAN markets.
Meanwhile, member of the EU negotiating delegation Raffaele Petriccione said the agreement is a new-generation deal which offers more comprehensive terms with a higher degree of liberalisation in comparison to the World Trade Organisation deal.
Apart from building necessary legal frameworks for trade and investment, Italian companies should travel more to Vietnam to learn more about the market and their partners, he said.
Vietnamese Ambassador to Italy Cao Chinh Thien, for his part, said Vietnam is hailed as an attractive business destination and a trustworthy trade partner, which will make it easier for Vietnamese and Italian firms to do business.
In an interview granted to Vietnam News Agency, former Italian PM Enrico Letta praised Vietnam as a promising market on the back of its political stability, young population, abundant and quality workforce, which present a good chance for Vietnamese and Italian entrepreneurs to forge partnerships.
The seminar attracted over 50 leading companies from northwestern Italy.
Argentine firms take interest in Vietnamese market
FECOBA – the federation of commerce and industry of Buenos Aires and Argentina’s confederation of enterprises CAME recently organised a workshop on trade opportunities with Vietnam in Argentina.
The workshop, themed “Vietnam – a strategic nation”, gathered businessmen from the host country as well as Colombia, Peru and Uruguay.
Speaking at the event, economic expert Guillermo Perez Cena stressed trade between Vietnam and Argentina has gained momentum in recent years. Argentina is one of the three Latin American countries (together with Mexico and Brazil) with trade value with Vietnam exceeding 1 billion USD.
In 2015, two-way trade hit more than 2.5 billion USD, up 34 percent from 2014.
Cena talked about Vietnam’s economic growth and integration progress, noting that this is a potential market for Argentine exporters of animal feed, vegetable oil, wine, grain, meat, fruit, pasteurised milk and medicine.
Argentina can import various commodities from Vietnam, particularly footwear, rice, garment-textile, coffee, rubber, pottery, plastic and woodwork products, he added.
Representatives from the Vietnam Embassy in Argentina informed attendants of Vietnam’s over-6.7-percent average growth rate in more than two decades and the country’s preferential policies for foreign investors.
They also answered several questions related to Vietnam-Argentina ties and visa application procedures.
Canadian exporters eye pork market in Vietnam
Canada, the world’s third largest pork exporter, is seeking to expand its market in Vietnam, where a growing middle class has driven demand for meat products.
“Vietnam holds tremendous promise for Canadian products, including seafood, grains, oilseeds, fruits, vegetables and meats like pork,” said Richard Bale, Consul General of Canada in Ho Chi Minh City.
He was speaking at a seminar in Ho Chi Minh City on April 8 held for Canadian pork exporters to explore opportunities in Vietnam.
The total value of Canadian products exported to Vietnam has increased about 20% annually over the past five years, he said.
“The middle class in Vietnam is expanding more quickly,” he said. “Their taste has become more sophisticated. Besides, there have been concerns around food safety and quality in the market.”
Cesar Urias, director of market access and government programs management at Canada Pork International, said that 70% of meat consumed in Vietnam is pork.
“The Trans-Pacific Partnership offers chances for exporters and options for consumers,” he said.
Canada produced more than 2 million tons of pork last year and hogs are raised and slaughtered under strict management systems to ensure safe and best quality, he said.
Canada-Vietnam trade relations have been expanding strongly in recent years. In 2015, exports of Canadian agri-food and seafood products to Vietnam reached C$353.6 million dollars (US$270,200), accounting for over 54% of all Canadian exports to Vietnam.
Vietnam to export mangoes to Australia
Australian agencies are finalizing procedures to allow Vietnamese exporters to ship mangoes into the market, said a source from the Vietnam Business Association.
Relevant agencies and companies have carried out market research and other activities to connect Vietnamese exporters with Australian buyers, the source told Thanh Nien.
Vietnamese mangoes are expected to sell well in the “difficult market,” the source said.
According to the business association in Australia, the Vietnamese-Australian community is now supplying around 30% of tropical fruit and vegetables to Australian consumers.
However, fruit exports directly from Vietnam have not been able to make inroads into the market. So far Australia has only licensed the imports of lychees.
According to customs, the total value of Vietnam’s fruit and vegetables exports last year was US$2.2 billion, up 47% over the previous year.
Garment industry training funded
The Government has offered financial support to the Việt Nam National Textile and Garment Group (Vinatex) for training the labour force in the textile and garment industry this year.
The funds worth of VNĐ63.5 billion (US$2.9 million) would come from the State budget for education and training activities, reported the Đầu tư (Investment) online. Former Prime Minister Nguyễn Tấn Dũng has asked Vinatex to manage and use the funds under the existing regulations.
That action was initiated under a development strategy for Việt Nam’s textile and garment industry by 2015 and forward to 2020, approved by the former prime minister in 2008.
Under the strategy, the Ministry of Finance is co-operating with the Ministry of Industry and Trade to build financial mechanisms and policies on supporting the implementation of programmes on fabric production, cotton tree development and human development for the textile and garment industry.
Meanwhile, many local garment companies have focussed all their resources on expanding production and export markets as a large strategy this year.
Đồng Nai Garment Corporation (Donagamex) has planned to reduce dividend pay-out ratio from 30 per cent to 20 per cent for ensuring investment to expand the production scale in some of its key factories this year.
Donagamex chairman Bùi Thế Kích said the corporation has planned to concentrate its capital on developing production in the Hưng Lộc Industrial Zone, a complex meant for the textile and garment industry.
It would also increase investment in a project to expand production in the Định Quán Garment Joint Stock Company, Đông Bình Joint Stock Company and Đồng Phước Company.
This year, there were many opportunities for the corporation to develop their production and business further, Kích said. Large export markets such as the United States, the European Union, Japan and South Korea have increased export orders for the corporation, so it must develop its investment to expand its production scale.
The Thế Kỷ Fiber Joint Stock Company has invested VNĐ274 billion ($12.5 million) to buy more equipment for increasing the annual output of fibre to 60,000 tonnes in the Trảng Bàng 4 Factory.
The Việt Nam Textile and Apparel Association (Vitas) said domestic textile and garment enterprises have had many investment activities since early this year from small firms to large corporations.
In March, the Thuận Phương Garment and Embroidery Ltd Company started its textile, dying and garment project in Long An Province with total investment of VNĐ600 billion in the first stage.
The project was expected to be completed in the first stage by the end of this year, Thuận Phương general director Mai Đức Thuận said, and added that the company would balance capital to ensure investment in the second stage with total capital of between VNĐ1.3 trillion to VNĐ 1.4 trillion.
Property developers urged to look for alternative capital sources
With lending to the property sector almost surely to be tightened, analysts are calling on real estate firms to securitise their projects and list their shares on the stock markets to raise money from the public.
In a draft document the State Bank of Việt Nam has circulated to gather opinions from financial institutions, it proposes increasing the risk weightage assigned to loans against property and securities from 150 per cent (the lowest level) to 250 per cent.
The cap on the ratio of short-term funds used for medium- and long term loans might be reduced from 60 per cent to 40 per cent.
The central bank’s move is aimed to ward off a possible credit crisis in case of a property bubble.
There are many good reasons for real estate firms to raise funds on the stock markets by securitising their projects, one of which is that the shares of property companies have become attractive since many housing projects are proving to be highly profitable.
In fact, trading of property firms’ shares account for 18-20 per cent of daily turnover. Some 60 of them are listed with their combined market capitalisation making up 12 per cent of the total market cap, behind only the banking and food sectors.
Analysts said securitisation to attract investments is feasible at this juncture, especially of major housing projects with prestigious owners, thanks to the real estate market’s strong recovery.
Property securitisation describes the process of transforming direct ownership of real property, such as land and buildings, into indirect ownership through investment in marketable securities.
In Việt Nam, though the laws allow developers to securitise their projects, there has not been much action on the ground.
Analysts said securitising property projects requires a developed secondary financial market, which is not the case in the country, so that the securities can be traded.
They however said property securitisation was not easy to be realised since listed real estate firms’ ability of attracting capital on the stock markets seems to be lower than those of firms in the other sectors.
This is because many securities investors always want to immediately see results from the business that they invest into, while effectiveness of a real estate project cannot be evaluated untill at least one year or more. So, investing into the real estate sector is know as a long term business.
In addition, specific listing criteria for real estate projects have yet to be worked out to enable developers to securitise their projects.
Besides securitisation, analysts also called for setting up real estate investment funds or trust funds, describing them as another effective alternative to raise capital for their projects.
Such funds, like mutual funds, enable small investors to put their money into real estate.
The funds offer a low-cost capital alternative and have proven highly successful in many countries.
The analysts said the most important thing to ensure the success of such funds is their prestige.
Transfer of cashew processing technology urged to be stopped
In a memo sent to the ministries of industry and trade, finance, agricultural, interior affairs, and science and technology and the Việt Nam Cashew Association (Vinacas), a group of domestic cashew processors have called for stopping the transfer of the country’s outstanding cashew processing technology and equipment to African nations.
They also urged Vinacas and other organisations and individuals to stop technology transfer to African countries that produce unprocessed cashew.
Their rationale is that that if they get the technologies, African countries will reduce sale unprocessed cashew to Việt Nam. The Ivory Coast, Ghana, Benin, Guinea Bissau, and Mozambique are implementing a policy of protecting domestic production and limiting exports.
The recent reduction in exports of unprocessed cashew has resulted in a shortage that is causing huge damage to Vietnamese processors since raw cashew grown in Việt Nam can only meet half their need.
Thousands of jobs are under threat, they warned.
Since 2006 Việt Nam has always been the world’s top exporter of processed cashew though also the biggest importer of unprocessed cashew.
Vietnamese cashew firms say the secret lies in a processing technology developed in 1984 by a group of agricultural engineers in HCM City that helps minimise losses. Over the last 20 years the technology has been constantly improved, helping the country export around US$2 billion worth of nuts annually.
The technology has also captured the attention of many nations with a traditional cashew industry like India and Brazil besides the African nations.
Since 2006 many delegations from India, Nigeria, Mozambique, Tanzania, and the Ivory Coast have come to Việt Nam to study the technology.
The export of the technology was once considered in 1999, but it did not materialise in the face of fierce opposition from the public and cashew industry.
Việt Nam imported 867,000 tonnes of unprocessed cashew from 25 countries, mainly in Africa, of which 302,000 tonnes coming from Ivory Coast.
If they acquire the technology from Việt Nam, not only are the African countries likely to stop exports of raw cashew, but they are also sure to become major rivals in exporting processed cashew.
New power pricing method to benefit investors
Investors in the power sector are set to benefit as the Government has approved a new power pricing method whereby electricity prices would automatically be adjusted following changes in fuel prices, exchange rates and power distribution.
The new method is specified in the revised master zoning plan for power development in 2011-20 approved by the Government last month.
The plan seeks to revise electricity tariffs in a way that ensures investors can recover their costs and power stations can make reasonable profits and become financially independent.
Relevant ministries and agencies will fix the tariffs based on seasonal and regional factors. Many different prices applied based on categorisation of consumers and locations will be gradually abolished.
Ministries and other agencies will consider the financial status of regions and consumers living in border, rural and mountainous areas and islands to set power prices and reasonable subsidies to help boost the development of these regions.
The plan envisages prioritising coal mines in the country for thermal power plants, especially those with a designed capital of 2,600MW.
Việt Nam will build nuclear power plants to ensure stable electricity supply in the future when primary energy sources have been used up.
The first nuclear power plant is expected to go on stream in 2028 and reach a capacity of 4,600MW in 2030, accounting for 5.7 per cent of the country’s total power output.
The funds needed for new power projects, excluding those under the build-operate-transfer form, and the national power grid is estimated at $148 billion in the 2016-30 period.
Korean paint warehouse fined for fire violation
On March 7, the Police Department of Fire Prevention, Fighting and Rescue (C66) under the Ministry of Public Security imposed a VND102 million ($4,579) fine on Korean shoe maker TeaKang MTC Vietnam Company in the southern province of Dong Nai for violating fire prevention regulations, according to newswire BaoDongnai.com.
Besides, C66 asked the company to suspend the operation of its paint warehouse where the authority detected violations.
Accordingly, on an unannounced inspection conducted on the same day, the local authorities of the southern province of Dong Nai detected that the company arbitrarily built numerous units outside the factory, obstructing the operation of fire trucks. Further violations have been registered in the positioning of fire alarm buttons and the company’s fire protection rules, which were found to go against fire protection safety regulations.
Furthermore, the company placed goods to block emergency exits, while simultaneously disregarding to place signposts indicating system exits. Its paint warehouse has yet to be equipped with a protection system preventing fire from spreading.
The company’s leaders confessed their violations of fire protection safety regulations with haste.
The paint warehouse of the factories is considered an extremely dangerous area with high fire risk. Thus, the local authorities asked the company to install a fire protection system to ensure safety regulations.
Established in 2005, TeaKang MTC Vietnam is a wholly Korean-owned company specialising in manufacturing and processing sport shoes, employing more than 3,000 locals.
On January 19, the paint warehouse of a foreign-invested enterprise, located in Tan Uyen town in the southern province of Binh Duong , caught on fire. The fire spread on a large scale and residents and workers failed to extinguish it, forcing the mobilisation of fire trucks and tens of firemen.
Singaporean investor loses faith in Viwasupco
Singaporean Acuatico Pte. Ltd. has divested its 43.2 per cent stake, equalling 21.8 million shares, in Vinaconex Water Supply Joint Stock Company (Viwasupco) as a reaction to a Chinese contractor’s winning a pipeline contract for a crucial water project at Viwasupco, according to newswire vnexpress.
Previously, Viwasupco planned to invest in Song Da Water Project – Phase II. Chinese pipe maker Xinxing won the contract by bidding 11.8 per cent under the investor’s asking price. Under the VND588 billion ($26.25 million) contract, Xinxing will supply ductile iron pipes for the project’s 21-kilometre pipeline.
However, the selection of the Chinese contractor for a crucial water project faced protest from residents, due to concerns over the quality of the ductile iron pipes.
Acuatico’s decision to divest also came in the context of Viwasupco’s ineffective operation, suffering continuous losses through the 2010-2014 period. In 2015, its revenue increased to VND404 billion ($18.1 million) with a profit of VND147 billion ($6.6 million), due to receiving exemption from paying corporate income tax, but this in itself proved little to brighten its prospects in Acuatico’s eyes.
On November 11, 2010, Vinaconex Joint Stock Company (Vinaconex) completed the transfer of 21.8 million Viwasupco shares to Acuatico. After the transfer, Vinaconex retained 25.5 million shares, equalling 51 per cent of Viwasupco’s total chartered capital.
Founded in 2006, Acuatico operates as an investment holding company that invests in water supply projects.
Tug of war over gold continues
Despite a rally in gold prices last month, the domestic demand for the precious metal remains weak.
For the first week of April, gold maintained its downward trajectory in the domestic market, hovering around the VND33.1 million mark for a tael ($1,261 per ounce). It is notable that in the past, domestic gold prices moved around at least VND3 million ($134) higher than global price quotes, due to controlling mechanisms set by the State Bank of Vietnam (SBV) to counter domestic gold consumption. However, in late March and April, domestic price tags for gold have plummeted below the global price, an unprecedented incident for the precious metal.
According to economic expert Nguyen Tri Hieu, gold prices in the international market have been driven up by geopolitical concerns and economic slowdowns. Contrary to its bullish tone last year, the US Federal Reserve is now quite reserved about a potential rate hike, which will dampen the USD’s growth while boosting gold, a traditional safe-haven asset.
“However, gold prices in Vietnam remain low because the domestic demand is weak after the SBV clamped down on gold usage. The economic situation in Vietnam and the VND are also doing quite well, further curbing the appeal of gold. As a result, gold prices in Vietnam are now lower than the global quotes,” Hieu said.
He predicted that for this year, international per ounce gold prices will stabilise around the $1,200 mark. Opposing forces, such as political headwinds and he Fed rate increase, will prevent gold from drastic fluctuations.
Meanwhile, Cao Thi Ngoc Dung, chairwoman and general director of Phu Nhuan Jewellery (PNJ), noted that gold bar sales at the firm have plunged last year and only made up 1 per cent of PNJ’s total revenue. The demand for bullion continues to dwindle compared to jewellery, which comprises 99 per cent of the firm’s sales.
“Contrary to the slowing demand for gold bars, we are still doing well on precious jewellery. Gold accounts for only 30 per cent of jewellery components, thus fluctuating gold prices do not have as strong an effect on our jewellery as on gold bars,” said Dung at the PNJ’s shareholders’ meeting.
Likewise, chairman of Vietnam Gold Business Corporation Tran Thanh Hai was bullish on the future of gold jewellery. According to him, although the demand for gold bars is weaker than before, Vietnamese people still favour gold jewellery as part of their long-standing tradition.
“I believe gold investors should remain cautious this year and keep a close watch on the global economic situations and the USD. From my perspective, it is unlikely that global gold prices will drop below $1,200 per ounce, so investors may choose to wait until prices go down a bit more to invest,” Hai said.
VinaCapital revives delayed Times Square Hanoi project
VinaLand – a closed-end fund governed by VinaCapital – is attempting to make hay while the sun shines by reviving its $50-million Times Square Hanoi shopping complex, which has been delayed for more than seven years.
David Blackhall, manager at VinaLand, told VIR that after a long downturn in Hanoi’s property market, real estate in the My Dinh area, where Times Square Hanoi is located, is taking off, and therefore it is high time for the developer to revisit the project.
“Things are looking a lot better, and it seems the trend will continue this year, so we are gearing up to restart development and new investment shortly,” he said. “As part of our development strategy we are looking at options for large anchor tenants, as they could get involved during the detailed design phase.”
Although Blackhall did not go into details regarding Times Square Hanoi’s future tenants, he said that the shopping complex would be modified to become a mixed-use project that includes retail space, hotels, serviced apartments, offices, and residential units.
Located in a prime location in the western part of Hanoi opposite the National Convention and Exhibition Centre, Times Square Hanoi was once thought to be the most advanced design for a mixed-use development in Hanoi.
The $50 million project was licensed as a 65:35 joint venture between VinaLand and its domestic developer Thang Long GTC in 2008. At that time, it was expected to be a complex comprising 20,000 square metres of high-end office space for lease, a 300-room 5-star hotel, and a shopping centre, and was expected to begin operating in 2011.
Explaining the long project delay, Blackhall said that “Over the past few years, economic factors such as high interest rates and low liquidity, in conjunction with a very challenging real estate market, have prevented investors from proceeding with this development. Also, the My Dinh area struggled to attract large numbers of commercial tenants (both office and retail) to fill vacant spaces, while hotels found it difficult to compete with rivals located around the central business districts, like Hoan Kiem.”
Another major factor delaying the project is height restrictions for buildings in the My Dinh area surrounding the National Convention Centre, in line with the Ministry of Construction’s Circular No.26/2009/TT-BXD. Because of this circular, VinaLand has to revise its design.
Empty horizon to heat up office market
With the growing demand for offices, the limited stock of Grade A and B buildings in the central business districts (CBD) in Ho Chi Minh City may heat up the competition in the near future.
David Brunt, property manager at Diamond Plaza, said that the supply of grade A office buildings has been fairly limited in the last few years. Vietcombank Tower has been recently launched, offering a lower rent compared to other Grade A buildings, earning it unprecedented popularity on the market—it has been snapped up rather quickly. Among the new buildings under construction, Saigon Centre Phase 2 and DeutschesHaus will come online in the near future. If these buildings are launched at the same time, competition will sharpen as space gets absorbed.
“This also affects Grade B buildings in District 1. At Diamond Plaza, we see Grade B tenants looking around to relocate and upgrade their offices. Some companies would like to expand their space or consolidate their offices in one building. As new buildings come online, there will be some short-term fluctuation in prices. Meanwhile, existing grade A and grade B buildings, like Bitexco Financial Tower and Kumho, need to become more competitive to fill up their buildings,” he noted.
In this sentiment, Humphrey Morgan, national head of office leasing at Savills Vietnam, said that with demand and building quality increased, more tenants are moving from grade C and grade B offices into better quality buildings. Besides, Mapple Tree is going to deliver a Grade A building in District 7 next year, which is forecasted to attract a lot of attention with its affordable rent. We may see companies establish back offices in District 7 due to the high occupancy and increasing rent in the CBD.
Christopher Marriott, CEO of Savills Southeast Asia, added that a wide range of free trade agreements have stimulated demand in the manufacturing industry as well as research and development in Vietnam. Therefore, the service and finance industries are expected to follow in suit and produce real demand in the coming time.
According to CBRE Vietnam, the office market had a quiet time in the first quarter of 2016, with no new Grade A and Grade B buildings appearing on the horizon. By the end of 2016, Ha Do Buidling in Tan Binh District and HQC Royal Tower in District 7, both Grade B, will come online. More, better-quality buildings launched by 2017 will offer more choice to tenants both within and without the CBD.
Recorded rents were stable in Grade B buildings, while Grade A slighty reduced by one per cent quarter-on-quarter. Two mature buildings reduced rent to attract more tenants. Owners tried to fill up the vacant space occupied by their major tenants who moved out earlier this quarter.
New buildings, such as Vincom Center, Vietcombank, and Bitexco Financial Tower, had a great leasing record since the fourth quarter of 2015, prompting them to mark up rent in the first quarter of 2016.
Based on CBRE’s enquiries, the most active sector in the first quarter was sourcing. Companies in this sector are looking for new space to occupy, and they often renew with longer lease terms. 64 per cent of the enquiries are made by old tenants considering expansion and relocation.
Regarding the future supply, this quarter recorded new completion dates of ongoing projects and two new projects in District 7. Four out of eight projects currently under construction are located in District 7. When these buildings are completed, competition between old and new buildings is expected to reduce the average rent in this cluster.
Vietnam Expo to bring enterprises together
The Vietnam International Trade Fair (Vietnam Expo), with the theme “Enhancing Regional and Global Economic Links” within the concept of “2016 – The Year of Important Trade Agreements”, will be held by the Ministry of Industry and Trade, directed by the Vietnam Trade Promotion Agency, and organized by the Vinexad Company from April 13 to 16 at the Hanoi International Exhibition Center (ICE).
Over the last two decades the Fair has been held annually and proven beneficial for organizations, enterprises and individuals in Vietnam and overseas.
At Vietnam Expo 2016 enterprises in Vietnam have the opportunity to promote their products and meet foreign buyers as well as expand and reinforce their presence in the domestic market. Participating overseas countries will also have the opportunity to access a huge number of enterprises in Vietnam to explore the domestic market, cooperate for investment, and transfer technology, as part of efforts to promote the growth of exports and attract foreign investment into Vietnam.
One highlight of the Expo is the attendance of enterprises whose brands have been awarded the tag “Vietnam Value” – a symbol of prestige and quality for Vietnam brands in the domestic market and assisting brand development in international markets.
Vietnam Expo 2016 will attract more than 500 enterprises from 23 countries and territories, with nearly 600 booths displaying products and services.
Nielsen identifies 5 key points in traditional trade
Traditional trade is the largest channel in Vietnam both by number of stores and by sales contribution, according to Nielsen’s “Shoppers vs. Retailers – Who Should I Focus on Instore?” report released on April 9.
Five key insights were identified in the report.
First, the store front is the golden gate
There is little browsing activity in grocery stores. “97 per cent shoppers only stand outside of the store due to limited space and 98 per cent shoppers ask shopkeepers to get the products while they are waiting outside,” according to the report.
Therefore, any brand exposure such as product display or Point-of-Sale Materials should aim to land at the store front to maximize visibility, because only 55 per cent of shoppers notice images on sign boards and 53 per cent notice images on visible coolers.
Second, shoppers are gone in 90 seconds
The report shows that three out four transactions take less than two minutes. “The majority of shoppers are gone in 90 seconds, with first 10 seconds being spent on ordering, the next 60 seconds waiting for the products they have ordered, and the last 20 seconds on the cash payment,” the report calculated.
Things happen pretty fast but there’s a whole minute to capture a shopper while he or she is idle, so this 60-second period is when opportunities arise for both manufacturers and retailers, opening up all sorts of interactions, Nielsen suggested.
Third, promotions are not communicated to shoppers by shopkeepers / store owners
Only 2 per cent of consumers recognize promotions when going to traditional trade stores and just 1 per cent of retailers recommend promotions to shoppers when they come. “This should be seen as an opportunity to train and educate retailers on how to influence the shopping experience of their shoppers and maximize the shopping basket when consumers are in store,” Nielsen recommended.
Fourth, there are few retailer recommendations for shoppers
On average traditional trade is out of stock of 8 per cent of its goods every day of the year, which Nielsen estimates causes lost sales of over $500 million for manufacturers. Furthermore, only 10 per cent of retailers offer another alternative when a shopper asks for a brand that is out of stock and only 10 per cent of retailers talk about new items when shoppers are in store, the report said.
“In this case, most retailers are letting shoppers go and losing money that they should have made,” according to the report. “The concept of cross-selling is not widely utilized by retailers and needs to be shared from manufacturers’ best practice.”
Fifth, 95 per cent of purchases are planned
About 95 per cent of purchases are planned but manufacturers have a chance to increase shoppers’ basket size by partnering with usually-purchased categories, which vary from men to women.
The report said that the Top 3 most-purchased categories for men are cigarettes, food (instant noodles and snacks), and beverages (carbonated drink, beer, liquid milk), which appear 48 per cent, 36 per cent, and 31 per cent, respectively, in men’s transactions. For women, food (instant noodles and fish and soya sauce) accounts for 60 per cent and beverages (liquid milk, ready-to-drink tea) 38 per cent.
With products that are already part of destination categories, it is more critical to protect stock levels and ensure trading compliance from retailers, the report advised.
“In a market with over 1.3 million traditional trade stores, the challenge to get your products into stores is incredibly difficult. For the most part, many manufacturers have considered Vietnam’s traditional trade as one that will diminish as the market continues to evolve. However, in 2015 traditional trade fought back and in fact grew faster than modern trade for the first time in a decade, and now accounts for over 85 per cent of sales, equivalent to nearly $10 billion in the fast-moving consumer goods sector. This has turned all eyes back to traditional trade and forced manufacturers to take a step back,” Mr. Vaughan Ryan, Managing Director, Nielsen Vietnam.
KinderWorld breaks ground at Ha Long project
The KinderWorld Education Group officially began construction of its Singapore Mixed Education Development project in northern Quang Ninh province on April 9.
Built on 7.1 ha at the Ha Long Marina Urban Area in Ha Long city, the project will receive total investment of VND270 billion ($12.15 million).
Mr. Ricky Tan, Chairman of the KinderWorld Group, said the project has received a lot of support from the provincial government. “It took four years to establish the first international college, in Da Nang, and 14 months to receive a land use rights certificate for our project in Quy Nhon city in Binh Dinh province,” he said. “We are honored to say that this project was established after only seven months and is a new achievement for KinderWorld in investing in Vietnam.”
Commencing in August, the first phase of the project includes the KinderWorld International Kindergarten, the Group’s pilot Pre-school Education Research Centre, and the Singapore International School, offering educational programs from Nursery to Year 3 initially.
The Research Centre will serve as a laboratory kindergarten where observation, research and data on advanced early childhood education curriculum and methodology will be undertaken by local and international education experts.
Additional educational facilities for the Singapore International School and student dormitories for 2,000 students will be added in Phase 2, 3 and 4 to further extend the range of educational programs to University Foundation Program and higher education. The student accommodation will be for students not only from Quang Ninh province but also from surrounding provinces.
Mr. Nguyen Duc Long, Chairman of the Quang Ninh People’s Committee, said the province recognized that education and training is a decisive factor in the rapid and sustainable development of the province. “The provincial government will therefore continue to create the most favorable conditions for investors in the province, especially investment in education and training,” he said.
A memorandum of understanding on strategic cooperation was also signed between the KinderWorld Education Group and BIM Group – SYRENA Vietnam on the same day.
The KinderWorld Education Group was established in 1986 in Singapore, opened its first international school in Vietnam in 2000, and now operates 16 campuses under the brand names KinderWorld International Kindergarten, Singapore International School, Singapore Vietnam International School, and Pegasus International College, from Nursery to Higher & Continuing Education in Hanoi, Da Nang, Nha Trang, Ho Chi Minh City, Vung Tau and Binh Duong.
The group also operates the Pegasus International School in Iskandar, Malaysia, and the Amata Singapore International School in Bangkok, Thailand.
Carlsberg spends $20 million promoting Tuborg
Danish brewer Carlsberg has spent VND450 billion ($20.18 million) on promoting efforts to introduce its Tuborg label in Vietnam, according to CEO of Carlsberg Vietnam Mr. Tayfun Uner.
The promotion plan was conducted during 2015 but the beer was only officially introduced in Vietnam on April 8.
Its slogan is “Open for Fun”. The bottle requires no bottle opener to open, which Carlsberg expects will increase sales and market share in Vietnam’s dynamic beer market. There were 129 breweries in the country as at last year, according to the Vietnam Beer, Alcohol and Beverage Association (VBA). Total production capacity is 4.8 billion liters but stood at 3.4 billion litters in 2015.
The Sai Gon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco) held the highest market share with 1.38 billion liters, followed by Heineken with 729 million liters, the Hanoi Beer Alcohol and Beverage Joint Stock Corp. (Habeco) with 667.8 million liters and then Carlsberg, with 229 million liters.
The four largest producers account for 88.4 per cent of the market.
Carlsberg arrived in Vietnam in 1993 but only in 2012 was Carlsberg Vietnam, a 100 per cent foreign company, established in the country, with three offices. It is also a strategic investor of Habeco, holding a 17.23 per cent stake.
$282.16 million in government bonds mobilized
The Hanoi Stock Exchange (HNX) successfully mobilized VND6.29 trillion ($282.16 million) in government bonds on April 6.
The total offering of VND7 trillion ($314.02 million) included VND4 trillion ($179.44 million) in five-year bonds, VND2 trillion ($89.72 million) in 15-year bonds, and VND1 trillion ($44.86 million) in 30-year bonds.
VND3.35 trillion ($150.28 million) in five-year bonds were sold at a winning rate of 6.4 per cent per annum, an increase of 0.02 per cent against the previous bidding session on March 30.
VND2 trillion ($89.72 million) in 15-year bonds were also sold, at a winning rate of 7.65 per cent per annum, equal to the winning rate at the last bidding session on March 23, and VND647.5 billion ($29.04 million) in 30-year bonds were sold with a winning rate of 8 per cent per annum, also the same as in the previous bidding session on March 10.
Since the beginning of this year the State Treasury has successfully mobilized VND79.66 trillion ($3.57 billion) in government bonds.
PM green lights two golf courses
The South Hoi An Golf Course and the Hai Phong Sakura Golf Club have received Prime Ministerial approval to be built within the framework of the National Golf Course Development Plan to 2020.
The 36-hole South Hoi An course covers an area of 142.9 ha in Duy Hai commune, Duy Xuyen district in central Quang Nam province, while the Hai Phong Sakura Golf Club spans Truong Thanh and An Tien communes in An Lao district, northern Hai Phong city.
They are among 15 courses to be added to the development plan while nine others have been removed.
By 2020 Vietnam is to have nearly 100 golf courses, built mainly on poor quality, sandy or unused land. Courses are not permitted to be built in rice growing, fertile or protected forest areas.
The Ministry of Natural Resources and Environment reported that by last year there were 58 golf courses on 9,270 ha in 24 cities and provinces around the country.
KONE opens new rep office
KONE, one of the global leaders in the elevator and escalator industry, has opened a new representative office in Hanoi to improve its supply capability and meet the increasing demands of the market.
The new office in on the 6th floor of the Kham Thien Building at 195 Kham Thien Street in Dong Da District.
KONE, which first appeared in Vietnam in 2006 via distributors and agents before being officially established in the country in 2009, has installed elevators and escalators in construction projects such as Ho Tram Grand Strip, JW Marriott Hanoi, Le Meridien Saigon, Inter Continental Nha Trang, Hilton Da Nang, and the Masteri Thao Dien and Sunrise City high-end apartment blocks in Ho Chi Minh City.
KONE Vietnam has applied advanced methods in Modular-Based Maintenance, which is designed to identify errors before they can impact on equipment and human safety.
Ford Vietnam enjoys record sales in March
Ford Vietnam sold 2,392 units in March an increase of 71 percent compared with the same period last year, the best sales ever recorded, the automaker announced on April 8.
The company’s General Director Pham Van Dung said the record sales for the month have contributed to a very high turnover for the first quarter this year, with 6,501 sold cars, a year-on-year increase of 69 percent.
Notably, sales of their three main product lines EcoSport, Ranger and Transit continued to lead the market.
Ford Transit remains the top of the commercial vehicle segment with the sale of 586 units, up 53 percent year-on-year.
Sales of the Ford Ranger have continued to lead the pickup truck segment with more than 1,198 units sold in March, rocketing up 126 percent against the same period last year.
And the EcoSport compact SUV continued to enjoy a surge of 53 percent compared with the same period last year with 436 units sold.