BUSINESS IN BRIEF 15/10
Master plan for construction of Southeast Quang Tri Economic Zone
The PM has recently approved a master plan for construction of Quang Tri province’s Southeast Quang Tri Economic Zone (EZ) until 2035, with a vision to 2050, aiming to build the zone into an area of vibrant and sustainable economic development and a centre for investment attraction and cargo transshipment in the region, while ensuring national defence and security.
The new EZ is expected to contribute to utilising potentials in serving socio-economic development, national defence and the security of the province as well as the whole central region.
In addition, the economic zone will be developed into an area of breakthrough development creating an impetus for the province’s socio-economic development, with synchronous and modern infrastructure, civilized urban areas, sustainable environment and effective land use.
The planning scale of the zone covers 23,792 hectares, including the entire administrative boundaries of 17 communes and towns to the southeast of Quang Tri province, belong to Hai Lang, Trieu Phong and Gio Linh districts.
As oriented by 2050, the Southeast Quang Tri EZ will become a dynamic, modern and effective zone in the central region, in Viet Nam and in ASEAN; a gateway for international exchange to the East Sea of Viet Nam; and an area of sustainable and harmonious development, with attraction to investors, modern and synchronous infrastructure and beautiful urban landscapes.
The Southeast Quang Tri EZ features four development zones. Specifically, the zone no. 1, covering 11,469 hectares to the southeast of the EZ, is the key development area which is home to crucial projects of the entire EZ, including power centre, energy complex, industrial zones, urban areas, public services, administrative areas, deep-water seaport and non-tariff zones.
The zone no. 2, covering 2,221 hectares to the northeast of the Cua Viet River, develops coastal resort tourism services and the Cua Viet urban area, which focuses on developing supporting services for the central region of the EZ.
The zone no. 3, covering 3,400 hectares to the northwest of the Cua Viet River, develops a regional-level infrastructure hub, with Quang Tri Airport as its focus, and luxurious services.
The zone no. 4, covering 6,702 hectares to the west of the EZ (closely connected to National Highway 49C), is an area for high-tech agriculture development and a reserve area for expanding the core region and stabilizing existing residential areas.
Under the plan, the Southeast Quang Tri EZ will focus on shifting agricultural production into manufacturing high-quality, high-tech and clean commodities associated with the application of scientific and technological advances; developing the models of farms and integrated farms; implementing measures to deal with environmental pollution; and combining farming production with the processing industry and the trade sector to ensure the consumption of farm produce.
Concerning forestry, mangroves will be zoned to be protected, preserve the environment and serve tourism. Meanwhile, the EZ will also zone the areas of forests serving resettlement areas associated with forest planting in Hai An, Hai Khe and Hai Duong communes.
Concerning trade and services, a first-class shopping centre will be built at the public centre in Trieu Lang commune, while a supermarket will be constructed to the south of Cua Viet town. The building of new commercial routes and streets is also under the plan.
In addition, traditional markets in communes will be upgraded, focusing on the areas purchasing farming products, along with the establishment of a network of shopping malls, general services, trade cooperatives, retail markets, convenience stores and grocery stores.
The plan also includes the formation of a logistics area, near seaports, for goods transshipment, and the establishment of a network of regional shopping and wholesale centres (20 hectares per centre).
U.S. furniture brand Caracole to open largest flagship store in Vietnam
Caracole, a luxury furniture brand from the U.S., will mark its first presence in Vietnam by opening its flagship store in HCMC in early November.
The 1,200-square-meter store is located on two levels of the new five-storey building of CDC Home Design Center Sala – Dai Quang Minh.
Pham Cao Dong, general director of CDC Home Design Center, said the Caracole showroom is where customers can browse for world’s latest designs and furniture while the CDC Home Design Center is an open space for local architects to come for work and look for new products and materials.
Dong said CDC Design & Arch, a place for local and foreign architects and interior designers, would be unveiled earlier next month.
Poland plans to boost meat export to Vietnam
Poland made efforts to boost its meat exports to Vietnam as trade between the two countries continues widening.
In the first half of 2016, Vietnam was Poland’s leading trade partner in the Association of Southeast Asian Nations (ASEAN) and the Eastern European country’s seventh biggest trade partner outside the European Union (EU).
In 2015, Polish exports into Vietnam increased to 224 million USD from 53 million USD a decade ago. Exports of farm animals and related products reached 80 million USD, double from 2013.
With the EU – Vietnam Free Trade Agreement taking effect soon, the EU’s meat exports to Vietnam will increase as tariffs reduce.
Poland’s meat products will also offer more choice for Vietnamese consumers but the price, higher than local products, will be a concern.
Jaroslaw Robert Olowski, Deputy President of the Polish Agricultural Market Agency, said that the price will match the quality.
Witold Choinski , President of the Polish Meat Association, said that with increasing income and desire for quality food, Vietnamese people are ready to pay more for safe and clean products.
On cutting costs, Choinski suggested that Polish producers can open farms in Vietnam or export small animals to Vietnam.
Poland’s poultry output in 2015 was 2.2 million tonnes, 42 percent of which was exported.
The EU country is encouraging Vietnamese enterprises to make fact-finding trips to learn about production lines in Poland.
Choinsky said from 2017-2019, the association will have working trips to Vietnam and invite Vietnamese companies to learn about poultry production lines in Poland and hoped Vietnamese units would be proactive in finding products for the Vietnamese market.
EU businesses seek cooperation opportunities in Vietnam
A delegation of 40 EU businesses will visit Vietnam from November 2-4 to seek investment and business opportunities in agriculture and farm produce trading in the country.
The delegation, to be led by EU Commissioner for Agriculture and Rural Development Phil Hogan, comprises firms operating in dairy, cereal, vegetable and wine production, heard a meeting in Brussels on October 13.
According to Diego Canga Fano, Multilateral Relations Director at the EC’s Directorate-General for Agriculture and Rural Development, there will be a range of trade promotion activities in Hanoi and Ho Chi Minh City during the trip such as workshops and meetings with local trade partners and the press.
The enterprises will hold working sessions with the Ministries of Agriculture and Rural Development, Industry and Trade, and Science and Technology, he said.
Diego Canga Fano highlighted Vietnam’s high economic growth rate and young population desiring to use European products as attractiveness to the firms.
Vietnam is one of the EU’s priority partners, he said, noting that the bloc wishes to step up trade ties with the Southeast Asian nation, especially with the EU-Vietnam Free Trade Agreement coming into force soon.
At the meeting, Nguyen Canh Cuong, Vietnamese Minister Counselor in charge of economic and commercial affairs in Belgium, briefed the EU businesses on Vietnam’s economic landscape and its potential for cooperation with the EU.
He told Vietnam News Agency that the EU has carried out many projects aiming to help Vietnam in agriculture and farm produce trading.
Through the visit, the EU aims to expand agricultural cooperation with Vietnam, he said.
Vietnam is the first leg of the EU firms’ trip to ASEAN nations, which will also take them to Singapore and Indonesia.-
Mining, agriculture slow economic growth
Weakness in the mining and agriculture segments of the economy dragged on third quarter growth and will likely result in Vietnam missing the year’s 6.7% targeted GDP growth rate, say government economists.
For the nine months leading up to October of 2016, the Southeast Asian nation’s economy expanded at a modest 5.93% rate—far short of the forecast, the General Statistics Office (GSO) said in its report.
In its report the GSO principally blamed the mining segment for the slowdown, which dipped a full 6.8% on-year in the third quarter after freefalling 5.3% in the second quarter of 2016 for a combined two quarter contraction of 12.1%.
Adverse weather conditions, including drought and salinization in the coffee belt and Mekong Delta also contributed to putting the skids on economic growth in both the foreign and domestic sectors.
Growth of the GDP in 2016 will definitely be lower than targeted but how much lower will depend primarily on how the mining segment performs in the fourth quarter, said Ha Quang Tuyen, head of the GSO National Accounts Department.
Mr Tuyen noted that overall the Vietnam economy grew at an annual 6.4% on-year rate in the third quarter, well below the 6.87% growth rate for last year’s third quarter and now the GSO is pinning their hopes on a better fourth quarter.
Mr Tuyen told reporters the GSO is hoping to see growth in the fourth quarter of the year at least equal to that of the fourth quarter of 2015 as weather patterns return to more normal.
Looking at longer term prospects, said Mr Tuyen, higher pledged foreign direct investment over the last decade is somewhat indicative of investors’ belief that Vietnam has the potential to become a robust economy.
Yet serious structural challenges to future growth remain. For instance, the debt burden of the government has been growing unsustainable over the past five years, he noted.
It is now dangerously close to the National Assembly’s debt ceiling of 65% of GDP.
Public debt, he noted, has been used much too often to finance the chronic fiscal deficit stemming from a variety of factors including the under-performing state-owned enterprises.
Ongoing inefficiencies in the public sector will not only weigh on the government’s coffers when the debt repayments become due, but they are also interfering with investment aimed at boosting worker productivity growth.
Most notably, said Mr Tuyen, higher productivity growth is essential to sustain the high GDP growth rates the government desires and without such improvements—long-term high GDP growth is simply an elusive dream.
Meanwhile, the Asian Development Bank has also lowered its annual GDP growth forecast for Vietnam to 6%, from the 6.7% it had projected earlier. Previously, the World Bank in July trimmed its GDP growth forecast for 2016 to 6% as well.
Vietnam coal giant to lay off 4,000 miners this year
The Vietnam National Coal and Mineral Industries Corporation (Vinacomin) is planning to lay off 4,000 workers in 2016, an official from the corporation said on October 12.
Vinacomin’s revenue reached US$3.2 million in the first nine months of 2016, equivalent to 93% of the same period last year.
The corporation’s profits have fallen for five consecutive years, and coal output is also forecast to fall 8.7% this year.
This sharp decline is due to cheap imported coal that costs US$5-10 less per ton than local sources, according to Vinacomin.
In the first eight months of this year, the country imported nearly 10 million tons of coal worth US$574 million, three times higher than the figure the government had estimated for the entire year; and it is forecast to keep growing.
Vietnam produced approximately 21 million tons of coal per year from 2006 to 2011, data from Vietnam Customs shows.
Vietnam government borrowing hits US$16 billion in Jan-Sep
Vietnam’s government has borrowed US$16 billion so far this year, including US$11 billion through bond sales which the Ministry of Finance said went quite smoothly.
Compared to the same period last year, government borrowings in January-September almost doubled.
The country has set a target of borrowing about US$20 billion this year to meet debt repayment obligations, offset the state budget deficit, raise funds for government spending and bolster an economy dogged by adverse weather conditions and an environmental disaster.
Vietnam’s debt servicing costs are estimated at US$12 billion this year. As of September 25, payments had reached nearly US$7.9 billion, of which 78% was allocated to settle debts secured from local bond sales.
In recent years, Vietnam has started to borrow more from local debt markets. As a percentage of the total outstanding government debt, domestic debt rose from 39% in 2011 to 57% in 2015, said Vo Huu Hien, deputy head of the Department of Debt Management and External Finance.
By shifting towards domestic sources to raise funds, Vietnam is relying less on foreign creditors, cutting the ratio of foreign loans significantly from 61% in 2011 to 43% in 2015.
Official figures show the budget deficit stood at 4.4% of GDP in 2011, 5.36% in 2012, 6.6% in 2013, 5.69% in 2014 and 6.1% last year.
The National Assembly, Vietnam’s legislature, has tried to place a cap on the budget deficit in recent years, but state budget expenditure has remained higher than targeted.
Vietnam ran an estimated deficit of VND152 trillion (US$6.8 billion) in the January-September period this year, said the General Statistics Office.
The World Bank forecasts that Vietnam’s public debt will climb to 63.8% of the country’s GDP in 2016, 64.4% in 2017 and 64.7% in 2018.
Slumping crude oil prices have cut budget revenues considerably. Government statistics show that crude-related revenue, which made up 30% of the nation’s budget in 2005, fell to 20% in 2010 and accounted for about 10% in 2015.
The country posted a sharp decline in Jan-Sept revenue from crude oil to an estimated VND29.8 trillion, 42% down from the same period last year.
The budget deficit is expected to widen further as the country lowers taxes to support businesses in the private sector.
The finance minister said that budget revenue from taxes and levies, excluding income from crude oil exports and taxes on land use, account for only 15.6% of gross domestic product (GDP), which is considered low compared to Thailand’s 23%, Laos’ 23.4% and Malaysia’s 24.5%.
Last year’s public debt, which in Vietnam also includes loans guaranteed by the government, stood at 62.2% of GDP, which was relatively close to the ceiling of 65% set by the National Assembly.
Vietnam’s government set an economic growth target of 6.7% for this year, following 6.68% growth in 2015.
However, adverse weather conditions and mass fish deaths along the central coast have forced the government to revise down the 2016 target to between 6.2% and 6.5%.
15 enterprises pledge to provide safe farm produce
Leaders of 15 large-scale enterprises in the agricultural sector cut a deal with the Ministry of Agriculture and Rural Development to supply safe agricultural produce nationwide last Saturday in Hanoi.
Deputy Minister of Agriculture and Rural Development Vu Van Tam at the ceremony noted the signing is just the first step of the program aimed to encourage other enterprises and groups to follow suit. He hoped the model would yield positive results, gradually improve consumer confidence as well as promote production and trade of safe food.
According to statistics, the whole country currently has 382 closed supply chains involved in farm produce, with 92 of them having been certified as safety chains. The main products are vegetables, tea, meat, eggs, rice and seafood among others.
Enterprises play a decisive role in the development of safe agricultural produce supply chains.
Many large enterprises have shown keen interest in the agricultural sector in recent years. For instance, VinEco was established as part of Vingroup’s venture in agriculture, with a capital of VND2 trillion (US$92 million). The company’s two-year strategy is to build around 300 greenhouses, providing clean vegetables. This shows that many enterprises have realized the potential in agriculture.
2016 credit growth forecast to reach 21.82%
Credit institutions expected credit would grow 7.37% in the final quarter of this year and 21.82% in all of 2016, according to the latest survey of the Monetary Forecasting and Statistics Department under the State Bank of Vietnam (SBV).
Of the overall credit growth of 7.37% expected for quarter four, outstanding loans in Vietnam dong are projected to increase 7.93% and those in foreign currency up 4.22%. In the previous survey, lenders forecast credit growth in the third quarter would stand at an average of 5.17%.
Regarding 2016 credit growth of 21.82%, credit institutions said Vietnam dong outstanding loans would climb 22.95% and foreign currency credit would edge up 8.22%. This year’s credit growth forecast is 4.5 percentage points higher than the actual figure at 17.26% in 2015, and was revised up from 20.4% in the previous survey.
Banks said capital mobilization would rise by 16.85% on average in 2016, down 0.72 point compared to their previous forecasts but still higher than the 2015 figure. Their forecasts for capital mobilization in Vietnam dong were kept unchanged but that in foreign currencies was expected to shrink 6.9%, much deeper than a 0.09% decline in the previous survey.
Meanwhile, 87.6% of credit institutions said liquidity has been ample. All banks majority owned by the State and small commercial banks said liquidity is good while 8.6% of credit institutions described it as normal.
Most of the credit institutions in the country said liquidity would be strong in the fourth quarter and all of this year.
By end-September, credit had grown 11.74%, higher than 11% in the same period last year, SBV deputy governor Nguyen Thi Hong was quoted by the central bank’s website as saying at a National Assembly (NA) Economic Committee meeting last Friday.
Hong said credit usually grows stronger in final months of the year than in previous months, and added the 2016 credit growth target of 18-20% is achievable.
She said capital for Vietnam’s economy is sourced mainly from banks. If the central bank revises this year’s credit growth target down to 15-16%, enterprises would face a lack of money to fund their production plans.
Hong said that by the end of August, bank loans for the real estate sector had increased 6.73%, much lower than 13.06% in the same period last year.
Meanwhile, the bad debt ratio had reached 2.66% as of August 31. In January-August, VND58.8 trillion of bad debt was settled.
In the year to date, Vietnam Asset Management Company (VAMC) has taken over bad debts worth a combined VND16 trillion, much smaller than the sum in the year-earlier period.
Mekong Delta canal to get upgrade under BOT form
The second phase of a project to upgrade Cho Gao Canal flowing through Tien Giang and Long An provinces in the Mekong Delta will be carried out under the build-operate-transfer (BOT) format, the Ministry of Transport announced.
Costing VND1.3 trillion (US$58.3 million), the project is aimed to upgrade a 28.6-kilometer section of the canal in the 2016-2018 period, according to a report of the Project Management Unit of Waterways under the ministry’s Vietnam Inland Waterways Administration.
Major activities of the project include dredging the canal, building a stone embankment on the southern side of the canal and roads along its two banks, and setting up ten sites for putting soil after dredging aside from installing signal buoys.
The project will also comprise works to expand the two roads along both banks of the canal by 3.5 meters in width as suggested by local authorities, and build a management station near Cho Gao Bridge.
Regarding capital, the investor will use its own funds and bank loans to implement the project and will collect fees on boats navigating on the canal after completion for recovering capital.
The first phase of the upgrade project using State budget has been finished and put into operation.
Cho Gao Canal is an important waterway for transporting goods by ships from HCMC to the Mekong Delta and vice versa.
The upgrade project will ease the traffic along the canal, saving ships from getting stuck due to landslides and shallow water.
It also marks the second waterway project in the south implemented under the BOT format, with the first being the project to build Binh Loi railway bridge in HCMC and upgrade the Saigon River section from Binh Loi Rail Bridge to Ben Suc Port in Binh Duong Province.
In this first project, the project’s investor is allowed to recover capital by collecting fees, estimated at VND70 per ton per kilometer, from cargo ships which run on the dredged section.
Japanese firms in China eye opportunities in HCMC
A delegation of 12 Japanese enterprises operating in China visited HCMC last week to look for cooperation opportunities.
The 12 firms specialize in producing electronic components, plastic molds, and office machinery among others, Amano Shynia, head of the Japan External Trade Organization (JETRO) in Guangzhou, told Le Thanh Liem, vice chairman of HCMC.
Shinya said those enterprises have been operating in China for more than 20 years but the labor cost in China has surged in recent years, causing difficulties to their businesses.
Therefore, Japanese companies want to explore more about sectors that HCMC is calling for foreign investments, the city’s policies for industrial development, as well as preferential policies for foreign direct investment (FDI) firms and Japanese firms investing in the city, he said.
He also wished the city government would create favorable conditions for Japanese companies.
Vice chairman Liem highly evaluated contributions of Japanese companies to the development of Vietnam and HCMC.
Liem noted that Japan is currently the sixth biggest investor in HCMC with more than 900 projects worth more than US$3 billion.
Regarding policies for FDI firms, Liem said the city welcomes Japanese companies in high-tech industries and environment-friendly sectors including mechanical engineering, electronics, information technology, chemical and food processing.
Liem said HCMC always has flexible policies to support foreign enterprises, especially Japanese firms, and he wished that the visit will pave the way for Japanese firms to develop specific projects in the city in the future.
Khanh Hoa to have 6,000 more hotel rooms in next three years
The central province of Khanh Hoa is expected to have an additional 6,000 luxury hotel rooms between now and 2020, which will put more oversupply pressure on hoteliers in the locality.
The extra rooms will raise the total number of hotel rooms in Khanh Hoa to 31,000, according to the Nha Trang – Khanh Hoa Tourism Association.
Of the additional volume, around ten hotel projects are going up in Nha Trang City while nearly 20 other hotel and resort projects are under construction along Bai Dai (Long Beach) in Cam Lam District.
The province currently boasts a stock of 25,000 operational hotel rooms, including 15,000 rooms of three to five stars in Nha Trang City, shows data of the association.
“The average occupancy rate of hotels around the province was recorded at 70% by late August, which is a positive result,” said Nguyen Van Thanh, vice chairman of the association.
But given the extra number of hotels and resorts, the volume of tourist arrivals has to double the current figure to help maintain the occupancy rate of 70%, he said.
Over 3.2 million tourists visited Khanh Hoa in the January-August period, up 13.16% year-on-year, including more than 789,000 foreigners, surging 32.25%, with Chinese tourists making up half of the total number of international arrivals, said the provincial Department of Tourism.
If the growth rate is kept stable, it is possible that the number of tourists to the province will double by 2020, Thanh said.
However, the tourism market usually sees fluctuations, such as sharp falls in the numbers of visitors from China and Russia, the two major visitors-generating markets for Khanh Hoa, recorded from late 2014 to early 2015.
Such market changes had resulted in many empty hotel rooms during the period and the tourism sector had had to make a lot of efforts to lure tourists back, he recalled, adding that it had also showed the weakness of hotel and resort operators in the province.
To prove his point, the vice chairman took the Chinese market as an example.
In mid-2014, when the number of Chinese tourists fell sharply, every hotel cut their room prices, without having any clue of how long the situation would last, the market size and demand of tourists.
In addition, local tour operators were put at a disadvantage, and had to let their Chinese partners take the initiative in setting prices.
After the large-scale price cut, many hotels in Nha Trang had incurred losses and had to agree on applying a price cap of VND1 million (US$44.8) per day to keep the room prices stable.
Unlike other tourism destinations such as Danang City where resorts prevail, accommodation facilities in Nha Trang City are mainly hotels developed in the downtown area, and their room prices are lower, Savills Vietnam revealed in a survey early this year.
Besides, due to oversupply of high-class hotels and resorts in the city, hoteliers there have undercut one another and room prices at five-star hotels in Nha Trang have dropped by 15% annually since 2012.
Smuggled cigarettes cause huge tax losses
Smuggled cigarettes cause tax losses estimated at VND10 trillion, or over US$450 million, to Vietnam per year and the number of cigarette smugglers across the border is increasing, heard a seminar on the fight against cigarette smuggling in the southern region.
The seminar was held last Friday in HCMC by the Police General Department and Cong An Nhan Dan newspaper in collaboration with Steering Committee 389 on fighting smuggling and trade fraud.
Major General Pham Van Mien, editor-in-chief of the newspaper, said Vietnam has a long land border stretching more than 4,550 kilometers, bordering China, Laos, and Cambodia so it is extremely painstaking to check cigarette smugglers.
In recent months, cigarette smuggling activities have reheated. The smugglers transport cigarettes by all means, from rudimentary vehicles to autos, taxi cabs, trucks, or even State-owned vehicles. Notably, smugglers will fight back anti-smuggling forces if they are detected.
Mien said smuggled cigarettes cause huge tax losses. Particularly, tax losses are estimated to have leapt from around VND6.5 trillion (US$293.02 million) in 2012 and VND6.7 trillion (US$302.04) in 2013 to some VND10 trillion now.
Smuggling and transporting illegal goods across the borderline happen mainly in the northern provinces of Cao Bang, Quang Ninh, and Lao Cai, the central provinces of Ha Tinh and Quang Tri, and the southern provinces of Tay Ninh, An Giang, Long An, Dong Thap, and Kien Giang.
According to the Vietnam Tobacco Association, more than one billion packs of smuggled cigarettes were transported to Vietnam last year, accounting for 25% of the domestic market share.
HCMC villa/townhouse segment sees robust Q3
Ho Chi Minh City’s villa/townhouse segment recorded robust performance in the third quarter of the year, according to the latest report from Savills on the city’s real estate market, released on October 11.
Six new projects and subsequent phases of five existing projects provided approximately 1,100 dwellings to the primary market. Primary stock reached approximately 3,800 dwellings, up 19 per cent quarter-on-quarter and 128 per cent year-on-year.
Sales increased 49 per cent quarter-on-quarter and 193 per cent year-on-year due to good performance in the new projects. Townhouses dominated with 71 per cent of total transactions. Absorption was 32 per cent, up 7 ppts quarter-on-quarter and 8 ppts year-on-year.
Districts 2 and 9 continued to outperform other districts, cumulatively accounting for 51 per cent of sales.
“Well-developed infrastructure and urban planning supported strong sales in the east of Ho Chi Minh City,” the report stated. “Projects with credible developers, appropriate pricing and a wide range of facilities remained key criteria of buyers.”
Regarding apartments, the report showed that sales in Grade C increased sharply. Eleven new projects and the next phase of one active project launched, supplying more than 4,600 units, representing a significant decrease of 47 per cent quarter-on-quarter. There were approximately 40,300 available units across all grades.
Sales reached 7,500 units, increasing 7 per cent quarter-on-quarter and 43 per cent year-on-year. Absorption was 19 per cent, increasing 2 ppts quarter-on-quarter and year-on-year due to good Grade A and C performances.
Grade A had the highest absorption at 34 per cent. Grade C transactions increased dramatically by 15 per cent quarter-on-quarter. Grade B sales fell 12 per cent quarter-on-quarter after six consecutive quarters of increases.
The serviced apartment segment, meanwhile, saw a slight increase in supply. Total serviced apartment stock was approximately 4,540 units from 83 projects, relatively stable quarter-on-quarter due to the re-entry of one Grade C project in Phu Nhuan district with five units and up 4 per cent year-on-year.
All grades showed marginal quarterly performance improvements. Average occupancy was up 3 ppts quarter-on-quarter and 2 ppts year-on-year to 84 per cent, with Grades A and B enjoying the strongest occupancy increases.
Average rents have improved since the first quarter, marking a recovery from three consecutive years of downward adjustments. Average rent was VND529,000 ($24) per sq m per month, relatively stable quarter-on-quarter but up 2 per cent year-on-year.
Competition from a large future supply of high-end buy-to-let apartments will create pricing pressure. From the fourth quarter to 2018, 12 serviced apartment projects providing 2,150 units are expected to enter the market.
The CBD will remain the investment hotspot, accounting for 64 per cent of total future supply to the end of 2018.
Da Nang condotel market: Now is the time to buy
Central Da Nang city has recently seen a boom in the number of condotels (a combination of apartments and hotels and also known as condo hotels), which offers more options for buyers.
Upcoming large-scale projects include Ariyana Beach Resort & Suites Danang, Soleil Da Nang, Coco Bay, Da Phuoc, Han Riverside, Central Coast, Vinpearl Han River, and Ocean Suites & Estates. A large future supply of apartments and coastal villas is expected.
Surveys have shown that more than 80 per cent of purchasers are from Hanoi, attracted by a wide a variety of products, complete infrastructure, bright tourism prospects and sales policies, and the image of a young, dynamic and green city.
Mr. Marc Townsend, Managing Director of CBRE, predicted that the condotel sector in Da Nang will grow more strongly and also in Vietnam as a whole in the years ahead.
The main reasons are sustainable profitability potential and reasonable prices of this type of property, as well as the controlled inflation rate in Vietnam. He added that this real estate model will become more attractive to investors both home and abroad.
The latest report from CBRE showed that condotels were the most vibrant segment in the market, with a significant number of new launches and sales transactions in the third quarter of this year.
More than 2,800 units were added to the market, increasing total supply to 5,751 units.
New projects coming online this quarter include Hoa Binh Green, Central Coast, Coco Skyline Resort, and Ariyana Beach Resort & Suites Danang (North block).
High-end properties dominate the market, with 67 per cent of total supply. The remainder is in the mid-end segment. As at the end of the third quarter, 70 per cent of condotel projects sold were in the high-end segment compared to 30 per cent in mid-end developments.
“Buyers now have more choice and consequently are taking more time to make a purchasing decision,” Mr. Townsend said. “Along with the positive growth in Da Nang’s hospitality market, the condotel market is expected to maintain sustainable improvement as its attraction remains strong.”
Among those condotel projects being developed in Da Nang, the Ariyana Beach Resort & Suites Danang has sparked much interest among buyers.
Ariyana Beach Resort & Suites Danang has a modern design with all condominiums featuring ocean views. In addition to its prime location near the center of Da Nang it’s the only luxury condotel project in Vietnam nestled on a beach.
All condominiums have ample space for residents and guests to experience the exceptional and incredible beauty of the coastline and relax and enjoy life.
Architect Andrew Frost applied “feng shui” principles in the planning and building of the three towers at Ariyana, with many condominiums having both northeast and southeast views. Under feng shui principles, the southeast represents the wind, and because the wind comes from far away it also signifies success in business for the condominium’s owner. The northeast, meanwhile, represents the changing of night and day and yin and yang – the start of new circumstances that will help owners move forward.
All three towers are designed in a manner that can be imagined as being located on the water, with a landscape overlooking the ocean. The staircase from the pool to the lounge room gives the impression of walking on the sea.
Ariyana Beach Resort & Suites Danang is located within the five-star Furama Resort Danang, which is recognized as one of the most luxurious on Vietnam’s central coast and in Asia by international tourism agencies. All condominiums have inherited the exquisite facilities of Furama Resort and Furama Villas, including swimming pools, a sports complex, luxurious spa services, a kids club, and a helipad. Furama Resort Danang is also well known for its cuisine, featuring dishes from Europe, Asia and Vietnam.
Ariyana has an internal road network connecting it with the Furama Resort Danang and the Ariyana Danang Convention and Exhibition Center, which will welcome the 21 Heads of State attending the APEC 2017 meeting. The Center also hosts cultural events, concerts and international exhibitions.
It is also located just ten minutes from two of the largest golf courses on the central coast: Danang Golf Club and Montgomerie Links, and has easy access to Ba Na Hills, Hoi An ancient town, and other local scenic spots. A shuttle bus is available every day for those who wish to visit Hoi An or Da Nang’s city center.
One of the main reasons Ariyana has attracted investors is the prestige of its developer. The project is being developed by the Ariyana JSC, an affiliate of Sovico Holdings. Sovico Holdings is well-known throughout Vietnam for a range of projects and companies, including HDBank, Vietjet Air, Phu Long Real Estate Company, An Lam Ninh Van Bay Resort in Nha Trang, Evason Ana Mandara Resort in Nha Trang, Furama Resort Danang, Furama Villas Danang, the Ariyana Danang Convention and Exhibition Center, Holiday Inn Airport Plaza in Ho Chi Minh City, Hoang Anh Dat Xanh Da Lat Resort in Da Lat, and Saigon Phu Quoc Resort & Spa on Phu Quoc Island.
Guaranteed yield has become the main sale and marketing strategy used to attract buyers. Offers ranging from 10 per cent of unit value per year over ten years have also attracted investors. Guaranteed yield programs assure a certain return on investments, which is what most investors are now looking for.
Mr. Nguyen Duc Quynh, PR and Communications Director at the Ariyana Joint Stock Company, told VET that: “As it is still in its early stages of development, Vietnam will certainly be a bright spot in the tourism industry. Because tourism is developing rapidly, and the perception of living is changing among Vietnamese people, they are now more willing to invest in a ‘second home’, balancing their work and relaxation and investing in their future too.”
Condotel projects, Mr. Quynh added, actively and positively contribute to a stable society, drawing money from people’s “pockets” to the market. “Condotel projects, when they become hotels or resorts, generate not only revenue from holidaymakers but also create more jobs,” he said. “Furthermore, these projects can bring profits to individual investors when they take up a leasing agreement with a hotel management company, which also can ease social issues.”
The condotel market expects to welcome more than 1,000 new units in the coming quarters, according to CBRE.
CapitaLand shakes hands with JLL Singapore
CapitaLand has appointed JLL Singapore as its sole marketing agent for D1MENSION, a luxury residential tower in Ho Chi Minh City.
This follows its announcement on September 23 that it had acquired a prime site in the city’s District 1, comprising a 17-storey residential tower and a 22-storey serviced residential tower, for $51.9 million, with an estimated project value of $106 million when completed in the first quarter of 2018.
“We are very pleased that JLL Singapore’s first residential agency appointment in Vietnam is with CapitaLand, with whom we have had a long and successful partnership in Singapore and Asia,” said Mr. Chris Fossick, Managing Director for JLL Singapore and Southeast Asia.
He added that the outlook for Vietnam and its real estate market is very positive, supported by strong fundamentals such as having one of the world’s fastest growing economies, with growth of 6 to 6.5 per cent expected over the next three to five years, significant urban population growth over the next decade, and a rapidly growing middle-class, which is expected to increase by over 130 per cent in the next five years.
Located in District 1, D1MENSION is close to shopping malls, cinemas, schools, office buildings, restaurants and medical facilities. Connected to downtown Ho Chi Minh City via the Vo Van Kiet Expressway, the development is within a five-minute drive from the CBD and enjoys connectivity to District 7, an established expatriate enclave with first-rate shopping malls and international schools.
The residential tower comprises 102 apartments units for sale across a variety of two-, three- and four-bedroom apartments and penthouse units, with state-of-the-art “sky facilities” such as a swimming pool, a gym and a clubhouse with panoramic views of the surroundings.
The project is expected to be launched on October 22 in Singapore. Prices range from $350,000 to $500,000 per unit.
Mr. Chen Lian Pang, CEO of CapitaLand Vietnam, said: “We are excited to unveil D1MENSION, CapitaLand’s first luxury boutique development in the vibrant and cosmopolitan District 1 in Ho Chi Minh City. D1MENSION will be the first residential development in Vietnam to offer property management and concierge services by Ascott, the world’s largest international serviced residence owner-operator.”
He added that investors can be assured of sustainable value in the mid to long term and believes that D1MENSION will appeal to buyers seeking exclusive and luxurious homes at a coveted address in the heart of Ho Chi Minh City. “With our previously launched projects in Ho Chi Minh City averaging about 90 per cent sales, we are confident that the limited 102 units at D1MENSION will be equally sought after,” he said.
Average incomes in Vietnam have increased by about 10 per cent per annum in the last five years while home prices have been stagnant. As a result, the home price to income ratio has fallen from 7.6 years in 2010 to 3.9 years currently.
The entry-level apartment price to income ratio of 3.9 years is 30 per cent lower than the average of 5.7 years among other Southeast Asian cities.
According to JLL Research, overall apartment prices in Ho Chi Minh City are expected to rise by 5 to 10 per cent per annum in the next three years, supported by strong absorption and affordability levels.
“Ho Chi Minh City apartment prices are among the most affordable in the region when compared against local income levels, making the entry point attractive,” Mr. Fossick added.
US$314 million to restructure rice industry by 2020
About 25 programs will be implemented with the total capital of VND7 trillion ($314 million) to restructure the rice industry towards added value increase and sustainable development, according to a rice restructuring project by 2020.
The project was announced by the Cultivation Department at a seminar in the Mekong Delta city of Can Tho on October 11.
Talking about the project which is planning rice industry until 2030, the Ministry of Agriculture and Rural Development’s agency said that it will focus on planning and infrastructure development.
Low yielding rice areas will be transferred into other crops, crossbreeding researches will be conducted and authorized agencies will map out rice development policies suiting new situation.
In addition, the programs will expand large scale production in accordance with market demand, boost mechanization and processing, build brand names and step up market development connectivity.
One of major works of the project is to develop irrigation system and upgrade traffic and electricity network for modern production.
The Mekong Delta, the Red River Delta and the South Central Coastal Region will need thousands of billion of dong for the restructuring project in the phase of 2017-2020.
According to plan, the country will maintain rice farming over about 3.8 million hectares to ensure food security and improve the use efficiency of these areas.
Rice farming will concentrate on high quality varieties for both local consumption and exports.
Investment in EPZs & IPs reaches 50. 65 percent
The Ho Chi Minh City Export Processing and Industrial Zones Authority (Hepza) today announced that total investment capital from domestic and foreign investors in the export processing zones and industrial Parks (EPZs & IPs) reached at nearly US$ 355 million, an estimate by 50. 65 percent in September compared to its target of US$ 700 million.
From January to October, HCMC only attracted 14 new projects from foreign enterprises and 23 projects with investment capital adjustment. Total investment capital from the foreign investors was US$ 161 million, reducing 67 percent over the same period of last year.
While, the domestic businesses registered 50 new projects and 18 projects with investment capital adjustment and a total investment capital of US$ 187 million which dropped down 26. 9 percent in comparison with the same period of last year.
A representative of the Hepza said that the reduction was due to the city has not received any large scale investment projects since January to October.
In order to improve the city’s investment environment, the Hepza said the city should have more preferential policies for the domestic as well as foreign investors in the upcoming time.
Tien Giang facilitates local enterprises
The southern province of Tien Giang’s authorities have pledged to create favourable conditions for the sustainable development of local businesses in a meeting held on the occasion of Vietnam Entrepreneurs’ Day (October 13).
According to Nguyen Dinh Thong, Deputy Director of the provincial Department of Planning and Investment, the province will focus on creating a favourable and equal environment for economic sectors, applying solutions to businesses’ development to 2020, along with the implementation of Resolution No.35 of the Government on developing and supporting businesses until 2020.
Besides, Tien Giang province pays attention to providing information for businesses and locals about socio-economic development, land use plans and incentives on investment and relevant issues.
The province has made efforts in improving business environment, thus promoting investment attraction and facilitating operations of its entrepreneurs and businesses.
Since the start of 2016, additional 411 businesses with a total registered capital of VND2.884 billion (US$130 million) have been established in Tien Giang, an increase of 9.9% compared to the same period last year.