BUSINESS IN BRIEF 2/11
PM orders stricter controls over multi-level marketing
People join a conference held by a multi-level marketing firm. The Prime Minister requires strict punishments for multi-level marketing companies violating legal regulations.
Prime Minister Nguyen Xuan Phuc has released a directive requiring ministries and relevant agencies to tighten State management of multi-level marketing (MLM) activities.
The directive aims to ensure social security and people’s rights while facilitating MLM companies’ ability to operate under a legal framework.
The PM instructs the Ministry of Industry and Trade (MoIT), in co-operation with the Ministry of Justice and relevant agencies, to review regulations that do not fit the current reality in multi-level marketing management.
Accordingly, the MoIT is required to uncover and strictly punish violations by multi-level marketing firms operating without business licences. The ministry will investigate, check and resolve violations by marketing companies with products beyond their granted business licences.
Check-ups ensuring the businesses’ food safety, promotions, advertisements and conferences will also be enhanced.
In addition, the ministry instructs market management departments to define goods’ origins, especially those that are domestically produced.
The Ministry of Police should quickly investigate and strictly punish organisations and individuals taking advantage of MLM committing tax evasion, commercial fraud, smuggling, counterfeiting, manufacturing poor quality products and illegal financial mobilisation nationwide.
The PM also asked the MoJ to co-operate with relevant agencies to study and propose supplemental criminal punishments for firms using multi-level marketing for illegal trading activities.
The Ministry of Health will investigate the production, processing, transport, import and export of food and cosmetics products of these companies.
The Ministry of Finance is required to quickly publish exact information on tax investigation results and check-ups on multi-level marketing businesses nationwide.
The Ministry of Science and Technology will be in charge of resolving violations of measurements, product quality and intellectual property rights of MLM companies.
The Ministry of Agriculture and Rural Development will investigate and prevent violations of production, packaging, imports and advertisements – especially fertilisers.
The State Bank of Viet Nam has instructed credit institutions to follow regulations on deposit management of multi-level marketing companies according to a decree published on May 14, 2014. The institutions are required to quickly freeze a businesses’ accounts to facilitate investigations and withdraw the assets of violated firms.
The PM asked provincial People’s Committees to enhance management and investigate violations, while organising training courses to popularise legal regulations on multi-level marketing.
The Viet Nam Competition Authority under the Ministry of Industry and Trade has punished several multi-level marketing firms, including the Absonutrix Viet Nam Joint Stock Company and Global Trade and Investment Corporation, for various violations.
The Absonutrix Viet Nam Joint Stock Company in HCM City has been fined VND350 million (US$15,593) for failure to submit financial reports, while the Global Trade and Investment Corporation has had its business registration licence revoked and its deposits seized.
The MoIT is set to terminate operations of the Thang Long Franchise Company Limited in Ha Noi, while requiring them to pay their dues to people who had participated in the company’s multi-level marketing network.
Vietnam, Northern Europe eye further trade ties
Vietnamese businesses were guided to seek niche in Northern Europe, which comprises Finland, Denmark, Norway and Sweden, at a seminar in Hanoi on November 1.
The event was jointly held by the Vietnam Chamber of Commerce and Industry (VCCI) and embassies of the Northern European countries.
In his opening remarks, VCCI Vice President Doan Duy Khuong spoke highly of cooperation between Vietnam and the four countries with annual two-way trade reaching about 1.3 billion USD.
Vietnam exports some 500 million USD worth of goods to Northern Europe each year, mostly raw materials, rubber, machinery, computers, electronic products and parts, equipment, tools and garments, while importing around 800 million USD from the countries, he said.
Vietnam and the Northern European countries have signed agreements on cooperation in economy, science-technology, trade, trade promotion and protection, and aviation transportation, creating legal frameworks for the collaboration between Vietnam and each nation, he noted.
However, Khuong pointed out that the trade and investment links have yet to match their potential and aspirations.
According to the official, to boost economic and trade ties between Vietnam and the countries, a range of projects have been launched in support of their businesses.
Of note, the Vietnam-EU Free Trade Agreement is expected to come into force in 2018, helping turn Northern Europe into a door for Vietnamese enterprises to access the EU market comprehensively.
At the same time, through Vietnam, EU and the Northern European countries will make inroads into the ASEAN Community with new business and investment opportunities, Khuong stressed.
Katja Majbom Goodhew, Commercial Counsellor at the Danish Embassy in Vietnam, suggested Vietnamese producers and exporters carefully study demands of Danish consumers, and make information about ingredients and materials of their products transparent.
She explained that Danish consumers have high requirements of food safety and quality, environmental hygiene, and even animal welfare.
Forum designed to promote innovation in Vietnam
The US Embassy in Vietnam and Arizona State University co-organised a forum in Hanoi on November 1 with a view to promoting the innovation campaign in the Southeast Asian country.
US Ambassador to Vietnam Ted Osius said the event was designed to define challenges and seek solutions to support the startup ecosystem in Vietnam, while creating economic values and developing science, technology, art and mathematics in the nation.
Deputy Minister of Science and Technology Tran Van Tung noted that the Prime Minister has recently approved a project to support the innovation startup ecosystem through 2025.
He pointed out the attraction of foreign investment as the biggest challenge for startups and proposed the Government devise particular policies to assist investors in the field.
This is the second innovation promotion forum hosted by Arizona State University, following the first event in 2015. A similar forum is scheduled to take place in the Mekong Delta city of Can Tho on November 3.
A start-up is a type of enterprise that can scale up quickly, based on intellectual property, technology and an innovative business model.
Under the national start-up development project, the Government will provide legal and financial support for around 2,600 start-ups across the country over the next decade.
Garment-textile firms urged to gear up for global value chain
Strengthening the supply chain in ASEAN textile sector towards sustainable development was the focus of discussion at an international conference in Hanoi on November 1.
The event was part of the meeting of the ASEAN Federation of Textile Industries 2016 (AFTEX) hosted by Vietnam.
President of the Vietnam Textile and Apparel Association (VITAS) Vu Duc Giang highlighted the strategic role of Vietnam’s textile and apparel in the bloc, saying that Vietnam tops ASEAN countries in apparel export.
The sector is also among the nation’s biggest foreign currency earners, which helps name Vietnam in the world’s top five largest apparel exporters, Giang said.
In 2015, the country earned 27 billion USD from textile and apparel export. The figure is expected to reach 29 billion USD this year. The sector has over 6,000 enterprises, creating jobs for over 2.5 million labourers.
Vietnam needs to develop a master plan for developing the garment sector by 2020, with a vision to 2040, he said, adding that the sector should have incentives to draw foreign investors while enterprises need to develop their own brand names.
VITAS joined the AFTEX in 2001. The federation has made significant contribution s to forming a free trade zone among the Southeast Asian nations, and the building of the ASEAN Economic Community (AEC) in 2015.
Vietnam attends Havana International Fair
Some 3,200 enterprises from over 73 countries and territories worldwide, including Vietnam, are displayed their products in the 34th Havana International Fair (FIHAV 2016) in Cuba, which kicked off on October 31.
Speaking at the opening ceremony, Cuban Minister of Foreign Trade and Investment Rodrigo Malmierca highlighted the event as a space for foreign firms to concretise business opportunities in Cuba.
He stressed the increased number of exhibitors at this year’s fair shows that international businesses are increasingly interested in establishing partnership with Cuban companies, as well as their growing trust in the prospect for development of the Caribbean country.
On the first day of the fair, Cuba and Russia signed two agreements on supply of the Vira radiobroadcast system serving radio communication in Cuba’s civil aviation, and on modernisation of Cuba’s sugar-cane industry.
The Cuba Chamber of Commerce also inked a memorandum of understanding with the Japan External Trade Organisation ( JETRO), aiming to their boost future cooperation.
Initiated in 1982, FIHAV is the largest annual trade fair in Cuba, and one of the largest bazaars in Latin America. It significantly contributes to improve the prestige of Cuba in the international market.-
Vietnamese corporate culture campaign to be launched
A campaign to build Vietnamese corporate culture will be launched in Hanoi on November 7, as heard a press conference in Hanoi on November 1.
The drive, to be launched by the Vietnamese Association of Business Culture and the Ministry of Industry and Trade, is meant to realise the Prime Minister’s Decision issued on September 26, 2016, in which November 10 is chosen as Vietnam Corporate Culture Day.
Following the launch ceremony, the association will raise awareness of the public, especially the business community, of the importance of building corporate culture amid global integration, drive back negative phenomena in manufacturing and trading, improve business climate, as well as invite foreign firms to join the effort.
Each year, the association will honour outstanding firms and entrepreneurs in developing corporate culture with national prizes. It is working with ministries and agencies to draft a set of criteria for the selection and awarding.
Recently, the association coordinated with the Ministry of Culture, Sports and Tourism to hold a seminar on building corporate and entrepreneurs’ culture for sustainable development, during which participants shared view that culture is a decisive factor for the success of businesses.
Large machinery imports reflect increasing investment in manufacturing
The large import of machinery, equipment and parts in the first ten months of this year reflected increasing investment in the manufacturing and processing industry, according to the General Department of Vietnam Customs.
In the period, Vietnam imported 22.55 billion USD worth of machinery, equipment and parts while exporting only 8.29 billion USD of those products, resulting in a deficit of 14.26 billion USD.
The General Statistics Office reported that the number of new firms in the manufacturing and processing sector rose 22.1 percent from the same period last year and their total registered capital went up 98.7 percent.
The sector also attracted a substantial amount of foreign direct investment, with 8.39 billion USD poured into newly-licensed projects.
The import of computers, electronic products and parts in the ten months reached 22.7 billion USD while export of those products fetched only 14.79 billion USD, translating into a 7.91 billion USD trade deficit.
It is noteworthy that this sector saw a high inventory index, which as of October 1 went up 45 percent from the same period last year.
A deficit of 1.83 billion USD was also seen in the trading of gas and oil, with 9.52 million tonnes of petrol and oil imported in ten months, while 6 million tonnes of crude oil were exported.
Vietnam reported a 3.52 billion USD trade surplus in the 10-month period, with m ajor foreign currency earners being phones and phone parts, electronic goods, textile and garments, computers, machinery and equipment, foot wear and aquatic products.
Phones and phone parts brought in an estimated 28.3 billion USD, up more than 10 percent year on year, while textile and garments earned nearly 20 billion USD, an increase of 5.2 percent.
The export value of agro-forestry-fishery products reached 26.4 billion USD, a year-on-year increase of 6.3 percent.
Support industry website launched
The Ministry of Industry and Trade has launched a website to update regularly legal documents and policies of State agencies on the support industry at www.support.gov.vn.
Addressing the launching ceremony on November 1, Deputy Minister of Industry and Trade Do Thang Hai said over the past years, the Government has issued numerous policies and incentives to encourage the development of the support industry.
He said the website will be an effective and strong tool to promote such policies among enterprises in the sector.
The website also features a list of potential and ongoing projects.
HCM City to receive more overseas remittances
Vietnamese expatriates living abroad will remit roughly US$2.5 billion to HCM City in 2016’s final quarter, deputy director of the State Bank of Viet Nam’s HCM City branch Nguyen Hoang Minh estimates.
This result would bring the city’s received overseas remittance this year to around $5.7-5.8 billion, up from $5.5 billion last year.
The Vietnamese diaspora sent more money to HCM City in the first nine months of this year, rising 4 per cent year-on-year to reach $3.25 billion.
Minh attributed the rise of the remittance to a warming domestic real estate market and rising deposit interest rates.
Echoing Minh, Dong A Money Transfer Company director Tran Van Trung predicts that the remittance to the city will be higher than last year thanks to the rebound of the real estate market.
Trung said that the US, Australia and Canada would remain Viet Nam’s largest remittance sources, followed by Malaysia, Taiwan and Japan.
Financial expert Huynh Trung Minh said that remittance had become an important capital source to offset the country’s trade deficit and support the country’s foreign reserves.
Trung Minh attributed the rise to the growing number of Vietnamese working and residing abroad.
Besides the streamlined policies and regulations encouraging Viet kieu (overseas Vietnamese) to invest to their homeland, an ease of remittance management policies – such as simplified remittance transfer service licences issued by the State Bank of Viet Nam – also contributed to increasing the remittance to the country, Trung Minh said.
Remittances to HCM City, which received the largest volume of remittances nationwide, have increased some 10 to 12 per cent on average in the past five years.
Remittances to the city last year reached $5.5 billion, exceeding the $5.2 billion received in 2014. More than 70.8 per cent of the remittance value flowed into production and businesses, while some 21.6 per cent went into real estate and 7 per cent to relatives.
November Gas price increases
Gas price continued its rising trend with an increase of VND19,000 (US$0.85) per 12kg cooking gas canister as of November 1, 2016.
Accordingly, retail price for consumers in the neighbourhoods of HCM City will increase. For example, SP Gas price from Saigon Petro Co Ltd (Saigon Petro) will increase to VND293,500 ($13.13) per 12kg canister.
Tran Van Phuc, business manager of Saigon Petro, explained the rise in November gas price was due to the recently announced increase in world gas price of $60 per tonne, making it a total of $415 per tonne. This hike in world price caused the price of domestic gas to be adjusted in accordance with the market.
This rise in November is the second continuous significant monthly rise in gas price, following the October hike of VND15,000 ($0.67) per 12kg canister.
Suppliers and distributors in HCM City and other southern cities and provinces announced the rise on October 31.
Walmart seeks stronger ties with local suppliers
Walmart has joined a business trade fair in Ho Chi Minh City seeking to strengthen its local supply chain with businesses in the manufacturing and agriculture segments of the economy.
At the event, Walmart representatives met with many local clothing, footwear and toy manufacturers, distributing them important policies and procedures of Walmart in regards to packaging, product codes and quality matters.
The retailer is widely reported to be in negotiations with two Vietnam local companies with regards to rice and other food products. However, unconfirmed reports say no agreement has been reached.
Promoting exports in the last months of the year
October was the third consecutive month in which the country’s exports reached higher growth than the same period last year, with an increase of 8.3%.
The total export turnover in the first ten months of this year was estimated at US$144.1 billion, a year-on-year increase of 7.2% with numerous commodities experiencing big increases in their export values.
By the end of October, there were 23 commodities with export turnovers of more than US$1 billion, including fourteen with turnovers exceeding US$2 billion.
In the first ten months of the year, the growth rate of the country’s exports still quite lower than the same period last year (8.5%).
The Ministry of Industry and Trade has forecast this year’s export turnover at US$174-175 billion, up around 7.5%-8%.
The inability to reach the target of 10% export growth set out by the National Assembly early this year was predicted a few months ago due to the decline of some commodities.
A series of key export items suffered a decline in both volume and value compared to the same period last year, such as rice’s export turnover, reaching US$1.9 billion, a year-on-year decrease of 16.3% in value and 20.6% in volume; crude oil, recording nearly US$2 billion, down 39.6% in value and 22.2% in volume; and cassava and cassava products, reaching US$809 million, decreasing 26.5% in value and 13.2% in volume.
There are many reasons for difficulties in export activities, including objective reasons such as low consumer demand in markets and the falling price of crude oil bringing about the decline of the prices of many export commodities.
In addition, many countries are enhancing their adaptation of measures and technical barriers to strictly control the quality of exported products, particularly agricultural and aquatic products.
In large export markets, Vietnamese products face fierce competition from many competitors including China and India.
Meanwhile, unfavourable weather in the country in recent months has affected the supply as well as productivity and quality of exported products.
However, frankly, the supply of many export commodities is still limited, particularly given the lack of enterprises with high production capacity.
Despite high export value, the production of key industrial export commodities, including phones, electronics, textile and footwear, still depends on imported raw materials due to the lack of a strong supporting industry.
Another important cause for decreased growth of exports is the low competitiveness of Vietnamese enterprises compared to other countries in the region.
Many export enterprises have not paid much attention to building their brands and improving their products’ quality. Moreover, many domestic goods have no access to big distribution channels in foreign markets.
In the last two months of this year, the world’s economic situation is forecast to experience no positive changes, with the continuously low price of oil and difficulties related to technical barriers continuing to create challenges for Vietnam’s export activities.
In addition, the prediction that the US will impose an anti-dumping tariff on Vietnamese frozen shrimp for the tenth time and the recall of Samsung’s Galaxy Note 7 have negatively affected Vietnam’s exports.
However, it can be seen that many commodities have begun to benefit from new free trade agreements (FTA) such as the FTA between Vietnam and Eurasia, which is expected to pave the way for the development of production in the country and exports and help Vietnamese goods further access global supply chains.
Despite difficulties, there are many opportunities for exports. Promoting exports in the last months of this year mainly depends on taking full advantage of opportunities as well as overcoming difficulties, particularly expanding export markets and effectively utilizing opportunities from the country’s international integration.
In addition, it is essential to urgently improve the competitiveness of domestic enterprises to proactively turn challenges into opportunities in export activities.
Handsome 9M figures for VietinBank
The Vietnam Commercial Bank for Industry and Trade (VietinBank) recorded strong growth in the first nine months of 2016, with after-tax profit reaching VND5.19 trillion ($232.52 million), up 16.4 per cent year-on-year. Potentially irrecoverable debts, however, may pose a problem.
Total assets stood at VND900 trillion ($40.32 billion) as at September 30, up 15.5 per cent compared to the start of the year. Customer loans and deposits, coincidentally, both reached VND625 billion ($28 million), up 16 per cent and 27 per cent, respectively, year-on-year, Vietinbank’s consolidated financial statement for the third quarter revealed.
Net profit from services reached VND393 billion ($17.6 million) in the third quarter, net profit from trading foreign currencies nearly VND131 billion ($5.87 million), and net profit from trading securities VND40 billion ($1.79 million).
Net losses from investment securities stood at only VND1.3 billion ($58,243) in the third quarter, down significantly from the VND74 billion ($3.31 million) in losses recorded in the third quarter of 2015. Net interest income reached VND5.94 trillion ($266.13 million), up nearly 21 per cent year-on-year.
Operating expenses increased 9.5 per cent year-on-year to VND3.04 trillion ($136.2 million) and provisions for credit losses increased a substantial 53 per cent year-on-year to VND1.96 trillion ($87.81 million). Pre-tax profit reached VND2.21 trillion ($99.01 million) during the third quarter, up 19.8 per cent year-on-year.
Cumulative pre-tax profit after the first nine months stood at VND6.48 trillion ($290.32 million), up 13.2 per cent, while after-tax profit reached VND5.19 trillion ($232.52 million), up 16.4 per cent. Attributable profit was VND5.18 trillion ($232.07 million).
Its bad debt ratio was down slightly to 0.85 per cent in the quarter against 0.92 per cent at the start of the year. Potentially irrecoverable debts increased by 30 per cent to 3.57 trillion ($159.94 million), or 66 per cent of all bad debts.
The bank set targets for 2016 at its annual general meeting in April. Total assets are to reach VND889.55 trillion ($39.85 billion), credit exposure VND798.49 trillion ($35.77 billion) and mobilized capital VND811.44 trillion ($36.35 billion).
Pre-tax profits are to increase 8 per cent year-on-year to VND7.9 trillion ($353.94 million). Return on average assets (ROAA) and return on average equity (ROAE) are expected to reach from 0.9 per cent to 1.2 per cent and 10 per cent to 11 per cent, respectively.
In related news, the Ministry of Finance (MoF) released an official document in June requesting the State Bank of Vietnam direct the representative of State capital in the Bank for Investment and Development of Vietnam (BIDV) and VietinBank to vote for the 2015 dividend payout to be in cash.
BIDV is set to payout 2015’s dividend in cash at a rate of 8.5 per cent per share, as confirmed at an extraordinary shareholders meeting on October 22, while VietinBank has made no indication to MoF on paying a dividend.
Under a plan submitted to VietinBank’s annual general meeting in April there was to be no dividend payout for 2015. Its Chairman was quoted as saying that “this is a necessary decision and has strategic meaning for the bank in improving its financial capability and ensuring its capital adequacy ratio (CAR) and continued development.” The central bank currently holds 64.46 per cent of its charter capital.
Besides wanting to keep all profits from 2015 for the bank’s development, VietinBank also proposed the government consider lifting the foreign ownership limit, in which the State would hold less than 50 per cent of charter capital. VietinBank said this would ensure the ownership and control of the State in the bank while also creating the conditions to attract more resources.
HCMC proposes to establish state-run gold exchanges
The HCMC People’s Committee has proposed the State Bank of Vietnam to study building state-run physical gold exchanges and trading centers to mobilize gold from citizens for socioeconomic development.
The committee has also proposed the Ministry of Finance and the Ministry of Industry and Trade to specify regulations on legal documents for gold/jewelry purchased from customers.
In addition, the city has suggested the central bank to permit credit institutions to provide loans in the Vietnamese dong for businesses making gold jewelry and fine arts.
The bank should intensify inspecting and handling gold import violations from border gates, it said.
Coffee prices up to VND 45, 000 per kilogram, highest since 2011
Prices of coffee cherries in the Central Highlands provinces of Dak Lak, Dak Nong, Gia Lai and Kontum increased to VND 45, 000 per kilogram on October 31, making the highest record since 2011.
Coffee prices increase by VND 45, 000 per kilogram.
The domestic coffee prices have been increasing to VND 40- 45 million per ton since the beginning of October.
Thus, the current coffee prices increased by VND 15 million per ton compared to the previous coffee crop.
Illegal businesses using multi-level selling to be charged with crime
The Prime Minister has issued a decree ordering ministries and related agencies to increase their control on multi-level selling and put criminal proceeding on enterprises employing the pyramid selling for illegal business.
The PM also asked the Ministry of Public Security to increase management, investigate and handle cases of illegal multi-level selling. Those individuals and enterprises that take advantage of the form of selling to carry out illegal acts such as appropriating others’ properties, evading taxation, commercial frauds, smuggling will be charged with a crime.
Police should issue harsh penalties on such illegal acts to deter people from committing crime, keeping the social order.
To create favorable condition for those conducting multi-level selling as per the country’s law, the PM ordered the Ministry of Industry and Trade, the Ministry of Justice and related agencies to review regulations and amend these improper regulations.
Additionally, the Ministry of Industry and Trade should liaise with relevant agencies to have timely discovery of illegal enterprises and issue strict punishment on them.
Local firms cause massive trade deficit in Jan-Oct
Vietnamese enterprises caused a colossal trade deficit of US$15.96 billion in January-October while foreign-invested businesses brought a trade surplus of US$19.5 billion, shows data of the General Statistics Office (GSO).
Total export revenue was put at US$144.1 billion in the period, a 7.2% year-on-year increase. Vietnam spent a total of US$140.6 billion on imports, up 2.1% over the same period last year, with domestic firms making up US$57.4 billion, up 2.4%, and foreign firms accounting for US$83.2 billion, up 1.9%.
Thanks to the outstanding export performance of the foreign-invested sector, the country enjoyed a trade surplus of US$3.52 billion.
Mobile phones and phone parts contributed the biggest part of US$28.3 billion, rising 10.3% year-on-year, followed by apparels with US$19.9 billion, up 5.2%; electronics, computers and components with US$14.8 billion, up 15.6%; footwear with US$10.4 billion, up 6.9%; and machinery, equipment and parts with US$8.3 billion, up 24.9%.
China remained the biggest exporter with Vietnam spending a combined US$40.3 billion on goods from the northern neighbor in January-October, down 1.2% year-on-year.
South Korea came in second with US$25.8 billion worth of goods shipped to Vietnam, up 10.8%, followed by ASEAN countries with US$19.1 billion, down 2.8%, Japan with US$12.2 billion, up 1.7%, the European Union with US$9.1 billion, up 6.4%, and the U.S. with US$6.7 billion, up 0.6%.
In October alone, exports edged up an estimated 0.5% month-on-month to US$15.5 billion despite a decline in phone shipments. Of which, domestic firms generated US$4.43 billion, up 3.9%, while foreign-invested firms posted US$11.07 billion, down 0.8%, including crude oil.
Products whose October export revenues were lower than in September included phones and components (3.9%), fruits and vegetables (17.9%) and steel and iron (25.2%).
According to GSO, after Samsung stopped Galaxy Note 7 production in September, market watchers predicted its move would affect the nation’s export revenues as Samsung Vietnam makes up a majority of the country’s phone and phone parts exports.
The problem did affect the business performance of Samsung but has yet to leave negative impact on the country’s overall phone and phone parts exports, the GSO said, explaining most of the Note 7s assembled locally were for the domestic market.
On the other hand, Samsung Vietnam boosted outbound sales of other phones, thus offsetting the lost revenue from Note 7s.
In the first two weeks of last month, phones and phone components brought US$1.35 billion in export revenue, a rise of 2.1% against the same period last year. For the entire month,
GSO estimated a 5% year-on-year pickup.
However, the office said the Note 7 incident might affect the export performance of the nation in the two final months of the year and cause full-year export growth to fall by around 30 basis points.
The country’s import bill in October was some US$15.7 billion, up 7.9% against the previous month, with US$6.3 billion from local firms, increasing 10.2%, and US$9.4 million from foreign enterprises, up 6.4%.
U.S. punitive tariffs almost certain on Vietnam steel pipes
Vietnam’s circular welded carbon-quality steel pipes exported to the U.S. are most likely to face anti-dumping tariffs of up to 113.18% following a conclusion on October 25 of the U.S. Department of Commerce (DOC).
DOC announced the official conclusion on the anti-dumping and anti-subsidy investigation into circular welded carbon-quality steel pipes imported from Vietnam, India, Oman and the United Arab Emirates (UAE), said the Vietnam Competition Authority at Vietnam’s Ministry of Industry and Trade.
The Vietnamese enterprises who have actively participated in the investigation are subject to a dumping margin of 0% to 6.27% while those who did not join the case face a rate of 113.18%.
The U.S. International Trade Commission will make a final decision on December 5 regarding injury for the American steel industry. If ITC says there is injury, DOC will impose the duties on December 12.
Property firms seek to build business links with Dubai
A Vietnamese business delegation is visiting Dubai in the United Arab Emirates (UAE) to sound out business opportunities.
Around 50 enterprises of Vietnam and Dubai attended a real estate investment forum co-held last Sunday by the Embassy of Vietnam in the UAE and the LP Vietnam Academy of Entrepreneurs. Pham Binh Dam, Vietnam’s ambassador to the UAE, said this was the first Vietnam-Dubai real estate forum.
“The real estate sector holds huge growth potential. Dubai is famous for its phenomenal growth in the sector with outstanding projects like a palm-shaped artificial island, a 116-storey skyscraper and a seven-star gold-plated hotel,” said Dam. “Vietnam can learn from extensive expertise or get creative inspirations from Dubai’s real estate sector.”
Mohammed Rashed, chief executive officer of Limitless LLC under Dubai state-owned property group Nakheel, said the forum opened up an opportunity to share experiences and ideas as Dubai’s real estate is famous all over the world.
The company is well known for its Palm Islands and The World, an archipelago of man-made islands in the shape of a world map, most of which remain undeveloped. These projects will cover around 20,000 hectares and accommodate over 330,000 people.
He said Limitless views Vietnam as a key market. It has invested in the 125-hectare Halong Star complex worth US$500 million with a system of luxurious hotels, villas, apartments, and a shopping center in the northern province of Quang Ninh.
As a participant in the forum, Tran Thi Quynh Ngoc, vice chair of Nam Cuong Group, said many Vietnamese enterprises in the field had little experience in developing large-scale projects. Therefore, the group is willing to cooperate with potential foreign partners, especially those with expertise in Dubai.
The group, Ngoc added, has not invested in luxury real estate projects but will eye this segment in the future.
“Dubai has transformed from a desert city into a modern luxurious one, together with its active real estate market. We are eager to learn from this success story and seek investment opportunities with Dubai-based real estate firms as well,” she said.
Draft law to cut subsidies for railway sector
The draft amendments to the Law on Railways put forth for discussion at the National Assembly sitting in Hanoi on October 31 introduce a radical change to the financial mechanism for railway operation with an aim to cut subsidies for this loss-making sector.
In the draft law, the Government shifts from collecting fees on railway infrastructure to leasing such facilities to maximize revenues.
Under the prevailing law, the Government ensures sufficient funds for managing, repairing and maintaining railway infrastructure, and each year, between VND1.1 trillion to VND1.6 trillion, or some US$50 million to US$75 million, is spent by the State for such jobs.
However, the total amount of fees collected by Vietnam Railways – as entrusted by the Government – is equivalent to only 21% to 24% of the sum invested. That is to say the Government has to make up for the hefty balance.
Such a subsidy mechanism is seen as inappropriate to the market status that the railway sector is heading for, especially at a time when several railway enterprises have gone public such as Hanoi Railway Transport Company and Saigon Railway Transport Company. In addition, subsidizing railway operations erodes the competitiveness of transport enterprises as well as those leasing railway infrastructure.
In submitting this draft law, the Ministry of Transport proposed that railway infrastructure be leased out to enterprises, rather than collecting a minimum fee regulated by the Ministry of Finance.
If the draft law is approved by the National Assembly, fees for using railway infrastructure would become service prices, which can be reached via tenders.
TP Bank gets B2 rating from Moody’s
For the first time, US ratings agency Moody’s Investor Service assigned B2 long-term local and foreign currency deposit and issuer ratings to Tien Phong Commercial Joint Stock Bank (TP Bank), with stable outlook.
Moody’s rates the lender’s short-term local and foreign currency deposit and issuer at ‘not prime’.
The bank’s baseline credit assessment (BCA) and adjusted BCA was rated at B3. Moody’s assigned Counterparty Risk Assessments of B2(cr)/NP(cr) to the bank.
TP Bank has the same rating as Vietnam’s five other large banks, including Military Commercial Joint Stock Bank, Vietnam International Bank, Vietnam Technological and Commercial Joint Stock Bank (Techcombank), An Binh Commercial Joint Stock Bank and Asia Commercial Bank.
The bank’s loan book is focused on retail and small and medium-sized enterprises, which accounted for 45 percent and 26 percent of gross loans, respectively, as of June 2016.
TP Bank’s total assets were estimated at about 83 trillion VND (3.7 billion USD), making it the 22nd largest bank in Vietnam in terms of assets, occupying 1.2 percent of Vietnam’s banking market.
According to Moody’s, TP Bank runs a stable operation with a high reliance on market funding with good growth in retail and small and medium-sized enterprise sectors and efficient risk management.
A TP Bank representative said a positive assessment from Moody’s motivates the bank to deliver for its customers. TP Bank aims to become the leading bank in Vietnam and plans to develop its digital banking services.
The bank is privately owned with major shareholder groups including SBI Holdings and related companies (about 20 percent stake), DOJI Group and related individuals (19.9 percent), FPT Corporation (around 9 percent) and IFC – belonging to the World Bank Group (4.99 percent).-
Better legal framework needed to attract foreign investors to road projects
Financial experts have called for a better legal framework to curb policy-related risks so that projects, particularly road projects in Việt Nam, could be made more attractive to foreign investors.
A member of the National Advisory Council on Finance and Monetary Policies, Lê Xuân Nghĩa, said at a talk last week that policy-related risks were the main issue concerning foreign investors to Việt Nam.
The talk, organised by Giao thông (Transport) newspaper, highlighted the need to develop another North-South highway in Việt Nam and suggestions to mobilise funding for the road project.
In the middle of this month, the Ministry of Transport submitted to the Government a scheme to build the North-South Highway from Hà Nội to HCM City, with total investment of about VNĐ230 trillion (US$10.2 billion).
Deputy Minister Nguyễn Nhật said that construction of the highway, which would begin from the capital city and stretch more than 1,620 kilometres along the east of the country, would be carried out from 2017 to 2022.
The investment would be mobilised from the State budget and private organisations and individuals. More than VNĐ136.2 trillion ($6.1 billion) would be mobilised from organisations and individuals, accounting for nearly 60 per cent, while the State budget would cover the remainder.
Nhật said the road sections, whose transport demand was forecast to reach 30,000-35,000 vehicles per day by 2030, would have four-lanes of at least 22 metres wide. Other road sections forecast to be less busy would have four-lanes of 17 metres wide.
Nghĩa said that under the proposed scheme, the Government would spend VNĐ93 trillion from selling Government bond instead of using Overseas Development Assistance (ODA) loans.
“It’s a bold and innovative proposal from the Transport Ministry and it’s likely the only way to implement the project,” Nghĩa said.
However, when the State’s contribution was from domestic resources, it would be difficult for private investors to access domestic commercial bank loans, Nghĩa said, suggesting that the funding should be from overseas.
“We could borrow from overseas investors, as I know that they have an interest in transport projects in Việt Nam,” he said, as long as Việt Nam could solve the bottleneck in frequently-changing policies.
Mechanisms on payback and funding allocation should be made as clear as possible, he said.
Head of Transport Ministry’s Private-Public Partnership Department, Nguyễn Danh Huy, agreed with Nghĩa over foreign loans for the project but he said there remained difficulties to get foreign loans now.
“The Transport Ministry met about 20 foreign investors and banks but they worry about policy-related risks in Việt Nam,” he said.
“They asked for guarantees in revenue and foreign exchange rates but we are unable to do so.”
Nguyễn Văn Tỉnh, General director of the Việt Nam Infrastructure Development and Finance Investment Joint Stock Company (VIDIFI) said that when the company developed the Hà Nội-Hải Phòng Expressway Project, it had committed to have 39 per cent of the project investment contributed by the Government but, so far, the company had yet to receive any penny.
“VIDIFI negotiated to sell the project to an Indian partner for US$2 billion but the partner stopped negotiations as soon as they learned about delayed contributions from the Government,” he said.
Deputy Transport Minister Nguyễn Nhật said that it was difficult to call for foreign investment at this time because the country does not have a specific law on Public-Private-Partnership contracts apart from the Prime Minister’s Decision, which has resulted in modest stability for related policies.
Diversifying rice varieties to combat climate change
The effects of this year’s severe drought on agriculture in the economically vital Mekong Delta will be felt for months, if not years, to come, say environmentalists and United Nations experts.
They also say Vietnam and other Mekong countries must prepare for an increase in future extreme weather events by boosting their early disaster planning and preparedness activities to mitigate the negative impacts of these types of weather phenomena.
The weather system delivered an increase in storms in 2015, followed by the worst drought in the Mekong Delta area in nearly a century, wreaking havoc on the environment and the livelihoods of the regions 20 million inhabitants.
The Vietnam government released a drought recovery plan on October 17 that outlines measures be taken in the short, medium and long terms. In the report, government economists have estimated the total economic loss from the drought at US$660.8 million (VND15 billion).
This calculates out to 0.35% of the national GDP, resulting in negative agricultural growth of 0.18% for calendar year 2016, the first time in decades the agriculture segment of the economy has contracted.
The intense drought that peaked in the country between February and May brought record-high salt levels and severe water shortages. About 2 million people had no access to water for consumption and domestic use, 2.2 million were food insecure, and more than 2 million lost income due to damaged or lost livelihoods, the report said.
Though drought conditions in Vietnam ended in September, their ramifications have created an ongoing need for humanitarian assistance.
The drought impact for affected households is still lingering and needs are pertinent, particularly in terms of water storage and purification, hygiene and nutrition support, disease surveillance and response, and livelihood recovery, the report said.
The drought recovery plan lays out a wide range of goals aimed at ensuring that the 18 provinces affected by the drought including those in the Mekong Delta region, receive water and water treatment supplies, foods, seed packages, nutritional supplements, essential medicines, and fish and poultry restocks.
The plan will also provide irrigation infrastructure repairs, cash-for-work programs, and technical assistance and technology for improved meteorological and disaster forecasting.
The provinces have estimated that the total cost of the recovery from now until 2020 will be more than US$1.2 billion, the report said.
“For medium-and longer-term recovery, there should be a more comprehensive approach to water supply, water, and land resource management, adaption measures for livelihoods and agricultural restructuring for a changing climate,” said Vu Minh Hai of Vietnam’s Climate Change Working Group in an email.
The Vietnam government has provided support of nearly US$60.7 million (VND1.5 billion dong) since 2015 to provide food, water purification tablets, financial aid, and water infrastructure repair work to the drought-affected areas of the country, according to the drought recovery plan.
United Nations agencies and NGOs have mobilized a further US$6.1 million from various sources to provide water supplies, sanitation and hygiene, nutrition, food, health, and financial aid for Vietnamese who live in the provinces affected by the drought, the report said.
Robinson, a former president of Ireland who previously served as UN High Commissioner for Human Rights, said leaders of countries must do more, especially since other extreme weather events will continue to take a toll on areas with vulnerable populations in the future.
“We want leaders of countries to be in the forefront of a new approach,” said Robinson, who visited Vietnam earlier this year as part of a UN mission to see how climate change weather patterns have affected the Mekong Basin.
Despite ongoing efforts to continuously monitor and address the impact of climate change, saltwater intrusion, and water availability in the Mekong Delta’s farmlands, the sharing of information with farmers remains “still slow and uncoordinated,” said Wilhelmina Pelegrina, food and ecological agriculture campaign coordinator at Greenpeace Southeast Asia.
“Democratizing and decentralizing climate information at the level of villagers or municipalities and enabling farmers and fisherfolk to have access to this information and its interpretation are crucial,” she said in an email.
“By having climate information in the hands of farmers and fisherfolk combined with their local knowledge systems, they will be able to plan and adjust their farming and fishing systems.”
Farmers in the Mekong Delta must “climate-proof” their farming by diversifying their crops to ensure that they have food when extreme weather events occur, Pelegrina said.
“Having diversity on-farm will be a challenge in the Mekong Delta as this is the rice bowl of Vietnam and the source of almost 90% of exported rice,” she said. “The region will have to look into ways to diversify and ensure resilience in their rice system. At the very least, by having different rice varieties that are adapted to local conditions.”