BUSINESS IN BRIEF 21/8

Middle East, Africa untapped

Vietnamese firms have failed to fully exploit the promising Middle Eastern and African markets, despite encouraging export turnovers they have earned from these countries in recent years, a seminar heard in Ha Noi yesterday.

Countries in these regions had high import demand for food, agricultural, seafood and consumer products that Vietnamese enterprises were capable of providing, said Ngo Khai Hoan, deputy head of the Ministry of Industry and Trade’s Africa, West and South Asia Markets Department.

As well as these reviewed items, the Middle Eastern nations alone had rising demand for construction materials, electronic cables, home decor, milk and milk products as well as office machinery and equipment. Also goods that would be to Viet Nam’s advantage, Hoan said.

In order to foster exports to these lucrative markets, domestic enterprises had to revise their business strategies with focus on improving their distribution channels while developing new ones, said Le Thai Hoa, deputy head of the department.

They should be also proactive in participating in trade promotion and fact-finding trips along with trade fairs and exhibitions held in these countries in a move to better study the tastes of consumers there.

Vietnamese businesses also needed to improve their understanding about these countries’ cultures so that they could provide suitable products, Hoa said, calling for closer links between exporters. That could help enhance their competitiveness in overseas markets.

Meanwhile, Nguyen Lien Phuong, director of the Viet Nam Institute for Businessmen encouraged the firms to pay attention to supervising the quality of their products and registering their trademarks not only in domestic markets but also international ones. 

Once local firms drew up long-term strategies which included developing export products and protecting their trademarks beside their close co-operation with relevant authorities, they could effectively tap into the African and Middle Eastern markets.

Viet Nam has to date established trade relations with 70 countries in African and Middle Eastern blocs. Two-way trade between Viet Nam and these nations had increased eight times over past 10 years.

US$ 10, 5 bln invested into Dung Quat Economic Zone

The People’s Committee of Quang Ngai province and the Management Board of Dung Quat Economic Zone (EZ) co- held a ceremony of the 20th anniversary founding of Dung Quat Economic Zone (August 16th, 1996- 2016).

On the occasion, the Management Board of Dung Quat Economic Zone received the first class Labor Medal. The Prime Minister also granted certificates to two outstanding groups and individuals. The People’s Committee of Quang Ngai also presented many certificates for outstanding groups and individuals in developing Dung Quat Economic Zone.

In 1994, the Government decided to build the first oil refinery in the country which is located at Dung Quat with total investment capital of over US$ 4 billion.

From 2006- 2010, Dung Quat Economic Zone became one of the key projects creating great development of Quang Ngai province on industrial output, export turnover and state’s budget revenues, and helping Quang Ngai become one of the highest earning provinces.

The period of 2011- 2015 marked powerful investment attraction into Dung Quat Economic Zone. Up to now, Dung Quat Economic Zone has total 132 investment projects with total registered capital of US$ 10, 5 billion. Of these, there are 28 foreign direct investment (FDI) projects worth US$ 6, 5 billion and 104 projects of domestic investors with nearly US$ 5 billion.

Value of industrial, trade and services output last year reached VND 87, 600 billion. Export turnover up to US$ 230 million. Total mass of cargo transported through the port in Dung Quat was16 million tons. The province creates more than 15, 000 jobs for local workers.

Speaking at the anniversary ceremony, Deputy Chairman of the People’s Committee of Quang Ngai Mr. Dang Van Minh stressed that management board needs to research and provide ideas for local authorities to improve further regional investment environment, attract infrastructure investment and human resources and others.

The management board should assist domestic and foreign investors and expansion of Dung Quat oil refinery, VSIP Quang Ngai and the Dung Quat industrial park and urban area, he said.

HCM City to host safe farm products fair

The first safe farm products fair will be organized at Dong Ho restaurant’s courtyard at No. 195-197 Cao Thang Street in District 10 in Ho Chi Minh City from August 20-21. 

So far, 27 businesses have registered to take part in the event, eight of them producers and traders of poultry, pork and seafood products and the rest, fruit and vegetable businesses.

Products that have food safety certification such as VietGap and GlobalGap are eligible to participate in the fair.

The fair’s organizers will regularly check the quality of produce and randomly test fruit and vegetable samples for plant protection residues.

The event will be held every two weeks by the Ho Chi Minh City Department of Agriculture and Rural Development

Export turnover hit US$ 191 billion in Jan-Jul

The total trade turnover touched nearly US$ 191.73 billion in the first seven months, up 2% (or US$ 3.83 billion) against the same period last year, according to the General Department of Viet Nam Customs.

As of late July, trade turnover of the FDI sector valued nearly US$ 123.14 billion, presenting a year-on-year growth of 3.5% (over US$ 4.14 billion) and accounting for 64.2% of national total figure.

In the second half of July, trade turnover surpassed US$ 14.76 billion, up 1.7% (or US$ 247 million) against the first half.  

Export volume touched US$ 7.7 billion in the second half of July, up 6.7% against the first half.  

Hence, as of late July, export turnover outstripped US$ 96.99 billion, up 5.4% (or US$ 5 billion) against the same period last year.

In the reviewed time, total import turnover was over US$ 7.06 billion, down 3.3% (or US$ 239 million) against the first half of July.

By the end of the seventh month, Viet Nam imported US$ 94.74 billion of goods, down 1.2% against the same period last year.  

Southern economic zone wants decentralization to spur growth

Provinces in the southern key economic zone plan to petition the Government to further decentralize decision-making power in terms of budget, borrowing, land use and road and waterway transport development to fuel growth in the region.  

The southern key economic zone comprises HCMC and seven neighboring provinces – Dong Nai, Ba Ria-Vung Tau, Binh Duong, Binh Phuoc, Tay Ninh, Long An and Tien Giang.

They will ask the Government to set debt limits based on their solvency, and allow them to build budgeting mechanisms and generate revenues to develop HCMC into the financial center in Vietnam and even ASEAN.

They will seek the Government’s nod to set up an investment fund to implement projects of regional scale.

The southern key economic zone council said at a meeting last week that it will ask the Ministry of Natural Resources and Environment to coordinate with the eight localities to draw up a zoning plan for land use. The council said there should be a mechanism in place to monitor all wastewater treatment systems at industrial parks and clusters in the region. 

A representative from the government of Ba Ria-Vung Tau Province told the meeting that the localities should request the Government to extend a metro line from HCMC to Long Thanh District in Dong Nai Province and Vung Tau Province to improve regional transport links.  

HCMC chairman Nguyen Thanh Phong said regional transport connectivity is weak at present so local authorities should discuss measures to strengthen it.

The provinces in the southern key economic zone want the Government to consider providing capital to invest in transport infrastructure and trade and services facilities at border economic zones to boost exports of Vietnamese goods to Cambodia and other ASEAN countries via the neighboring nation.

In addition, State capital should be used to construct roads from border gates in Tay Ninh and Binh Phuoc provinces to Cambodia to sell goods to Thailand, and build the expanded National Highway 14C, a border patrol road and National Highway 22B.

The southern key economic zone has maintained steady growth over the past 10 years with its growth rate 1.5 times higher than the nation’s average. It makes up 8% of land and 17% of the population and 40% of gross domestic product (GDP) in Vietnam.

The key economic zone generates 40% of total export revenue, contributes 60% to the central State budget and attracts more than 50% of total foreign direct investment (FDI) capital. 

In February 2014, the Prime Minister approved a master zoning plan for social-economic development in the southern key economic zone until 2020 with a vision towards 2030.

In the 2021-2030 period, it will achieve average economic growth of 8-8.5% annually and GDP per capita of US$12,200 by 2030. Total investment in the region in 2015-2020 is estimated at VND6,540 trillion.

Agencies back removal of controversial circular on car imports

Representatives of agencies, business associations and car importers have thrown their weight behind the proposed abolishment of a controversial circular that sets out strict requirements for importers of completely built-up (CBU) cars.

Nguyen Mai, chairman of the Vietnam Association of Foreign Invested Enterprises (VAFIE), told a workshop in Hanoi last week that there is no reason for the circular to exist. The circular issued by the Ministry of Industry and Trade requires traders of CBU cars to obtain a certificate proving that they are authorized dealers of foreign carmakers. As small firms cannot meet this condition, the circular has created monopolistic power for authorized importers.

“There have been many policies in place to protect the local automobile industry but I can say that they all failed,” Mai said, adding that prices of imported cars in Vietnam are among the highest in the world.

Mai noted the Prime Minister at recent conferences underscored the need to create a good environment for enterprises to operate.

Le Thuy Trung, deputy head of the Industrial Economy Department at the Ministry of Planning and Investment, said many customers had to wait for buying domestically-assembled cars and some even had to pay an extra amount of money to get the cars they want. 

Circular 20 is a business condition, Trung said. Authorized agents are a kind of monopoly, pushing prices of cars in Vietnam up 2-3 times compared to other markets.

“Therefore, I think Circular 20 should be axed,” Trung told the workshop, stressing this is the Ministry of Planning and Investment’s view.

Nguyen Dong Phong, deputy head of the vehicle quality management department at Vietnam Register, said other countries do not have any document similar to Circular 20 and that small dealers and importers have found it impossible to obtain an authorized dealership certificate from foreign carmakers.

The requirement goes against the Government’s policy to create favorable conditions for enterprises to grow.

Nguyen Minh Duc from the legal department at the Vietnam Chamber of Commerce and Industry (VCCI) said the organization has petitioned the Government to do away with the circular.

However, Pham Anh Tuan from the Vietnam Automobile Manufacturers Association (VAMA) said the organization wants the Government to keep the circular in place. Autos should meet environment and traffic safety standards, so an authorization certificate is a must.

VAMA’s view is backed by authorized importers of Audi, Porsche and Rolls-Royce. They said the removal of Circular 20 would result in trade fraud and tax revenue shortfall.

However, small auto importers did not agree, saying healthy competition would benefit consumers. Monopoly will bring huge profit to a small number of firms, said Nguyen Dinh Quyet, director of Hung Ha Company.

Nguyen Huu Dung, director of Carmax Company, said at the workshop that consumers would benefit if Circular 20 is scrapped.

Ministry: PVFI, Sabeco staff appointments legal

The Ministry of Industry and Trade said its appointments of Vu Quang Hai, a son of former Minister Vu Huy Hoang, to senior positions at PetroVietnam Finance Investment JSC (PVFI) and Saigon Beer-Alcohol-Beverage Corporation (Sabeco) were in line with the prevailing regulations.

The ministry was quoted by the local news site Dan Tri as saying that there were inadequacies in the recruitment and promotion of Hai at Vietnam National Tobacco Corporation (Vinataba). However, the ministry said there was no evidence that Hai was responsible for PVFI’s losses of VND220 billion in 2011 and 2012 while he was serving as general director.

The Vietnam Association of Financial Investors (VAFI) on August 15 said it had received a document from the ministry responding to the association’s petition against manpower management at PVFI, Sabeco and Vietnam National Oil and Gas Group (PVN).

The ministry said in the document that Hai was recruited by PetroVietnam Finance Corporation (PVFC) in January 2008 and in August 2010 promoted to the representative of the Stake stake in PVFI where he worked as board member.

Hai took up the post of PVFI general director in January 2011.

PVN said Hai was picked as the representative of the Stake stake, PVI board member and general director in line with the existing regulations.

The Ministry of Industry and Trade said Hai was assigned to work for Sabeco to increase the number of young employees at the units under the management of the ministry in accordance with its resolution on human resources. 

The ministry noted that it did not appoint Hai as the representative of the Stake stake at Sabeco.

According to a Sabeco report, Hai got approval from shareholders to take up the posts of board member and deputy general director in line with the 2005 Enterprise Law and Sabeco’s operation regulations in 2013.

The ministry said under the Government’s Document 651/TTg-DMDN dated May 8, 2015, State Capital Investment Corporation (SCIC) was not told to take the management rights of State stakes in Sabeco and Habeco.

The ministry reported its plans to withdraw State capital from Sabeco four times between 2012 and 2016. It admitted that the delay of Sabeco’s listing on the stock exchange failed to meet investors’ expectations.

The ministry pledges to seek Government approval for Sabeco to list on the HCMC exchange in the coming time.

New Nissan plant to open in Da Nang

TCIE Viet Nam Co. Ltd will operate a new plant of van and truck in Hoa Khanh industrial zone factory from 2017 with total investment of US$15 million.

It is the second plant that TCIE Viet Nam, a member of Malaysia’s Tan Chong Motor Group, has invested in the central city after the first locally-assembled Nissan Sunny cars plant was put into operation in 2013 with total investment of $40 million.

As planned, the new automobile plant will produce 500 Nissan vans and 2,000 Nissan trucks per year.

The factory is the first and only Nissan Sunny assembly plant in central Viet Nam, with an annual capacity of 6,500 Nissan Sunny sedan models.

According to TCiE, the Nissan Sunny XL Manual Transmission model accounted for 60 per cent of sales in 2015.

TCiE also announced that Ho Wah Juan is the newly appointed chairman and began managing the Da Nang-based automobile plant in 2015.

The central city also hosted an investment promotion in Malaysia last month to call for investors in fields of automobile electronic equipment, solar power cell, tourism, and food processing, in addition to industrial parks.

Malaysia is the eighth biggest investor in Da Nang with 13 foreign direct investment projects worth $102 million, which is just 3 per cent of total FDI projects in the city. 

Ford VN breaks sales record in 2016

Ford Vietnam has reported a record 92 per cent year-on-year growth in sales in July to 2,704 units.

The US company said: “The EcoSport SUV, Ranger pickup and Transit commercial van led strong sales across the Ford line up in Viet Nam for the month, each continuing leadership of their respective segments in July and helping Ford’s market share rise 2.8 points from a year ago to 9.7 per cent.”

Year-to-date sales is up 58 per cent over the same period last year to 16,320 units, as Ford remains one of the fastest growing auto brands this year.

Sales of Ranger soared 224 per cent in July to 1,256 units and 115 per cent in the year-to-date to 8,124.

The versatile Transit continued to lead the commercial van segment, delivering an all-time record month with retail sales increasing 75 per cent to 719.

Year-to-date sales is up 45 per cent to 4,118.

Slim opportunity for SBIC’s solar power project

State-run Shipbuilding Industry Corporation (SBIC)’s opportunity to co-operate with Foxconn in the development of a 200 megawatt solar power plant in South Cam Ranh Industrial Zone (IZ) is slim, as the Prime Minister (PM) is considering Khanh Hoa province’s proposal to revoke the IZ’s investment certificate.

According to Le Duc Vinh, Chairman of the Khanh Hoa People’s Committee, the province expected that the IZ would attract investment capital to the province’s industrial sector, however, the construction has been immobile for the seven years since it was licensed.

“The project’s long delay in construction does not comply with the Law on Investment and the Law on Land, while simultaneously preventing the planning of Cam Ranh region in general,” Vinh added.

In early August, SBIC proposed the Khanh Hoa People’s Committee not to revoke the project’s investment certificate so that the company can carry out negotiations with HC Global Joint Stock Company (HCG) to join the solar power plant. According to SBIC’s design, the plant is to be implemented by a consortium of Taiwanese Foxconn Technology Group, HCG, and Clean Energy JSC.

However, according to VIR’s source, no further information on the solar power project has been disclosed for now. Besides, while the consortium has no specific plans for the solar power project, it is difficulty for the investors to persuade the authority to change its decision.

South Cam Ranh IZ, invested by Nha Trang Shipbuilding Co., Ltd., was licensed in March 2009 with the total investment capital of VND980 billion ($43.9 million). However, the construction has yet to be implemented due to the investor’s financial troubles.

Khanh Hoa has been considering revoking the project’s investment certificate since 2012.

HCM City makes property mortgage details public

Recently the Ho Chi Minh City Department of Natural Resources and Environment published a list of 77 apartment projects that have been registered as mortgaged at land registration offices.

The list has been submitted to relevant offices in the city as well as uploaded on the website of the Land Registration Office.

This is the first time in Viet Nam that property mortgages have been announced publicly with details of names, addresses, contracts, relevant organisations, and mortgage registration dates.

Most of the projects were mortgaged under credit contracts signed in 2015 or 2016, though some go back as far ago as 2010, especially in Tan Phu District.

Consequently, the developers of many of the projects have already sold flats in them to buyers but are yet to provide them with the title deeds (also known as red and pink books).

The action is said to have been prompted by the Harmona scandal in the city a few months ago.

More than 600 buyers of apartments in the Harmona in the city’s Tan Binh District got a rude shock one day when they were told their homes would be seized by a bank because the developer had mortgaged the building and failed to repay the loan.

The building was handed over to the bank on June 9, meaning nearly 2,000 people living there had to leave their apartments despite already making full payment.

This kind of violation by developers has become a cause for serious concern in recent times.

As a result, the city has decided to make the legal status of property projects public to reduce the risk for buyers.

But the action has not come in for universal approbation as one might have expected.

True, some analysts have hailed it, saying the risk faced by home buyers has been growing since a large number of transactions are done before projects are finished, and this move would promote transparency in the property market and protect buyers.

But many objections have been raised.

Many critics point out that the way the city has announced the list of mortgaged projects has deeply worried both buyers and developers and even affected their business.

They have a point: the list is simplistic, only mentioning names, addresses, contracts, relevant organisations, and mortgage registration dates, and not the precise status of the projects. In many cases, the developers have not even borrowed money but had to mortgage the development to a bank to obtain the guarantee mandated by the Real Estate Law.

The law requires developers, before selling or leasing unfinished properties, to obtain guarantees from banks, who will compensate buyers if the sellers default.

So clearly there is a case for making it explicit why a development has been mortgaged: to borrow money or for getting the bank’s guarantee.

The simplistic list has begun to cause unnecessary misunderstanding between developers and buyers, according to critics.

Many buyers, on discovering their properties are mortgaged, have anxiously sought clarifications from the developers as well as local authorities.

Some individual customers, whose mortgage details have also been listed, are very unhappy that their private information has been made public.

Many developers are now fearful that potential buyers will become wary of buying from them.

Analysts insisted that the exact status of the mortgages need to be published as well since it is the main reason for conflicts between developers and buyers.

One way the tension can be eased is by banks closely monitoring loans to ensure the developers use them for the right purpose, which would ensure projects are completed on schedule, they added.

Are bonus shares a reward?

Early in August the Vinacomin-Deo Nai Coal Joint Stock Company will issue 13.44 million bonus shares to its shareholders to increase its capital.

The chartered capital will increase to VND294.4 billion (US$13.08 million) after the issuance. Last year the company had paid a dividend of VND600 per share.

Many companies in Viet Nam issue bonus shares instead of paying cash dividends, a strategy that divides critics since while it rewards shareholders, it also unduly dilutes the company’s equity.

Two other coal companies, Coc Sau and Cao Son, also plan to issue bonus shares to their shareholders in August, with the former set to issue 19.49 million shares.

The two companies’ shares are now traded at VND6,000.

Not only coal companies but many firms in other industries also opt to issue bonus shares.

Lam Thao Fertiliser & Chemicals Joint Stock Company, for instance, recently decided to issue more than 35 million bonus shares.

Its chartered capital is expected to rise from the current VND778.3 billion to over VND1.128 trillion.

The Southern Freight Forwarder Company (STG) has issued 1.7 million bonus shares and also made a rights issue, issuing 55.1 million common shares to existing shareholders at VND10,000.

The money from the issuances will be used to buy other companies and redeem its bonds.

The question is, what do shareholders think about getting bonus shares?

If the company is performing well, most shareholders are happy to get bonus shares since they can avoid paying the income tax (of 5 per cent) on cash dividends.

But if the firm is not doing well, they do not want bonus shares since the share price is likely to be low.

To issue bonus shares, a company transfers a part of the reserve to the capital account, thus increasing the capital.

But analysts said that the bonus shares of the above companies come from share premium, development funds and profits retained over the years, while the shareholders are by definition already their owners.

This means that shareholders do not get any reward from the company since it is tantamount to taking their money and giving it to them.

So when are bonus shares actually a reward for shareholders?

The analysts said they would be actual rewards only when they are issued from the company’s social welfare and reward funds meant to respectively ensure the cultural and social welfare of the firm’s employees and reward them for outstanding achievements.

When the company issues bonus shares from those funds, its equity will increase, while employees will receive shares instead of rewards.

Thus, the bonus shares of many companies such as Deo Nai Coal Joint Stock Company and Lam Thao Fertilisers and Chemicals Company will not actually benefit shareholders.

Apparel export target seen unobtainable in 2016

This year’s export target of US$30 billion seems to be a daunting task for the textile and garment sector given higher costs, fewer orders and mounting competition.

Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS), told a press conference in Hanoi last week that the sector posted export revenue of only US$12.76 billion in the first six months, growing 4.72% year-on-year but representing just 41% of the full-year target.

Again, the growth was mainly driven by foreign direct investment (FDI) firms while domestic peers struggled to find new orders in the period.

VITAS forecast finding new orders would continue to be tough and that some small and medium enterprises could be forced out of business. If the situation does not improve, the industry would find it hard to obtain outbound sales of US$29 billion this year.

Giang said Vietnamese enterprises are not as competitive as exporters from other parts of Asia.

Cambodia and Bangladesh enjoy tariff incentives offered by the U.S and Europe while wages in Myanmar, Bangladesh, and Sri Lanka are lower than in Vietnam. Recently, China has also lowered social insurance premiums from 20% to 18% in the context that many of its textile and garment companies have been shuttered.

There are signs of buyers shifting their orders from Vietnam to other countries to benefit from lower costs, Giang said.

Global economic woes are presenting an extra headwind to the industry. Particularly, many UK textile and garment enterprises operating in Vietnam have plans to shut down following the Brexit vote to leave the European Union last month.

Speaking at the press conference, VITAS vice chairman Nguyen Xuan Duong pointed out three main negative factors for the local textile and garment industry.

First, Vietnam’s foreign exchange policy has kept the Vietnamese dong currency stable compared with the U.S. dollar while the currencies of major markets such as the EU, Japan and China have fallen by 8-18% against the greenback. At the same time, ASEAN countries, India, and Bangladesh have seen their currencies down by 10-20%.

The annual region-based minimum wage raise has also sent production costs of local textile and garment firms up and undermined the competitiveness of Vietnamese garments.

Besides, lending rates of 8-10%, two to three times higher than in other countries that are Vietnam’s apparel export rivals, have placed another financial burden on local companies. As a result, prices of Vietnamese textiles and garments are 20-30% higher than in other countries.

Lawyer: VN still faces U.S. safeguard measures against shrimp

US$ 10, 5 bln invested into Dung Quat Economic Zone, Export turnover hit US$ 191 billion in Jan-Jul, Agencies back removal of controversial circular on car imports, Apparel export target seen unobtainable in 2016

Though the U.S. and Vietnam have signed an agreement on anti-dumping duty on shrimp imports from the latter, there remain legal issues concerning warm-water shrimp and trade defense measures against the Southeast Asian country, a lawyer said.

Lawyer Nguyen Hai from Mayer Brown JSM told the Daily that the deal struck earlier this month to settle World Trade Organization (WTO) disputes over the U.S.’s imports of Vietnamese warm-water shrimp was a big win for Vietnam concerning the dispute settlement mechanism of the WTO as a plaintiff.

According to Hai, the agreement will leave certain positive impact on Vietnam as the nation can resort to legal tools to protect the legitimate rights and benefits of its domestic industries. Besides, it is expected that U.S. agencies like the Department of Commerce (DOC) will weigh the issue of compliance when undertaking safeguard investigations.

However, the lawsuit result does not resolve legal issues concerning warm-water shrimp in particular and trade defense cases the U.S. will bring against Vietnam in general.

The WTO’s decision is beneficial for Vietnam as the U.S. application of zeroing to calculate anti-dumping duty rates and the country-wide rate is said to run counter to relevant rules of the WTO.

Not only Vietnam but other markets like the European Union (EU), Japan and China have filed their cases against the U.S. because of the zeroing methodology.

Removing zeroing, the U.S. has re-calculated tariffs imposed on Vietnamese shrimp exporters, with the anti-dumping duty fully lifted for Minh Phu Seafood Corp.

Under the U.S. regulations, the anti-dumping duty on an exporter will be removed completely if it is confirmed not to dump products in three consecutive administrative reviews.

Meanwhile, the country-wide rate often applies to countries that the U.S. regards as non-market economies such as Vietnam and China. A company that fails to prove its independence from its government will be subject to a country-wide rate, normally the highest rate.

Property firms ask power and water suppliers to share costs

Property firms in HCMC have asked power and water suppliers to share costs of building utility systems in apartment buildings, saying realty developers always bear all electricity and water network installation expenses.     

The HCMC Real Estate Association (HoREA) said at present companies in the property sector must install power and water meters, do the plumbing and wiring for apartment buildings, and finally hand them over  to these utilities to power and water companies without reimbursements.

The association said 2-3% of a property project’s cost goes to power and water installations. This cost is passed on to homebuyers in the end. 

Though costs of power and water systems are high, realty enterprises do not know an appropriate accounting mechanism after the systems are handed over to power and water firms.

HoREA said this onus has been on housing developers over the years and that suppliers should have been responsible for developing power and water systems.

However, Hochiminh City Power Corporation said this responsibility should rest with property companies. According to the Law on Real Estate Business, the developer should hand over the home to the buyer after construction of housing, and technical and social infrastructure is done and their projects are connected to infrastructure in the neighborhood.

In the meantime, HoREA said power companies have to comply with the 2004 Electricity Law which specifies power generation, transmission and distribution firms are responsible for installing transformer stations, meters and cable systems to transmit and sell electricity to customers.   

Therefore, HoREA proposed power and water companies get involved in the apartment construction process to install necessary equipment to sell water and electricity to residents. This is the way telephone, television and Internet service providers are doing.

SBIC divests from VALC

Shipbuilding Industry Corporation (SBIC) has sold over seven million shares, or a 5.34% stake, in Vietnam Aircraft Leasing Company (VALC).

SBIC said in a report that it earned VND116.8 billion (US$5.24 million) from transferring the shares to an individual investor at VND16,600 per share, higher than the starting price of VND11,600. The proceeds are VND46.8 billion higher than the amount the corporation invested in the company.

The divestment from VALC is part of SBIC’s restructuring plan aimed to raise funds for its new business and expansion plans.

VALC was founded in 2007 by the Bank for Investment and Development of Vietnam (BIDV) and Vietnam Airlines Corporation. It is the sole aircraft leasing company in Vietnam and now leases aircraft to domestic airlines.

VALC posted revenue of over US$76.6 million and after-tax profit of US$19.5 million last year, down 4.25% and 1.43% respectively. As of end-2015, its total assets were over US$723 million, with fixed assets accounting for 92.23%.

According to a business plan for 2016 approved at a general shareholder meeting in late April, VALC looks to attain US$68.5 million in net revenue and US$15.15 million in after-tax profit this year, down 10.81% and 22.31% year-on-year respectively.

VALC will put up for auction the five turboprop ATR-72-500s currently leased to Vietnam Airlines at a reserve price of VND215 billion (US$9.62 million) each on August 5 as the national carrier will end its short-haul aircraft lease four years ahead of schedule.

VCCI urges early result of Lee&Man pulp mill inspection

The Vietnam Chamber of Commerce and Industry (VCCI) in Can Tho City has proposed an early announcement of the environmental inspection result of Lee&Man Vietnam Paper Co Ltd’s pulp mill in Hau Giang Province.

Nguyen Phuong Lam, vice director of VCCI Can Tho, said at a press conference held in Can Tho City on July 25 to announce the socio-economic performance of the Mekong Delta that the agency has asked Hau Giang to announce the environmental inspection result given public attention.

Lam said the public is waiting for information about the progress of the pulp mill component and the environmental inspection result of the Ministry of Natural Resources and Environment at the project in the Mekong Delta province.

Ho Van Phu, director of the Hau Giang Department of Natural Resources and Environment, told the Daily that the province is also waiting for a result from the ministry.

Earlier, Minister of Natural Resources and Environment Tran Hong Ha told the General Department of Environment to work with relevant agencies over plans to inspect the paper and pulp company and other enterprises in the province over their compliance with environment regulations. The Lee & Man paper project was inspected in three days from July 1.

The Ministry of Industry and Trade has proposed the Government not approve construction of the pulp mill expansion with an annual capacity of 330,000 tons as it fails to meet environmental protection requirements.

Lam said both foreign and domestic investors must observe regulations on environmental protection but stressed that Vietnam cannot stop attracting investment because of environmental protection. Lam also called for central authorities to work out specific regulations on wastewater discharge.

Quang Nam chairman: Deforestation seriously breaks law

Dinh Van Thu, chairman of Quang Nam Province, has said the deforestation of Fokienia trees in Nam Song Bung protected forest in Nam Giang District has seriously violated the law and showed signs of conspiracy among government agencies and officers.

The deforestation near the border area with Laos has stoked great public concern, Thu said in a report sent to the Prime Minister a couple of days after the Government leader told the Ministry of Public Security to collaborate with the Ministry of National Defense and the central province to investigate the deforestation of Fokienia, which is in the Vietnam Red Data Book of endangered species.

Nguyen Hong Quang, office manager of the Quang Nam People’s Committee, was quoted by Dan Tri newspaper as confirming what Thu said in the report.

Thu told the province’s police chief to mobilize forces to probe the case and the provincial Department of Foreign Affairs to ask the authorities of neighboring Laos’ Sekong Province over the investigation to quickly find violators.

Thu ordered heavy sanctions against violators, including heads of local agencies found involved in the case.

Thu also called for border checkpoints to facilitate police to handle the case and relevant agencies to make reports on their responsibilities for the deforestation.

Three officers at Dac Oc border checkpoint in Nam Giang District have been suspended. They are lieutenant-colonel Nguyen Tan Lac, head of the checkpoint, lieutenant-colonel Le Xuan Chinh, deputy head of the checkpoint, and lieutenant-colonel Do Hoanh Minh.

Le Trung Thinh, the customs chief at Nam Giang border gate, was also suspended last Wednesday.

First-half FDI approvals in Mekong Delta at 20-year high

Foreign direct investment (FDI) approvals in the Mekong Delta region amounted to nearly US$1.4 billion in the first half, the highest in almost 20 years, according to the Vietnam Chamber of Commerce and Industry (VCCI) in Can Tho City.

At a press conference on July 25 on the Mekong Delta provinces’ socio-economic performance in January-June, Nguyen Phuong Lam, deputy director of VCCI Can Tho, said foreign firms registered US$987 million for 79 new projects and US$412 million for 51 operational projects.

VCCI Can Tho reported that the FDI pledges were made by Asian investors, mainly for textile-garment and footwear projects. This signaled that foreign firms are preparing to bank on opportunities from the Trans-Pacific Partnership (TPP) trade deal that Vietnam and 11 other Pacific Rim countries signed in February this year.

Agriculture, a key sector in the delta, made up a small fraction of the total FDI approvals.

Only one agricultural project worth US$68,000 and relating to medicinal herb farming was registered by a Japanese investor, Lam said.

In the first two quarters, 13 Mekong Delta provinces posted combined gross domestic product (GDP) of over VND255 trillion (US$11.43 billion), up 6.5% year-on-year, the report showed. Meanwhile, total development investment in the region increased by 6-10% from the same period last year to VND107 trillion.

The delta earned export revenue of over US$6.12 billion in the period. Long An Province took the lead with over US$1.8 billion, followed by Tien Giang Province with over US$908 million and Can Tho City with US$650 million.

Total imports in the region stood at over US$2.8 billion in the period.

Business accelerators needed to fast-track startups

Startups have attracted a lot of attention from the business community and the State but there is no strategic cooperation between large enterprises and young companies, so the business accelerator (BA) model can provide a solution to bridge this gap and help fast-track startups in Vietnam.

Amir Gelman, an expert from The Junction, a well-known BA in Israel, said at a recent innovative course organized by the Center of Business Studies and Assistance (BSA) and the Embassy of Israel in Vietnam that around 200 big corporations in the world have BAs to prop up startups. Some of the big names include Microsoft, Samsung, IBM, Coca-Cola, and Unilever.

A BA will choose startups that meet its criteria and provide a three-to-six-month support program including training, consulting and professional networks to help those startups develop as fast as possible. The program will end with a Demo Day where startups present their ideas to investors.

Gelman took Microsoft as an example. He said the BAs of Microsoft recruit startups in sectors such as cloud computing, Internet and mobile application, which are in the company’s wheelhouse. Microsoft does not ask for a stake or investment right in return, so it can attract the best startups.

The company itself benefits from this program, Gelman said, pointing out that Microsoft’s seven BAs around the world can know more about market trends from the startups that it supports.

According to Gelman, the BA model or similar programs offer big enterprises five basic benefits: they can learn about changes in the market and stay competitive, build their brand image, identify consumer pains, boost the morale of their employees by working with startups, and test new technologies of startups without investment costs.

The success of startups will bring back value to enterprises, Gelman said.

Not all companies, especially small and medium enterprises in Vietnam, can have a BA. However, big enterprises can sponsor BAs established by investment funds or by State agencies and then they can work directly with startups. Or they can get information from BAs and join a Demo Day to seek potential startups.

Currently, BAs are not popular in Vietnam but Pitching or Demo Days are often held by startup supporting centers such as SECO EP, Viet Youth Entrepreneurs, Startup Vietnam Foundation and DreamPlex. Notably, the BA of Vietnam Silicon Valley, a project under the Ministry of Science and Technology, also has attracted interest from many enterprises.

Loss-making furniture maker’s leaders unseated

Truong Thanh Furniture Corp (TTF) has announced a major leadership shakeup after the HCMC Stock Exchange put the firm under special surveillance early this month due to a loss of more than VND1.12 trillion (US$44.8 million).

TTF said in a statement on August 15 that Vo Truong Thanh was removed from the post of chairman from August 12 for failing to fulfill his duties to help the company get out of troubles.

In addition, some senior company executives have stepped down.

On August 13, Tran Hoai An was removed from the post of board member while Ta Van Nam lost the post of permanent deputy general director on the previous day and deputy general director and board member Dinh Van Hoa left as well.

TTF also announced appointments of new leaders. Accordingly, Vu Tuyet Hang, general director and legal representative of the enterprise, was named board member to replace An since August 13. Hang was also elected chairwoman of the firm.

Meanwhile, Pham Thi Huyen Nga was elected vice chairwoman and Duong Trinh Thuy Nhu permanent deputy general director to replace Nam from August 13.

TTF shares are now tradable in matching and put-through methods in the afternoon phase after the firm was put under special surveillance.

Early this month, TTF had to explain a loss of up to VND1.12 trillion in the second quarter. Auditors discovered that inventories worth VND980 billion went missing while it racked up business and production losses of nearly VND70 billion in the period.

Furthermore, the firm reported more than VND236.7 billion in pre-tax profit at the end of last year but then posted a VND20 billion loss. Coupled with the missing inventories and the change of auditing firm from DFK to Ernst & Young, investors have cast doubt on its auditing results, leading to a strong price drop of TTF shares on the stock market.

Ministry discusses building produce brands

The Ministry of Agriculture and Rural Development on August 15 convened a meeting with relevant agencies and business associations to discuss ways to build national brands for agricultural products to help them enter global markets.

National brands for agricultural products were planned years ago. However, it was not until recently the ministry had seriously raised the issue at its meetings with relevant agencies and appointed a deputy minister in charge of this matter.

Local industry associations have paid attention to building brands for the agricultural products they have exported. Most recently, the Vietnam Pepper Association (VPA) has promoted a brand for Chu Se pepper in the Central Highlands province of Gia Lai and is backing Cu Kuin District in Dak Lak Province to register the Cu Kuin pepper brand.

However, experts said local brands such as Chu Se, Cu Kuin pepper or Buon Ma Thuot coffee are often associated with geographical indications but cannot well represent the country.

In fact, over the years, leading agricultural export products of Vietnam such as pepper, cashew nuts, coffee and rice have mainly been shipped abroad as crude or semi-processed products. To make the most of opportunities from the bilateral and multilateral free trade agreements that Vietnam has signed, the agriculture ministry has identified the branding for domestic agricultural products as a priority, with a focus on rice as the country’s key export earner in the first stage.

The agriculture ministry has assigned the Vietnam Food Association (VFA) to build a strong brand for Vietnamese rice.

Deputy Minister of Agriculture and Rural Development Tran Thanh Nam said doing the branding for Vietnamese rice should be the top priority.

Huynh The Nang, chairman of VFA, said the association is pondering two different approaches of building brands for enterprises first and then a national brand for rice, and vice versa. Therefore, VFA needs to collect comment from firms on this matter.

Huynh Van Thon, chairman of Loc Troi Group in the Mekong Delta province of An Giang, said that building a national brand for rice is easier than producing high-quality rice bearing that brand, and low-grade products will leave a bad impact on the national brand.

VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR

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