BUSINESS IN BRIEF 4/1

Over VND104 trillion needed to complete Ho Chi Minh Road

The amount of capital needed to connect sections in the second phase of Ho Chi Minh Road is estimated at VND104.37 trillion (US$4.58 billion), the Government said in a report sent to the National Assembly (NA).

The road is a project of national importance which was approved by the NA in 2004.

It runs from Pac Bo in the northern mountainous province of Cao Bang to Dat Mui Commune in the southernmost province of Ca Mau with a total length of 3,183 kilometers, in which the main route stretches 2,499 kilometers.

The first phase covering 1,350 kilometers between Hoa Lac hi-tech park in Hanoi and Tan Canh Commune in the Central Highlands province of Kon Tum has been put into use.

Construction has been done since 2008 on the second phase, which covers 1,394 kilometers of the road’s main route, to build component projects for linking sections of the main route and so far, 55.4% of this phase has been finished.

According to the Government, more than VND50.4 trillion had been mobilized for the Ho Chi Minh Road project as of the end of last September, including VND23.32 trillion from the State budget and Government bond sales, VND18.58 trillion from build-operate-transfer (BOT) and build-transfer (BT) investors, and VND9.5 trillion of official development assistance loans.

As planned, all component projects of the second phase will be finished by 2020 to complete the entire main route with two lanes. Later, several sections of Ho Chi Minh Road will be upgraded to meet expressway standards in line with the country’s expressway development plan until 2020.

So far, all operational sections of the Ho Chi Minh Road project, either of the first or second phase, have met requirements as evaluated by the State Assessment Council.

As for the plan of this year, the Government will start construction on Cam Lo-La Son Expressway running from Quang Tri Province to Thua Thien-Hue Province in the central region, and Chon Thanh-Duc Hoa Expressway from Binh Phuoc Province to Long An Province in the southern region under the BOT format.

The Government will also build plans to change the investment format for Doan Hung-Cho Ben Expressway from Phu Tho Province to Hoa Binh Province in the north from BOT with private funds to BOT combined with State budget, Government bond or ODA as the 130-km project costs dearly, making it difficult for investors to recoup investment capital.

EVN to spend US$366.7 million upgrading southern power grid

Southern Power Corporation (EVNSPC) will put aside VND8,350 billion, or nearly US$370 million, to develop power grid projects in 2017 to meet electricity demand of 21 southern provinces.

According to an investment plan for 2017 of EVNSPC, commercial power output in southern provinces excluding supply for HCMC is estimated at around 62 billion kWh this year, up 12.33% compared to last year.

Although electricity demand is forecast to rise sharply this year, the corporation still pledged to ensure sufficient supply for 21 southern provinces.

In addition, the corporation is expected to finalize three 220-kV transformer stations in Dong Thap Province’s Sa Dec Town, Long An Province’s Can Duoc, and Kien Giang’s Long Xuyen, as well as complete upgrading the power grid for Phu Quy Island off the south-central province of Binh Thuan in 2017.

Dairy firms no longer care about milk price caps

A controversial decision imposing price ceilings on powdered milk products for children under six years old expired at the end of last year, but its termination or continuation is no longer a concern of dairy firms.

The authority to continue or stop price ceilings on such powdered milk products has now been transferred to the Ministry of Industry and Trade instead of the Ministry of Finance as previously, in line with the Government’s Decree No. 149/2016 that took effect early this month.

However, experts said it is likely authorities will lift the ceiling prices as some signals biased towards the removal of the decision appeared last year.

Last May, in a working meeting with U.S. Trade Representative Michael Froman, Minister of Finance Dinh Tien Dung pledged to consider lifting the price caps in July 2016, half a year earlier than planned by the Finance Ministry in its previous decision.

Milk price control in Vietnam was one of the issues Froman raised at the meeting, which was among a series of events held during U.S. President Barack Obama’s three-day Vietnam visit.

Finally, for some reason, the price caps on the products had still been maintained, but the possibility of an extension is low.

However, some milk firms said they do not care much about the extension or stoppage of the price caps after two and a half years of implementation. They have adapted to this price management policy despite their disagreement. Many enterprises have steadily grown again after a long period of falling sales and profits due to economic difficulties, dwindling purchasing power, and price ceilings.

The decision imposing price ceilings on powdered milk products for children under six years old came into effect in June 1, 2014. It should have expired by the end of the second quarter of 2015, but the Finance Ministry twice extended it to December 31 last year.

Access to credit tough for SMEs

SMEs always find it hard to gain access to credit at banks, according to the Vietnam Association of Small and Medium Enterprises (VINASME).

VINASME statistics showed around 55% of SMEs have difficulty accessing various credit support programs because they lack high-value assets as collateral, use outdated technology, and have low business efficiency.

Moreover, the quality of management and human resources at SMEs is low, with 55.63% of SME owners having college education or below. Even those with university education or higher lack necessary knowledge of economics and corporate governance.

They have a limited understanding of legal matters and international business practices.

Tran Buu Long, deputy director of the HCMC Credit Guarantee Fund, said fears of rejection had kept SMEs at bay since the fund requires them to have assets as collateral.

Article 23 of Decision 58/2013/QD-TTg signed by the Prime Minister provides strict mortgage requirements, Long said. In particular, those seeking assistance from credit guarantee funds must use their existing or future assets as guarantees.

The amount which SMEs in HCMC have not been able to repay is VND90 billion.

Le Thi Kim Xuan, head of the Vietnam Banks Association’s representative office in HCMC, said many SMEs have found their hands tied due to their difficult business situations.

The requirements for SMEs to access credit are stringent, she said.

Becamex IDC opens int’l hospital in Binh Duong

Becamex International Hospital was inaugurated in the southern province of Binh Duong last Friday with the number of beds amounting to over 1,000.

In the first phase covering 5.3 hectares, the hospital has 300 beds with facilities imported from the U.S., the Netherlands and Japan. The project will be expanded to 12.7 hectares in the coming time.

Nguyen Van Hung, chairman and CEO of Becamex IDC Corporation, the investor of the project, said the hospital aims to provide high-quality medical checkup and treatment services for locals and foreigners in Binh Duong and neighboring localities.

Becamex International Hospital will also carry out scientific studies and provide medical training.

NA sets up BOT supervision mission

The Standing Committee of the National Assembly (NA) has just enacted a resolution on the establishment of a mission to supervise the implementation of policies and laws concerning BOT traffic works nationwide in 2011-2016.

Vu Hong Thanh, member of the NA Standing Committee and chairman of the NA Economic Committee, will act as head of the supervision mission.

One of the tasks for this supervision mission is to review and evaluate policies and laws that encourage the development and operation of traffic infrastructure projects in the form of build-operate-transfer (BOT).

Besides, the mission will identify the achievements in the implementation of such policies and laws in 2011-2016, especially in the use of the State budget via government bonds to finance National Highway 1 and Ho Chi Minh Road in 2014-2016. In addition, the limitations and shortcomings of this process, along with their causes, should be figured out.

The responsibilities of the Government, ministries, agencies, localities and individuals concerned should be clarified.

The supervision mission will make proposals and recommendations for improving policies and laws regarding BOT traffic projects, as well as measures to better the implementation of such policies and laws. Also, they are responsible for perfecting other forms of investment, such as public-private partnership (PPP) and build-transfer (BT).

Bodies subject to the supervision are the Ministry of Transport, Ministry of Planning and Investment, Ministry of Finance, Ministry of Construction, Ministry of Natural Resources and Environment and State Bank of Vietnam, together with the centrally-run cities and provinces where there are BOT traffic projects.

Special focus will be on the owners of the transport projects in the form of BOT, lenders and management units in charge of such projects.

However, according to the program, the mission may not conduct field fields.

Specifically, they are responsible for urging the Government, ministries, agencies, localities and units to send reports on the content requested; receiving and examining the reports and documents submitted; summarizing the reports according to the approved outline; and asking for supplements (if necessary).

The mission will work with the representatives of the Government and relevant agencies over such reports.

Local NA delegations are in charge of supervision in their localities and report to the mission on the results in accordance with their specific requirements.

Reportedly, the banking industry has given out a large sum for transport infrastructure, making up 85-90% of total investment capital in about 150 BOT and BT projects funded by banks.

There are 96 BOT toll stations nationwide, expected to have risen to 102 by 2020 and 121 by 2030.

Tax regulation puts auto importers under tenterhooks

Auto importers are under tenterhooks due to a circular dated August 12 which imposes higher special consumption tax on imported cars that have been sold since July 1 last year.

According to Circular 130 issued by the Ministry of Finance on August 12 last year, enterprises importing autos before July 1 last year but selling the products after that will have to pay higher special consumption tax as regulated in the Law 106/2016/QH13 amending and supplementing the laws on value-added tax, special consumption tax and tax management.

In specifics, the special consumption tax is raised from 60% to 90% for passenger autos under nine seats with engine capacity of 3.0-4.0 liters.

The tax rises from 55% to 110% for those with engine capacity of 4.0-5.0 liters, at 130% for autos of 5.0-6.0 liters, and 150% for those of more than 6.0 liters.

Explaining the time to apply the tax, the Finance Ministry and the General Department of Taxation said the move was meant to prevent tax losses and fight trade fraud.

Meanwhile, auto import enterprises said the tax regulation is unreasonable and puts them in a difficult position.

Do Van Thuat, director of Long Quang Investment Co. Ltd, said enterprises have to build their business plans for a full year and that it takes three to six months to import an auto into Vietnam and 15-20 days to finish customs clearance procedures.

Given those factors, it is reasonable when Circular 130 was issued on August 12 but imposes special consumption tax in retrospect on autos sold after July 1.

“We had already signed contracts with customers half a year before and could not ask them to pay more. In order to comply with the circular, we will have to pay the tax using our own budget, which means the policy is biased against us,” he said.

Nguyen Tuan, director of Thien An Phuc Company in Hanoi, recalled how Circular 20 of the Ministry of Industry and Trade on authorized distribution had caused 200 auto importers to stop operation, leaving only 30 in business, and now Circular 130 continues to hit car importers when some enterprises have had to pay tens of billions of dong for tax arrears.

PM wants filmmaker equitization reviewed

Prime Minister Nguyen Xuan Phuc has told the Ministry of Culture, Sports and Tourism to review the equitization process at Vietnam Feature Film Studio although its share sales were completed in June last year.

According to a document sent to the ministry, the review is to ensure that relevant parties had fulfilled their responsibilities in line with the prevailing regulations on stake sales and that investors had done what was committed.

The Government recently held a meeting on land management during the equitization process of State-owned enterprises, including the filmmaker.   

The ministry is tasked with cooperating with the ministries of finance and science-technology and relevant agencies to calculate the company’s brand equity to increase the value of the State stake before the enterprise transforms itself into a joint stock concern.   

Vietnam Feature Film Studio launched its initial public offering (IPO) in June last year. According to the equitization plan approved by the Ministry of Culture, Sports and Tourism, the company had chartered capital of VND50 billion.

The State holds a 20% stake, strategic investors 65%, employees 5% and other investors 10% after the IPO.   

The company had racked up losses of VND39.6 billion by end-September 2014. It is using an office covering 5,000 square meters on Thuy Khue Street in Hanoi, leasing a 900-square-meter office on Hoang Hoa Tham Street in the capital city and having two other land lots in Dong Anh District in Hanoi and Thai Van Lung Street in HCMC.

However, they were excluded in the process of calculating the corporate value.

Waterway Transport Corporation JSC (VIVASO) bought a 65% stake at VND10,200 each and became the strategic investor of Vietnam Feature Film Studio. VIVASO is 80% held by Van Cuong Construction United Co Ltd.

HCMC budget revenues from crude oil seen declining

Budget collections from crude oil exports in HCMC are expected to continue falling to VND12.4 trillion (US$546 million) this year, heard the city government’s conference on socio-economic tasks for 2017.

Crude oil exports contributed VND22.98 trillion to the city’s budget in 2015. The figure dropped to VND15.5 trillion in 2016 and is forecast to plunge to VND12.4 trillion in 2017, or 68.13% of the 2016 estimate. The global oil glut will continue dampening prices this year.

In contrast, import-export tax revenues reached VND156.5 trillion in 2015 and are projected to exceed VND226.48 trillion in 2017. Similarly, budget collections from domestic sources neared VND94 trillion in 2015 and are expected to increase to VND109 trillion this year. 

A representative of the HCMC Department of Finance said the city is allowed to retain only 18% of total shared revenue and this will mainly come from valued added tax, corporate income tax, environmental protection tax, personal income tax and special consumption tax.

All budget collections from crude oil exports will go directly to the State budget. If its import-export tariff revenues are higher than the target, the city can keep the balance. 

Overall, the city looks to raise its budget revenues by 15.79% year-on-year to VND347.882 trillion in 2017.

Meanwhile, budget spending by districts is estimated at VND70.647 trillion, including regular expenditures of VND34.2 trillion and investment projects of VND25.15 trillion. Budget overspending by districts is forecast to reach VND2.9 trillion.  

Speaking at the conference, Phan Thi Thang, director of the Finance Department, said the city government would take measures to meet the targets and would launch programs to back enterprises so as to create more sources of revenue.

To realize the ambitious targets, the city’s economy should grow at least 8.4-8.7%. The city’s contribution to the State budget in 2017-2020 is the highest among the nation’s 63 provinces and cities.

“The 2017 budget collection target is a tall order so the city must adopt strict measures to meet it,” Thang said.

She proposed strengthening inspections into tax payments, fighting fraud and reviewing tax arrears to step up budget collections. In addition, the customs department should continue improving administrative procedures, cutting time needed for goods clearance and slashing fees and charges to support businesses.

Thang said the city government would issue municipal bonds, use idle capital, ask for more official development assistance (ODA) loans and generate revenue from advertising on commuter buses.   

The city has set the GDP growth target of 8.4-8.7% in 2017 with total factor productivity (TFP) contributing 36% to economic growth, total investment in the economy accounting for 35% of GDP and 50,000 enterprises established, including those converted from household businesses.

The poverty rate is projected to fall by 1.2%. The city looks to create 125,000 new jobs and reduce the unemployment rate to less than 4%.

New houses are projected to amount to eight million square meters while all households will be able to gain access to running water and all of their solid waste will be treated.

HCMC’s GDP last year soared to roughly VND1,024 trillion, an 8.05% pickup versus 2015. Its budget collections surpassed VND307.3 trillion.   

HCMC chairman Nguyen Thanh Phong said 2016 GDP growth was higher than the target and the livelihoods of residents improved. However, industrial wastewater was not treated properly and environmental pollution remained a headache. 

HCM City sees record 18 per cent credit growth
     
Commercial banks in HCM City saw record credit growth of 18 per cent in 2016, according to the State Bank of Viet Nam (SBV).

To Duy Lam, director of SBV’s HCM City Branch, said the city’s total credit balance reached VND1,457 trillion (US$64.09 billion) last year, with the production and business sector accounting for 78 per cent of the total.

Commercial banks’ total deposits increased by 16 per cent over previous years, he said. In addition, a nationwide programme to connect commercial banks with enterprises under Government Resolution 35 achieved positive results.

To date, 21,914 customers in the city have received loans with a total amount of VND281.216 trillion ($12.36 billion).

In 2016, online banking services at commercial banks in the city continued to improve with the number of customers using the service surging by more than 54 per cent over 2015.

This year, SBV’s HCM City Branch will continue guiding commercial banks in the city to improve credit growth safely and sustainably.

SBV’s HCM City Branch plans to focus on providing loans for production and business fields, which will conform to credit growth regulations and credit growth targets, especially strict control credit for risky sectors such as stock, property and consumer credit.

It aims to continue monitoring monetary and credit policies in 2017 to maintain stable inflation, achieve its credit growth target, facilitate economic growth, and remove obstacles for enterprises. 

Power projects mired in land-use discord

Several contentious issues are dogging implementation of key projects managed by the Southern Power Management Board (SPBM), contradictory regulations and land evaluation and compensation rules that residents are not ready to accept.

The board currently manages investments in 79 power projects that are designed to meet energy demands of 23 provinces and municipalities in the Southern region in the year 2016 and beyond.

Also, the National Power Transmission Corporation (NPT), under the state-owned Việt Nam Electricity (EVN), has assigned SPBM the management of 220kV/550kV projects in the period 2016-2020 periods.

Đoàn Tấn Phong, Director of SPMB, said the most persistent obstacle in the projects’ progress was land clearance and compensation issues, especially the delayed valuation of needed land in HCM City and Southeastern provinces.

Nguyễn Hải Đăng, Head of SPBM’s Compensation Office, said land valuation was not easy since the projects span a vast area lying in different localities.

According to Government’s Decree No.44/2014/NĐ-CP, farm land that falls within the power grid ‘safety corridor’ will not be eligible for compensation.

However, Government’s Decree No.47/2014/NĐ-CP provides that in cases where land is not converted to other uses, but its usage will be seriously restricted, the compensation level will be decided by the provincial People’s Committee.

This discrepancy leads to the fact that compensation for adjacent localities might vary greatly, and unfairly affected households are outraged. They complain and refuse to co-operate, further delaying the land clearance progress.

For the 220kV or 500kV projects, many households have already received compensation, but refused to remodel their houses to follow power grid safety guidelines or flat out rejected compensation, demanding a bigger sum.

The Compensation Office also acknowledges that the compensation for land areas claimed by the state for public or national defence purposes, including socio-economic development projects, is not “close to the market price,” which leads to very unhappy residents and further delays.

“Besides, procedures for enforcement are really complicated, following strict legal provisions, and as a consequence, delay in land transfer for the projects is inevitable,” Đăng said.

Other issues plaguing the clearance progress include the authorities’ simultaneous use of two types of topographies, unofficial land-use rights transfer between people, overlapping project zones, requiring adjustments to original plans.

Until 2018, the Southern region will depend largely on the power provided by the power centres of Duyên Hải and Vĩnh Tân. If the thermal power stations Vĩnh Tân 1, Long Phú 1 and Sông Hậu 1, among others, start operating on time, power supply for the Southern region will be assured, experts say.

This year, SPMB targets completion of 12 projects with 742.5km of electrical lines and 1,525MVA in combined substation capacity.

Phong said the company had worked in close collaboration with local authorities to facilitate land clearance process.

Problematic cases would be reported to EVN, Ministry of Industry and Commerce, and the Government for support and directives, especially in cases involving key projects.

“We will also step up monitoring and supervising efforts from the very beginning in order to construction errors. All supervisors will be required to have proper qualification documents,” Phong said.

Supervision of subcontractors’ work will be carried out in order to timely make any necessary adjustment, according to Phong. If subcontractors prove incapable, SPMB will administer heavy sanctions, terminate the contract and propose bans to prevent such subcontractors from participating in future projects.

Regarding land clearance, SPBM has asked EVN to further promote information dissemination on land clearance compensation policies, and pay more attention to raising public awareness on the risks of keeping residential houses within the power grid’s ‘safety corridor’ so that people can understand and follow set guidelines.

A policy concerning long-term training for the ‘compensation task force’ must be devised and implemented, to create a group of qualified people who are equipped with necessary knowledge and skills.

In cases where enforcement cannot be carried out against private properties in the ‘safety corridor’ and households refuse to accept compensation, local forces will be tasked with protecting the status quo and preserve public order as the compensation task force carries out their duties.

According to the board, provincial authorities must implement measures to better manage land resources and frequently update project plans in areas under their jurisdiction to ensure consistency and avoid overlapping between local and national projects. 

Improved quality boosts export of fruit, vegetables

Vietnam’s fruit and vegetable export in 2016 hit 2.4 billion USD, representing an increase of 30 percent from 2015 and exceeding the year target of 2.2 billion USD set by the Ministry of Industry and Trade.

According to the Vietnam Fruit and Vegetables Association, the result was attributable to efforts to seek new markets and keep traditional markets.

In 2016, five types of fruits gained entry to four new markets – mangoes to Australia, dragon fruits to Taiwan (China), longans and lychees to Thailand and cashew to Peru, thus expanding the market for Vietnam’s fruit and vegetable to more than 60 countries and territories.

China continues to be the largest market for Vietnam’s fruits and vegetables, accounting for around 70 percent, followed by the Republic of Korea, the United States and Japan.

Bui Sy Doanh, from the Department of Plant Protection under the Ministry of Agriculture and Rural Development, said the department would continue stepping up negotiations on technical barriers to help more Vietnamese fruits and vegetables enter selective markets like the US, Japan and Australia.

In 2017, Vietnam hopes to win import approval of Australia for its dragon fruits, approval of Japan for red-flesh dragon fruits and that of the US for star apples. 

Nguyen Huu Dat from the Vietnam Fruit and Vegetables Association emphasized the need to further improve post-harvest preservation and processing technologies to meet demands for quality and diverse products in foreign markets.

Quality crucial for domestic products to retain market

Improving quality will be key for made-in-Vietnam products to keep its market share in the face of increasingly fierce competition from imports, according to a trade official.

Nguyen Thi Thu Trang, Director of the World Trade Organisation and Integration Centre of the Vietnam Chamber of Commerce and Industry, made the warning, adding that if domestic manufacturers fail to capitalize on their advantages in transport costs and tax, they may lose market share to imported products.

However, the Ministry of Industry and Trade was of the view that there is only a small possibility that import products can replace made-in-Vietnam products on the market, at least in the near future.

The ministry said that import products are mostly marketed by modern retail forms like shopping malls, supermarkets and convenience stores, which account for just between 25 and 30 percent of Vietnam’s retail market.

The remaining market share is still dominated by traditional retail forms like markets, grocery stores and specialised stores, which are mostly owned by local retailers. Those retailers continue to rely on made-in-Vietnam products, which are cheaper thanks to lower expenses on transport and procedures, lower tax, and advantages in products’ freshness.

Trade ministry strives to meet surging demand during Tet

The Ministry of Industry and Trade (MoIT) has directed its agencies and companies to stock up on goods to meet demand which is expected to surge during the upcoming Lunar New Year (Tet) festival. 

The Ministry’s Domestic Market Department reported that stockpiles of various consumer goods, ranging from confectionery, beverages to fresh food, increase by 10-15 percent from last year. 

Localities, enterprises and relevant agencies were asked to apply measures to ensure supply-demand balance, and bring goods to rural, mountainous and island areas, especially those hit hard by disasters. 

At the same time, the MoIT directed market management agencies of cities and provinces to crack down on smuggled and fake goods. 

In coordination with the Ministry of Agriculture and Rural Development (MARD), the Finance Ministry and the State Bank, the MoIT sent working teams to Hanoi, Ho Chi Minh City and the central provinces of Quang Binh and Nghe An to check preparations for the holiday, which is the most important one in a year for Vietnamese. 

According to the department, 44 out of 63 cities and provinces have devised plans for commodity stockpiles, 21 of them are conducting the market stabilisation programme by connecting businesses with credit organisation or offering interest rate subsidy for businesses to buy goods. 

The MoIT also partnered with the MARD and local governments to boost consumption of safe farm produce and inspect food hygiene. 

The two ministries have worked together to review supply-demand balance and devise solutions to ensure supply.

Vietnam moves to improve equitisation transparency

In a new move, the Government has announced the rate of State-ownership in firms that are set to be equitised, instead of fixing the rates by sectors as usual.

It has also issued a list of 103 State-owned enterprises (SOEs) in which the State will hold a 100% stake and another 137 that will be equitised in the 2016-20 period.

Among those that are to be equitised, the State will hold over 65% of the charter capital in four, and 50%-65% in 27, and below 50% in 106 SOEs.

The State will retain full ownership in SOEs operating in sectors like national defence and security, nuclear power and money printing.

The new lists and other provisions are contained in Decision No 58 issued on the very last day of 2016 to replace the Decision No 37/2014/QĐ-TTg dated June 18, 2014, and will take effect on February 15 this year.

Dang Quyet Tien, deputy director of the Ministry of Finance’s Corporate Finance Department, welcomed the decision saying that it proves the Government’s determination to improve transparency and effectiveness of equitisation process.

Tien said publicising names of the equitised companies with specific rates of State ownership would help avoid enterprises’ petitions for maintaining a higher rate of State ownership as had previously happened.

Previously, the Government had only regulated the extent of State ownership rates by sector, not specific SOEs, leading to low divestment, Tien said.

He said that the average divestment rate at SOEs is now 8%, meaning that the State still holds 92% of the firms’ charter capital after equitisation.  

SOEs are not willing to equitise because of leaders’ fears that they will be unemployed if controlling stakes fall in private hands, according to Tien.

Besides, due to poor preparations for equitisation, private investors are not provided with enough information, and many stakes languish “on the shelves”.      

To ensure that the equitisation process benefits both the State and private investors, the Government would require better information disclosure by the SOEs and might lift the cap on the number of strategic shareholders so as to increase the number of bidders, Tiến said.

Tiến also said that the Government would not rush to sell its stake at one time. Instead, the divestment would be divided into many phases, depending on the market situation.

“I think the Vietnamese market is still small, so if we don’t have policies to attract foreign capital, it is difficult for us to reach the SOE equitisation targets,” he said.

The Steering Committee for Enterprise Renovation and Development reported on December 28 that the Government had sold stakes in 55 enterprises in 2016, bringing the number of SOEs equitised in the 2011-16 period to 554.

The 55 equitised enterprises were under the management of the ministries of National Defence, Industry and Trade, and Agriculture and Rural Development; the Vietnam Rubber Group; and the Vietnam Southern Food Corporation.

As of now, the State has sold shares worth more than VND4.493 trillion (US$199.69 million) in book value for more than VND7.098 trillion (US$315.46 million).

Local retailers must sell superior products to dominate market

Vietnamese producers must improve product quality and make the most of their advantages so that imported goods don’t take over the market, the Vietnam Chamber of Commerce and Industry said.

Currently, the chances of imported goods taking over the market are low. Foreign retailers in Vietnam are fighting for market share within modern retail models, while domestic retailers continue to dominate traditional retail mediums, Nguyen Thi Thu Trang, Director of the World Trade Organisation Centre of the Vietnam Chamber of Commerce and Industry, said.

Modern retail models such as shopping malls, supermarkets and convenience stores, which largely incorporate mixed-use retailing, account for 25% to 30% of the Vietnamese retail market, whereas 70% to 75% are traditional retail models such as wet markets, box stores and grocery stores.

The main supply source for domestic retailers is local producers, who have advantages such as lower logistical cost because of smaller distances, cost benefits owing to the absence of import tariffs, and the opportunity to sell fresher products. So the chances of imported consumption goods overthrowing domestic products in the retail market is slim in the near future.

However, there are worrying signs within the agricultural products and household goods sectors. For example, as of the end of 2016, Vietnam had spent US$365 million on import of vegetables and fruits from Thailand, almost twice the amount compared to the same period in 2015 (US$189 million).

These imported Thai products are available both in large supermarkets and small retail stores all over Hanoi. Despite being sold at higher price than their Vietnamese and even Chinese counterparts, Vietnamese consumers are choosing Thai products. An employee of a fresh fruit store on Ba Trieu Street, Hanoi, said that it could be because the imported products look better and are packaged better, coupled with consumer xenophilia.

The Ministry of Industry and Trade  has amended several laws related to taxes, such as value added tax and special consumption tax, to help domestic businesses cope with price competition and work to improve product quality and their distribution network. 

These laws, however, also ensure that domestic producers are subject to the same taxes as foreign businesses importing products, to establish a fair ground.

The ministry had also issued directions on the distribution of goods before the upcoming Tet (Lunar New Year), urging local authorities, businesses and agencies to actively monitor demands for goods and ready a steady supply before the shopping rush begins, in addition to careful selection of imports and close watch on frauds, with help from the agriculture and rural development ministry.

FTAs sharpen Vietnam’s competitive edge

The ASEAN Economic Community and free trade agreements have improved the competitiveness of Vietnam’s economy and businesses, said the Vice President of the Vietnam Chamber of Commerce and Industry, Hoang Quang Phong.

Reviewing the first year since Vietnam joined the ASEAN Economic Community, Phong said international economic integration has pressured Vietnam to reform its legislation and improve its investment environment.

The Director of the WTO and Integration Center, Nguyen Thi Thu Trang said that the removal of tariff barriers in 9 ASEAN markets over the past year have opened ample opportunities for Vietnamese businesses.   

US, Switzerland buyers turning towards Vietnam gemstones

The US, the world’s largest diamond market by total dollar sales, is increasingly turning to coloured gemstones from Vietnam as its jewellery of choice, according to data compiled by Vietnam Customs.

The US imported roughly US$283.63 million of cut coloured gemstones in the eleven months of last year leading up to December, allowing for Vietnam exports to jump by nearly 148% of the figure for the same eleven-month period in 2015.

Meanwhile, exports to Switzerland, Europe’s jewellery manufacturing hub, have also leapt upwards, touching an estimated US$329 million, making the Central European country the second largest market of Vietnam.

The two countries collectively accounted for a 74.4% market share of the country’s exports, which tallied in at US$823.47 million for the January-November 2016 period, per Vietnam Customs figures.

US trade ‘more important than ever’ to Vietnam

Perhaps no country more than Vietnam will feel the effects of the demise of the Trans Pacific Partnership (TPP) in terms of diminished foreign direct investment and trade, says the Ho Chi Minh City People’s Committee.

The 12-member TPP trade deal would have lifted the country’s US$193.6 billion economy— by some estimates as much as 11% in terms of gross domestic product over coming years. 

This results because the trade pact would have allowed for exporters operating within the borders of Vietnam to pay lower and in many cases no tariffs for shipping goods within the proposed TPP free trade region

Transnational companies with operations in Vietnam that would have benefited tremendously include Siemens, Intel, Samsung Electronics, and major Japanese automakers besides US apparel and shoemakers.

Though it now appears likely the TPP is down for the count and will not be resuscitated, HCM City, like the Vietnam Government, remains committed to continuing down the path of fully integrating the country’s economy, said Le Thanh Liem, vice chair of the Committee at a recent luncheon.

At the meeting, Mr Liem reminded the audience that the decision to pull back from the TPP was made by the Government well prior to US President-elect Donald Trump’s announcement of his intention to withdraw.

Since that decision was made, he noted, HCM City and the Government have actively pursued a robust trade agenda seeking independent bilateral and free-trade agreements with TPP signatory member countries and other regional trade blocs.

They have also proceeded on a course to implement crucial reforms to improve the country’s business climate, train the country’s work forces and elevate the domestic sector’s competitiveness among other steps important for successful integration.

On November 22, Trump said: “On trade, I am going to issue a notification of intent to withdraw from TPP, a potential disaster for our country [the US]. Instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back on to American shores.”

With respect to trade, Trump has made it clear the US will remain open for business and HCM City along with the Government welcomes new bilateral trade negotiations with open arms, said Mr Liem.

The geopolitics of trade are in flux right now until both countries sit down at the table and hammer out a new bilateral trade agreement. From Vietnam’s point of view, we have positive demographics— we have comparative advantages in many segments of the economy that the US desires, added Mr Liem.

We also have a highly appealing commercial and consumer market for US businesses, he noted.

So though there is a lot of uncertainty, there is no cause for alarm or reason not to believe that a new bilateral trade agreement with the US would not hold great promise for the future.

HCM City is as positive as ever on the prospects for enhanced trade, and believes the country is uniquely poised to take advantage of the current global economy. There’s a window of opportunity open for us with the upcoming change in the US administration.

The time is ripe for Vietnam and the US to partner for prosperity.

It is our sincere hope, said Mr Liem, that Vietnam become an economic hub for the globe and a location of choice for business and investors directly contributing to job creation and middle-class prosperity.

As we approach the upcoming new year, there is no reason not to be as thrilled about the country’s economic prospects for tomorrow as there was last year at this time, he concluded.

Vinhomes Gardenia flexible apartments will heat up market
     
Property developer Vingroup has introduced convertible apartments of two bedrooms and a space meant for flexible usage at A3, The Arcadia building in the Vinhomes Gardenia project.

Priced reasonably but offering a high living standard and flexibility in interior designs, the apartments are expected to elicit special attention in the market. Earlier, one-bedroom apartments with a flexible space had proved very successful mid-2016.

The flexible space can be converted into a third bedroom or a workroom, depending on the need of the house owner.

Small-sized apartments with flexible space are garnering market attention, especially appealing to bachelors or nuclear families.

With effect from December 15, the property developer is offering unprecedented attractive promotional offers such apartments. These include an interior decoration package worth VND120 million (US$5,350) and loan support programme. Buyers not desirous of availing the loan support programme will be eligible for a discount of up to 10 per cent.

A single per cent discount will be offered to buyers of second apartment or those who convince their relatives or friends to buy an apartment.

“A3, The Arcadia” is the only building with an indoor all-season swimming pool at the Vinhomes Gardenia.

The building features urban living facilities, such as gyms, an outdoor swimming pool, a tennis course, Vinschool, kids’ playground, a supermarket and gardens.

Vinhomes Gardenia is the first high-end urban area development of the Vingroup in the West of Ha Noi, designed by the world’s leading architecture consultancy firms, such as Singapore’s CPG and Canada’s West Green Design.

Apartments in the A1, A2 and A1 The Arcadia, would be handed over to the owners by the end of 2017. 

Spanish PSH Group secures amusement park project in Thua Thien Hue

On December 28, the People’s Committee of Thua Thien-Hue licensed PSH Group from Spain to develop Hue Amusement & Beach Park at Vinh Thanh and Vinh An communes of Phu Vang district.

The VND1.06-trillion ($47.5 million) project will sport 1,000 four-star and five-star hotel rooms, 93 villas, and other facilities, such as a water park, a bird garden, a trade centre, and craft stores. It will be located on a land plot of 49.5 hectares.

The construction works will start in the second quarter of 2017. The project is going to start operations in the second quarter of 2019 and is expected to make the city more attractive to tourists by providing a wide range of entertainment options.

In 2016 the province has attracted a number of tourism projects. Names include Vinh Thanh-Vinh Xuan golf course project by BRG, Lap An Lagoon eco-tourism project by Bitexco, and Bach Ma luxury resort by Myway Hospitality.

PSH Group (Grupo PSH) is headed by president Gregorio Pérez Saavedra, son of Gregorio Pérez Alonso, who founded the Sunrise Beach Hotels (SBH) brand—a leading hotel group in the Canary Islands, with nearly 10,000 beds and around 1,200 employees.

In Vietnam, SBH has recently signed to manage and operate the Legenda Del Mediterraneo luxury resort, located on Lang Co beach, with a total area of 7.7 hectares and investment of VND700 billion ($31.4 million). Developed by Vietnamese company Vicoland, the project is expected to start operation in December 2017. SBH is also surveying the southern province of Binh Dinh to develop a luxury resort.

Disbursement of housing stimulus on time

The disbursement of the housing stimulus package, valued at VND30 trillion (US$1.4 billion) in preferential loans, will finish on schedule, according to the State Bank of Viet Nam (SBV).

The disbursement of the housing stimulus package, valued at VND30 trillion (US$1.4 billion) in preferential loans, will finish on schedule, according to the State Bank of Viet Nam (SBV).– Photo realimes.vn
SBV’s statistics showed that, as of the end of November, VND29.239 trillion had been disbursed, with outstanding loans remaining at VND24.116 trillion.

The disbursement is now being hastened and will finish by the end of this month.

The central bank said the housing stimulus package significantly contributed to the recovery of the property market, reducing stockpiles, removing difficulties for developers, as well as for the recovery of the economy.

Of note, the package enabled more than 50,000 households to purchase affordable homes.

Nearly 86 per cent of the preferential loan package was provided to buyers. Disbursements for buyers are to continue until the end of the year, though disbursements ended for developers on June 1.

A total of VND5.395 trillion from the package was provided to developers.

The housing stimulus package began on June 1, 2013, with the aim to encourage development and purchase social housing projects and affordable homes, providing impetus to the stagnant real estate sector.

Disbursements from the package were previously scheduled to finish by June 1, but due to disappointing results the Government extended the deadline until the end of this year.

After the VND30 trillion package, the property market was still awaiting new loan packages for social and affordable housing.

In June, the Prime Minister decided upon a preferential lending interest rate of 4.8 per cent for social housing purchases, to be offered by the Bank for Social Policies by December 31. Although the deadline nears, preferential loans remained inaccessible due to the shortage in sources of capital.

UPCoM listing by firms sees major shareholders sell out

The Southern General Import-Export Joint Stock Company (SGIEC), a strategic shareholder in the Vietnam Seafood Corporation (SEA), made the decision to sell its stakes immediately after the latter listed on UPCoM on December 23.

SGIEC has registered for selling 18.75 million shares of SEA, equivalent to 15 per cent of the company’s prescribed capital. If the transaction goes through, SGIEC would no longer be a SEA shareholder.

The main reason for the separation is believed to be a difference of opinion between SGIEC and SEA’s state shareholder over developing a real estate project in downtown HCM City.

Similarly, the Pacific Petroleum Transportation Joint Stock Company listed its shares on UPCoM on December 12.

Immediately afterwards a major shareholder with a 10.13 per cent stake, PVI Asset Management Joint Stock Company, announced it would sell all its shares in Pacific.

Not only are some big stakeholders selling out their shares but even parent companies are doing so from their subsidiaries.

For instance, the Song Da 5 Joint Stock Company has decided to sell 13.2 million shares, or 88 per cent of the legal capital of its subsidiary, Song Chay Hydro Power Company, after the later listed on UPCoM.

Some State agencies too are doing this.

The People’s Committee of the northern mountainous province of Lang Son recently registered for a second time to sell more than 2.2 million shares of the Lang Son Water Drainage and Supply Joint Stock Company, which will reduce its ownership from 95.05 per cent to 51 per cent.

After the company listed on UPCoM in late July the People’s Committee had once tried to sell its shares, but in vain.

Analysts said the rush to disinvest is caused by a desire to restructure investments to improve their effectiveness.

Besides, many investors looking to pull out are simply taking advantage of the fact that many companies are listing on UPCoM and hoping to get better prices for their shares.

It is benefiting the market by increasing liquidity and its sheer size by increasing the free float of shares.

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

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