VIETNAM - BUSINESS IN BRIEF 22/11

by lexie Tue Nov 22, 2011 6:59 pm

Last update 22/11/2011 07:00:00 AM (GMT+7)

BUSINESS IN BRIEF 22/11

Ha Noi vows low inflation at Tet

The price of goods in the capital city of Ha Noi over the Tet holidays would increase by less than 1 per cent, forecast deputy head of Ha Noi's Industry and Trade Department Nguyen Van Dong at a press conference yesterday.

"The price increase at Tet is unavoidable. To limit this, city authorities and local companies are making every effort to prepare enough goods for both new year holidays," Dong said.

"With our efforts, we hope that the price will only increase by between 0.5 per cent and 0.7 per cent," Dong added, noting that this level was lower than in previous years.

According to Dong, the total goods volume needed for Christmas, New Year and Tet (Lunar New Year) was estimated to surge by 20-22 per cent against previous months with a total value of about VND24 trillion (US$1.1 billion).

To meet the goals of fully meeting demand and stabilising prices, 15 companies will join in the city's price stabilisation programmes.

Those companies will receive interest free loans of VND475 billion ($22.6 million) from the city's People's Committee to stock and stabilise the prices of nine commodities including rice, pork, eggs, cooking oil, vegetables and some processed seafood.

Along with the city's support, those companies will use their own capital to double their stockpiled products.

"They will also be responsible for organising 653 outlets for those goods," Dong said.

The outlets would be set up in both central and rural areas, he said.

This year, the city is also encouraging handicraft villages to join in the price stabilisation programme.

According to Dong, supervision would be strict this year to avoid smuggling, speculation and counterfeit goods.

"There will be about 600 supervisors checking quality, food safety and prices in stores and supermarkets," he said.

Banking system issues aired

The Vietnamese banking system has demonstrated a number of shortcomings in the five years since the nation joined the World Trade Organisation, according to participants at a forum hosted by the Foreign Trade University in Ha Noi last week.

Inadequate technology and poor corporate governance, especially for financial management, were the two major disadvantages of domestic commercial banks, said the unviersity's associate dean, Nguyen Thi Quy, noting the rising proportion of bad bebts in recent years.

At the end of last year, the average ratio of bad debt among commercial banks was around 2.5 per cent, she said, but this had lately risen to 2.8 per cent among commercial banks with shares listed on the nation's stock exchanges.

Trinh Quang Anh, director of Maritime Bank's Economics Research Centre, voiced concern over the capital adequacy ratios (CARs) of banks currently, saying that CARs computed in accordance with International Financial Reporting Standards and those calculated under the Vietnamese accounting standards varied significantly.

Former Minister of Trade Truong Dinh Tuyen said that challenges in the financial services sectors were foreseen when the country joined the WTO. The existing challenges to the banking system did not result from national commitments to the WTO, he said. Rather, taking part in the organisation had helped Viet Nam recognise weaknesses and presented a good opportunity.

Several domestic banks, including Maritime Bank, have tried to take advantage of that opportunity.

Maritime Bank had invested to improve and renew its business strategy, in addition to comprehensively reinventing its image. It had hired a global management consulting firm – McKinsey and Company Inc – to build the bank's business strategy since 2009, Anh said.

Last year, the bank was ranked fifth among Vietnamese commercial banks, with a return-on-equity (ROE) the highest among banks with earnings of at least VND1 trillion (US$47.84 million).

Japanese firms seek partners

Japan's Aureole Group organised the first Aureole Fair in HCM City yesterday to seek Vietnamese partners and expand its business operations in the country.

Japanese companies want to work with Vietnamese businesses as well as FDI companies operating in Viet Nam.
About 260 Vietnamese companies took part in the event.

Ngo Le Thu, deputy director of the Sai Gon Trading Group's Market Department, said her company had co-operated with Mitani Sangyo Group for two years.

Thu said that Vietnamese companies wanted to work with Mitani Sanyo Group because Japan specialised in producing nutritious food and health supplements, and had strict requirements on food quality.

Thu said the co-operation between the companies would help develop a market for nutritious foods at a time when the income and living standards of the Vietnamese people were rising.

Vietnamese goods penetrate S Korea

Vietnamese businesses have been taking part in the Viet Nam-Indonesia goods exhibition and fair at Lotte Mart Centre in the Republic of Korea.

The five-day fair, which ends today, aims to help Vietnamese enterprises introduce their products to Korean markets.

The fair is the first programme organised by the Korean retail chain to promote Vietnamese business opportunities in the country.

Lotte Mart Supermarket Chain hoped that revenue from Vietnamese goods would increase by 1-5 per cent and begin to penetrate other foreign markets such as Indonesia, China and India through its presence in these markets.

As of now, Lotte Mart has two store locations in Viet Nam.

False price reports to be fined

The Government issued a regulation setting the standard fine for false reporting on markets and prices.

Under Decree No 84/2011/ND-CP, which took effect yesterday, individuals and businesses who spread misleading information about market trends and costs would be fined VND500,000 – 10 million (US$24-476).

News outlets and relevant agencies who perpetuate false statements in print, on air, or online would be fined VND10-20 million ($476-952).

Youth look for better values

Although international brands are in high demand, local alternatives seem to be winning the spending battle amongst Vietnamese youth, according to a recent G2/Grey Group study.

Up to 45 per cent of youngsters said that, although they liked expensive brands, they would still prefer special deals due to the current economic scenario, it said.

The study, based on interaction with over 400 youths, found that around 30 per cent of incomes were spent on beverages, with cafes and restaurants being the largest consumption channels.

Health and beauty was the second largest segment, accounting for 20 per cent with shampoos, facial cleansers and skincare products leading the race, it said.

Vietnamese youth also love technology, with around 65 per cent intending to buy an electronic gadget in the next three months. Around 27 per cent want to buy digital cameras while 33 per cent want to upgrade their laptops. Needless to say mobile phones top the list at 52 per cent.

NGOs exempt from work permit rules

The Ministry of Labour, Invalids and Social Affairs issued Circular No 31/2011/TT-BLDTBXH on November 3, implementing Government Decree No 34/2008/ND-CP of March 2008 and Government Decree No 46/2011/ND-CP of June 2011 on recruitment and management of foreigners working in Viet Nam. Under Circular No 31, after obtaining a work permit, an employer and foreign employee must sign a labor contract before the employee starts working. Foreign employees who are exempt from the work permit requirement include foreigners specified in licenses for the establishment of representative offices, project offices and non-governmental organizations. This circular takes effect on December 18.

Trade promotion representative offices

The Government issued Decree No 100/2011/ND-CP on October 28, regulating the establishment and operation of representative offices by foreign trade promotion organisations. Under the decree, the representative office of a foreign trade promotion organisation may: (i) perform the function of a liaison office; (ii) carry out trade promotion activities originating from abroad and support foreign enterprises to access and operate in the Vietnamese market, collect and provide economic, trade and market information to foreign organisations and enterprises, as well as by promoting foreign cross-border trade with Viet Nam and other commercial connections between foreign and domestic enterprises; (iii) co-ordinate with other agencies and organisations in conducting trade promotion; (iv) and perform other trade and commercial promotion activities under Vietnamese law. Representative offices are not permitted to directly conduct profit-generating activities in Viet Nam. Decree No 100 takes effect on December 15.

Changing the way to use and manage land, improve public awareness and research capacity were among the long-term solutions to combat desertification in Viet Nam, said deputy minister of Agriculture and Rural Development, Hua Duc Nhi.

Forestry and water resources protection were top priorities, Nhi said.

Ineffective land use caused desertification and exacerbated erosion, landslide, and impoverished the land, experts shared at a conference on environmental protection in the agriculture sector.

Degraded land or desertification was a major factor in the narrowing agricultural and forestry land that results in poverty.

According to the ministry's Administration of Forestry, Viet Nam presently has about 9.43 million hectares of desertified land, accounting for 28 per cent of production land.

Each year, about 1.5 per cent of the country's land is eroded, turning into non-productive land.

About 22 million people whose livelihoods rely on agricultural production in rural areas are affected by the desertification process.

Fertiliser abuse, forests' degradation, water pollution and droughts have been increasingly reported nation-wide, especially in the central, northern mountainous and Central Highland regions.

Yearly erosion and wash-out cause fast and large-scale desertification in the central region as 80 per cent of land there is not fertile. For example, Quang Binh, Quang Tri, Quang Ngai, Binh Dinh, Ninh Thuan have such dipped land.

In Binh Thuan Province's Tuy Phong and Bac Binh districts, there was 35,000 ha of desertified land spreading 50-km coastal line.

There, sand encroachment occupied an area of about 5,000ha, which faced highest risk of desertification in the region.

Experts said that the main cause of environmental degradation was the high frequency of natural disasters including flooding and droughts, marine resource over exploitation and population growth.

However, legal framework and protection capacity were limited.

The Administration of Forestry emphasised that afforestation was a top priority.

Pham Minh Thoa, from the Viet Nam Office for the United Nations Convention to Combat Desertification, ,said that it was necessary to manage and regulate water resource more suitably, improve afforestation and forest protection to improve underground water sources which would help reduce erosion.

Moreover, localities needed to study their land resources thoroughly before designing land-use plans.

During the last five years, Viet Nam had a national action programme to combat desertification. In 1998, the country joined the United Nations' Convention to Combat Desertification which was ratified in 1994 and so far had about 200 country members.

Chinese products disguised as Da Lat specialties

Many agricultural specialties labeled as “Made in Da Lat” in the Central Highlands city of Da Lat are in fact Chinese products.

At Da Lat Market and in many tourism areas, many “specialties” made from apricots, plums, strawberries and potatoes are being sold in eye-catching packages labeled “Made in Da Lat.”

They have attracted many unsuspecting tourists.

According to the Saigon Times Online, the fruits were imported in large cartons before traders put them into smaller packs and placed the “Made in Da Lat” labels on them.

Traders always claim that their products are Da Lat’s authentic specialties, though some of the fruits have never been grown in the city.

Da Lat’s real specialties include peach jam, strawberries, wine, sweet potatoes and fresh vegetables.

Phan Thi An, deputy head of the provincial Food Hygiene and Safety Agency, said most of the specialties available on the market in Da Lat came from China.

An said it was not difficult to distinguish Chinese products from real Da Lat specialties.
“[Chinese products] always have brighter colors and fresher looks thanks to preservatives and other food additives,” she said.

“We are not sure if these colorful Chinese products contain any toxic substances.”

Though the disguised Da Lat specialties have been around for years, local authorities are yet to be able to solve the problem.

Bui The, head of the secretariat of the provincial Department of Industry and Trade, said his agency had not detected any cases of Chinese products disguising as Da Lat specialties.

“We were informed but have found no evidence,” he said.

“The facilities that produce these products managed to prove the origin of their products.”

But he said the agency didn’t have enough staffs for thorough inspection.

For his part, Le Xuan Phuc, head of the Standards and Quality Agency under the provincial Department of Science and Technology, warned that consumers should ask traders to prove the products’ origin before buying their products.

Contraband gold marketed as well-known brand

Many one-tael gold bullions faking well-known brands, mostly that of the Saigon Jewelry Co (SJC) -- the country’s largest gold trader -- have been circulated on the market, a meeting heard yesterday.

At the joint meeting held by the Ho Chi Minh City branch of the State Bank of Vietnam, the municipal Department of Industry and Trade, and the market management agency, the authorities said the fake SJC gold bar had been produced in such a sophisticated way that it could hardly been distinguished by a traders’ naked eye.

[The fake bullion] had virtually identical design and weight as the authentic one, they said, adding that the molten bar showed that it was made of 99.99 percent pure gold, like the authentic SJC bar.

“Only when we compared the fake bars with the moulds did we find the difference,” the authorities said.

A representative of SJC said they had discovered the fake SJC gold bullion when gold traders brought some one-tael bullions to the company to exchange for bullions of lighter weights. (1 tael = 37.5 grams)

“We contacted the authorities immediately afterwards but the origins of the fake SJC gold bars are yet to be traced,” he said.

“It is likely that some individuals have turned the smuggled gold into a fake branded one for easier circulation in the market.”

The authorities also said this was a new trick of gold smugglers to deal with the recently tightened gold trading policy.

They said that before the central bank started to closely follow the gold trading sector, gold traders could easily have their smuggled gold material produced into SJC gold bars by SJC.

But under the new regulation, SJC could only produce gold bullion for traders who had gold import licenses, and the number of bars allowed to be produced was also restricted by the central bank, they said.

Gold traders had smuggled a large amount of material gold in September, when the gap between these products and SJC gold bullion prices was as much as VND4 million (US$200) a tael.

“[Gold traders] had planned to turn the smuggled gold into SJC bars to earn profits, but were later hindered by the tightened policy.”

“They have thus turned the material gold into fake SJC bullion.”

The authorities added that the smugglers also had another trick to illegally bring gold into the country.

They said gold traders had turned the material gold into gold bullion with Cambodian brands before bringing them into Vietnam.

“With this, the Cambodian gold bullions will become legal as long as gold traders can manage to bring them over the border.”

For its part, SJC said that gold shop owners should be highly aware of the fake SJC bullion.

“Gold shops should make immediate report to SJC in case they find the suspected SJC gold bullion,” it advised.

“We recommend that consumers only buy from trusted gold shops and ask for the receipts of the gold before purchasing.”

Local seafood exports faced with difficulties

The short supply of raw material and costly quality tests remain the biggest obstacles facing local seafood exporters, a meeting heard on Tuesday .

Speaking at a meeting held by the Vietnam Association of Seafood Exporters and Processors (VASEP), Nguyen Thi Thu Sac, VASEP’s deputy chairwoman, said the material shortage would remain a tough problem without a government effort to find an answer for it.

She said many of the hundreds of seafood processing plants along the central coast have had to stay closed, since most of the raw materials have been bought up by Chinese traders.

“Many local processors have had to import raw materials for moderate production over the last two years,” she said.

Adding to the problem is the fact that processors have had to wait as long as a week for their cargos to arrive, while in other countries, the time was only a couple of days, she added.

She said many global importers had chosen Vietnamese businesses as their seafood outsourcing processors thanks to low labor costs and the presence of a large workforce.

But the quality tests that must be performed before products are exported have been costly for processors.

Phan Thanh Chien, CEO of Havico, said a 40-feet container of nobashi and sushi shrimp produced by his company cost VND5.8 million (US$278) to test.

“We have spent a total of VND350 million on testing fees this month and the full-year figure could be as much as VND6 billion,” he said.

Under a regulation imposed by the Ministry of Agriculture and Rural Development, seafood exports to Japan and Canada are required to undergo enrofloxacin and ciprofloxacin tests.

“Besides these tests, the exports also have to be tested for trifluralin, which will add up to a huge expense for the processors,” he said.

Also speaking at the meeting, VASEP Chairman Tran Thien Hai said the seafood sector had targeted an $8-billion export turnover in the next five years.

“We need government support to solve the export problems in order to achieve this target,” he concluded.

Ethanol refineries have it hard on local market

With little cooperation from fuel wholesalers, many ethanol refineries around the country have found few domestic consumers and had to export most of their products.

Luu Quang Thai, Chairman of Dong Xanh JSC, the country’s fist biological fuel producer, said the company had inaugurated the Dai Loc Ethanol Refinery with an annual capacity of 125 million liters in the central province of Quang Nam last April.

He said E5 bio fuel, which was gasoline mixed with 5 percent of ethanol, could not have its own filling stations but had to be distributed along with the gasoline retail system.

But he said domestic consumption was very poor.

He said although the refinery had aimed at distributing its production equally between exports and domestic consumption, it had to export as much as 90 percent of production as the domestic market showed no interest on bio fuel.

“I wonder why the domestic market has refused to use such economical and biologically useful fuel,” he said.

Other ethanol producers also said they had to ship their products to China.

In fact, PetroVietnam Oil has been selling E5 bio fuel since August 2010 at its 106 stations countrywide.

Deputy CEO Le Xuan Trinh said the company had planned to use all of its stations to sell bio fuel this year
.
But PetroVietnam Oil’s effort is not enough to ease ethanol producers’ concern since Petrolimex, the country’s largest fuel distributor holding 60 percent of the market share, is still not likely to join the E5 bio fuel market.

Pham Anh Tuan, CEO of Phuong Dong Bio fuel Co., the operator of an ethanol refinery in the southern province of Binh Phuoc, said the non-cooperation of the fuel distributors could waste hundreds of millions of liters of ethanol.

A fuel distributor based in HCMC said most fuel dealers had refused to sell E5 bio fuel since they would have to change their equipments.

Thai of Dong Xanh Co agreed, saying most petrol stations had hesitated to change their tanks and machinery.

Other fuel distributors and dealers said they would have to spend a big sum on building the infrastructure for mixing ethanol with gasoline.

But Tuan of Phuong Dong Co said the main cause was a government policy.

He said a draft plan by the Ministry of Industry and Trade said that not until 2015 would E5 bio fuel become mandatory nationwide.

Fuel experts said when the bio fuel market became completely synchronized it would greatly benefit consumers as well as the economy.

E5 bio fuel is currently VND200 a liter cheaper than A92 gasoline, they said, adding it would also help the country save hundreds of millions of dollar on fuel imports.

But the greatest benefit was that bio fuel could help reduce 30 percent of CO emission, they said.

Experts urge to reduce number of SOEs

At a conference on a draft plan to restructure the state-owned enterprises held yesterday, experts said the number of the state-owned enterprises should be reduced because of their poor economic effectiveness.

At the conference, which was held by the Ministry of Finance, Doctor Nguyen Ngoc Tuyen, head of the Institute of Financial Economics, said the return on equity of the SOEs in the period between 2007 and 2009 was only 4.3 percent, while the figure for the foreign direct investment (FDI) sector was double that.

He said the restructuring should aim at reducing the number of SOEs in an effort to increase their economic effectiveness.

“[The restructuring] should be conducted on a large scale for all 86 of the state-run firms,” he said.

“We should ask the SOEs to end their involvement in the banking and finance sectors, amend certain incentive policies they are enjoying, and remove their monopoly in the power, coal and fuel sectors.”

Hoang Tran Hau, a member of the board that drafted the SOE restructuring plan, agreed that the economic effectiveness of the SOEs’ operation had slumped.

He cited statistics from the Ministry of Planning and Investment as saying that the SOEs are holding as much as 70 percent of the economy’s total capital, 60 percent of lending from commercial banks, and 70 percent of ODA loans, but their contribution to the GDP was only 38 percent.

He said many state-run enterprises lacked transparency in their operation, adding that some do not even have records of their actual profits or losses.

“Some have operated with losses and the government has had to set aside a big sum to offset for them,” he said.

He said the SOEs had invested $7.3 billion, or 10 percent of GDP, into non-core businesses.

“In just the last quarter of 2007 and the first of 2008, the state-run firms sunk as much as $1.4 billion in the real estate and securities sectors,” Hau said.

Professor Truong Moc Lam, former chairman of Bao Viet Insurance Corporation, said many SOEs had created a complex system of affiliates and subsidiaries under them.

For instance, he said, oil and gas company PetroVietnam set up a subsidiary working in the insurance sector, and that subsidiary then created another subsidiary to operate in the property sector.

“They have just messed things up,” he said.

“SOEs should be allowed to set up just one subsidiary.”

Doctor Nguyen Minh Phong said SOEs are accounting for 60 percent of loans and 70 percent of bad debts of the commercial banks.

Phong stated that SOEs currently account for 40 percent of GDP, while in other developed countries, the rate was only 5 to 20 percent.

“Vietnam’s ratio should thus be reduced to these rates,” he suggested.

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