Vietnam - News and Regulations

REGIONAL TRADE - Vietnam is Asian trade's 'RISING TIGER'

While China continues to rule the US import trade, Vietnam's apparel industry is becoming a key component in an economic rebound that's gaining strength, according to the latest trade data from the PIERS Global Intelligence Solutions.

That's good news for the Port of Savannah, which in 2008 already had a nearly 30-percent market share of total US East Coast trade with Vietnam.

Now, a recently modified Suez service covering Southeastern Asia, Vietnam and South China will begin calling on Savannah this month, further strengthening the ties between Savannah and Vietnam.

Kawasaki Kisen Kaisha Ltd - more commonly known as "K" Line - will deploy nine 5,500-TEU container ships in cooperation with Mitsui O.S.K. Lines on a loop from Ho Chi Minh, Shekou, Hong Kong, Yantian, Singapore, Halifax, New York, Norfolk, Jacksonville, Savannah, Singapore and back to Ho Chi Minh.

"Savannah has become the port of choice for Suez services," said Ports Authority executive director Curtis Foltz.

"With this service we will participate in eight of the 10 services transiting the Suez Canal to the United States East Coast and in both of the direct services to the important growth market of Vietnam."

Until recently, container cargo between Vietnam and the US was transshipped via other Asian ports such as Singapore and Hong Kong because Vietnam's ports were shallow and limited to small feeder vessels. However, there has been significant port development in southern Vietnam near HCM City.

The first phases of the Saigon Container Port and the Saigon Newport-managed Tan Cang Cai Mep Terminal have been receiving vessels for the last year, with another five new deepwater terminals expected to be operational by the end of 2011.

These deepwater terminals are capable of handling Panamax and post-Panamax vessels and have opened the door for direct container services between Vietnam and the US

Massive growth

Trade between the Port of Savannah and Vietnam has grown considerably during the last five years, with Savannah's imports from Vietnam growing 148 percent and Savannah's exports to the nation increasing 294 percent. Savannah's main imports during 2009 were furniture, apparel, and food, specifically coffee, while key exports were food, namely poultry, cotton and lumber.

US cotton and hardwood lumber exports have helped support Vietnam's rising textile, apparel, footwear and furniture industries.

PIERS Global Intelligence statistics reveal Vietnam swiftly growing in US imports of women's apparel and infant wear.

During a five-year period from 2005 to 2009, Vietnam emerged as the leading country in these two categories, with imports nearly doubling on a compound annual growth rate of 17.4 percent.

This strong performance has allowed Vietnam to match Hong Kong's market share at 11 percent.

"Rapidly rising wages in China are forcing manufacturers to reconsider production facilities. Vietnam is becoming the clear alternative for low-cost producers," said Mario Moreno, an economist at PIERS.

Vietnam's prime minister reported at last week's World Economic Forum on East Asia that its economy will grow 6.5 to 7 percent this year after expanding 5.3 percent in 2009.

In the first four months of 2010, exports of computer and electronics jumped 40.8 percent, compared to the same period last year, said IMA Asia. Technology giant Intel will fuel that surge with a new packaging and testing plant in HCM City opening this year.

"In effect, we are seeing a very fast transformation of Vietnam's light industrial base," Richard Martin, managing director of IMA Asia, told the Journal of Commerce.SSVNEWS

ECONOMIC GROWTH - Vietnam targets 7.5 pct GDP growth in 2011

Vietnam economy is expected to return to fast growth momentum from 2011 onwards, the government said. GDP growth rate could reach 7-7.5 percent in the next year, it said.

This target has recently been given in government directive on the projection of socio-economic development plan and state budget estimate for the coming year. Under this directive, the state budget revenues needs to ensure mobilisation rate of more than 23 percent of GDP, of that, tax and fees rate is more than 21 percent of GDP.

The government expects the total domestic revenue (excluding revenue from crude oil and land-use fees) to be up by 17 to 19 percent from the estimate of 2010, revenue from exports and imports to increase by 7 to 9 percent.

Prime minister requested ministries and central agencies to cancel, modify or amend the ineffective and outdated regulations and policies that are no longer relevant to the actual situation; or submit to the competent authorities to do so. At the same time, those bodies need to propose additional regulations and policies that are essential for 2011-2015 period. That will make a foundation for restructuring and enhancing the efficiency of budget expenditure relevant to the management fields.

Prime minister assigned the Ministry of Planning and Investment to report the 2010 socio-economic development plan and state budget estimate this September to the government for comments, then complete and submit to the Congress.

According to the government's assessment, there may be some complicated and unpredictable changes in the world economy next year. The global economic recession has been in control, but the world economy has not yet regained growth momentum of the previous years. Hence, to achieve the target set, three major things are needed to be done, including improving the socialist market oriented economy, quickly developing the human resources and maintaining infrastructure constructions in harmony with a number of modern large scale works.

Vietnam expects to achieve a growth rate of 6.5 percent this year.SGTD

INFRASTRUCTURE/

TRANSPORTATION –

Government confident in high-speed railway project

Despite intense criticism over the costly express railway project, the government's determination to press on with it remains unshaken.

Deputy prime minister Nguyen Sinh Hung, speaking at the ongoing National Assembly session in Hanoi on Saturday after two and a half days of Assembly deputies grilling some ministers over pressing issues, said he was confident in the $56 billion project.

"I'm feeling secure about this express railway project. It must be done and I will be on the government's side to ask the National Assembly for clearance to carry out the project. We cannot do nothing," he said.

If approval from the legislature is forthcoming, the government will proceed with the project on a phase-by-phase basis, not the whole of it at once, he said, adding the government would balance resources in the implementation process.

To ease worries over how to secure huge finances for the project as expressed by National Assembly deputies, Hung reckoned that with the current pace of growth, gross domestic product (GDP) would amount to $300 billion by 2020, $700 billion by 2030, $1,200-1,400 billion by 2040 and $2,400-2,800 billion by 2050.

The respective GDP per capita will be $3,000, $6,000, $12,000 and $20,000, so it will still be safe if Vietnam borrows up to $150 billion, he said. "With such debt, we can still get the job done."

Outspoken National Assembly deputies earlier questioned the feasibility of the high-speed rail line that would be running in parallel with the existing aging system.

Nguyen Minh Thuyet, a deputy of Lang Son Province, said he suspected the objectivity in the project formation process. Only a limited number of Vietnamese and Japanese firms are involved in the formulation, evaluation, consulting processes, he said.

A deputy of Hai Duong Province, Le Dinh Khanh, proposed the project be delayed until GDP per capita had reached $3,000. This is because the country's current GDP totals over $100 billion.

Meanwhile, some other deputies threw support behind the project, saying it would create an impetus for economic development. "If we don't do it, the current railway network will become outdated, thus causing a bottleneck for economic development," said Nguyen Ba Thanh, Party secretary of Danang City.

Deputies of the National Assembly also asked government ministers tough questions about increasingly severe power shortages and forest land leasing to foreign firms.

Deputy Le Van Cuong of Thanh Hoa Province said lack of power supply was a big issue in the previous National Assembly session but it had not been resolved to date.

Deputy prime minister Nguyen Sinh Hung said the government took responsibility for this problem but to solve it, more investments should be made to build more power stations, and modernise power generation equipment.

As for the leasing of forest land in areas of importance to national defense, deputy Duong Trung Quoc said those who had leased out vast areas of forest land should be held responsible.

Hung said in response that this was a lesson from decentralising power to local authorities without supervision from the relevant ministries and that this issue would be reviewed and measures would be taken to deal with those responsible.SGTD

ECONOMY - Business sentiment runs high in Vietnam

Chief executives of domestic and foreign companies in Vietnam exuded an air of optimism last week when they discussed Vietnam's future economic outlook.

At a business luncheon organised in HCM City last Friday by the British Business Group Vietnam (BBGV) and the European Chamber of Commerce in Vietnam (EuroCham), guest speakers conceded there remained woes but said growth momentum had emerged again.

Speaking to more than 150 business executives, Tom Tobin, CEO of HSBC Bank (Vietnam) Ltd, said growth drivers were in place now as reform and stimulus measures taken by the government were starting to take effect.

Tobin said HSBC was expecting the country's gross domestic product (GDP) to grow 7.2 percent this year, higher than projected by the Vietnamese government. "So, we are quite optimistic."

Prime minister Nguyen Tan Dung told the 19th World Economic Forum on East Asia 2010 in HCM City earlier this month that the nation was looking to an economic expansion of 6.5 percent or above this year and an average of 7-8 percent in 2011-2020.

Ian Lydall, senior partner and general director of PricewaterhouseCoopers, said the narrow difference of GDP growth forecasts by the government and HSBC indicated more confidence in the country's steady growth.

The Economic Intelligence Unit (EIU) in March 2009 put Vietnam's economic growth for last year at a mere 0.3 percent while others had more positive projections. In the end, the country posted growth of over 5.3 percent last year though the global economy was still reeling from the crisis.

Projections for Vietnam's GDP growth have changed this year. "The difference has been down in a range of from 0.5 percent to 1 percent. So, I think we got more confidence," Lydall told the Daily after the luncheon.

Despite caution about forecasts given the remaining challenges, particularly in the Eurozone, Lydall said there were high hopes for Vietnam. "There are reasons to believe that something slightly above 7 percent is possible."

On the same side, Tobin of HSBC said notwithstanding tough global conditions, Vietnam was now a middle-income country and continued growth was backed by the construction and stable services sectors, growing productivity and strong consumption demand.

"We're looking at a kind of almost full recovering to where it was before… The Vietnam story I think is picking up again," Tobin said. He added foreign direct investment (FDI) was still flowing into the country and new investors were arriving.

Lydall, who is also board member of BBGV, showed positive factors. "You can see this in terms of investment, additional investment made by the companies already here and new investments come again plus the attitude of business leaders."

Lydall said many British firms were interested in the Vietnamese market and looking to expand their business. Retail is one of the sectors attractive to British companies and a number of retailers want to have their presence here.

Lydall, Tobin and other guest speakers named inflation and trade deficit as the major concerns for Vietnam. But, Chairperson and CEO of REE Corp. Nguyen Thi Mai Thanh said the government had made serious efforts to control inflation while maintaining the momentum for economic growth.

Dominic Scriven, CEO of Dragon Capital, sent out a positive message about Vietnam in a statement released before he presented his view on the economic events, outlook and the stock market in Vietnam at the luncheon.

"Vietnam's macro-economic concerns have eased so far this year; yet again pointing out the merits of non-correlation. Clearly this won't be the case for ever, but for now, policymakers should be encouraged, and businesses motivated," Scriven said.

Lydall noted many Vietnamese companies had been resilient through the economic downturn, turning in sound financial performances. "Whilst this varies between industry sectors there is every reason to believe that the outlook for the rest of 2010 is good."SGTD

CORPORATE CAPITALIZATION - Banks face tighter listing rules

Credit institutions would not be allowed to list shares on the nation's stock exchanges if they did not meet charter capital requirements at the time of applying for the listing, under the latest draft regulation from the State Bank of Vietnam currently being circulated for public comment.

While most enterprises must simply comply with requirements in the Law Securities Law in order to list shares, commercial banks must also receive approval from the central bank.

Current regulations state that all commercial banks will be required to have at least 3 trillion dong ($158.7 million) in charter capital by the end of 2010. If the proposed regulation is issued, this would also become the threshold requirement for banks to apply for a listing on one of the nation's two stock exchanges.

Some market watchers commented that the circular, if issued, would block a valuable avenue for banks to raise capital. The draft regulation is certainly not good news for smaller banks that have been considering selling shares on the stock exchange as a measure to raise funds in order to meet this year's stricter charter capital requirements.

"Well, we are getting some bad luck!" the deputy director of a HCM City-based bank told Vietnam News on condition of anonymity. "Listing is considered the best way to raise capital for small banks at this time, but that plan now seems out the window. It's not easy at all because the deadline is now very near."

The central bank has already asked commercial banks and other credit institutions to submit plans no later than June 30 outlining how they expect to meet higher charter capital requirements by the end of this year. Those banks unable to submit plans would be subject to closure or required to merge with another institution. Those institutions would be required to submit plans for closure or merger to the State Bank by September 30.

In addition to the capital requirement for listing shares, the draft circular would also requires applicants to be profitable for two consecutive years prior to applying for a listing, to demonstrate a capital adequacy ratio and to maintain a bad debt ratio of no more than 3 percent of outstanding loans.

Just six out of nearly 39 commercial banks have listed on the HCM City or Hanoi stock exchanges. They are Asia Commercial Bank, Sacombank, Saigon-Hanoi Bank, Eximbank, Vietcombank and Vietinbank.

State Bank of Vietnam Governor Nguyen Van Giau has told reporters in the past that he would not overindulge banks which failed to increase charter capital in accordance with regulations.vnnews

Economic zones boost central region

The rapid development of economic zones (EZs) in the central provinces is significantly contributing to the regional economy.

By early June, Dung Quat EZ in Quang Ngai Province had attracted 167 investment projects with a combined registered capital of $10.7 billion.

Deputy head of the EZ management board Le Van Dung said 51 projects were now operational, employing about 12,000 workers.

The zone's development has increased the contribution made by the industrial sector to the province's GDP, he added. From 2006-2008, the zone accounted for half of the local budget.

From now until 2020, businesses and investors operating in the EZ will employ approximately 67,600 workers, Dung said.

Of that number, FDI projects will employ an estimated 11,200 workers (17 percent of the total); while domestic investment projects in oil refining, shipbuilding, seaports, will employ about 13,000 workers.

Meanwhile, Ho Sy Nguyen, head of Chan May – Lang Co EZ management board, said licences had been granted to 33 projects with a combined registered capital of 31 trillion dong (over $1.6 billion).

Of the total, 10 are foreign-invested, worth $1.4 billion, and accounting for 70 percent of the total FDI registered in Thua Thien – Hue Province.

In the period of 2010-2015, the province plans to give top priority to improving the zone's infrastructure while speeding up the implementation of key projects such as the Chan May seaport and the Chan May new urban area, Nguyen said.

Meanwhile, the Chu Lai EZ in Quang Nam Province, which was established by the government in 2003, is also planning to improve its infrastructure to attract more investment, according to the zone's management board.

Recently, the board licensed three new projects, valued at 615 billion dong ($32.3 million). There are now eight licensed projects in the zone, capitalised at $274 million.

Meanwhile, plans to turn Chu Lai into the region's biggest goods transit airport by 2015 is expected to spur the EZ's development.

Not wanting to lag behind, the Nhon Hoi EZ, which was established in June 2005, now has a non-tariff area, industrial parks, a sea port and port services, a tourism area and a new residential area, all operating under a special incentive scheme.

To date, the EZ had attracted 58 projects, capitalised at $3.3 billion. Of those, 19, worth $951 million, have been licensed, Man Ngoc Ly from the EZ authority, said.

Khang Thong Trade and Construction Co announced that it would soon start construction of a $224 million non-tariff complex in the zone. The 600ha complex will comprize a non-tariff area, an industrial zone and a deep sea port.sgtd

Resources - PetroVietnam may seek Australia LNG pacts, financial review says

Vietnam Oil & Gas Group, the state- owned company known as PetroVietnam, may seek to buy liquefied natural gas from Australian energy companies after visiting several firms this year, the Australian Financial Review reported, citing an interview with Austrade's Kuala Lumpur-based trade commissioner Paul Martin. Vietnam is targeting more than A$1 billion of energy exports from Australia to Vietnam by 2015, the newspaper cited Martin as saying.

POWER - Power failures decrease coal-mining output

The alternate power failure situation has made serious impacts on coal mining and consumption, said Vietnam National Coal-Mineral Industries Group (TKV).

In May alone, there were total of 314 power cuts in 19 coal firms, equivalent to 649 hours of production suspension. The series of rotating power cuts has caused number of coal firms to be unable to complete mining and consumption plans. In addition, the current difficulty of coal industry is that the low-calorie coal is in slow consumption with high inventory volumes.

Since copper refineries are heavily dependent on imported power, whenever the power is cut, voltage increases and decreases abnormally, leading to low productivity and high incomplete products volume. In the first 6 months, TKV estimates that it produces 25.814 million tonnes of crude coal, accounting for 54.4 percent of the full-year target; consumption reaches 21.715 million tonnes, accounting for 50.5 percent, of which coal export volume is 10.168 million tonnes and domestic consumption is 11.547 million tonnes.

Oliver Massmann