Vietnam - News and Regulations

RETAIL/DISTRIBUTION-Vietnam's retail market growing rapidly
Being evaluated as a major potential market, Vietnamese retail market has been growing rapidly with sales force growth averaging approximately 23 percent per annum. Holding the fourth position among 30 countries that are attractive to foreign retailers, Vietnam's domestic market expects to attract various giants in retail sector. According to the market research of CB Richard Ellis Vietnam Company (CBRE), retail sales and services revenues at Vietnam's current prices have gone up by 16 percent in the first six months of 2010, and doubled compared to the same period of 2009. Having been in Vietnam since 1998, from struggling with the initial point of sale, Big C has expanded to 10 supermarkets directly distributing consumer goods and necessaries in major cities like Hochiminh city, Hanoi, etc. According to PR manager of Big C Vietnam Duong Thi Quynh Trang, Big C will soon open a supermarket in Vinh city, Nghe An province. Big C's recent business is very good and they determinedly believe in the future development of the company. There currently are 30 foreign retailers investing in Vietnam, focusing on mixed commercial centres, supermarkets, convenience stores, health and beauty studios, and food stores. According to preliminary survey, most businesses are operating effectively and have been expanding their business. CBRE Vietnam's managing director Marc Townsend said they forecast that there would be more and more high-class retailers entering Vietnam's market. The main attentions are the young population and the fast urbanisation of Vietnam. Besides the industrialisation process, which resulted in developments in technology, increasing number of medium and high-income earners has led to changes in lifestyle, including a preference trend for foreign brands. Fever in market for retail space Despite being offered at a very high rental rate since being put into use in April 2010, Vincom centre in Hochiminh city has basically filled up more than 90 percent of the total space. Similarly, finding a suitable point of sale in the downtown areas such as Diamond, Sai gon Square, Parkson, etc., is too difficult for many businesses, when most lessees have signed long-term rental contracts. Currently, the average rental for ground floor and first floor is ranging from $97 to $124 per square metre monthly, two to three times higher than renting a space far from the centre. According to real estate specialists, the current supply for retail space in Hochiminh city is nearly 318,000 square metres, located in 24 commercial centres and commercial complex. Of that, the filling rate is nearly 95 percent. By 2013, the supply is expected to increase by three times. Facing the limit of vacant retail space in the centre, retail space supply outside the city centre is estimated to increase by more than 10 times with the participation of a number of new large-scale commercial centres. There have been many new retail spaces locating in the outside city centre area, such as in District 7 (Crescent Mall, Sunrise Shopping Mall), and District 2 (Metropolis), etc. These new sources of supply are expected to help the city solve the problem of retail space shortage in the city centre for foreign investors.vnnews

FOOD PROCESSING - Northern Kinh Do JSC earns profit of 12.4b dong in Jan-June

The STC-listed Northern Kinh Do Food Processing Joint Stock Co (coded NKD) has earned accumulative pre-tax profit of 12.49 billion dong in the first six months of this year, fulfilling 10 percent of the year plan of 120 billion dong.

According to the combined financial reports, in Jan-June the company reported gaining net revenue of 305 billion dong, up 12.5 percent against the same period of last year. Meanwhile, NKD's combined profit in H1 reached 74.48 billion dong, surging by 21 percent year-on-year.

The revenue from financial activities reduced by half at 9.34 billion dong and operation costs rose to 18.8 billion dong, resulting in net profit of 11.49 billion dong, equalling to 37.6 percent over the last year.

The company reported gaining other profits of over 1 billion dong, and pre-tax profit of 12.49 billion dong, a sharp reduction in comparison with that of H1 of 2009 of 33.6 billion dong and fulfilling 10.4 percent of the year plan.

In Q2, the company estimated to reach 149 billion dong of net revenue, a slight increase of 5.6 percent against the same period of last year. Meanwhile, the after tax profit in April-June was posted at 729 million dong.

STATE OWNED ENTERPRISES- Vietnam's inefficient state firms in spotlight

The near-bankruptcy of one of Vietnam's largest state-owned enterprises highlights a lack of oversight and easy access to capital by the inefficient business groups, observers say.

In early July the ruling Communist Party announced that the chair of shipbuilder Vinashin, Vietnam Shipbuilding Industry Group, would be reprimanded for pushing the firm to the brink of bankruptcy.

The government said Pham Thanh Binh had been suspended and was accountable for the group's debts, which local media said amounted to at least 80 trillion dong (4.3 billion dollars).

Police are reportedly investigating.

Vietnam began opening its economy to the world 24 years ago. While small-scale private enterprise flourishes, 60 or 70 percent of the nation's capital and assets are held by state-owned groups, outspoken economist Pham Chi Lan, a former economic adviser to the government, was quoted by local media as saying.

Along with Vinashin, these groups include Electricity of Vietnam (EVN), the power monopoly, and PetroVietnam, the Vietnam National Oil and Gas Group, as well as others.

Prime minister Nguyen Tan Dung, who assumed his post four years ago, "has been a major supporter of building up Vietnamese business conglomerates along the model of South Korea's chaebols," said Carl Thayer, a Vietnam specialist at the University of New South Wales.

Vinashin, established in 1972 to consolidate the country's shipbuilding industry, built and repaired vessels but also engaged in shipping, heavy industry and other services, the company website said.

Local media have reported that the firm -- whose interests included ports and real estate -- would now be restructured to focus on its core business.

The Vinashin case emerged just months before next year's Communist Party Congress, at which key leadership posts will be determined.

Thayer said the scandal could have been a threat to prime minister Dung but he "struck pre-emptively" by ordering the restructuring.

"Dung has put himself in a win-win situation," Thayer said.

Before the scandal, Vinashin said it had more than 160 subsidiaries including 39 shipyards, and benefited "from strong government support".

In an interview with local media, Lan accused state-owned business groups such as Vinashin of being over-indulged.

"Vinashin was given huge resources, and allowed to spend money freely and incur big debts," she was quoted as saying. "I think if the state didn't give money to Vinashin so freely, the losses would have not been so huge."

Lan declined to speak to AFP.

Jonathan Pincus, dean of the Fulbright Economics Teaching Programme in HCM City, said some large state companies had easy access to state land and capital without being forced to compete, which led to over-investment.

He said the solution was to force them to borrow at commercial terms and to buy land at normal market prices.

"The tenure and compensation of managers of state companies should be linked to company performance. Greater transparency is also essential," Pincus said, suggesting that large state firms list on international equity markets, which would force them to disclose information.

Hanoi's Young Business Association, in a paper for a World Bank-backed forum last December, said the efficiency of capital investment in state-owned businesses was lower than in private enterprises from the same industry.

"Forty-five percent of the state-owned corporations are encountering losses," it said. "Yet resources, both human and material, still flow overwhelmingly into state firms".

Pincus said other state sectors could adopt Vietnam's telecommunications model. All the mobile phone providers are majority-owned by the state but none dominates the market, meaning they all have to compete on service and price, he said.

Lan was quoted as saying that because top executives of state groups are appointed by the prime minister, they scorn guidance from anyone else, and regulations do not clearly specify the supervisory responsibilities of government ministries.

She said state business groups should be even more transparent than listed firms "because they hold the assets of the people." AFP

SOE debt load hits nearly two times equity, losses mount

By the end of 2008, total capital of 20 audited state-run corporations was estimated at 137.464 trillion dong, while total combined debts were recorded at around 87 trillion dong and the average ratio of payable debts on total equity was 1.8 times, according to the auditing results of state-owned enterprises, state financial institutions and state banks announced yesterday by the State Audit of Vietnam.

SAV said that the business capital of those corporations posted the strong growth against previous years as their production scale was continuously expanding.

However, some corporations operated primarily based on appropriated capital and loans leading to their financial instability. Specifically, the coefficient of payable debt on equity in 2008 by Civil Engineering Construction Corporation No. 6 (Cienco 6), under the Ministry of Transport was 30.53 times; Vietnam Industry and Construction Corporation at 16.47., Vietnam National Coffee Corporation (Vinacafe) 3.36 times. SAV said that most state-owned companies did not correctly reflect their revenues and expenses.

The 2008 financial report of 183 out of 242 independently- accounted enterprises of 20 state-run corporations showed a total pre-tax profit of 20 corporations reached 16.626 trillion dong as there was 12 out of 20 corporations that obtained 2008 revenue higher than 2007's. However, total payable debts of 20 corporations by the end of 2008 was 26.586 trillion dong as the ratio of payable debts to total assets was 19.34 percent, on total equity was 55.48 percent. In particular, many bad debts outstanding for years had yet to be settled.

In particular, due to the lack of contracting inspection and internal financial control, some enterprises were facing up to several receivables not yet settled and a record of accounting books was incomplete, leading to the problem: "fake profit, real loss. " The typical example is Vinacafe, which reported a profit of 199 billion dong, but actually it posted the accumulated losses of 525 billion dong by December 31, 2008.

Total bad debts of Vietnam Engineering Construction Corporation amounted to 118.6 billion dong (already set aside 11 billion dong for stand-by reserves), which did not include several advances exceeding the regulated internal rate and advances to employees left and no possibility of debt receivables.

Bad debts of Cienco 6 were posted at 46.4 billion dong, while overdue receivables from customers in Vietnam Environment, Water Supply and Construction Investment Corporation were 33 billion dong.

According to SAV's comments, they are actually the figures of potential losses.nglaod

POWER - EVN seeks $300m bank loans for 5 years

Electricity of Vietnam started talks with a group of banks for five-year term loan of about $300 million, according to two people familiar with the matter.

The Hanoi-based utility's loan may pay an all-in fee of about 400 basis points more than the London interbank offered rate, and proceeds would be used for working capital, the people said, asking not to be identified as the plan is private.

Credit Agricole CIB, Credit Suisse Group AG, HSBC Holdings Plc and Natixis have bid to participate as a group, while Australia & New Zealand Banking Group Ltd, Bank of Tokyo- Mitsubishi UFJ Ltd, BNP Paribas SA, Deutsche Bank AG, Standard Chartered Plc and Sumitomo Mitsui Banking Corp. are considering involvement, the people said.bloomberg

RESOURCES/UPSTREAM GAS - Indian quartet eyes BP's Vietnam patch

Four Indian state-run oil companies Gail India, Oil India, Oil & Natural Gas Corporation and Indian Oil Corporation will jointly bid for BP's oil and gas assets in Vietnam, Oil India chair Nayan Mani Borah said.

The four Indian companies will approach PetroVietnam for a joint bid for BP's assets, he said, adding that state-run PetroVietnam has the first right of refusal on the assets.

"The approach and goal is to combine our strengths with PetroVietnam," Dow Jones cited Borah as saying.

He said the bid would likely be for BP's share in a gas block, pipeline and a power plant.

BP holds a 35 percent stake in Block 6.1 in Vietnam. ONGC holds 45 percent and PetroVietnam the other 20 percent interests.VNN

PSG gained nearly 30b dong of pre-tax profit in H1

PetroVietnam Southern Gas JSC (PSG) announced the parent company's business result in the second quarter with sales and service supplying revenue of 847.2 billion dong, up 140 percent, pre-tax profit of 17.3 billion dong, increasing 96.03 percent, after tax profit of 15.965 billion dong, up 124.54 percent year-on-year.

According to H1 accumulative business result, PGS's revenue gained 1.4895 trillion dong, rising 139 percent, pre-tax profit of 29.55 billion dong, up 82.41 percent year-on-year, after tax profit of 26.88 billion dong, about two times of the same period of last year.DTCHK

Oliver Massmann