Vietnam - News and Regulations

Business outlook - Vietnamese firms still upbeat in 2011

Though Vietnamese private firms are slightly less optimistic about business outlook in 2011, 62 percent compared to 72 percent a year ago, the country still ranked 16th in business optimism in a recent survey over 39 economies worldwide.

This is significantly higher than the global average of +23 percent and higher than the Asia Pacific (excluding Japan) average of +50 percent, according to the 2011 Grant Thornton International Business Report (IBR).

"Inflation and rising interest rates have had an impact on the levels of Vietnamese optimism, hence the decrease from the previous year, albeit at +62 percent this is still a relatively strong result," Ken Atkinson, Managing Partner of Grant Thornton Vietnam, said.

Despite declining optimism, businesses in Vietnam continue to take a long term view.

A balance of +41 percent of businesses expect to increase expenditure on R&D (global average: +24 percent), +34 percent expect to increase investment in plant and machinery (global average: +35 percent) and +78 percent (global average: +29 percent) expect to increase employment.

Confidence levels in economic performance this year are higher in Latin America than any other part of the world, recording +75 percent. 2011 is the first year Latin America has led the world on optimism.

"In recent years the global focus for emerging economies has been on the BRIC economies of Brazil, Russia, India and China. However, this survey helps confirm that a wider view of Asian and Latin American economies reveals many other countries with strong levels of business confidence and high forecast growth rates in 2011," Ken Atkinson said.

Optimism in North America is just +26 percent, with Europe the least optimistic region at +22 percent. Globally, Chile (+95 percent) scored the highest optimism of any country surveyed followed by India (+93 percent), Philippines (+87 percent) and Switzerland (+85 percent).

Asia Pacific, last year's leading region for business optimism, saw a fall in overall optimism from +64 percent to +50 percent as economies such as Mainland China (down from +60 percent in 2010 to +42 percent), Australia (down from +79 percent to +37 percent) and New Zealand (down from +66 percent to +35 percent) showed large negative swings in optimism.

Businesses around the world expect weak investment in 2011 since the IBR reveals that business owners expect to see only moderate levels of investment in 2011.

Some 35 percent more businesses expect to see increases in investment in plant and machinery and only 24 percent more expect to see an increase in research and development (R&D). A notable exception to this trend is Mainland China where +47 percent of businesses expect to increase investment in plant and machinery and +61 percent expect to increase their R&D.

"Sooner or later businesses will need to invest if they want to continue to grow.

Governments in these economies need to create environments that encourage business investment. But with interest rates already at historic lows in some key economies, the option to reduce them further and stimulate investment is not available. Therefore they will need to be creative," Matthew Lourey, Advisory Services director at Grant Thornton Vietnam, said.

"Some of this creativity might be directed towards the banks where lending activity to businesses in a number of economies has been low as they seek to rebuild their balance sheets in the wake of the financial crisis," he added.

The Grant Thornton IBR is a survey of medium to large privately held businesses, researching the opinions of over 5,700 businesses in Q4 2010, and over 11,000 on an annual basis.

The target respondents are chief executive officers, managing directors, chairmen or other senior executives (title dependent on what is most appropriate for the individual country) from 39 economies primarily across five industries: manufacturing (25 percent), services (25 percent), retail (15 percent and construction (10 percent) with the remaining 25 percent spread across all industries.

It provides insight into the views and expectations of over 11,000 businesses per year across 39 economies. This unique survey draws upon 19 years of trend data for most European participants and nine years for many non-European economies.

The research is carried out primarily by telephone interview lasting approximately 15 minutes with the exception of Japan (postal), Philippines and Armenia (face to face), mainland China and India (mixture of face-to-face and telephone) where cultural differences dictate a tailored approach.

Data collection is managed by Grant Thornton International's core research partner - Experian Business Strategies.

Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. The Q4-2010 fieldwork took place in Nov/December 2010.vnnews

Vietnam in top four emerging property markets: AFIRE

Vietnam is attracting attention of international investors as it becomes part of top four emerging real estate markets.

Association of Foreign Investors in Real Estate (AFIRE) has released report on global real estate market, according to which Vietnam ranks the fourth in the emerging markets about the level of attractiveness to foreign investors.

AFIRE's survey was conducted on investors currently holding more than $627 billion of real estate globally, of that $265 billion are in the US. Among those, about 65 percent of respondents said the US promises the best chance for price increase, far exceeding the 10 percent of respondents choosing China, which ranks the second on the list.

Among the emerging markets, Brazil takes the leading position from China, making it second, in relacing India. Vietnam was not in the list last year, but surprisingly gets the fourth position, leaving Mexico in the fifth place.

VnEconomy had an interview with Peter Ryder, general director of Indochina Capital, an American businessperson who is successful in a series of real estate projects in Vietnam surrounding this issue.

Evaluating the new rating of AFIRE for Vietnam, especially in the context when the country was not even in the list of last year, Ryder said this result is due to the rapid growth of Vietnam's real estate market and the open regulations, which allow the participation of foreign investors.

Regarding the true meaning of this rating to the development of Vietnam's real estate market, Ryder said in the current context of real estate investment worldwide, Vietnam's real estate market has proved its attractiveness through domestic demand and the ability to recover of the economy, supported by the factors such as economic growth, fast urbanisation and the formation of a new middle class. Although the investment environment remains challenging, the real estate market of Vietnam has still been attracting attention from institutional investors globally. Ryder added that AFIRE's survey shows interests of international investors in Vietnam's real estate market, a trend that has markedly been increasing since 2010, and would likely continue if the economy of Vietnam maintains positive growth.

With the ongoing pursuit for perfection of the market for commercial and housing real estate, Indochina Capital expects long-term interests of foreign investors. For example, the recent cooperation of Indochina Capital with Orix, one of the biggest financial service companies in Japan, centered on their interests in accessing investment opportunities in real estate market of Vietnam.

The relatively positive economic growth in 2010 has brought optimism to the real estate market. Since the recession in 2008, many projects have begun in all fields, with the considerable increase of supply source for office market in Hanoi and HCM City, as well as in the market for housing and resorts. The market has been witnessing remarkable growth from both demand for renting and demand for investing.

Since early 2010, Vietnam's real estate market has gradually been improved correspondingly to the continuous expansion of the economy, since the orbit of the real estate market in the country has been linked to the economy. With the brighter outlook of the domestic and global economies, market for commercial and housing real estate of Vietnam has been having positive development momentum, a trend that Indochina Capital predicted to be continued until 2012.

Ryder said it is hard to compare Vietnam's real estate market to other Asian markets in the same period of development, since the cyclical fluctuations vary greatly between regions. However, Vietnam is still having better development in real estate compared to many other Asian countries. In terms of supply, Hanoi and HCM City have rather limited supply of modern retail spaces and housing system.

He added that urbanisation process of Vietnam would still go on, demand for housing and retail trade system would continue to increase, and Indochina Capital would proritise to invest in those areas.

Concerning Indochina Capital's plan for real estate sector this year, Ryder said in Indochina Land, the group noted the increase in house sales with total revenue of about $40 million in 2010. With underway projects, the group has expanded operation to various areas, including commercial real estate, office spaces, tourist areas and service apartment real estate, etc.

In 2011, Indochina Capital would continue focusing on projects such as Indochina Hanoi Plaza, a complex worth $160 million and Da Nang Hyatt Regency worth $130 million with high quality rooms. The group expects to complete both projects in the last six months of 2011.

In addition, the group would launch new development projects, primarily the Saigon South residential area in Nha Be district, HCM City. Indochina Capital is in design phase of a project capable of providing overall 1,000 to 1,200 apartments for middle-income earners.

Moreover, Indochina Land Holdings 3 (investment fund) has been established and launched recently, aiming to invest in real estate market. The investment strategy of the group for this fund is to focus on residential areas in both urban and suburban, as well as other complex projects in Hanoi and HCM City.vneconomy

BOND RATING - VINASHIN - Troubled shipbuilder's default hinders Vietnamese bond sales

State-owned Vietnamese firms have failed to sell overseas bonds after troubled Vietnam Shipbuilding Group (Vinashin) defaulted on foreign debt repayment, companies and economists said Thursday.

Truong Huy Cuong, a spokesman for the PetroVietnam Group (PVN) said the company halted a 1 billion-dollar overseas bond sale planned for the fourth quarter in 2010.

The company would try and repeat the sale an "appropriate time" the Vietnam News quoted PetroVietnam chair Dinh La Thang as saying.

Vinashin, which is state owned, failed in late December to repay 60 million dollars, the first tranche of a 600 million-dollar loan arranged by Credit Suisse in 2007.

Vietnam National Coal and Mineral Industries Holding Corporation (Vinacomin), has delayed selling bonds worth 500 million dollars overseas.

Economist Nguyen Quang A said he believed state-owned firms had to shelve overseas bond sales because global ratings agencies have downgraded Vietnam's sovereign credit rating.

On December 23, Standard & Poor's downgraded Vietnam's sovereign credit rating to BB- from BB, while the local currency rating dropped to BB from BB+, with a negative outlook.

On December 15, Moody's Investors Service lowered Vietnam's government bond rating to B1 from Ba3, maintaining a negative outlook.

"Vietnamese state-owned firms will meet a lot of difficulties in operations due to lack of capital," said Nguyen Quang A. However, a positive side effect may be that those firms may now have to tighten spending, he added. "It means that the effectiveness of using capital will be higher."DPA

Vietnam's knowledge economy index remains low despite rapid growth, experts

Vietnam has a high growth rate but not high quality amid its environmental pollution, complicated climate change, weak manpower, and low quality of life.

A series of above factors are Vietnam's disadvantages which experts, agencies and local governances upbeat at the third conference on national sustainable development held January 6. They are also reasons requiring Vietnam to change its growth form towards the solid development based on three pillars: economy, society and environment.

Giving assessment on the sustainable development strategy from 2005 to 2010, vice minister of Planning and Investment Nguyen The Phuong said that Vietnam with a relatively high growth rate escaped from low income countries. But, our economy has not been sustainable, developed mainly in wide-range while its competitiveness and efficiency have not been appropriate with its potential. The economy sees a potential backward.

Vietnam's knowledge economy index only reached 3.02 in 2008, ranking 102 among 133 listed countries while that of mid income countries was 4.1. In addition, our country's productivity was very low, only equal to 38 percent of China and 27 percent of Thailand, Phap Luat newspaper reported, citing Phuong's report.

PhD Le Xuan Ba, head of Central Institute for Economic Management spoke, Vietnam's growth was reliant on capital. Separately, in the period from 1991 to 1995, capital factor contributed up to 29.8 percent of the GDP, which was raised to 51.2 percent in following five years and nearly 60 percent in 2001 to 2005. Therefore, Total Factor Productivity, an important measure of growth efficiency and quality, of Vietnam remained low. This meant that the factors that create a sustainable development such as labour quality, technologies have not become main factors of the economic growth.

Meanwhile, a representative from Hai Phong Department of Planning and Investment said: "It is impossible on economic growth as previous years any more. Economic development must be attached to environmental protection as well as social security including clean water standard, poverty household ratio, urban waste, dust, or water pollution…So Vietnam should conduct environmental protection funds soon and review new poverty standard.

Finally, a Quang Nam municipal governance's representative said we need to develop a green GDP along with environmental protection.vietbiz

Hanoi's GDP growth at 11pct in 2010

In 2010, Hanoi's gross domestic product (GDP) growth was at 11 percent, 1.5 fold against 2009's figure at 6,7 percent and approximately the figure of 10.9 percent in 2008 and 11.2 percent in 2007.

The capital city's average GDP reached 37 million dong per person. The state economic area contributed about 45 percent of GDP, lower than 52.1 percent in 2005 meanwhile the private economic area contributed about 38 percent of GDP, higher than 31.8 percent in 2005, and 17 percent remaining contributed by foreign invested economic areas, increasing slightly against 16.1 percent in 2005.

In 2010, the city's industrial production value posted a rise of 14.4 percent, of which, the expanded industrial sector increased 11.6 percent, service up 11.1 percent and agriculture, forestry and seafood fields up 7.2 percent.

The recovery and acceleration of industrial production growth was seen clearly in three consecutive quarters at 12.4 percent, 13.9 percent and 13.7 percent and over 14 percent in Q4.

For full year, the state area grew 9.3 percent, private area up 14.9 percent and foreign invested area up 16.8 percent.

The processing industry accounted for the highest percentage (about 96 percent) and saw highest growth (over 14 percent year-on-year).

The city's total retail sales and services increased 30.5 percent from 2009. Of which, retail was up 31.2 percent. The capital city's retail network also increased sharply with 362 markets, 70 trade centres and supermarkets and a series of other option shops.

If calculating from 1994, Hanoi is estimated to account for 12.73 percent of the country's GDP growth (equalling to half of HCM City's GDP, three fold higher than Hai Phong's GDP and seven fold increase against Da Nang's GDP), account for 10 percent of the country's total stage budget collection, 13.2 percent of the country's industrial production value, and about 20 percent of the country's total social investments.

Hanoi's export turnover increased 26.3 percent against 2009, of which, local export posted a rise of 30.8 percent.

Many export items saw strong rise of from 30-40 percent such as rice (43.3 percent), apparel products (33 percent), electronic products (36.6 percent), computer components and peripheral (34.3 percent), glass and glass products (37.1 percent) and electricity wires and cables (38.4 percent).

The city's import spending was up 12 percent from 2009. Of which, local import increased 3.8 percent. Notably, fertiliser import decreased 40.8 percent while other items increased strongly like accessories and equipments (up 15 percent), chemical (up 15.4 percent), plastic (up 23.9 percent) and petroleum (17.5 percent).

The city's production value for agriculture, forestry and seafood sector increased 8.78 percent.

In 2010, Hanoi's total development investment capital was nearly 173.269 trillion dong, rising 17.2 percent from 2009. Of which, capital from the state budget decreased 1.1 percent, loans increased 6.7 percent, investment of state enterprises was up 0.5 percent, investment by private firms up 27.9 percent and investment by foreign-invested firms up 11.5 percent.

Hanoi's total budget collection in 2010 reached 100 trillion dong, exceeding 12.7 percent against the estimate, up 17 percent year-on-year. Of which, domestic collection reached 87.56 trillion dong, surpassing 15.2 percent against the estimate and rising 18.4 percent y-o-y.

The local budget spending in 2010 was 40.037 trillion dong, exceeding 14.9 percent from the estimate and down 13.2 percent year-on-year. Of which, frequently spending was 17.905 trillion dong, surpassing 21.3 percent versus the estimate and up 29.5 percent y-o-y and spending for basic construction was 16.922 trillion dong, exceeding 12.2 percent of the estimate and a year-on-year rise of 29.8 percent.

Till the end of December 2010, the total deposits of banks in Hanoi reached 750.704 trillion dong, up 1.48 percent from the previous month and 28.21 percent from the previous year. Of which, savings increased 1.6 percent and 30.19 percent respectively, valuable paper issuance up 1.5 percent and 44.56 percent and payment deposits up 1.4 percent and 25.01 percent respectively.

The total outstanding loans till the end of December 2010 reached 475.356 trillion dong, rising 1.67 percent month on month and 26.12 percent year-on-year, of which, short term outstanding loans up 1.8 percent and 28.45 percent and medium and long term outstanding loan up 1.5 percent and 23.05 percent respectively.vietbiz

Oliver Massmann

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