Vietnam - News and Regulations

FINANCE - Vietnam SME index stays at the second highest in the world
Though dropping 8 points in comparison to the last wave, Vietnam small business confidence index stays positively at 156, the second highest in the world, over the global average of 125. This is in line with the economic outlook of all as SMEs in Vietnam with 60 percent who believe that the economy will continue to grow in the next six months.
Over half of the surveyed enterprises in Vietnam are involved in international business, which is much higher than the average global figure of 29 percent. Mainly these enterprises are conducting import (71 percent) and export services (34 percent) marketing products/services through international subsidiaries or offices (10 percent) and off-shoring services, e.g. call centres, service centres (7 percent). Over half of the Vietnam SMEs have plans to either expand (42 percent) or continue their existing international activities (9 percent) while about one fifth (18 percent) have plans to go international while the rest of almost one third (31 percent) does not. When being asked about the intention to do business internationally in the next two years, 82 percent of the international companies believe that they will expand their business, which is double compared to the figure globally. 37 percent of domestic enterprises have plans to do business internationally. Availability of financing (49 percent) and concerns about dealing in foreign currencies (48 percent) remain at the top of barriers for doing international business. Aside from that, the complexity of certain international markets, e.g. tax, foreign currency controls, local regulations and legal complexities, lack of knowledge (e.g. taxation, regulations), contacts and experience of overseas markets are also concerns for these businesses. While considering the expansion of their business internationally, 48 percent of the surveyed Vietnam SMEs said that they need information about foreign exchange risk and regulations while another 46 percent need to know more about financial options that they may be available. They also consider tax implications and legal advice as vital to their business should they wish to expand globally. Increasing their revenue is the top reason that drives businesses to trade beyond their national borders with 95 percent of Vietnam SMEs agreeing on this. 48 percent wish to expand abroad to tap new customers in their target. The top three concerns for the next six months are inflation (62 percent), economic conditions (52 percent) and difficulties in accessing credit (48 percent). This is also in line with the latest result from the HSBC Emerging Market Index survey. The survey results also highlight that government policy measures such as monetary policy and stimulus packages play a key role for local economic growth as 53 percent of local SMEs believe that these help their business significantly, followed by 28 percent of the enterprises who say the increasing demand from domestic market will also boost the economic growth. Commenting about the results of the survey, Huynh Buu Quang, Head of Commercial Banking, HSBC Bank (Vietnam) Ltd said: "The results of the latest HSBC Global Small Business survey continued to reflect the shift in economic growth from developed markets to emerging markets. Vietnam small businesses will benefit from this movement. I'm glad to see the strong intention to expand business internationally to capture new opportunities, but they will also need support to prepare carefully for the expansion, from financing resources to knowledge on international markets, foreign exchange risk and regulations. At HSBC, with a network of 8,000 offices in 87 countries and territories, our international connectivity and excellent on-the-ground expertise, we are uniquely placed to help small businesses with their financing needs and function as a bridge for those who would like to go beyond the national borders to tap new markets. intellasia

ENERGY EFFICIENCY - Steel and cement sectors must minimise electricity use
This is the first time pressure of supplying power for the two industries has actively been discussed, before the risk of 2011's power shortage, which is forecasted to be two to three times more serious than last year. The meeting was chaired by deputy minister of Industry and Trade Hoang Quoc Vuong last week, with the participation of the Vietnam Steel Association, Vietnam National Cement Corporation, Vietnam Steel Corporation, Electricity of Vietnam (EVN), Electricity Regulatory Authority of Vietnam, Energy Department and Department of Heavy Industry. Deputy minister Vuong said 2011 continues to be a very difficult year for power supply. According to EVN's power supply and operation plan in 2011, there might be a shortage of up to two billion kWh of power in the dry season of 2011, doubling last year's shortage. Thus, reducing the use of power is required and steel and cement industries must reduce power consumption during this period, directed the deputy minister of Industry and Trade. In 2010, as cutting living power was not enough, steel and cement industries were also affected. In July 2010, the Vietnam Steel Corporation sent written document to Ministry of Industry and Trade requesting the ministry to direct EVN not to apply sudden power cut. Just two months later, EVN sent written report to the ministry mentioning that the hot development of steel industry, with supply exceeding demand, has put great pressure on power sector, which already lacked of investment capital, now must supply power for the projects out of planning. In the context of future power shortage, the ministry also requested steel and cement enterprises to set up production and repairing plans to minimise the use of power in the dry months (especially from March to June) of 2011.
In 2010, commercial electricity output of EVN was estimated at 85.7 billion kWh (up by 14.5 percent over 2009). Of that, steel and cement manufacturing already consumed 10.19 billion kWh. The power consumption of these two industries accounted for 12.04 percent of the total commercial electricity production, up by 27.5 percent over 2009. Power consumption of steel sector was 4.67 billion kWh, accounting for 5.52 percent, and of cement sector was 5.52 billion kWh, accounting for 6.5 percent. According to calculations of Vietnam Cement Association, cement consumption would continue to increase by nine to 10 percent compared to 2010, estimated at 56 to 57 million tonnes. In 2011, cement industry would have 10 new plants put into operation, with output volume expected to increase by about nine billion tonnes, bringing the total capacity of cement production in 2011 to estimated over 60 million tonnes, meeting the domestic demand and having a little surplus for export.
In 2010, cement industry produced nearly 51 million tonnes; the consumption reached 50.21 million tonnes, up by 10 percent compared to 2009.
As forecasted, with the rise of input costs as at present, in 2011, prices of electricity, coal and packing would continue to rise, and there would be an increase adjustment to prices of cement in the market. Particularly, as recommended by Department of Heavy Industry (Ministry of Industry and Trade), in 2011, cement enterprises would also face tension of power supply; the peak time is from March to June. To limit the negative impacts of power reduction, at the request of Ministry of Industry and Trade, the Vietnam Cement Association and Vietnam National Cement Corporation have sent written document to members of steel and cement industries directing them to soon improve technology and equipment, in order to enhance efficiency of power use. Especially, those members should have plans to used waste energy to to support production.
To avoid the same situation like last year, EVN needs to work with steel and cement manufacturers to build a unified plan for power supply in 2011. However, if EVN needs to reduce power supply, EVN should still prioritise the plants of those two sectors, which have high electrical efficiency and are in development planning.DDKT

VIETNAM BOND INTERNATIONAL - Unfavourable time forces firms to postpone International bond issuance
Vietnam Oil and Gas Group of Vietnam (PVN), in the last days of 2010, has postponed the plan to issue international bonds worth $1 billion. Previously, some other corporations have also failed to raise capital through international bond issuance. However, in 2011, international capital remains an important driving force for Vietnamese enterprises and any moves of large enterprises can strongly influence the domestic capital market.
Dinh La Thang, PVN's President said the group has officially stopped the issuance of international bonds in US market in the fourth quarter of 2010. Thang said the reason was the unfavourable time, adding that in deed, some corporations of Vietnam also failed to do so, referring to the names such as Vietnam Coal-Mineral Industries Group (TKV) and Electricity of Vietnam (EVN). Both those corporations and PVN planned to mobilise capital on international bond market in 2010, with offering value ranging from $500 million to $1 billion. Preparing for the international bond releases, all three corporations have done international credit ratings with prestigious credit rating agencies such as Standard & Poor's and Moody's, etc. The ratings were completed in mid of the second quarter of 2010. However, Vinashin's issue in June 2010 has greatly affected the plans. TKV's credit rating was degraded from BB to BB- (according to assessment of Standard & Poor's), which is lower than the investment level. Standard & Poor's did the rating based on the low ability that government would support TKV as well as other corporations in paying debts. At the same time, PVN had to carry out another credit rating since it received some losing companies transferred from Vinashin. In 2011, mobilising international capital continues to be necessary if Vietnam hopes to grow quickly and strongly. Talking on whether the situation would be different in 2011, Thang said that in 2011, PVN needs $5 to $6 billion dollars for project investments, only 30 percent of which is the group's equity capital. PVN will carry out the issuance when the market is favourable. EVN is not an exception. In the last five years, the group has implemented and put into operation 21 power projects with total capacity of 6,280 MW (including capacity of 770 MW purchased from China), of that, 10 plants were completed in 2010, with total capacity of 2,078 MW. In addition, EVN is carrying out 15 projects, with total capacity of 10,581 MW, of which six power projects started in 2010, with total capacity of 5,356 MW. Total capital investment needed for the 15 projects is $9 billion, including thermal power projects: Nghi Son 1, Mong Duong 1, Vinh Tan 2, Duyen Hai 1, Duyen Hai 3, and hydropower projects: Song Bung 4, Lai Chau, etc.
Moreover, EVN has 11 projects in preparatory phase of investment, with total capacity of 7, 285 MW, and is completing investment procedures for five other power projects to be started in 2011-2015 period, including two nuclear power plants Ninh Thuan 1 & 2 (over 4,000 MW), and three pumped storage hydropower plants (Bac Ai, Ham Thuan Bac, and Moc Chau, with total capacity of 3,600 MW). For such projects, it is very difficult to only rely on domestic capital.
For TKV, in 2011-2015 period, the total investment capital needed is up to 261.316 trillion dong, for projects to expand coal mines, improve mining capacity, thermal power projects such as Cam Pha I, II, Mao Khe, and Dong Nai 5 hydropower project, etc. Of the investment capital, TKV will seek commercial loans for 183.869 trillion dong, other capital sources only account for 32.447 trillion dong. Not only state-owned corporations are in need of international capital, private corporations such as Hoang Anh Gia Lai and Vincom are urgently carrying out international bond issuance plans as the domestic capital seems to be rather limited. Commenting on information that Moody's lowered credit rating of Vietnamese corporations after Vinashin's issue, general director of a large financial institution in Vietnam said that we should not be too pessimistic; in fact, this move only retards the capital mobilisation process of enterprises. In contrast, after this issue, corporations would recognise their weaknesses, strengths and issues to consider amendments.
When the corporations are facing difficulties in issuing international bonds, must the government directly raise capital as in the two previous releases? According to experts, the government should create mechanism to encourage corporations to self manage the international bond issuance. Vietnam has long been dependent on the government, turning government into the only prop, forcing the government to control various issues while it does not have sufficient resources to monitor. Letting corporations be in active state would make the mobilisation process to be healthier, more transparent and the prime costs may be lower. The economy would be fuelled when corporations successfully mobilised capital from international bond issuance. A greater meaning is the national brand of Vietnam on international capital market would be improved. Therefore, there is a need for a mechanism to support corporations and enterprises to raise capital abroad. In addition, self-renewal and operating efficiency improvement of state-owned enterprises are essential requirements.
In addition to the plans to mobilise international bond funds, 2011 is found to be a busy year in calling for investment for projects underway. Thang said the corporation has considered calling capital from sources such as equitising major projects, partly selling PVN's capital in the projects to foreign investors. PVGas is currently negotiating with foreign partners to sell 20 percent of stake, followed by Nhon Trach 2 thermal power plant and Dung Quat Oil Refinery. PVN would also partly divest capital in the business members it does not hold controlling shares. Particularly, it would negotiate with Samsung Corporation (Korea) to lower the percentage of ownership in PetroVietnam Construction Joint Stock Corporation by 30 percent.
According to a leader in oil and gas industry, in the previous time, many investors want to purchase shares of PVN's power plants. If the conditions such as contract to sell electricity to EVN, selling price to EVN were passed smoothly, this capital mobilisation channel would be very potential.VNS
PRIVATISATION - Vietnam's Petrolimex to complete privatisation process this year
State-run Vietnam National Petroleum Corp. Friday said it aims to complete its privatisation process this year. The company, known as Petrolimex, said in a statement that the ownership restructuring plan will help it operate more efficiently.
The Ministry of Industry and Trade said last year that the government will retain a stake of at least 75 percent in the company when it is privatised.
Petrolimex, which holds a 60 percent share of Vietnam's retail oil product market, also Friday reported pre-tax full-year profit of 1.21 trillion dong ($62 million) in 2010 but didn't provide a comparative earnings figures for 2009. The company said it had revenue of 138.6 trillion dong in 2010, 29 percent higher than the previous year. DTCHK
PetroVietnam awarded in top firms list
HCM City — The Viet Nam Report Joint Stock Company (Viet Nam Report) officially announced the top 500 Vietnamese companies of 2010 (VNR500).
The winners were presented with awards in HCM City last Saturday.
The Viet Nam National Oil and Gas Group (PetroVietnam) topped the list of five largest State-owned enterprises, followed by the Viet Nam National Petroleum Corporation (Petrolimex), the Electricity of Viet Nam (EVN), the Viet Nam Posts and Telecommunications Group (VNPT) and the Viet Nam National Coal and Mineral Industries Holding Corporation Ltd (Vinacomin).
The top five largest private businesses included the Sai Gon Gold and Silver ACB-SJC Joint Stock Company, the Corporation for Financing and Promoting Technologies (FPT), the Asia Commercial Joint Stock Bank (ACB), the Viet Nam Dairy Products JSC (Vinamilk) and the DOJI Gold and Gem Group.
On the occasion, about 400 leaders from the selected businesses attended the forum "Large businesses and their leading role".
The VNR500 Forum 2011 also drew the participation of leading experts from inside and outside of the country, including Prof Stephen M Walt from Harvard University and Alex Malley, CEO of the Australian Association of Certified Practising Accountants (CPA Australia).
According to participants at the forum, large businesses should not only focus on business operations but also have an important and active leading role in addressing social issues such as education, health, and diplomacy.
Nearly half of the companies in the VNR500 are State-owned enterprises. Foreign-invested and private companies accounted for 23.8 per cent and 31.2 per cent, respectively.
The proportion of private companies on the VNR500 has increased yearly, accounting for 24 per cent of the enterprises listed in 2008 and 30 per cent in 2009.
The Viet Nam Report ranks companies according to independent criteria, including the enterprises benefits, total assets and number of employees.
VNR500 is independently surveyed by Viet Nam Report with support and guidance from domestic and foreign experts, which is headed by Associate Dean of Harvard's Business School John Quelch. The organising board said it based the rankings on the Forbes 500 list and on international standards.
The database was sourced from total assets, turnover, profit, growth rate and employee figures that were compiled by the General Statistics Office and surveys. — VNS

PRODUCTION – EXPORT - Mascot International Vietnam invests in second garment factory
Thomas Bo Pedersen, director of Denmark's Mascot International Vietnam Co specifying in producing and exporting garment products announced that the company would invest additional $24 million to build the second garment factory in Vietnam, raising the designed capacity to three times higher than the current one. The company reported gaining positive growth rate of 20 percent in 2010. Therefore, Mascot would like to build long-term investment strategy in Vietnam where there were many favourable conditions created for investors, Pedersen said. At present, the company's first garment factory was located in Hai Duong province with over 1,000 local people working there.VNS

POWER - Vietnam invests in Cambodia power plant Vietnam Ministry of Planning and Investment has licensed the $800 million hydro-electric power plant to be constructed in Cambodia, according to the ministry's Foreign Investment Agency. This project by state-owned Vietnam Electricity Group (EVN) is solely invested by its joint-stock subsidiary EVN International, whose shareholders include major state companies and corporations, such as PetroVietnam, EVN, and Vietnam Rubber Group. The power plant, Lower Se San 2, is located in Cambodia's Stung Treng province on the Se San river, a major tributary of the Great Mekong River flowing through Indochinese countries from China. Its capacity is estimated at 400MW with an average output of 1998 million KWh per year, half of which will be sold back to Cambodia. EVN International also currently carries out other energy projects and research for investment in neighbouring Laos and Cambodia. Construction for the plant is to begin this year and it is expected to go into operation in 2016. ECO-NEWS

Construction on Vung Ang 2 thermo power plant to start The management board of Vung Ang Economic Zone, Ha Tinh province has allocated 43-hectare land for building Vung Ang 2 thermo power plant in Ky Loi Commune, Ky Anh Dist, near Vung Ang 1 thermo power plant. The construction project was supposed to be carried out by Japanese investor of Vapco Co with total investment capital of $1.7 billion.
The new thermo power plant has designed capacity of 1,200MW. At present, the local functional authorities concentrated on ground clearance and compensation works, as well as resettlement support for local people. The construction was supposed to be kicked off before March 2011.
Despite the weather conditions, the contractors of Vung Ang 1 thermo power plant have already finished installing the steel structure for the second boiler of this project, up to now.THGOI

Oliver Massmann
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