Vietnam - News and Regulations

WORLDBANK - WB to lend Vietnam $350m to reform government policy
The World Bank (WB) will lend Vietnam $350 million in a second phase of a project aimed to help the country's government develop its public investment policy.
The loan comes from two of the World Bank affiliates: $250 million from the International Bank of Reconstruction and Development (IBRD) and $100 from the International Development Association (IDA) fund. French Development Agency (AFD), a development fund of the French government, will also provide €35 million (US$48 million) as part of a co-financing scheme with the World Bank for the project.
The Public Investment Reform Project seeks to support modern governance in such areas as better planning processes, more transparent procurement and stronger public financial management. It is designed to assist the government of Vietnam to strengthen the selection, preparation, implementation and supervision of public investment projects.
The first phase of the project, from December 2009 to Sep 2010, received $500 million of funding from the World Bank and €100 million (US$134.5 million) from the French Development Agency (AFD).TUOI TRE



POWER - Research and Markets: Vietnam power report Q4 2010


Research and Markets (http://www.researchandmarkets.com/research/92b742/vietnam_power_repo) has announced the addition of the "Vietnam Power Report Q4 2010" report to their offering.

Business Monitor International's Vietnam Power Report provides industry professionals and strategists, corporate analysts, power associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Vietnam's power industry.

The new Vietnam Power Report from BMI forecasts that the country will account for 1.51% of Asia Pacific regional power generation by 2014, with the risk of power shortages if generation expansion falls below the required level. BMI's Asia Pacific power generation assumption for 2010 is 7,698 terawatt hours (TWh), representing an increase of 4.2% over the previous year. BMI are forecasting an increase in regional generation to 9,234TWh by 2014, representing a rise of 20.0% between 2010 and 2014.

In 2010, Asia Pacific thermal power generation will have totalled an estimated 6,133TWh, accounting for 79.7% of the total electricity supplied in the region. BMI's forecast for 2014 is 7,216TWh, implying a 17.7% growth that reduces the market share of thermal generation to 78.1%. This is thanks largely to environmental concerns promoting renewable sources, hydro-electricity and nuclear generation. Vietnams thermal generation in 2010 is an estimated 54.5TWh, or 0.89% of the regional total. By 2014, the country is expected to account for 1.17% of regional thermal generation.

For Vietnam, oil will have accounted for an estimated 22% of 2010 primary energy demand (PED), followed by gas at 9%, coal at 16% and hydro-power with 4%. Direct burning of wood and waste materials contributes a further 50% to overall energy consumption. Regional energy demand is forecast to reach 5,236mn toe by 2014, representing 20.6% growth from the estimated 2010 level. Vietnams estimated 2010 energy market share of 1.79% is set to rise to 2.21% by 2014. An estimated 40TWh of hydro-electric demand in 2010 is forecast to reach 55TWh by 2014, with its share of the Asia Pacific hydro market rising from 4.07% to 4.49% over the period.

Vietnam now shares fourth place with India in BMI's updated Power Business Environment Ratings, thanks largely to the growth potential of power consumption and energy demand, plus healthy scores in several other categories. It should be able to pull further away from Indonesia and Pakistan below, and has longer-term potential to challenge Japan above it.

BMI is now forecasting Vietnamese real GDP growth averaging 6.26% per annum (pa) between 2010 and 2014, with a 2010 assumption of 6.00%. The population is expected to expand from 88.4mn to 92.0mn by 2014, with per capita GDP and electricity consumption set to increase by 47% and 53% respectively. Power consumption is expected to increase from an estimated 72TWh in 2010 to 114TWh in 2014, providing a slight theoretical supply surplus if generation grows at no less than the publisher's assumed average annual rate of 10.2% (2010-2014). There is, however, a real risk of electricity shortages if the power industry cannot deliver adequate new capacity as demand soars.

Between 2010 and 2019, BMI are forecasting an increase in Vietnamese electricity generation of 110.1%, which is at the top of the range for the Asia Pacific region. This equates to 42.2% in 2014-2019, down from 47.7% between 2010 and 2014. PED growth is set to decrease from 49.1% between 2010 and 2014 to 40.9%, representing 110.1% for the entire forecast period. Hydro generation is expected to rise by 105% between 2010 and 2019, with thermal power generation forecast to increase by 113% over the same period. More detailed long-term BMI power forecasts can be found later in this report.

Key Topics Covered:

* Executive Summary
* SWOT Analysis
* Industry Overview
* Market Overview
* Business Environment
* Industry Forecast Scenario
* Country Snapshot: Vietnam Demographic Data
* BMI Methodology

Companies Mentioned:

* Electricity Of Vietnam (EVN)

For more information visit http://www.researchandmarkets.com/research/92b742/vietnam_power_repo

Contact:

Research and Markets
Laura Wood, Senior Manager,
press@researchandmarkets.com
U.S. Fax: 646-607-1907
Fax (outside U.S.): +353-1-481-1716

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INFRASTRUCTURE - Action plan for Hanoi's socio-economic development in 2011
Chair of Hanoi People's Committee Nguyen The Thao has signed document No.26/CTr-UBND announcing the action plan to carry out government's resolution on key measures to direct the implementation of the socio-economic development plan in 2011.
One of the main tasks of the city in 2011 is to promote higher economic growth along with sustainable development. Specifically, Hanoi targets GDP growth of 12 percent, export growth of 14 percent, 19 to 20 percent total social investment growth, and budget revenue growth of five percent compared to estimates assigned by the government, etc. In order to perform this task, the city requested Department of Planning and Investment to coordinate with the Department of Finance and other related departments, districts, and agencies to focus on building and implementing projects to improve investment environment, enhance Provincial Competitiveness Index (PCI), and on implementing effectively investment promotion programmes, etc. Department of Industry and Trade should actively track and give forecasts on domestic and foreign markets in order to have timely guidance; boost trade promotion and development of commercial infrastructure towards civilisation and modernity; strengthen ma
nagement and control on the market and price, actively balance supply and demand of essential commodities, etc.
Another emphasized task is to strengthen planning and construction of essential infrastructure in urban and rural areas; improve the efficiency of urban management and improve environmental quality. Accordingly, Department of Planning and Architecture should expeditiously carry out research, set up city district planning and planning for urban zones and main roads; continue reviewing and joining planning. Department of Planning and Investment should gather synchronous capital investment for major constructions and projects, especially important transportation infrastructure projects, main axes, highways, ring roads, urban axes, etc. to ensure efficiency.
Department of Natural Resources and Environment should urgently relocate production bases that cause pollution or are inconsistent with planning from the inner city and residential areas; guide and supervise the strict implementation of waste treatment in new urban areas, industrial parks, hospitals, and trade villages, etc. The department should also conduct research and propose incentive mechanisms, to encourage all economic ownerships to participate in wastewater treatment and environmental services.
RESOURCES - $25m invested in gold mines in Vietnam
Canada's Olympus Pacific said it would continue investing more $25 million in gold mining projects in Vietnam, much lower than the previous $100 million the company had commenced by the last year end.
Olympus Pacific now is the only foreign-invested company licensed to exploit and export gold in Vietnam with two operational projects in Bong Mieu mine, Phuoc Son Dist, Quang Nam province and another exploration project in Tien Thuan, Binh Dinh province.
The firm has invested about $80 million in the projects so far and said in late 2011 that it would pour additional $100 million to develop its operations in Vietnam. However, However, the expansion plan narrowly was abolished because of the difficulties that the firm had to face the regulation of taxing 10 percent on mining physical gold for exports from January 1, 2011. As a result, the investment line was reduced from $100 million to $25 million.
Before changes in taxes, we have to revive before making investment decision. Instead of going quickly, we now have to go towards step by step, Olympus Pacific's CEO David Seton was quoted as saying by Bloomberg.
According to Seton, the new capital Olympus Pacific will pour into Vietnam this year will be used to develop mines, upgrading factories as well as improving waste treatment system. The changes will help Olympus Pacific increase its mining output from 45,000 ounce of material gold in 2010 to 75,000 ounce this year.
Regarding import tariff, he said his Olympus Pacific would continue proposing Ministry of Finance a reduction in the near future with a view to create more conditions for its investment. But, for the time being, Olympus Pacific is seeking partners to refine materials, limit exports of unprocessed gold and avoid high tariff.
Meanwhile, Taxation Policy Department of the finance minister said in an interview with the local newswire VnExpress on February 2 that they just worked with enterprises to seek opinions on new regulation of gold and raw ore export tariffs.
"Since the new tariff regulation in Circular 184 took effect, we have sought enterprises' respond to have further amendments. Still, first, regulations on material gold export tariffs will be unchanged", an official from Taxation Policy Department said.VIETBIZ

STATE FUEL SUBSIDIES - Vietnam Govt to keep fuel price stabilisation fund
The Vietnamese government will continue to operate the fuel price stabilisation mechanism though there are reports that a fund meant for it is running out of money.
The Ministry of Finance report that 83 billion dong (US$4.25 million) is left in the fund while fuel wholesalers claim it is 1.35 trillion dong in the red.
The Ministry said this means the oil companies overdrew 1.4 trillion dong from it last year to cover their losses. The fund receives the 300 dong surtax that has been slapped on a litre of gasoline.
But the companies complain that they suffer a loss of 2,000-2,400 dong on every litre of gasoline despite using the fund to offset losses.
In December, the ministry accused Petrolimex of surreptitiously drawing 1.24 trillion dong (US$60 million) from the fund to cover its losses.
Last year the government provided the industry 7 trillion dong in the form of import tax cuts and 3 trillion dong from the fund. This year the total amount has already topped 8 trillion dong.
There has been speculation that retail gasoline prices will shoot up after the Lunar New Year since international prices have rising to above $90 a barrel and seem headed for the $100 mark. The oil firms late last year called for shutting down the fund and increasing fuel prices instead. But the government has defended the fund saying it is meant for a rainy day.VNS

EXPORTS - Vietnam's rice exports reach high in first days 2011
Vietnamese enterprises registered to export more than 1.5 million tonnes of rice according to signed contracts till January 31, up 15.74 percent year-on-year, the Vietnam Food Association (VFA) reported. The number of registered contracts in January also reached high, mainly those signed to ship 300,000 tonnes to Malaysia and Indonesia. The country's rice export last month achieved over 485,000 tonnes, beating the estimate of 350,000-400,000 tonnes thanks to high volume of deals signed between December (2010) and January (2011) with Indonesia and Bangladesh. At a recent meeting, some rice traders expressed concerns that Vietnam so far has not yet signed export deals with Philippines for 2011. This has affected strongly to Vietnam's rice price as speculation sentiment declines and pressure of interest rates is tenser. Truong Thanh Phong, chair of VFA expected the demand for Vietnamese rice was still satisfactory, boosted by the contracts signed since late 2010. If Vietnam signs export contract with Philippines, Cuba, Iraq, Malaysia, VFA estimated, the enterprises will export 1.6 million tonnes in the first quarter, 2.24 million tonnes in the second quarter. The association will announce to purchase 1 million tonnes of rice for storage and distribute export quota to 65 enterprises, up 10 enterprises against 2010. He also recommended the associates to comply with VFA regulations and guidance. VFA prohibited sale of 25 percent broken rice in the centralised market without signing government contracts and sale of rice to private firms before the contracts being inked.vns
Exports of Vietnam textile and garment industry in 2010 reaches $11.2b
Exports of Vietnam textile and garment industry in 2010 reached $11.2 billion. The industry currently ranks fifth among those countries with largest export scale of textile and garment in the world. Vietnam is currently the second largest textile and garment exporting country to the US, the third in Japanese market and European market.
Particularly, the industry targets to become a key economic industry in 2015. How would it achieve the target?
Succeed in crisis
According to Le Tien Truong, deputy general director of Vietnam National textile and Garment Group (Vinatex), textile and garment industry has stood firm in the global economic crisis in 2007 – 2009. Specifically, while the world textile and garment sector fell deeply by 12 to 15 percent, Vietnam export turnover was still maintained, the industry even increased market shares in all three major markets and ranks second in market share in the US market. With such results, Vietnam's textile and garment industry is in the top five largest textile and garment exporting countries in the world. In 2010, with exports of $11.2 billion, the industry overcame 80 percent of the crisis effects. As estimated, Vietnam would have about 100 million people by 2015, 50 percent of them in the working age.
In addition to asserting to be the key economic sector, 2011-2015 is the period that the sector will accelerate towards working environment, working conditions, cultural and spiritual life and income. According to Truong, Vinatex has developed action plans including organising cultural and spiritual activities, community house, and apartment building for workers. Truong said that the group's target is to become the key unit with advantages. Therefore, it should soon start preparing for market and business issues. Especially, textile and garment industry of Vietnam still depends heavily on imported raw materials; thus, the issues on labour, supporting industries and raw material sources are important for the breakthrough.
Localisation rate target of 60 percent
From only processing and packaging in 1995, to date, localisation rate of the industry has reached 46 percent, 49 percent in Vinatex. With the target to increase localisation rate to 60 percent in 2015, the group has built complete textile and garment centres to be the core units. Specifically, it is the model of supply chain from design, fibre producing, weaving, dyeing, to making a complete product in industrial parks with good environment treatment solutions. In addition, production and business activities of the group have also associated with vocational training to provide labour for the industrial parks.
However, such modern and standard model is only suitable for industrial zones with high automation, less labour usage and convenience transportation. Therefore, relocating textile and garment companies is necessary. In which, the garment companies should be close to local areas so that workers do not have to travel far to work.
Truong added that the 10-year strategy (2011-2020) of Vietnam textile and garment industry is to build core units in scattered industrial parks. Accordingly, the group has made movement plans. Typically, Nha Be Garment Company has stably moved 12,000 workers to Binh Dinh province instead of locating in HCM City, contributing to reduce pressure on transport, accommodation for workers. Specially, textile and garment industry strives to reach monthly income of workers from $250 to $300 per person by 2015, instead of around $100 per person as at present.VNS

STOCK MARKET GOES INTERNATIONAL - Vietnam stock market aims for global connection
Vietnam will complete the legal framework for its stock market this year in an effort to connect it with regional and world markets, deputy Finance minister Tran Xuan Ha said Tuesday.
The plan to globalise the Vietnamese stock market has been under review for several years and hopefully it will be connected to the global market this year, the Vietnam Economic Times reported Ha as saying, during the re-opening of the Hanoi Stock Exchange following a 10-day holiday break.
He said Vietnam's market capitalisation accounted for nearly 37 percent of the gross domestic product last year. Since 2009, stock transactions have declined in terms of value but capital flow increased by 350 percent.
Vu Bang, chair of the State Securities Commission, said the stock market has "many opportunities" to grow this year.
"We expect more foreign investment to come in," he said, noting that local companies will boost share sales this year.VNS

RATING - Fitch rates Vietnam's Hoang Anh Gia Lai at 'B'; outlook stable
Fitch Ratings has today assigned 'B' Long-term foreign currency and local currency Issuer Default Ratings (IDR) to Vietnam's largest listed real estate developer, Hoang Anh Gia Lai JSC (HAGL). The Outlook for both ratings is Stable.
HAGL's ratings are constrained by its large capex plans of over USD400m until the end of 2013. The company plans to diversify away from its established, but volatile, residential property development business in Vietnam into hydropower generation, iron ore mining and rubber plantations in Vietnam, Cambodia and Laos. This concern is heightened by the company's high funding costs, with current interest costs of 16 percent to 17 percent per annum on its existing floating rate dong denominated loans, reflecting the current high interest rate environment in Vietnam.
Furthermore, there are execution risks in the planned expansion as the company has a limited track record in the new businesses which face material regulatory risks. For instance, the Vietnamese iron ore mining rights need to be renewed every three years, and the company has yet to secure many of the mining rights and an export quota. In the hydropower sector, Fitch notes that independent power generation in Vietnam is still in its infancy, and there is a limited track record of pricing mechanisms, power purchase agreements and on-time payments by the state utility.
However, Fitch notes that HAGL has taken steps to address many of these risks. It has plans for a US dollar denominated offshore debt funding, which, if successful, will lower its funding costs and improve its debt maturity profile. Furthermore, the company has recently sold new shares and minority stakes in operating subsidiaries to raise capital. The company also maintains high cash balances and undrawn committed facilities to manage liquidity risks.
There is also significant flexibility in its capex plans to reduce, delay and/or cancel projects as they are modular. For instance, its expansion into hydropower involves 17 distinct projects, with an average planned capacity of 27 megawatts. Furthermore, many of its projects are being executed with in-house project management and construction know-how, where it has a proven track record in its property development business. In addition, the company has begun selling iron ore domestically at prices not materially lower than international prices less export taxes and transportation costs, suggesting that this venture can be profitable even without exports.
The ratings are also supported by HAGL's established residential property development business, which focuses on the mid-tier market in HCM City. The company has a sufficient land bank for proposed projects over the next five years. This land was acquired at materially lower costs than current market value, which in addition to the reliance on in-house construction, allows for high profit margins. Liquidity risks are relatively low as most of the development costs are funded via pre-sales. In addition, the company has demonstrated a track record of pricing competitively to ensure high take-up rates. For instance, it reduced selling prices by up to 40 percent to generate sales during the property market downturn in 2008 and 2009. Despite this, the company was able to generate a reasonable level of profitability due to its low costs.
The Stable Outlook reflects Fitch's expectation that cash flows from property development would be sufficient to cover funding costs during HAGL's expansion phase until the end 2013. Fitch expects the company's funds from operations (FFO) interest coverage to range between 2x to 3x during this period. Negative rating actions could be taken if the company's FFO interest coverage is sustained below 2x and/or if the company does not scale back its capex without securing longer term lower cost funding. A positive rating action is not envisaged until the new ventures contribute to at least half of total operating profits and generate sufficient FFO to sustainably provide 2.5x coverage of interest.fitchrating





Oliver Massmann
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