Vietnam - News and Regulations

INTERNATIONAL MONETARY FUND ON VIETNAM - Vietnam's economic growth at 6.3pct in 2011: IMF says

Vietnam's consumer price index (CPI) in 2011 is forecasted to rise 13.5 percent against 2010's and it would be 6.7 percent in 2012.

In the World Economic Outlook report 2011, the International Monetary Fund (IMF) forecasted Vietnam's economic growth this year would be 6.3 percent, falling from 6.8 percent in 2010 and it would be 6.8 percent in 2012.

The economic growth of five economies in the Asean region, including Indonesia, Malaysia, Philippines, Thailand and Vietnam is forecasted at 5.4 percent in 2011 and it would be 5.7 percent in 2012.

In comparison with the growth forecast in January, IMF reduced 0.1 percent for this year's forecast and retained the forecast for 2012.

Amongst five aforementioned countries, Indonesia still leads the growth with strong consumption and investment recovery.VNS



POWER – ROADMAP TO COMPETITIVE MARKET - State may end power monopoly

HA NOI — Deputy Minister of Industry and Trade Hoang Quoc Vuong has asked the Electrical Distribution and Control Department to review regulations on a competitive electricity market, which is expected to be set up on a pilot basis this July.

The nation is hoping to develop a competitive electricity market to improve efficient use of power supplies in the context of a market economy.

According to the department, a switch from the present State monopoly on power supply to a competitive market would create an equal playing field, cut power generation costs and ensure a better balance between demand and supply.

However, people have raised concerns over difficulties in the implementation of the market as State-owned electricity supplier Electricity of Viet Nam (EVN) still enjoys a monopoly in the market.

Vuong asked the department to complete and issue the regulations this May and draft plans to train staff at relevant agencies on the changes.

The department in co-operation with EVN would also have to draft and submit a detailed plan for the competitive market to the ministry.

It would be responsible for establishing working groups in charge of preparing to ensure the market runs smoothly.

Head of the department's Electricity Market Section Pham Quang Huy said preparations for the pilot market have been completed without difficulties and ahead of schedule.

"All information on the pilot market would be published on the ministry's website to ensure transparency for participants," Huy said.

He said the department has prepared plans for the operation of the market, adding that it has adding that it has asked EVN to upgrade infrastructure to help ensure a smooth transition.

EVN was required to upgrade or buy software systems to meet the market's requirements.

It would have to check and upgrade its current software and complete transmission network connections to power plants participating in the pilot electricity market.

EVN would ask concerned units to complete separation of current electricity buying contracts from thermal power plants into fixed and variable components. In addition, it would invest in load system management to ensure utilisation of assets and load forecasts.

The Ministry of Industry and Trade issued a circular on May 10, 2010 on the operation of the electricity market.

The market will comprise companies that buy and sell electricity, generate electricity, operate the supply network and manage the market itself.

The circular also requires all licensed power plants with a capacity of 30MW and above, except for current facilities built under Built-Operate-Transfer (BOT) contracts and hydroelectric facilities, to join the market.

Deputy Prime Minister Hoang Trung Hai asked the ministry to issue necessary regulations to ensure the move to a new electricity market results in savings across the board – in generation, transmission, and distribution – to ensure reasonable prices for consumers.

Hai approved plans for the market which aim for a wholesale competitive electricity market the 2015-22 period and a retail competitive electricity market after 2022. — VNS



Power rationing worries firms

HAI PHONG — Electricity rationing has been implemented in the northern city of Hai Phong to deal with the serious power shortage this dry season.

Planned electricity rationing has been defined based on the amount of electricity apportioned to Hai Phong and average business consumption in the first half of last year.

Electricity rationing plans were announced at a meeting held by the city People's Committee on March 11 with representatives of 14 districts and 67 major enterprises, whose power consumption totals 3 million kWh per day.

Many of the enterprises have expressed concern about the transparency of electricity rationing plan, and businesses already have to register their monthly electricity usage in order to help in power supply planning.

"Electricity rationing for March was based on average electricity consumption in the first half of last year," said deputy director of Hai Phong MTV Electricity Company Ltd Tran Ngoc Quynh.

However, using such criterion creates a paradox, where the more enterprises save energy, the less electricity they will be apportioned, which would not encourage energy savings, according to investment manager of Vinausteel, Nguyen Dang Quang.

In addition, the priority for enterprises with modern energy-saving production lines was also a question to be pondered, as the electricity saved had reached its maximum level with the temporary production line, Quang said. The only solution to saving more was to buy completely new lines, which required large levels of investment while the amount of electricity saved would be negligible, he added.

Concern was also expressed about sudden power cuts, as this would affect the machinery, and could cause major losses to enterprises, Quynh said. A weekly and monthly rotating power cut was preferred.

Co-ordination between electricity suppliers and enterprises was essential, VSC-POSCO Steel Company proposed. Plans for electricity rationing should be widely distributed in advance so that businesses could plan their production timetables based on the schedule.

At the meeting, the People's Committee also agreed to let enterprises propose their own electricity supply timetable.

With over 1,000 small- and medium-sized enterprises, electricity rationing would fall under the responsibility of local electricity suppliers.

However, power wastage was still common and exceeded real business rates of consumption, said Quynh. For example, the difference of 130,000kWh per day of the Noura Industrial Zone could be equal to an entire day's energy consumption in Tien Lang District, he added.

According to estimates, 67 major enterprises in the city consume up to 43 per cent of the city's total electricity supply, yet are currently using only 84 per cent of the amount they claim they need.

Hai Phong Electricity hoped enterprises would do more to save electricity, said Quynh.

He also added that Hai Phong Electricity in co-ordination with the city's People's Committee and the Department of Industry and Trade would try their best to ensure equality and transparency in electricity rationing and prevent under-the-counter electricity sales by energy suppliers.

According to national power supplier Electricity Viet Nam, the country will face a major power shortage of about 3 to 4 billion kWh, triple that of 2010, while demand for electricity is increasing.

In Hai Phong, power shortages totaled 3-4 million kWh per day, said Quynh.

"Power shortages undeniably have a negative affect on production" said Tran Dinh Long, who is in charge of electricity management at the Dinh Vu Steel Company.

Production could be reduced up to 40 per cent due to the shortage, he added.VNS





Electricity Sector: SMOOTHING THE WAY

Vietnam needs investors in its electricity sector but a range of difficulties make many reluctant to come on board.

Electricity generation in Vietnam is forecast to be at the top of the range in the Asia Pacific region. The country has rich potential for development with demand from its 87 million population and capacity of 17,000MW in 2009.
With one of the youngest workforces in the world and one of the fastest growing economies in Asia, Vietnam is set to attract a lot of attention over the next few years. A great deal of money, both local and foreign, will go to improving electricity capacity. Build-operate-transfer (BOT) contracts are in the process of negotiation around the country, including the 1200MW Nghi Son 2 plant and the 750MW O Mon 2 plant. “With this month seeing the first draft of the Ministry of Industry and Trade’s Power Development Master Plan VII, the dynamics of Vietnam’s power industry will change forever,” said Mr. Oliver Massmann, Partner at Duane Morris LLC, who has been in Vietnam for 20 years and has lengthy experience in the power sector.

Although Vietnam is now ranked sixth, just below Malaysia, in BMI’s updated Power Business Environment Ratings, foreign investors face a range of challenges in doing business in its power sector.

Decision makers
When VFR asked Mr. Joel Laykin, Secretary General of the Independent Power Producers Forum (IPPF), about the challenges a power project may face in Vietnam, his reply was “Government decision makers”. “Negotiation time” was the answer from one Vietnamese expert long involved in power projects such as Phu My 2-2, which has a capacity of 715MW.
Investors believe that the legal framework in the power sector still contains many shortcomings, such as unclear documentation and uncertain regulations regarding BOT projects. The biggest challenge, analysts say, is that strict requirements over independent power producers (IPPs) prevent investors from conducting their investment.
Electricity of Vietnam (EVN) being the single electricity purchaser also discourages investors and adversely affects Vietnam’s development. IPPs cannot sell their electricity at a fair price, which affects their ability to recover costs and earn profits. A lawyer from Malakoff, a power generation company planning to invest in Vietnam, said that high Government subsidies in the power sector meant investors find it difficult to compete. “Despite Government encouragement and a competitive roadmap, few investors can meet the financial requirements and the sector will continue to be monopolized by EVN for the next two years,” said Mr. Massmann.
There are also some unreasonable requirements in pre-licensing procedures. Perhaps because direct investment is quite new for Vietnam’s power industry, decision makers appear confused. Under Decision No. 30/2006/QD-BCN, investors must obtain agreement from EVN on electricity purchasing and a commitment from banks or credit institutions regarding lending. The problem is that this takes a long time for companies and banks are unlikely to provide such a guarantee before projects have been approved. Investors must also ensure their equity/debt ratio is 30/70 or less in special circumstances. But there is no definition of “special circumstances” and equity expectations are too high for such major projects.
Article 31 of the Law on Electricity, meanwhile, defines a fixed electricity price that creates difficulties for investors in negotiating prices with EVN. Bidding procedures are also time-consuming. For example, negotiations regarding the Phu My 2-2 project continued for two years after the tender closed. One analyst estimates it takes four to six years to establish a project and a further two or three years to negotiate a power purchase agreement (PPA) in Vietnam.

Beyond the decisions
In the current context, joint ventures with Vietnamese partner(s) may be a better option and more time-efficient for investors than stand-alone development. But “if you want to have a private Vietnamese partner taking part in your project, it will be very, very costly,” said one experienced investor. “And ‘private’ is not ‘private’ in Vietnam.” If a private partner is more than 50 percent owned by a state-owned enterprise (SOE), it is considered an SOE and must follow rules on SOEs, not those for private companies. Another problem for private enterprises is the lack of information regarding tenders compared with SOEs, which have good relations with government officials.
According to Ms. Dao Nguyen, Managing Partner at Mayer Brown JSM, Vietnam has put in place fairly clear legal fundamentals for investment in the power sector compared with ten years ago. The legal framework, she believes, is not a challenge for investors. “Vietnam is a developing country and needs projects like Phu My 2-2 and Phu My 3, but lenders to these projects required the State to offer a wide variety of guarantees,” she said. “Currently, the State is deciding whether it is appropriate to use Phu My 2-2 documentation as the benchmark for future BOT projects, since it was licensed over ten years ago and the law and economic environment in Vietnam have changed since then. Thus, investors may find it difficult because they may have to wait for the State to make a decision on the type, scope and extent of the guarantees that would be available and what types of projects would receive such support from the Government.”
For example, under the Law on Investment, the Government will decide what projects are considered “important” and will decide which ones will be provided guarantees in respect of loans, raw material supply, sale of products, payment and other guarantees, but they are yet to define what an “important” project is. Further, foreign exchange guarantees are not enough for investors/lenders of major projects. Government guarantees were limited by the International Monetary Fund (IMF) under the Enhanced Structural Adjustment Program (ESAP), and although these restrictions expired at the end of 1998 Vietnam continues to follow them. On loans with a maturity of 1 to 12 years, the Ministry of Finance can only provide guarantees of up to US$400 million per year. Investors complain that the State lacks a sub-national debt financing system, for example a municipal bond market.

Wait and see
In February 2006, the Prime Minister approved the Electricity Market Master Plan for the development of the electricity market.

According to the master plan, the Government is planning to slowly remove subsidies on electricity. To 2014, IPPs will not be allowed by EVN to sell directly to the market, to 2022 EVN will be transformed into independent distributing companies, and after 2022 customers nationwide will have the right to select an electricity supplier. The reality is, though, that customers will have to accept a competitive price, which will be higher than today’s price.
When asked about investor attraction, Mr. Dau Duc Khoi, Deputy General Director of EVN, said “I think we must wait until the opening up of a competitive power retail market. If supply exceeds demand by 20 percent, power producers will have to compete more strongly. The result will be higher quality electricity and competitive prices, and investors will come.”



FORESTRY – RESOURCES - Timber origin issues plague local exporters



Made-in-Vietnam timber and wood products have faced obstacles in accessing foreign markets due to stricter foreign laws, which require timber products to be granted Forest Stewardship Council certification, said Hua Duc Nhi, deputy minister of Agriculture and Rural Development.

Forest Stewardship Council (FSC) certification proves wood products are from certified sources of origin throughthienthanden1902

out the supply chain, and guarantees that timber used has been supplied through responsibly harvested and verified sources.

Only legally harvested timber and wooden products are allowed to be imported to European markets, as regulated by the European Union's Forest Law Enforcement, Governance and Trade.

The US Lacey Act also bans the import, export and transport of illegally-exploited forest products into the US market.

To meet the foreign export requirements, Vietnam has targeted that 30 percent of the total production forest area will meet FSC certification in 2020.

"However, to date, only 0.36 percent, equal to 16,500ha has been certified," Nhi said.

"No practical solutions to expand the certified area have been discussed nor implemented," he added.

According to the director of Sustainable Forest Management Institute, Nguyen Ngoc Lung, irresponsible and poor land management by local authorities and inconsistency in the government's land policy have caused difficulties to forestry enterprises in obtaining certification.

Numerous forestry enterprises have not been provided certified land use rights, while many other forests have two concomitant owners, which makes it impossible to register for the certificate, Lung added.

Nhi also added that 80 percent of processed wood is imported, while there are few wood processing workshops in forested areas. To improve the effectiveness and sustainability of forest exploitation, investment in forest plantations is desperately needed.

Vietnamese forest products are now present in 120 foreign markets, with export turnover reaching $3.4 billion in 2010, according to Nguyen Thi Hoang Thuy, deputy director of the Ministry of Industry and Trade's Multilateral Trade Policy.

However, according to Nguyen Ton Quyen, vice president of Vietnam Association of Wood and Forest Products, 90 percent of the exported timber products are sold through middle men and most products are based on export designs leaving Vietnamese produced goods unrecognised abroad.

In addition, due to the excessive concentration on exports, the domestic market is now dominated by foreign enterprises cornering up to 80 percent of total domestic spending on wood products, said Tran Duc Sinh, general director of the Vietnam Forestry Company.

Enterprises should be aware of the significance of using certified timber and wood products to widen export markets, while also paying attention to the domestic market, Nhi emphasized.VOV



CONSTRUCTION MATERIALS – CEMENT - Cement production costs rise by up to 30pct

Recent increases in the price of electricity, coal and fuel have forced the Vietnam Cement Industry Corporation (VINCEM) to increase cement prices by 120,000 dong (US$5.8) per tonne to avoid losses, the corporation announced.

Cement production costs have increased from 22 to 30 percent for a number of reasons, including a 15.3 percent increase in electricity and fuel prices, the devaluation of the dong against the US dollar, high lending interest rates and a 40 percent increase in coal prices which became effective at the beginning of this month.

Chair of the Vietnam Cement Association Nguyen Van Thien said power costs made up from 45 to 50 percent of cement production costs.

Since the end of last year, the cement sector has been struggling with these challenging factors. This year, VINCEM would have to pay back 3.2 trillion dong (US$154.6 million) in debts and Cam Pha Cement Plant, 800 billion dong ($38.64 million), said Le Van Chung, VINCEM's management board chair.

"Therefore, cement manufacturers were forced to adjust their cement prices in order to survive and pay back their debts," he said.

Chung said during the past 10 years, prices for cement made in Vietnam were $50 per tonne which was much lower than average prices in Asean countries which ranged from $65 to $75 per tonne.

In the past three years, cement prices have risen by 13 -15 percent while coal prices have doubled and fuel and electricity prices have been increased constantly.

However, one of the most serious problems was that electricity and coal sectors raised their prices while also reducing supply to only 70 percent of the cement sector's need, causing a shortage of around 10 million tonnes of cement.

Power cuts will also lead to standstills on the cement assembly lines.

To minimise the difficulties, Chung said the corporation had instructed its members to cut production costs by saving energy.

Accordingly, cement plants had to reschedule operation of their assembly lines to take advantage of non-peak hour power costs.

VINCEM is also developing a project to use extra heat from clinker kilns to generate power at Hoang Thach and Tam Diep cement plants.

All plants under the corporation were aiming to set up this new equipment to generate more than 18 to 20 percent of power needed for production, Chung added.





Economy - Chipping away at trade gap



Vietnam's trade deficit with China has increased in recent years but according to the latest report from the Ministry of Industry and Trade, exports from Vietnam to China increased in the first two months of this year.

Bui Huy Son, director of the Ministry of Industry and Trade's Asia and Pacific Department talked about the trade value between the two countries over past years and in the future.
The Vietnamese trade deficit with China has increased year after year. What are your views on this?
Vietnam has often had a trade deficit with China, and it was pretty minimal in 2006, however it dramatically rose to $12.7 billion in 2010 compared with just $189 million in 2001.

The figure reflected the fact that Vietnam has a great demand for production inputs and consumer goods, with China meeting this demand. Besides that, increasing of foreign invested projects has also created a high demand for equipment and technologies, which domestic producers have failed to meet. There has also been an increase in the import of material transported between economic groups and multinational corporations who have investments on both sides of the border.



The large trade deficit is a great concern, isn't it? What solutions can you suggest to reduce it? A large long-term trade deficit with China or any other country in the world can affect overall macro economic factors, so it is a problem that can't be ignored.



In fact, many countries have experienced this situation in the early stages of domestic production. In terms of the Chinese market, Vietnam will continue to have a trade deficit in the coming period, and an initial target is to reduce this. To attain this target, the structure of imported goods from China should be changed and the proportion of imports to exports should reduce.



In the first two months of this year, Vietnam saw a reduction in the trade deficit with China. Exports from Vietnam to China jumped almost 61 percent to $1.34 billion, while imports from China to Vietnam surged just 25 percent to $1.23 billion. That meant the proportion of imports to exports during the first two months fell from 50 percent to 40 percent against the same period last year.



Why did exports from Vietnam to China increase in the first two months? China has encouraged imports, but the country has not yet developed specific measures, excluding the devaluation of yuan. So far, the devaluation has just had an indirect effect on the increase of imports from Vietnam to China. This is a new Chinese policy so it needs more time to have an effect on trade between China and other countries.

I generally think the increase in Chinese imports in the first two months is due to the efforts of Vietnamese companies in expanding their markets. They've developed production, distribution and good relations with Chinese partners.

In addition, Vietnamese producers have been able to compete with their Thai, Malay and Indonesian rivals in the Chinese market.



FOREIGN DIRECT INVESTMENT - Say no to inefficient FDI projects

One of the most outstanding features of Vietnam's foreign economic activities is the attraction of investment since the Doi Moi (Renewal) process was launched 25 years ago.

In fact, FDI businesses are one of the most dynamic sectors taking the lead in export activities, contributing to the state budget, and generating jobs for workers.

However, many FDI projects have proved ineffective and many economic experts and policy makers say that it is high time to say no to inefficient ones.

FDI businesses made up 55 percent of $19.25 billion in trade turnover in the first quarter of this year. Although FDI registered capital in Vietnam reached $2.37 billion in the reviewed period (only 67 percent of last year's figure), this is a positive sign. The figures have shown that FDI businesses have played an important role in the national economy.

Yet, in recent years, we have witnessed a boom and withdrawal of billion-dollar FDI projects in many provinces and cities nationwide. The emergence and withdrawal of hundreds of billions of dollars are attributed to the world's economic crisis and investors' opportunism. Many of them seized the opportunity to exploit natural resources such as land, forest, and mineral ores and a cheap labour force in Vietnam along with investment incentive policies. Not only have newly-registered projects withdrawn their licences, but also projects which have been ongoing for many years but have not used land funds sufficiently.VNS



Resources-mining



Firms launch joint ore project

Ha Tinh Minerals and Trading Corporation (Mitraco) and Hoa Phat Minerals Company have announced plans to join forces in setting up Hoa Phat Mitraco Minerals Joint Stock Company. Hoa Phat will hold a 63.5 percent stake in the venture.

The main function of the plant, which is expected to open mid-2012, is to process iron ore from Thach Khe Mine.

Thach Khe Iron Joint Stock Corporation has signed an agreement to supply the firm with ore.



Philex unit drills 2nd oil well in Vietnam

Philex Mining Corporation announced that its international oil exploration affiliate Pitkin Petroleum Plc has found encouraging oil and gas flow rates in Block 07/03, offshore Vietnam.

In a disclosure to the Philippine Stock Exchange, Philex said the block�s operator Premier Oil Vietnam South B.V. said the positive "hydrocarbon flow rates from the Oligocene section in Ca Rong Do, which in addition to the previously proven Miocene reservoirs, provide further exploration upside across the area."

Premier Oil added that "we look forward to the result of the sidetrack well which will provide additional data to determine the hydrocarbon distribution in this part of the Ca Rong Do (CRD) structure."

Pitkin said that the CRD-2X appraisal well has been drilled to a total depth (TD) of 3,785 meters MDRT, appraising the Miocene sands discovered in 2009 with the CRD-1X well.

The well was deepened from the preliminary TD of 3,109 meters MDRT to evaluate the Oligocene which was not tested by the CRD-1X well. Thus, two drill stem tests of the hydrocarbon bearing sands in the Oligocene section have been conducted.

The first zone tested flowed gas and condensate at rates of 9.7 MMSCFD (million standard cubic feet per day) and 870 barrels of oil per day, respectively while the second zone tested flowed gas and condensate at rates of 17 MMSCFD and 1730 BOPD, respectively.

Pitkin said the well will now be sidetracked to further evaluate the distribution of hydrocarbons in the Miocene sands.

Philex said Pitkin, via its wholly-owned unit Vietnam American Exploration Company LLC, has a participating interest of 40 percent in Block 07/03.

Its partners are Premier Oil (30 percent), PearlOil (Ophiolite) Ltd (15 percent), Pan Pacific Petroleum (Vietnam) Pty Ltd (5 percent), and PetroVietnam Exploration & Production Corporation Ltd (10 percent).

Pitkin, which is currently 18.46 percent owned by the Philex group through wholly-owned subsidiary Philex Petroleum Corporation, is an international upstream oil and gas company focused on tertiary basins primarily in the Pacific Rim region with operations in Peru, Vietnam, the Philippines, and the USA.

It is involved throughout the exploration and production value chain, with an active exploration program, a redevelopment project and equity interests in small scale production.





Infrastructure - Atomic energy and its benefits discussed

The atomic energy sector, the attitude of the society to atomic energy and Ninh Thuan's future socio-economic developments are being discussed at a forum in the south central coastal province of Ninh Thuan on April 13.

At the two-day forum, Russian Ambassador to Vietnam Kovtun Andrei Grigorievich spoke of the importance of the event for Vietnam and the State Atomic Energy Corporation Rosatom of Russia, as well as Vietnam-Russia cooperation in building the first nuclear power plant in Ninh Thuan province.

The forum will help broaden constructive dialogues between Russian and Vietnamese partners aimed at ensuring radiation and nuclear safety, he added.

Russia will be totally responsible for the safety of nuclear power plants inside its territory but also in other nuclear power plant projects in which it is involved, the diplomat emphasized.

The director for Rosatom State Corporation Programmes Boyarkin Sergey Alexandrovich said that the corporation has built 66 units in 12 countries, confirming that Russia will use the safest technology in building the Ninh Thuan nuclear power plant 1.

Rosatom experts gave a detailed explanation of the plant's location in case of quakes and tsunamis.

Rosatom will also introduce its experiences in building nuclear power plants in Russia and policies to assist personnel training for Vietnam's atomic energy sector.





AIRPORTS - US firm proposes to build 7 airports in central under PPP model

The US-based Airport Management Co has recently proposed to invest in airports in the central region of Vietnam under the public-private partnership (PPP) model. This proposal was sent to the Ministry of Planning and Investment (MoPI) by the representative from Cedona Group, the consulting company under ADC-HAS.

The airports in the proposal include Chu Lai, Phu Bai, Da Nang, Tuy Hoa, Quy Nhon, Pleiku and Cam Ranh.

According to Cedona Group, these airports have great potential and the investment here also is in line with the Vietnam's development plan.

Last year, ADC-HAS entered Vietnam and proposed to invest in airports of Long Thanh and Chu Lai.



VN, Venezuela boost petroleum cooperation

Vietnam and Venezuela have signed a number of agreements on oil and gas cooperation.

The agreements were signed in Caracas, Venezuela, on April 13 by Chairman of the Vietnam National Oil and Gas Group (PetroVietnam) Dinh La Thang and Venezuelan Minister for Energy and Petroleum and President of the Venezuelan State Oil Company PDVSA Rafael Ramirez.

The two leaders formalised PDVSA’s involvement in expanding the Dung Quat Oil Refinery in Vietnam by refining 100,000 barrels of oil per day taken from the Junin 2 bloc of Venezuela’s Orinoco Oil Belt, the world’s largest oil reserve.

They also assessed the possibility of its joint venture Petromacareo to begin tapping the Junin 2 oil field six months ahead of schedule.

Petromacareo is scheduled to tap the Junin 2 field from the third quarter of 2012 with a daily capacity of 50,000 barrels which is expected to be quadrupled after two years.

The two leaders discussed three potential cooperation agreements, including PetroVietnam’s assistance to PDVSA in product distribution in Asia .

PetroVietnam is a strategic partner and one of the first companies cooperating with PDVSA in projects to develop the Orinoco Oil Belt, PDVSA said on its website.



TRAFFIC INFRASTRUCTURE - Fund shortage hinders new coach stations

HCM CITY — A lack of funds and problems related to traffic infrastructure are hindering the HCM City government's plan to build two new coach stations in suburban areas.

Under the VND3.6 trillion (US$1.8 million) scheme by the city People's Committee, Suoi Tien and Tan Quy Tay coach stations would have been commissioned by 2015 to replace the two existing Mien Dong and Mien Tay stations.

Construction of the two new coach stations, to be invested by the Sai Gon Transportation Mechanical Corporation (SAMCO), is also aimed to create a link with the bus system, and the metro and tram routes.

Suoi Tien Coach Station, to cover 12ha of District 9 and nearly 4ha of Binh Duong Province, is designed to connect with the metro route No.1 stretching from Ben Thanh Market to Suoi Tien Recreational Park.

The 14.8ha Tan Quy Tay Coach Station is designed to link with the tramline No.1 from downtown city to Cho Lon and Mien Tay coach stations.

The two new stations, about three to four times the size of the old ones, will be built to modern standards and will include shopping, sightseeing, and recreational facilities to serve passengers.

But SAMCO said the two projects are short of funds to clear the ground and their connectivity with a metro route upon completion is in doubt.

SAMCO deputy general director, Le Van Pha, said costs have amounted to VND1.6 trillion ($800,000) to clear the site for the two new stations.

Although SAMCO had planned to take out bank loans, banks refused to lend the capital for ground clearance.

City administration earlier issued a decision to provide an annual support of 8 per cent to the interest rate of bank loans to develop primary components of the projects.

But the investor balked at the proceeding with the projects, given the rate has now jumped to 18 to 20 per cent from 12 to 14 per cent, when the decision was issued.

Municipal authorities and the investor are also concerned about whether or not the two new coach stations can connect with the metro route No.1 and the tram line.

Otherwise, the projects will yield little socio-economic benefits, and can even be wasteful, they said.

Currently, only the depot of the metro route No.1 was already built in District 9 while construction of other components has been delayed due to ground clearance.

The route is scheduled for completion by 2016.

With capital investment continually climbing, the city has temporarily halted construction of the first tram line.

An alternative proposal by the Department of Transport to launch an express bus route is under consideration.

Intervention

To unravel existing setbacks, the city People's Committee has recently agreed to exempt land-use fee from the area where the two new coach stations will be located.

The city will also spend money from its budget to develop connecting traffi infrastructure, such as tunnels, overpasses, and pedestrian bridges as soon as the two projects are finished.

The city will exempt the investor from compensating for cleared public land to reduce investment costs, and allow the investor to use already-cleared land to recoup investment capital early.

Pha said the solutions offered by city authorities had partly helped the investor solve problems and hasten implementation of the projects.

But the big problem are the funds needed to compensate for ground clearance, adding that SAMCO is awaiting the financial assistance plan from the city government.

He suggested that the city consider providing interest-free loans worth VND1.12 trillion ($560,000) for 14-15 years for ground-clearance compensation of the main operational complex.

SAMCO will call for social participation in the construction of other components and enjoy the annual 8 per cent interest subsidy from the city, Pha said.

Reducing pollution

The HCM City Department of Transport will carry out a pilot programme to encourage local residents to use public transport or non-motorised vehicles in an aim to reduce traffic accidents and environmental pollution.

Duong Hong Thanh, deputy director of the department, said that the programme, expected to start in the beginning of May, would encourage state employees, students and workers to use buses or non-motorised vehicles at least one day per week.

From September, the programme would expand to the entire city, Thanh said.

Every day, nearly 2,900 buses carry nearly 1.5 million passengers on more than 147 routes, according to Le Trung Tinh, head of the department's Transportation Management Office.

The buses operate at only half of their capacity and can serve an additional 2 million passengers a day.

The bus system covers most of the city's routes from central to outlying areas, making it easy for commuters to reach any destination by transferring from one bus to another.

An estimated 4.947 million vehicles, including 447,000 automobiles and 4.5 million motorbikes, are registered in the city, according to the department's figures.

At least one litre of petrol at a cost of VND21,300 (US$1.03) could be saved per day if a motorbike driver shifted to bus travel. This is equal to a total of VND21.3 billion (US$1.03 million) in fuel costs for a total of one million motorbikes a day.

With city subsidies to bus companies, bus fares have remained stable at VND4,000-5,000 per ticket despite recent fuel hikes.

The city subsidises the costs to encourage the usage of public transport among city residents, particularly students and low-income earners.

Four planned

A city plan envisages building four new coach stations by 2015, covering a total 79ha or three times as large as the current ones.

Apart from Suoi Tien and Tan Quy Tay stations, ground will be broken for the 24-ha Xuyen A Coach Station in Hoc Mon District to serve passengers travelling to Cambodia and Tay Ninh Province.

Construction will also start for the 19-ha Long Truong-Song Tac station in District 9 to serve passengers going to the central region, southern Ba Ria-Vung Tau province and Lam Dong Province in the Central Highlands.




[Thank you for your interest in this topic. This communication may be considered promotional in nature.]

With Compliments

Oliver Massmann

Rechtsanwalt

General Director – Duane Morris Vietnam LLC



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