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Oliver Massmann
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INVESTMENT – Hanoi attracts US$875 million FDI in six months
VOV
Hanoi lured US$875.1 million foreign direct investment (FDI) capital in the first half of this year, up 6.7 times compared to the same period last year, according to the Hanoi Statistics Office (HSO).
The capital comes from 140 FDI projects, including 107 new projects with registered capital of US$414.4 million and 33 old ones with additional capital of US$460.7 million.
The HSO said that in the reviewed period development and investment capital reached VND77.154 trillion, up 12.6 percent over the same period last year.
HSO Head Cong Xuan Mui said since the first quarter of this year Hanoi has conducted strict supervision to cut and expand many public investment projects. The capital city has increased funding for technical infrastructure, social and civil projects aimed at building houses for workers at industrial zones, students and low-income people in urban areas.
It has also accelerated the implementation of some waste treatment projects to improve the environment around the city.
Vietnam to inspect 2,600 FDI firms for tax evasion
Thanhnien
Vietnam's Finance Ministry has announced it would carry out inspections of 2,600 loss-making foreign invested companies this year.
The inspections aim to find out whether these companies have abused transfer pricing to hide profits so that they can evade tax in Vietnam, ministry officials said.
Transfer pricing refers to paper transactions among members of the same company that allow allocating profits to lower-tax countries. Though it is not illegal, Vietnamese authorities are watching closely for potential tax avoidance by companies engaged in the practice.
A Finance Ministry official who wished to remain unnamed said many FDI firms, which had reported losses for past several years, had declared profits in the first five months of this year after knowing that the ministry would conduct inspections at more than 80 FDI enterprises early this year.
Vietnam is home to 8,600 foreign direct invested companies.
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New Zealand firms keen on forestry-based projects
The Saigon Times Daily
New Zealand companies are looking to work with Vietnamese partners over plans to develop forests in appropriate areas and create demand for wood-based construction structures, the New Zealand trade commissioner to Vietnam said.
Such forests will generate sustainable sources of timber for the country's furniture sector and New Zealand companies will share their experience and technology, Graham Sims told the Daily on the sidelines of the New Zealand Timber Innovation and Technology Conference in HCM City on Tuesday.
Sims said the technology and treated timber products highlighted at the conference had been used widely in his home country to build homes and resorts and expected that Vietnamese companies would see the advantages of innovations that New Zealand offer.
At the event, New Zealand wood companies showcased their glue laminated timber (Glulam), an engineered durable wood product that has been used to build houses, schools and bridges. Other exhibits included joinery and interiors, furniture and components, outdoor decking and landscaping timbers, veneers and overlays, lumber grades and construction materials and millwork.
"New Zealand is keen to share our ideas with Vietnam and explore how Glulam and laminated veneer lumber (LVL) can meet Vietnam's needs," conference guest speaker Hugh Morris said.
Sims said New Zealand companies were exploring ways to join forces with Vietnamese firms to carry out forestry-based projects. He elaborated they wanted to establish joint ventures or partnerships with Vietnamese counterparts to turn out and process wooden products for local sale and export.
"I think it is important that joint ventures are equal proportions so that our companies bring technologies and need companies that can fund and provide land suitable for the building site," Sims said.
Kerry Bloor, director of Timbalink, said the company was pressing ahead with opening wood processing and treating facilities in Vietnam next year, with the first factory being up and running in the southern province of Binh Duong in around February.
Bloor told the Daily that Timbalink planned to commission the second factory near HCM City next year and that these two factories would be developed in coordination with a Vietnamese partner. The company has not finalised the costs of these projects but the amounts must be significant, Bloor said.
Vietnam has imported timber from New Zealand since 2000. Sims said last year's timber sales to Vietnam totalled NZ$60.9 million, the second largest export earner of New Zealand in bilateral trade with Vietnam after dairy products.
New Zealand has some 1.8 million hectares of intensively managed and sustainable forest plantations, heard the conference held by the New Zealand Trade and Enterprise office in Vietnam.
ECONOMY – Exports to US experience a boost
VIR
Vietnam earned over $6.15 billionfrom exports of goods to the US in the first five months of the year, an increase of 22.5 per cent over the same period last year.
In a freshly released report, the General Department of Vietnam Customs said that with this achievement, the US continued its role as Vietnam’s largest market for exports, making up 17.7 per cent of Vietnam’s total export turnover.
The five-month export value also saw Vietnam surpass the Philippines and Indonesia on the list of ASEAN exporters to the US.
Vietnam has also caught up with Malaysia , which is now the leading ASEAN country in exports to the US, in the exports of several staples.
Vietnam shipped garment and textiles, woodworks, footwear, seafood, cashew nuts and machinery to the US .
Of these, garment and textiles continued to gain the highest value with over $2.55 billion in the first five months of the year, a year-on-year increase of 17.7 per cent, making up 50 per cent of the country’s garment and textiles exports turnover. Following was footwear with an export value of $714 million, making up over 30 per cent of total footwear export turnover.
The US was the largest importer of Vietnamese handbags, wallets and suitcases, spending $180 million on the products in five months of the year, an increase of 44 per cent.
In the same period, Vietnam spent $1.77 billion on importing goods from the US, an increase of 26 per cent over the same period last year.
As a result, Vietnam had a trade surplus of $4.34 billion to the US, an increase of 21 per cent.
The US Commerce Association forecast that Vietnam is capable of leading ASEAN in exports to the US in 2011.
Efforts to stabilise economy face setback: minister
The Saigon Times Daily
The minister of Planning and Investment warned on Tuesday that efforts to stabilise the economy set out in the government's Resolution 11 are facing a major setback as central and provincial authorities do not want to reduce public investment.
Vo Hong Phuc in a report submitted to the National Assembly's Standing Committee on Tuesday claimed that a number of ministries and provinces were very reluctant to shelve public investment projects as told.
Authorities at central and provincial levels are challenging the government's efforts to tighten the fiscal policy in order to stabilise the economy, he noted.
According to Resolution 11 issued by the government in late February to curb inflation, many new public investment projects must be written off or put on hold, excluding those for natural disaster prevention.
The minister in his report blamed provincial authorities the most. Provinces across the country announced to postpone 918 new projects worth 2.272 trillion dong, representing 21 percent and 12 percent of the total number of projects and total capital approved earlier for such localities this year, respectively.
Meanwhile, centrally-governed bodies and ministries were also hesitant to cut investment, having announced to postpone 171 projects worth 585 billion dong, equivalent to 38 percent and 25 percent of the total number of projects and committed capital earlier assigned to them, respectively.
In total, according to the report, authorities at the central and provincial levels have committed to cut off 1,145 projects with investment of 3.15 trillion, equivalent to 23 percent of the number of newly-built projects and 14.5 percent of the total capital, respectively.
These figures show that the majority of new projects are still being executed, instead of being postponed in order to help stabilise the economy.
Furthermore, minister Phuc revealed that the capital of the postponed projects was being poured into other projects, instead of being cut off totally.
"The percentage of new projects being postponed is small. Some ministries and provinces continued their state-funded projects while others are waiting for the government to adjust Resolution 11," Phuc said.
The report also shows that ministries and provinces have pledged to save a total sum of 5.556 trillion for the State Budget by postponing new projects. However, the figure is trivial compared with the total number of 152 trillion dong as public investment from the State Budget planned for 2011.
Economists claimed the fiscal policy was not conducted in a strict way in order to help stabilise the economy.
Head of Vietnam Economics Institute Tran Dinh Thien said he doubted the willingness in cutting public investment by central and provincial authorities.
"Just look at the way State-owned enterprises are doing. They've announced to cut as much as 39 trillion dong in a very short time. I think they cut projects on papers only," he said.
Meanwhile, Chair of the Vietnam Chamber of Commerce and Industry Vu Tien Loc proposed a tougher stance on the part of the government.
"We ask that the government seriously cut off public investment as a fiscal measure in order to ensure more room for the monetary policy to exercise," he said.
INDUSTRY - Payback time for steel firms
Vietnambusiness
According to the Ministry of Finance (MoF), steel firms had benefited from cheap power prices.
In reality, from March 1, 2011 the average power price stood at VND1,241 per kWh (up 15.3 per cent on average against the previous level) while that sold to steel firms was only VND535 per kWh. Thus, in churning out a tonne of steel products steel firms would enjoy profits ranging from VND214,000 ($10) to VND321,000 ($15) depending on steel furnace technology level on the back of power price differences.
The MoF proposed to impose 3 per cent export tariff on some sorts of steel products including construction steel, cold rolled steel, steel pipes and galvanised iron sheets with an aim to put a cap on the export of such products.
Earlier, in August 2010 Vietnam power authority Electricity of Vietnam (EVN) proposed the prime minister require the developers of big steel projects to self build their power plants and sell extra power output to the national grid.
According to EVN statistics, the price of power sold to the steel sector is currently 8.12 cents per kWh in Thailand, 14.1 cents in Singapore and 6.7 cents in Indonesia. That was why investments were poured into steel production in Vietnam over the past couples of years, according to relevant state competent agencies and industry experts.
EVN reportedly spent over VND30 trillion ($1.45 billion) into developing power network and sources in the past years to ensure sufficient power supply to the steel sector which now stands at around 3,500 million kWh.
Vietnam Steel Association (VSA) chairman Pham Chi Cuong, though echoing the proposal to sell power at prices set by market rules to the steel sector, assumed power prices only made up a small proportion of steel items’ production costs.
According to VSA, steel billet production was the biggest power consumer (600kWh per tonne) among steel items which use an average 100-120kWh per tonne only. Meanwhile, steeping up local steel billet production is a state investment priority to ease dependence on imported products. The VSA said 11,300 tonnes of steel billets exported in 2010 were first imported by commercial firms that it was all exported.
The VSA also suggested bolstering steel exports to expand output markets, ameliorate investment efficiency of businesses and ensure employment.
A senior industry expert said investors jumping into steel production would continue due to the sector’s high profit margins and a glut of steel would be inevitable.
In 2010 after-tax profits of privately-run Hoa Phat Group, a leading steel manufacturer, was VND1.376 trillion ($66.4 million) with 36 per cent coming from steel trading. Pomina’s 2010 after-tax profit of around VND660 billion ($31.8 million) chiefly came from the steel business.
Hoa Phat Group leads whole country in steel consumption in May
Vietnambusiness
The statistics of Vietnam Steel Association (VSA) showed that in the first five months of this year Hoa Phat Steel was ranked at the first place in terms of steel consumption volume at over 297,000 tonnes of products, equivalent to 14 percent of total market shares.
The group’s sales volume in Jan-May period increased by 40 percent against the same period last year. In May, the steel mills in the Hoa Phat Iron Cast and Steel Complex in Hai Duong province – the first phase reported gaining the highest steel production output, in which the scrolling steel mill had highest production output of 34,188 tonnes, surpassing the designed capacity by 13.4 percent.
ENERGY - Coal, power giants declare financial difficulties
Vietbiz24
With the current high interest rate of 19-21%, energy groups of Vietnam are facing lot of difficulties in accessing capital, especially in the context that banks are ignoring capital provision to the electricity industry due to debt problems.
Last weekend, Vietnam Energy Association organized a conference to discuss common measures to hasten energy projects. The title came from debt problems of groups, which caused many barriers for smaller sized energy enterprises in accessing loans.
Vu Manh Hung, Deputy General Director of Vinacomin stressed, “The group expects to open a deep coal mine in coming time but we also do not know how to meet enough 30% of total investment capital according to Law on Minerals that will take effect from July 1”.
Investment for a new coal mine has increased strongly to almost $200-240 per tone, total need of capital for a project is around $400 million or 8 trillion dong, he estimated. With the regulation requiring equity of 30% of investment estimate, this will be the huge capital amount that Vinacomin as well as other investors will find it very difficult.
In the forthcoming time, Vietnam plans to develop coal-fed thermo power industry. Concerning only 13 old thermal electricity projects of Power Planning 6 that the Electricity of Vietnam (EVN) “refused” and returned to the government in the end of 2008, they will need up to 40 million tons of coal by 2015 if wanting to ensure the right progress. As planned, all projects will eat imported coal while after 2015, Vinacomin will be able to import only 6 million tons. Vinacomin now has a big headache how to increase domestic coal output to meet the demand amid serious capital shortage.
Therefore, coal output is on danger of not meeting demand of electricity demand.
With the similar problem, Song Da Group as both investor and contractor is stuck because of “chain debt”.
Le Van Khuong, Deputy General Director of Song Da Group said that our difficulty was multiplied due to capital shortage in doing investment and payment delays of partners.
He said, “We, as contractor, are building Lai Chau hydropower plant with total workload value of 1.2 trillion dong, but so far the investor EVN has advanced only 200 billion dong. We did not have any money as starting work on Lai Chau hydropower plant. A lot of support works for the starting should have been carried out. We also are suffering similar problems in other projects as a contractor”.
Luu The Bieu, representative of EVN explained that to date EVN has signed to borrow only 3.6 trillion dong for resettlement of Lai Chau hydropower project. But actually the loan is not necessary immediately. The urgent issue is need of capital for construction installation, but EVN has not been able to arrange capital yet.
EVN also is struggling with shocks of forex rate, and higher interest rates. In Dong Nai 4 power project capitalized at 4.5 trillion dong, despite the group accessed loans of commercial banks. But for price slide and resettlement policy, total cost for the project was pushed to 1.5 trillion dong. EVN does not know how to manage the increased capital as the interest rate has risen to 21% per annum, Bieu complained.
Paying 200 billion dong to Song Da Corp for Lai Chau work was the group’s efforts, he confirmed.
EVN asked the government’s approval to issue $1 billion of international bonds to manage capital. Yet, the government sent the application to Ministry of Finance for consideration. Till now the ministry has not released any guidance.
Two of 13 electricity projects that EVN rejected have not seen any investor.
Most representatives of energy groups in the conference proposed the government to soon issue a mechanism to deal with the aforementioned difficulties such as prioritizing ODA capital for electricity projects, supporting interest rates, guaranteeing foreign loans, increasing coal and electricity prices based on market.
Vietnam power demand seen up 15pct/yr in next five yrs -EVN
Reuters
Coal will take over from hydropower as the leading fuel for new electricity generation in Vietnam in the next five years, during which power demand is set to rise by 15 percent annually, Vietnam Electricity (EVN) said on Wednesday. Trinh Ngoc Khanh, head of planning at the power monopoly, also said the manufacturing sector will face power shortages in 2011, coming as the economy is expected to grow at a slower pace of 6.5 percent this year and next.
The country has not been able to meet demand for electricity by about 3 percent in the past five years and EVN will need to invest $3 billion a year for new power plants and transmission infrastructure between 2011 and 2015, during which 38 projects would come online, he said.
He said electricity consumption would nearly double to 175 gigawatt-hours in 2015 from 98 gigawatt-hours this year. Supply will increase to 196 gigawatt-hours from the current 110.8 gigawatt-hours.
Vietnam will see a sharp increase in the use of fuels such as oil, coal and gas for power generation, Khanh said.
Hydropower has been dominant in Vietnam, but it is waning. Last year it accounted for 37.6 percent of total generation, followed by gas with 31.7 percent, coal at 18.3 percent, oil at 5.4 percent and small hydro and renewable making up 2.3 percent. New generation capacity between this year and 2015 will total 26,911 megawatts, of which coal will account for 14,370 MW, gas 2,970 MW, hydropower 7,605 MW and imported hydropower 635 MW, he said. Small hydropower plants and renewable sources will add 1,331 megawatts, bringing total generating capacity in the system to 48,497 MW. Ten northern provinces live on 1,000 MW of imported hydro power from China, which accounts for some 4.65 percent of the total.
In the face of chronic power cuts, the government decided this year to put the burden on the manufacturing sector instead of cutting residential electricity, which stirred public outcry last year. "We asked the production sector to cope with the power shortage this year. The impact has been big," said Khanh. Tomaso Andreatta, vice chair of the European Chamber of Commerce in Vietnam, called the situation an "energy emergency" and said it felt worse than a 3 percent shortfall. "If electricity producers are allowed to sell directly to customers instead of via EVN, lots of companies would like to pay more to have enough power," he said. EVN expects to make no profit this year with government-mandated power prices equalling production costs, Khanh said. Last year EVN reported a loss of 15 trillion dong.
Electricity producers facing difficulties in price negotiation with EVN
VietBiz24
The Electricity of Vietnam (EVN), the country's power group, is managing and operating about 51.3 percent of total power capacity of the whole system. Including the electricity sources in which EVN holds majority stake, the ratio will be 71 percent, according to data of Ministry of Industry and Trade.
Foreign and other private investors own and run only 10.4 percent. Remainder of the power capacity belongs to the giants including PetroVietnam, Vinacomin and Vietnam Industry Construction Group.
Industry experts opined that the EVN's monopoly has made the sales and purchase of electricity difficult. Vu Manh Hung, vice CEO of Vinacomin was quoted as saying that Vinacomin started to join development of power projects from 1998 with Hai Phong 1and 2, Quang Ninh 1 and 2...But, many projects were prolonged and lagged due to failure in price negotiation with EVN. Even, some plans that were to be operated still are under price negotiation, namely Song Dong and Cam Pha.
According to Nguyen Khac Son-General director of Pha Lai Thermal Power Joint Stock Co, his firm is one of lucky customers that has ben able to successfully sign electricity selling contract in four years with EVN at a price of 700 dong per kWh. The selling price is adjusted every month. When coal and oil prices increase, electricity price will be corrected as well.
The core reason of the difficulty in electricity price negotiation was that EVN wants to enjoy a certain profit to ensure its business cost. If purchase cost of electricity generating companies is high, EVN may suffer loss. He shared, "Enterprises have to negotiate a long term contract because EVN still will have to do cross-offset for various objectives, prices among member companies and external firms are different".
Not only electricity sellers as well as buyers with EVN are complaining due to insufficient electricity supply. Dao Huu Huyen, director of Duc Giang Chemical and Detergent Co (DGC) stressed, his company had to pay 15-30 billion dong a month to Lao Cai Power but several investment projects of DGC are struggling hardships because of electricity.
Vietnam's Electricity Law rules that producers must supply electricity sufficiently to construction works but the process has taken place slowly. He cited, phosphate 1 factory of his company has been lagged in 3 months. "We are going to start running turbine 2 of the factory in July but till now we have not have backup grid. Because of lacking a grid of electricity, all phases have to be suspended to wait for reply from electricity suppliers", he added.
DGC leaders are always nervous in every electricity price increase. Pursuant to the government's Decision 24, electricity price may be adjusted once 3 months but electricity selling and buying contracts cannot be signed for 3 months.
"Electricity suppliers want enterprises to share difficulties but when firms demand, the suppliers ignore", he emphasized. "Electricity companies and businesses need to negotiate without basing on price frame of 1,900 dong per kWh at rush-hours, and 1,200 dong/kWh at low-hours."
Electricity price ruled by the government has caused hardships for both sellers and buyers who are difficult in price negotiations because in fact, input costs are changing quickly. The prime minister was proposed to offer average electricity selling price and specific price will be made by seller and buyer, according to Duong Quang Thanh-Deputy general director of EVN said.
Race to meet power demands
VIR
Vietnam will build nearly 100 power plants to meet its soaring power demand by the end of 2020.
Electricity of Vietnam (EVN) said at the ongoing 2nd Vietnam Power Summit 2011, taking place on June 22-23, in response to critical energy security issues, Vietnam had commissioned more power projects to add electricity to the grid in the next few years and had rolled-out new initiatives toward liberalising the power sector with new independent power projects.
Over the next 10 years, Vietnam plans to build 95 power plants with an estimated investment of $39.58 billion, whose total capacity would be 49,044 megawatts, of which a large part of investment capital will be sourced from foreign investors. This will be aimed to meet the growth rate of 12 per cent per year in power demand by 2020.
At present, Vietnam has 38 power projects which are under construction, of which 26 belong to EVN.
EVN said it would need over $3 billion each year to invest into the plants and power grids.
It is expected that the country’s power consumption by 2015 will grow by 15 per cent, while the power supply will grow by 14.5 per cent.
Also by late 2015, Vietnam’s total power capacity will be 48,497MW.
With rapid industrialisation and economic growth, Vietnam’s power infrastructure is now incapable of meeting increasing demand for electricity.
At the seminar, key questions discussed at the event include challenges faced by independent power producers, investors and financiers in developing power projects in Vietnam, how to ensure financing and investment flows meet these challenges, and the changing expectations, issues and challenges of independent power producers and international financiers
The two-day networking summit brings together key Vietnamese regulators, local power players, international power producers, developers and operators, multilateral agencies, financiers, investors, legal experts and consultants.
The summit is organised by the Ministry of Foreign Affairs’ The World and Vietnam Newspaper and Euromoney Seminars, which is a division of Euromoney Institutional Investor PLC.
RESOURCES - Huge titanium processing complex proposed in Binh Thuan
The Saigon Times Daily
The Department of Geology and Minerals of Vietnam is seeking government approval for a 100-square-kilometer complex to tap titanium ores in the south-central coast province of Binh Thuan.
Tran Van Mien, head of the department's Geology Office, told the Daily on Tuesday that the ministry had discovered a titanium mine with reserves estimated at 540 million tonnes, which encompasses Ninh Thuan, Binh Thuan and Ba Ria-Vung Tau provinces. Most of the ores found are sparsely located in coastal areas in Binh Thuan.
"The department has suggested building the complex to extract and process up to 150 million tonnes of titanium ores," said Mien. "The remaining 300 million tonnes should be kept as a national reserve resource for the coming generations."
He said the appropriate exploitation and the complete processing of titanium would create a key economic development driver for the three provinces in the future.
Mien noted the region had in recent years attracted many investors committed to other industries than titanium but in fact they wanted to tap huge titanium ores. In some areas, haphazard titanium mining has spiralled out of control and caused damages to the economy and environment.
"If government approval is forthcoming, this will become the largest titanium complex in the country," he said. The project planned for development in Tuy Phong District will need huge capital.
According to environment experts, Vietnam has huge titanium potential. Titanium is a heat-resistant and uneroded agent suitable for the aeronautical industry and other industries.
The precious mineral, however, is hindering economic development in Binh Thuan Province because most of the areas found to contain titanium overlap many licensed industrial parks, resorts and wind mill projects in the province.
State management of fuel sector under the spotlight
VNS
Reporter spoke to Petrolimex deputy general director Vuong Thai Dung about recent increases in import duties on fuel products that were aimed at helping to stabilise the market.
What is your assessment of the situation surrounding oil and petrol? Does current State management of oil and petrol prices meet the expectations of enterprises?
Petrol and oil prices are not dependent purely on economies. They’re also dependent on politics. Insecure situations in Egypt and other places in Africa, for example, have directly impacted on oil and petrol prices. For this reason, it is difficult to anticipate oil and petrol prices.
In my opinion, prices must harmonise interests between the State, enterprises and consumers. Both the State and enterprises have compromised their interests to ensure consumer interests in recent years. Thus, when world prices decrease and local enterprises start making a profit, import duties and contributions to the petroleum price stabilisation fund should be raised in anticipation of world price fluctuations. In my opinion, the way the State has managed oil and petrol prices recently has been sensible.
Why is it sensible to raise import duties when fluctuating prices are hard to predict?
They are imported products and the imposition of import taxes is the interest of the State. However, import tax increases or decreases in the meantime have some drawbacks in the context of fluctuating market prices.
Oil and petrol prices are currently under State control and enterprises have no power over price adjustments. The latter are always on the defensive and suffer more losses than anyone if prices are not adjusted in a timely manner.
I think we should increase the petroleum price stabilisation fund while temporarily postponing the imposition of import taxes on kerosene and diesel oil until the market becomes relatively stable. Imposition of import taxes is one measure but it is not as optimal as increasing the petroleum price stabilisation fund. And last but not least, we should think of cutting down oil and petrol prices to consumers if conditions allow us to do so.
How have measures taken by the Ministry of Finance impacted enterprises?
As I already mentioned, the optimal measure is to increase the petroleum price stabilisation fund, then apply import taxes and reduce oil and petrol prices for consumers. However, the State recently raised import duties on some products while increasing contributions to the petroleum price stabilisation fund on others. In this case, I don’t think there has been much impact on enterprises.
You said recent solutions taken by the State to control oil and petrol prices are sensible in the present context. But on their part, consumers believe the way oil and petrol prices are adjusted is unsatisfactory because enterprises are quick to raise prices but slow to cut them. What do you think?
Enterprises have no alternative but to store oil and petrol for at least 30 days to satisfy demand. How could they sufficiently provide oil and petrol to consumers if they did otherwise? We cannot reduce prices when world oil and petrol prices decrease because we cannot throw old products out to buy new ones. It’s not to mention some smaller enterprises import a lot of oil and petrol when world prices reduce.
In my opinion, consumer complaints about quick price increases and slow price reductions are emotional. Enterprises are not allowed to adjust prices automatically. Under the current rulings, price rises may only occur every 20 days at a minimum. There is no limitation in time for price decrease.
Will Petrolimex reduce prices in the time to come?
I want to reiterate that we must import oil and petrol in advance while the State imposes different import taxes depending on world prices. We cannot say everything in advance. We all expect that it is possible to increase import taxes or reduce prices for consumers if world prices continue to fall.
Enterprises keep asking the State to increase prices as world oil and petrol prices soar. Do they automatically propose price reductions?
We have proposed price reductions several times and it is a matter of course that we did not inform everyone every time we increase or reduce oil and petrol prices because such information can have significant negative impacts on consumers. People will speculate on products if they know prices will go up. On the contrary, agents and distributors would not buy oil and petrol if they knew prices would reduce in the coming days which would force them to close their stations and impact customers.
Vietnam interested in oil exploration in Sri Lanka’s Mannar Basin
colombopage
The Vietnam Oil and Gas Group, trading as PetroVietnam has expressed interest in exploring oil in the Mannar Basin off the northwest coast of Sri Lanka.
Vietnamese Ambassador to Colombo, Tong Sin Thanh has said that the company which is wholly owned by the Vietnamese central government and has operations in 18 countries is prepared to join in oil exploration in Sri Lanka.
The Ambassador has also said that his country is ready to enhance bilateral relations not only in the oil and gas sector but also in the aviation and tourism fields.
Petrovietnam has been successful in oil and gas exploration and production overseas. At present, the company is investing in 23 oil and gas exploration and production projects all over the world.
Meanwhile, the Russian oil giant Gazprom has also shown interest in investing in the oil exploration in the Mannar Basin. Gazprom is to send a team of experts to Sri Lanka soon to further explore the possibility.
Mannar basin has eight oil and gas exploration blocks and two of them have been granted to China and India.
Sri Lanka has already allowed Cairn Lanka, a wholly owned subsidiary of the Indian oil giant Cairn India to commence drilling for oil in the Mannar Basin in August 2011.
PORPERTY – Agencies warn against FDI virtual capital in real estate projects
Vietnamnet
Experts have pointed out that while the registered foreign direct investment (FDI) in the real estate sector is relatively high, the implemented capital remains modest, which means a high proportion of “virtual capital”.
The statistics released by the Ministry of Planning and Investment (MPI) show satisfactory figures about the foreign direct investment (FDI) in the real estate sector, with seven billion dollars worth of newly registered capital by the end of 2010. However, no one can say for sure that how much of the registered capital will be disbursed in reality.
Many projects remain immovable
In early 2007, when the former Ha Tay province was going to be merged into Hanoi, people had the chance to witness the splendid work-starting ceremony of the residential quarter project, with investing by South Korean Booyoung Vietnam. The project was expected to have six 30-storey buildings with 5000 high grade apartments in the Mo Lao new urban area.
However, the construction site quickly became deserted just after a short time, and is now a vast land area overgrown with weeds. According to the Mo Lao Urban Area’s Management Board, the project has experienced five investment license adjustments over the last five years.
The 4.3 hectares of “clean” land (the site clearance has been completed and the land is now ready for construction) which has been allocated to Boonyoung Company remains a deserted area, which is really a big waste.
Similarly, the 207 hectares of “golden land”, located at a very advantageous position, programmed for the new West Lake urban area, remains a deserted area, which is now temporarily used for the scrap material ground.
Licensed in early 2006, the project has not made any progress so far, even though the project’s investor has good financial capability. The problem is that to date; only 80.9 hectares of clean land has been obtained. The problems in the policies and the weak capability of government agencies have caused the project’s delay.
Besides this, a series of other real estate projects in Hanoi have not been implemented over the last many years and are facing a revoked license. These include huge projects like the one registered by Trang Tien Trade Company which has the registered capital of over 10 million dollars, and the one by Hacom joint venture, capitalized at 12 million dollars.
According to the Hanoi Planning and Investment Department, by 2011, the city has attracted 94 foreign invested projects in the real estate sector with the total registered capital of five billion dollars. However, the implemented capital remains modest at 2.4 billion dollars, or just a half of the registered capital.
“The registered capital is high, while the disbursed capital remains low. The virtual capital has been increasingly high,” said a financial expert. He has pointed out that the problem will cause many bad consequences. Especially, this affects the investment environment and causes the natural resources waste.
Registered as foreign invested, implemented as domestic invested
Officials from the Hanoi Planning and Investment Department have also pointed that it has discovered some cases, where investors register as foreign invested projects, but in fact, the projects use domestic capital sources.
In fact, the foreign investors, who registered the projects, only brought small amounts of capital to Vietnam, while they planned to seek capital from domestic sources for the projects’ development.
“It is very risky to use domestic sourced capital for the foreign invested projects’ development. In case the projects meet difficulties, this will cause bad consequences to the society,” an official from the Hanoi Planning and Investment Department said.
“It is necessary to set up reasonable regulations to punish the violations in the real estate investment, especially in the projects on commercial accommodations,” he added.
The Ministry of Construction has sent a dispatch to the Ministry of Planning and Investment, requesting to check real estate projects and consider the measures in dealing with the projects that have been slow in the implementation.
To date, many mammoth real estate projects have been given “death certificates”, including Bai Bien Rong eco-tourism center in Quang Nam, which had the registered capital of 4.15 billion dollars, The Aj Vietstar in Ba Ria-Vung Tau, Ben Got urban area in Phu Tho, and Nam Tuy Hoa Creation City in Phu Yen province.
FINANCE - Interest rates, inflation set to fall: central bank
tuoitrenews
There are signs that interest rates are cooling, but the State Bank of Vietnam will deploy measures to control credit growth, its governor, Nguyen Van Giau, has said.
Speaking at a press conference in HCM City last week, he said the consumer price index (CPI) has edged down since May and is likely to hover around 1 percent in June.
He said there were indications that interest rates would fall soon.
Some rates that lead market rates, like that on government bonds, had fallen to less than 14 percent per year and the seven-day interbank rate to 14-15 percent, he said.
Many joint-stock banks have hit the credit growth ceiling of 20 percent and would no longer mobilise deposits at any cost like they used to, he said, adding this would also pull down lending rates.
He also took questions from the media.
You said that the central bank will control interest rates in line with inflation, which means they will decline when inflation cools. So what does the central bank plan to do now?
In general, when the CPI goes down, the central bank will... pull interest rates down. We cannot immediately change the policy or slash interest rates.
The central bank will stick to the target of stabilising the economy. So when inflation decreases, the interest rates will also reduce in a steady manner.
How does the 20 percent cap set on credit growth affect interest rates?
The 20 percent cap on credit growth is very helpful. At present, many commercial banks have almost hit the ceiling. There will be no banks wanting to mobilise funds at high rates since they cannot lend it to customers and firms.
When the banks have no channel for their funds, they will have to use it to buy bonds. But since they are close to the bond [purchase] limit in 2011, they will have to reduce deposit interest rates.
The credit growth did not seem balanced in the first five months of this year - it went up by only 7.05 percent against a cap of 20 percent. So will it peak in the next seven months?
At present, the very high loan interest rates have prevented individuals and firms from borrowing from banks. When the economy is stable, the interest rates will fall quickly.
A suitable rate for credit growth by the end of June is 8-8.5 percent, and it would worry me if the figure turns out to be higher. But the central bank will keep the growth under control.
Do you think commercial banks will manage to bring their loans outstanding below the 22 percent cap as required on June 30?
Currently, there are 23 banks with loans to non-productive sectors ranging from 22 to 50 percent, including 18 that range from 31 to 37 percent, and one with over 50 percent.
Those who fail to reduce their loans to non-manufacturing sectors to 22 percent by the end of this month and to 16 percent by year-end will have to double their compulsory reserves.
Loans to real estate are worth 222 trillion dong, down 5.5 percent since late 2010. The figure for HCM City is 95 trillion dong.
This is a good chance to eliminate speculators from the property market.
Dollar exchange to hold steady till end of the year: ANZ
StoxPlus
The US dollar-dong exchange rate is expected to hold steady to the end of this year, but ANZ bank anticipates a dong devaluation early next year.
According to the bank's report released today, government efforts to stabilise the foreign exchange market and restore confidence in the dong were having a positive effect.
The dong onshore trading rate has stabilised in the 20,550-20,650 dong per US dollar range in recent months.
In the offshore Non Deliverable Forward (NDF) market, the dong's implied 12-month discount has narrowed by 2.2 percentage points from its post-devaluation peak in February. The dong's one-month NDF discount has also stabilised around 1.0 per cent.
"The State Bank of Vietnam (SBV)'s more aggressive stance on inflation and changes in its FX policy are behind the recent stabilisation," ANZ's report said.
However, ANZ expects the dong to be devalued by 3-4 per cent in 2012 as inflation remains in double-digits. The dong's real effective exchange rate (REER) - a measure of its cost competitiveness - has appreciated by 5.6 per cent since March, which will adversely impact on the trade deficit and exacerbate Vietnam's already fragile balance of payments position.
Vietnam's inflation climbed to 19.8 per cent year-on-year in May, marking a 29 month-high.
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INVESTMENT – Hanoi attracts US$875 million FDI in six months
VOV
Hanoi lured US$875.1 million foreign direct investment (FDI) capital in the first half of this year, up 6.7 times compared to the same period last year, according to the Hanoi Statistics Office (HSO).
The capital comes from 140 FDI projects, including 107 new projects with registered capital of US$414.4 million and 33 old ones with additional capital of US$460.7 million.
The HSO said that in the reviewed period development and investment capital reached VND77.154 trillion, up 12.6 percent over the same period last year.
HSO Head Cong Xuan Mui said since the first quarter of this year Hanoi has conducted strict supervision to cut and expand many public investment projects. The capital city has increased funding for technical infrastructure, social and civil projects aimed at building houses for workers at industrial zones, students and low-income people in urban areas.
It has also accelerated the implementation of some waste treatment projects to improve the environment around the city.
Vietnam to inspect 2,600 FDI firms for tax evasion
Thanhnien
Vietnam's Finance Ministry has announced it would carry out inspections of 2,600 loss-making foreign invested companies this year.
The inspections aim to find out whether these companies have abused transfer pricing to hide profits so that they can evade tax in Vietnam, ministry officials said.
Transfer pricing refers to paper transactions among members of the same company that allow allocating profits to lower-tax countries. Though it is not illegal, Vietnamese authorities are watching closely for potential tax avoidance by companies engaged in the practice.
A Finance Ministry official who wished to remain unnamed said many FDI firms, which had reported losses for past several years, had declared profits in the first five months of this year after knowing that the ministry would conduct inspections at more than 80 FDI enterprises early this year.
Vietnam is home to 8,600 foreign direct invested companies.
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New Zealand firms keen on forestry-based projects
The Saigon Times Daily
New Zealand companies are looking to work with Vietnamese partners over plans to develop forests in appropriate areas and create demand for wood-based construction structures, the New Zealand trade commissioner to Vietnam said.
Such forests will generate sustainable sources of timber for the country's furniture sector and New Zealand companies will share their experience and technology, Graham Sims told the Daily on the sidelines of the New Zealand Timber Innovation and Technology Conference in HCM City on Tuesday.
Sims said the technology and treated timber products highlighted at the conference had been used widely in his home country to build homes and resorts and expected that Vietnamese companies would see the advantages of innovations that New Zealand offer.
At the event, New Zealand wood companies showcased their glue laminated timber (Glulam), an engineered durable wood product that has been used to build houses, schools and bridges. Other exhibits included joinery and interiors, furniture and components, outdoor decking and landscaping timbers, veneers and overlays, lumber grades and construction materials and millwork.
"New Zealand is keen to share our ideas with Vietnam and explore how Glulam and laminated veneer lumber (LVL) can meet Vietnam's needs," conference guest speaker Hugh Morris said.
Sims said New Zealand companies were exploring ways to join forces with Vietnamese firms to carry out forestry-based projects. He elaborated they wanted to establish joint ventures or partnerships with Vietnamese counterparts to turn out and process wooden products for local sale and export.
"I think it is important that joint ventures are equal proportions so that our companies bring technologies and need companies that can fund and provide land suitable for the building site," Sims said.
Kerry Bloor, director of Timbalink, said the company was pressing ahead with opening wood processing and treating facilities in Vietnam next year, with the first factory being up and running in the southern province of Binh Duong in around February.
Bloor told the Daily that Timbalink planned to commission the second factory near HCM City next year and that these two factories would be developed in coordination with a Vietnamese partner. The company has not finalised the costs of these projects but the amounts must be significant, Bloor said.
Vietnam has imported timber from New Zealand since 2000. Sims said last year's timber sales to Vietnam totalled NZ$60.9 million, the second largest export earner of New Zealand in bilateral trade with Vietnam after dairy products.
New Zealand has some 1.8 million hectares of intensively managed and sustainable forest plantations, heard the conference held by the New Zealand Trade and Enterprise office in Vietnam.
ECONOMY – Exports to US experience a boost
VIR
Vietnam earned over $6.15 billionfrom exports of goods to the US in the first five months of the year, an increase of 22.5 per cent over the same period last year.
In a freshly released report, the General Department of Vietnam Customs said that with this achievement, the US continued its role as Vietnam’s largest market for exports, making up 17.7 per cent of Vietnam’s total export turnover.
The five-month export value also saw Vietnam surpass the Philippines and Indonesia on the list of ASEAN exporters to the US.
Vietnam has also caught up with Malaysia , which is now the leading ASEAN country in exports to the US, in the exports of several staples.
Vietnam shipped garment and textiles, woodworks, footwear, seafood, cashew nuts and machinery to the US .
Of these, garment and textiles continued to gain the highest value with over $2.55 billion in the first five months of the year, a year-on-year increase of 17.7 per cent, making up 50 per cent of the country’s garment and textiles exports turnover. Following was footwear with an export value of $714 million, making up over 30 per cent of total footwear export turnover.
The US was the largest importer of Vietnamese handbags, wallets and suitcases, spending $180 million on the products in five months of the year, an increase of 44 per cent.
In the same period, Vietnam spent $1.77 billion on importing goods from the US, an increase of 26 per cent over the same period last year.
As a result, Vietnam had a trade surplus of $4.34 billion to the US, an increase of 21 per cent.
The US Commerce Association forecast that Vietnam is capable of leading ASEAN in exports to the US in 2011.
Efforts to stabilise economy face setback: minister
The Saigon Times Daily
The minister of Planning and Investment warned on Tuesday that efforts to stabilise the economy set out in the government's Resolution 11 are facing a major setback as central and provincial authorities do not want to reduce public investment.
Vo Hong Phuc in a report submitted to the National Assembly's Standing Committee on Tuesday claimed that a number of ministries and provinces were very reluctant to shelve public investment projects as told.
Authorities at central and provincial levels are challenging the government's efforts to tighten the fiscal policy in order to stabilise the economy, he noted.
According to Resolution 11 issued by the government in late February to curb inflation, many new public investment projects must be written off or put on hold, excluding those for natural disaster prevention.
The minister in his report blamed provincial authorities the most. Provinces across the country announced to postpone 918 new projects worth 2.272 trillion dong, representing 21 percent and 12 percent of the total number of projects and total capital approved earlier for such localities this year, respectively.
Meanwhile, centrally-governed bodies and ministries were also hesitant to cut investment, having announced to postpone 171 projects worth 585 billion dong, equivalent to 38 percent and 25 percent of the total number of projects and committed capital earlier assigned to them, respectively.
In total, according to the report, authorities at the central and provincial levels have committed to cut off 1,145 projects with investment of 3.15 trillion, equivalent to 23 percent of the number of newly-built projects and 14.5 percent of the total capital, respectively.
These figures show that the majority of new projects are still being executed, instead of being postponed in order to help stabilise the economy.
Furthermore, minister Phuc revealed that the capital of the postponed projects was being poured into other projects, instead of being cut off totally.
"The percentage of new projects being postponed is small. Some ministries and provinces continued their state-funded projects while others are waiting for the government to adjust Resolution 11," Phuc said.
The report also shows that ministries and provinces have pledged to save a total sum of 5.556 trillion for the State Budget by postponing new projects. However, the figure is trivial compared with the total number of 152 trillion dong as public investment from the State Budget planned for 2011.
Economists claimed the fiscal policy was not conducted in a strict way in order to help stabilise the economy.
Head of Vietnam Economics Institute Tran Dinh Thien said he doubted the willingness in cutting public investment by central and provincial authorities.
"Just look at the way State-owned enterprises are doing. They've announced to cut as much as 39 trillion dong in a very short time. I think they cut projects on papers only," he said.
Meanwhile, Chair of the Vietnam Chamber of Commerce and Industry Vu Tien Loc proposed a tougher stance on the part of the government.
"We ask that the government seriously cut off public investment as a fiscal measure in order to ensure more room for the monetary policy to exercise," he said.
INDUSTRY - Payback time for steel firms
Vietnambusiness
According to the Ministry of Finance (MoF), steel firms had benefited from cheap power prices.
In reality, from March 1, 2011 the average power price stood at VND1,241 per kWh (up 15.3 per cent on average against the previous level) while that sold to steel firms was only VND535 per kWh. Thus, in churning out a tonne of steel products steel firms would enjoy profits ranging from VND214,000 ($10) to VND321,000 ($15) depending on steel furnace technology level on the back of power price differences.
The MoF proposed to impose 3 per cent export tariff on some sorts of steel products including construction steel, cold rolled steel, steel pipes and galvanised iron sheets with an aim to put a cap on the export of such products.
Earlier, in August 2010 Vietnam power authority Electricity of Vietnam (EVN) proposed the prime minister require the developers of big steel projects to self build their power plants and sell extra power output to the national grid.
According to EVN statistics, the price of power sold to the steel sector is currently 8.12 cents per kWh in Thailand, 14.1 cents in Singapore and 6.7 cents in Indonesia. That was why investments were poured into steel production in Vietnam over the past couples of years, according to relevant state competent agencies and industry experts.
EVN reportedly spent over VND30 trillion ($1.45 billion) into developing power network and sources in the past years to ensure sufficient power supply to the steel sector which now stands at around 3,500 million kWh.
Vietnam Steel Association (VSA) chairman Pham Chi Cuong, though echoing the proposal to sell power at prices set by market rules to the steel sector, assumed power prices only made up a small proportion of steel items’ production costs.
According to VSA, steel billet production was the biggest power consumer (600kWh per tonne) among steel items which use an average 100-120kWh per tonne only. Meanwhile, steeping up local steel billet production is a state investment priority to ease dependence on imported products. The VSA said 11,300 tonnes of steel billets exported in 2010 were first imported by commercial firms that it was all exported.
The VSA also suggested bolstering steel exports to expand output markets, ameliorate investment efficiency of businesses and ensure employment.
A senior industry expert said investors jumping into steel production would continue due to the sector’s high profit margins and a glut of steel would be inevitable.
In 2010 after-tax profits of privately-run Hoa Phat Group, a leading steel manufacturer, was VND1.376 trillion ($66.4 million) with 36 per cent coming from steel trading. Pomina’s 2010 after-tax profit of around VND660 billion ($31.8 million) chiefly came from the steel business.
Hoa Phat Group leads whole country in steel consumption in May
Vietnambusiness
The statistics of Vietnam Steel Association (VSA) showed that in the first five months of this year Hoa Phat Steel was ranked at the first place in terms of steel consumption volume at over 297,000 tonnes of products, equivalent to 14 percent of total market shares.
The group’s sales volume in Jan-May period increased by 40 percent against the same period last year. In May, the steel mills in the Hoa Phat Iron Cast and Steel Complex in Hai Duong province – the first phase reported gaining the highest steel production output, in which the scrolling steel mill had highest production output of 34,188 tonnes, surpassing the designed capacity by 13.4 percent.
ENERGY - Coal, power giants declare financial difficulties
Vietbiz24
With the current high interest rate of 19-21%, energy groups of Vietnam are facing lot of difficulties in accessing capital, especially in the context that banks are ignoring capital provision to the electricity industry due to debt problems.
Last weekend, Vietnam Energy Association organized a conference to discuss common measures to hasten energy projects. The title came from debt problems of groups, which caused many barriers for smaller sized energy enterprises in accessing loans.
Vu Manh Hung, Deputy General Director of Vinacomin stressed, “The group expects to open a deep coal mine in coming time but we also do not know how to meet enough 30% of total investment capital according to Law on Minerals that will take effect from July 1”.
Investment for a new coal mine has increased strongly to almost $200-240 per tone, total need of capital for a project is around $400 million or 8 trillion dong, he estimated. With the regulation requiring equity of 30% of investment estimate, this will be the huge capital amount that Vinacomin as well as other investors will find it very difficult.
In the forthcoming time, Vietnam plans to develop coal-fed thermo power industry. Concerning only 13 old thermal electricity projects of Power Planning 6 that the Electricity of Vietnam (EVN) “refused” and returned to the government in the end of 2008, they will need up to 40 million tons of coal by 2015 if wanting to ensure the right progress. As planned, all projects will eat imported coal while after 2015, Vinacomin will be able to import only 6 million tons. Vinacomin now has a big headache how to increase domestic coal output to meet the demand amid serious capital shortage.
Therefore, coal output is on danger of not meeting demand of electricity demand.
With the similar problem, Song Da Group as both investor and contractor is stuck because of “chain debt”.
Le Van Khuong, Deputy General Director of Song Da Group said that our difficulty was multiplied due to capital shortage in doing investment and payment delays of partners.
He said, “We, as contractor, are building Lai Chau hydropower plant with total workload value of 1.2 trillion dong, but so far the investor EVN has advanced only 200 billion dong. We did not have any money as starting work on Lai Chau hydropower plant. A lot of support works for the starting should have been carried out. We also are suffering similar problems in other projects as a contractor”.
Luu The Bieu, representative of EVN explained that to date EVN has signed to borrow only 3.6 trillion dong for resettlement of Lai Chau hydropower project. But actually the loan is not necessary immediately. The urgent issue is need of capital for construction installation, but EVN has not been able to arrange capital yet.
EVN also is struggling with shocks of forex rate, and higher interest rates. In Dong Nai 4 power project capitalized at 4.5 trillion dong, despite the group accessed loans of commercial banks. But for price slide and resettlement policy, total cost for the project was pushed to 1.5 trillion dong. EVN does not know how to manage the increased capital as the interest rate has risen to 21% per annum, Bieu complained.
Paying 200 billion dong to Song Da Corp for Lai Chau work was the group’s efforts, he confirmed.
EVN asked the government’s approval to issue $1 billion of international bonds to manage capital. Yet, the government sent the application to Ministry of Finance for consideration. Till now the ministry has not released any guidance.
Two of 13 electricity projects that EVN rejected have not seen any investor.
Most representatives of energy groups in the conference proposed the government to soon issue a mechanism to deal with the aforementioned difficulties such as prioritizing ODA capital for electricity projects, supporting interest rates, guaranteeing foreign loans, increasing coal and electricity prices based on market.
Vietnam power demand seen up 15pct/yr in next five yrs -EVN
Reuters
Coal will take over from hydropower as the leading fuel for new electricity generation in Vietnam in the next five years, during which power demand is set to rise by 15 percent annually, Vietnam Electricity (EVN) said on Wednesday. Trinh Ngoc Khanh, head of planning at the power monopoly, also said the manufacturing sector will face power shortages in 2011, coming as the economy is expected to grow at a slower pace of 6.5 percent this year and next.
The country has not been able to meet demand for electricity by about 3 percent in the past five years and EVN will need to invest $3 billion a year for new power plants and transmission infrastructure between 2011 and 2015, during which 38 projects would come online, he said.
He said electricity consumption would nearly double to 175 gigawatt-hours in 2015 from 98 gigawatt-hours this year. Supply will increase to 196 gigawatt-hours from the current 110.8 gigawatt-hours.
Vietnam will see a sharp increase in the use of fuels such as oil, coal and gas for power generation, Khanh said.
Hydropower has been dominant in Vietnam, but it is waning. Last year it accounted for 37.6 percent of total generation, followed by gas with 31.7 percent, coal at 18.3 percent, oil at 5.4 percent and small hydro and renewable making up 2.3 percent. New generation capacity between this year and 2015 will total 26,911 megawatts, of which coal will account for 14,370 MW, gas 2,970 MW, hydropower 7,605 MW and imported hydropower 635 MW, he said. Small hydropower plants and renewable sources will add 1,331 megawatts, bringing total generating capacity in the system to 48,497 MW. Ten northern provinces live on 1,000 MW of imported hydro power from China, which accounts for some 4.65 percent of the total.
In the face of chronic power cuts, the government decided this year to put the burden on the manufacturing sector instead of cutting residential electricity, which stirred public outcry last year. "We asked the production sector to cope with the power shortage this year. The impact has been big," said Khanh. Tomaso Andreatta, vice chair of the European Chamber of Commerce in Vietnam, called the situation an "energy emergency" and said it felt worse than a 3 percent shortfall. "If electricity producers are allowed to sell directly to customers instead of via EVN, lots of companies would like to pay more to have enough power," he said. EVN expects to make no profit this year with government-mandated power prices equalling production costs, Khanh said. Last year EVN reported a loss of 15 trillion dong.
Electricity producers facing difficulties in price negotiation with EVN
VietBiz24
The Electricity of Vietnam (EVN), the country's power group, is managing and operating about 51.3 percent of total power capacity of the whole system. Including the electricity sources in which EVN holds majority stake, the ratio will be 71 percent, according to data of Ministry of Industry and Trade.
Foreign and other private investors own and run only 10.4 percent. Remainder of the power capacity belongs to the giants including PetroVietnam, Vinacomin and Vietnam Industry Construction Group.
Industry experts opined that the EVN's monopoly has made the sales and purchase of electricity difficult. Vu Manh Hung, vice CEO of Vinacomin was quoted as saying that Vinacomin started to join development of power projects from 1998 with Hai Phong 1and 2, Quang Ninh 1 and 2...But, many projects were prolonged and lagged due to failure in price negotiation with EVN. Even, some plans that were to be operated still are under price negotiation, namely Song Dong and Cam Pha.
According to Nguyen Khac Son-General director of Pha Lai Thermal Power Joint Stock Co, his firm is one of lucky customers that has ben able to successfully sign electricity selling contract in four years with EVN at a price of 700 dong per kWh. The selling price is adjusted every month. When coal and oil prices increase, electricity price will be corrected as well.
The core reason of the difficulty in electricity price negotiation was that EVN wants to enjoy a certain profit to ensure its business cost. If purchase cost of electricity generating companies is high, EVN may suffer loss. He shared, "Enterprises have to negotiate a long term contract because EVN still will have to do cross-offset for various objectives, prices among member companies and external firms are different".
Not only electricity sellers as well as buyers with EVN are complaining due to insufficient electricity supply. Dao Huu Huyen, director of Duc Giang Chemical and Detergent Co (DGC) stressed, his company had to pay 15-30 billion dong a month to Lao Cai Power but several investment projects of DGC are struggling hardships because of electricity.
Vietnam's Electricity Law rules that producers must supply electricity sufficiently to construction works but the process has taken place slowly. He cited, phosphate 1 factory of his company has been lagged in 3 months. "We are going to start running turbine 2 of the factory in July but till now we have not have backup grid. Because of lacking a grid of electricity, all phases have to be suspended to wait for reply from electricity suppliers", he added.
DGC leaders are always nervous in every electricity price increase. Pursuant to the government's Decision 24, electricity price may be adjusted once 3 months but electricity selling and buying contracts cannot be signed for 3 months.
"Electricity suppliers want enterprises to share difficulties but when firms demand, the suppliers ignore", he emphasized. "Electricity companies and businesses need to negotiate without basing on price frame of 1,900 dong per kWh at rush-hours, and 1,200 dong/kWh at low-hours."
Electricity price ruled by the government has caused hardships for both sellers and buyers who are difficult in price negotiations because in fact, input costs are changing quickly. The prime minister was proposed to offer average electricity selling price and specific price will be made by seller and buyer, according to Duong Quang Thanh-Deputy general director of EVN said.
Race to meet power demands
VIR
Vietnam will build nearly 100 power plants to meet its soaring power demand by the end of 2020.
Electricity of Vietnam (EVN) said at the ongoing 2nd Vietnam Power Summit 2011, taking place on June 22-23, in response to critical energy security issues, Vietnam had commissioned more power projects to add electricity to the grid in the next few years and had rolled-out new initiatives toward liberalising the power sector with new independent power projects.
Over the next 10 years, Vietnam plans to build 95 power plants with an estimated investment of $39.58 billion, whose total capacity would be 49,044 megawatts, of which a large part of investment capital will be sourced from foreign investors. This will be aimed to meet the growth rate of 12 per cent per year in power demand by 2020.
At present, Vietnam has 38 power projects which are under construction, of which 26 belong to EVN.
EVN said it would need over $3 billion each year to invest into the plants and power grids.
It is expected that the country’s power consumption by 2015 will grow by 15 per cent, while the power supply will grow by 14.5 per cent.
Also by late 2015, Vietnam’s total power capacity will be 48,497MW.
With rapid industrialisation and economic growth, Vietnam’s power infrastructure is now incapable of meeting increasing demand for electricity.
At the seminar, key questions discussed at the event include challenges faced by independent power producers, investors and financiers in developing power projects in Vietnam, how to ensure financing and investment flows meet these challenges, and the changing expectations, issues and challenges of independent power producers and international financiers
The two-day networking summit brings together key Vietnamese regulators, local power players, international power producers, developers and operators, multilateral agencies, financiers, investors, legal experts and consultants.
The summit is organised by the Ministry of Foreign Affairs’ The World and Vietnam Newspaper and Euromoney Seminars, which is a division of Euromoney Institutional Investor PLC.
RESOURCES - Huge titanium processing complex proposed in Binh Thuan
The Saigon Times Daily
The Department of Geology and Minerals of Vietnam is seeking government approval for a 100-square-kilometer complex to tap titanium ores in the south-central coast province of Binh Thuan.
Tran Van Mien, head of the department's Geology Office, told the Daily on Tuesday that the ministry had discovered a titanium mine with reserves estimated at 540 million tonnes, which encompasses Ninh Thuan, Binh Thuan and Ba Ria-Vung Tau provinces. Most of the ores found are sparsely located in coastal areas in Binh Thuan.
"The department has suggested building the complex to extract and process up to 150 million tonnes of titanium ores," said Mien. "The remaining 300 million tonnes should be kept as a national reserve resource for the coming generations."
He said the appropriate exploitation and the complete processing of titanium would create a key economic development driver for the three provinces in the future.
Mien noted the region had in recent years attracted many investors committed to other industries than titanium but in fact they wanted to tap huge titanium ores. In some areas, haphazard titanium mining has spiralled out of control and caused damages to the economy and environment.
"If government approval is forthcoming, this will become the largest titanium complex in the country," he said. The project planned for development in Tuy Phong District will need huge capital.
According to environment experts, Vietnam has huge titanium potential. Titanium is a heat-resistant and uneroded agent suitable for the aeronautical industry and other industries.
The precious mineral, however, is hindering economic development in Binh Thuan Province because most of the areas found to contain titanium overlap many licensed industrial parks, resorts and wind mill projects in the province.
State management of fuel sector under the spotlight
VNS
Reporter spoke to Petrolimex deputy general director Vuong Thai Dung about recent increases in import duties on fuel products that were aimed at helping to stabilise the market.
What is your assessment of the situation surrounding oil and petrol? Does current State management of oil and petrol prices meet the expectations of enterprises?
Petrol and oil prices are not dependent purely on economies. They’re also dependent on politics. Insecure situations in Egypt and other places in Africa, for example, have directly impacted on oil and petrol prices. For this reason, it is difficult to anticipate oil and petrol prices.
In my opinion, prices must harmonise interests between the State, enterprises and consumers. Both the State and enterprises have compromised their interests to ensure consumer interests in recent years. Thus, when world prices decrease and local enterprises start making a profit, import duties and contributions to the petroleum price stabilisation fund should be raised in anticipation of world price fluctuations. In my opinion, the way the State has managed oil and petrol prices recently has been sensible.
Why is it sensible to raise import duties when fluctuating prices are hard to predict?
They are imported products and the imposition of import taxes is the interest of the State. However, import tax increases or decreases in the meantime have some drawbacks in the context of fluctuating market prices.
Oil and petrol prices are currently under State control and enterprises have no power over price adjustments. The latter are always on the defensive and suffer more losses than anyone if prices are not adjusted in a timely manner.
I think we should increase the petroleum price stabilisation fund while temporarily postponing the imposition of import taxes on kerosene and diesel oil until the market becomes relatively stable. Imposition of import taxes is one measure but it is not as optimal as increasing the petroleum price stabilisation fund. And last but not least, we should think of cutting down oil and petrol prices to consumers if conditions allow us to do so.
How have measures taken by the Ministry of Finance impacted enterprises?
As I already mentioned, the optimal measure is to increase the petroleum price stabilisation fund, then apply import taxes and reduce oil and petrol prices for consumers. However, the State recently raised import duties on some products while increasing contributions to the petroleum price stabilisation fund on others. In this case, I don’t think there has been much impact on enterprises.
You said recent solutions taken by the State to control oil and petrol prices are sensible in the present context. But on their part, consumers believe the way oil and petrol prices are adjusted is unsatisfactory because enterprises are quick to raise prices but slow to cut them. What do you think?
Enterprises have no alternative but to store oil and petrol for at least 30 days to satisfy demand. How could they sufficiently provide oil and petrol to consumers if they did otherwise? We cannot reduce prices when world oil and petrol prices decrease because we cannot throw old products out to buy new ones. It’s not to mention some smaller enterprises import a lot of oil and petrol when world prices reduce.
In my opinion, consumer complaints about quick price increases and slow price reductions are emotional. Enterprises are not allowed to adjust prices automatically. Under the current rulings, price rises may only occur every 20 days at a minimum. There is no limitation in time for price decrease.
Will Petrolimex reduce prices in the time to come?
I want to reiterate that we must import oil and petrol in advance while the State imposes different import taxes depending on world prices. We cannot say everything in advance. We all expect that it is possible to increase import taxes or reduce prices for consumers if world prices continue to fall.
Enterprises keep asking the State to increase prices as world oil and petrol prices soar. Do they automatically propose price reductions?
We have proposed price reductions several times and it is a matter of course that we did not inform everyone every time we increase or reduce oil and petrol prices because such information can have significant negative impacts on consumers. People will speculate on products if they know prices will go up. On the contrary, agents and distributors would not buy oil and petrol if they knew prices would reduce in the coming days which would force them to close their stations and impact customers.
Vietnam interested in oil exploration in Sri Lanka’s Mannar Basin
colombopage
The Vietnam Oil and Gas Group, trading as PetroVietnam has expressed interest in exploring oil in the Mannar Basin off the northwest coast of Sri Lanka.
Vietnamese Ambassador to Colombo, Tong Sin Thanh has said that the company which is wholly owned by the Vietnamese central government and has operations in 18 countries is prepared to join in oil exploration in Sri Lanka.
The Ambassador has also said that his country is ready to enhance bilateral relations not only in the oil and gas sector but also in the aviation and tourism fields.
Petrovietnam has been successful in oil and gas exploration and production overseas. At present, the company is investing in 23 oil and gas exploration and production projects all over the world.
Meanwhile, the Russian oil giant Gazprom has also shown interest in investing in the oil exploration in the Mannar Basin. Gazprom is to send a team of experts to Sri Lanka soon to further explore the possibility.
Mannar basin has eight oil and gas exploration blocks and two of them have been granted to China and India.
Sri Lanka has already allowed Cairn Lanka, a wholly owned subsidiary of the Indian oil giant Cairn India to commence drilling for oil in the Mannar Basin in August 2011.
PORPERTY – Agencies warn against FDI virtual capital in real estate projects
Vietnamnet
Experts have pointed out that while the registered foreign direct investment (FDI) in the real estate sector is relatively high, the implemented capital remains modest, which means a high proportion of “virtual capital”.
The statistics released by the Ministry of Planning and Investment (MPI) show satisfactory figures about the foreign direct investment (FDI) in the real estate sector, with seven billion dollars worth of newly registered capital by the end of 2010. However, no one can say for sure that how much of the registered capital will be disbursed in reality.
Many projects remain immovable
In early 2007, when the former Ha Tay province was going to be merged into Hanoi, people had the chance to witness the splendid work-starting ceremony of the residential quarter project, with investing by South Korean Booyoung Vietnam. The project was expected to have six 30-storey buildings with 5000 high grade apartments in the Mo Lao new urban area.
However, the construction site quickly became deserted just after a short time, and is now a vast land area overgrown with weeds. According to the Mo Lao Urban Area’s Management Board, the project has experienced five investment license adjustments over the last five years.
The 4.3 hectares of “clean” land (the site clearance has been completed and the land is now ready for construction) which has been allocated to Boonyoung Company remains a deserted area, which is really a big waste.
Similarly, the 207 hectares of “golden land”, located at a very advantageous position, programmed for the new West Lake urban area, remains a deserted area, which is now temporarily used for the scrap material ground.
Licensed in early 2006, the project has not made any progress so far, even though the project’s investor has good financial capability. The problem is that to date; only 80.9 hectares of clean land has been obtained. The problems in the policies and the weak capability of government agencies have caused the project’s delay.
Besides this, a series of other real estate projects in Hanoi have not been implemented over the last many years and are facing a revoked license. These include huge projects like the one registered by Trang Tien Trade Company which has the registered capital of over 10 million dollars, and the one by Hacom joint venture, capitalized at 12 million dollars.
According to the Hanoi Planning and Investment Department, by 2011, the city has attracted 94 foreign invested projects in the real estate sector with the total registered capital of five billion dollars. However, the implemented capital remains modest at 2.4 billion dollars, or just a half of the registered capital.
“The registered capital is high, while the disbursed capital remains low. The virtual capital has been increasingly high,” said a financial expert. He has pointed out that the problem will cause many bad consequences. Especially, this affects the investment environment and causes the natural resources waste.
Registered as foreign invested, implemented as domestic invested
Officials from the Hanoi Planning and Investment Department have also pointed that it has discovered some cases, where investors register as foreign invested projects, but in fact, the projects use domestic capital sources.
In fact, the foreign investors, who registered the projects, only brought small amounts of capital to Vietnam, while they planned to seek capital from domestic sources for the projects’ development.
“It is very risky to use domestic sourced capital for the foreign invested projects’ development. In case the projects meet difficulties, this will cause bad consequences to the society,” an official from the Hanoi Planning and Investment Department said.
“It is necessary to set up reasonable regulations to punish the violations in the real estate investment, especially in the projects on commercial accommodations,” he added.
The Ministry of Construction has sent a dispatch to the Ministry of Planning and Investment, requesting to check real estate projects and consider the measures in dealing with the projects that have been slow in the implementation.
To date, many mammoth real estate projects have been given “death certificates”, including Bai Bien Rong eco-tourism center in Quang Nam, which had the registered capital of 4.15 billion dollars, The Aj Vietstar in Ba Ria-Vung Tau, Ben Got urban area in Phu Tho, and Nam Tuy Hoa Creation City in Phu Yen province.
FINANCE - Interest rates, inflation set to fall: central bank
tuoitrenews
There are signs that interest rates are cooling, but the State Bank of Vietnam will deploy measures to control credit growth, its governor, Nguyen Van Giau, has said.
Speaking at a press conference in HCM City last week, he said the consumer price index (CPI) has edged down since May and is likely to hover around 1 percent in June.
He said there were indications that interest rates would fall soon.
Some rates that lead market rates, like that on government bonds, had fallen to less than 14 percent per year and the seven-day interbank rate to 14-15 percent, he said.
Many joint-stock banks have hit the credit growth ceiling of 20 percent and would no longer mobilise deposits at any cost like they used to, he said, adding this would also pull down lending rates.
He also took questions from the media.
You said that the central bank will control interest rates in line with inflation, which means they will decline when inflation cools. So what does the central bank plan to do now?
In general, when the CPI goes down, the central bank will... pull interest rates down. We cannot immediately change the policy or slash interest rates.
The central bank will stick to the target of stabilising the economy. So when inflation decreases, the interest rates will also reduce in a steady manner.
How does the 20 percent cap set on credit growth affect interest rates?
The 20 percent cap on credit growth is very helpful. At present, many commercial banks have almost hit the ceiling. There will be no banks wanting to mobilise funds at high rates since they cannot lend it to customers and firms.
When the banks have no channel for their funds, they will have to use it to buy bonds. But since they are close to the bond [purchase] limit in 2011, they will have to reduce deposit interest rates.
The credit growth did not seem balanced in the first five months of this year - it went up by only 7.05 percent against a cap of 20 percent. So will it peak in the next seven months?
At present, the very high loan interest rates have prevented individuals and firms from borrowing from banks. When the economy is stable, the interest rates will fall quickly.
A suitable rate for credit growth by the end of June is 8-8.5 percent, and it would worry me if the figure turns out to be higher. But the central bank will keep the growth under control.
Do you think commercial banks will manage to bring their loans outstanding below the 22 percent cap as required on June 30?
Currently, there are 23 banks with loans to non-productive sectors ranging from 22 to 50 percent, including 18 that range from 31 to 37 percent, and one with over 50 percent.
Those who fail to reduce their loans to non-manufacturing sectors to 22 percent by the end of this month and to 16 percent by year-end will have to double their compulsory reserves.
Loans to real estate are worth 222 trillion dong, down 5.5 percent since late 2010. The figure for HCM City is 95 trillion dong.
This is a good chance to eliminate speculators from the property market.
Dollar exchange to hold steady till end of the year: ANZ
StoxPlus
The US dollar-dong exchange rate is expected to hold steady to the end of this year, but ANZ bank anticipates a dong devaluation early next year.
According to the bank's report released today, government efforts to stabilise the foreign exchange market and restore confidence in the dong were having a positive effect.
The dong onshore trading rate has stabilised in the 20,550-20,650 dong per US dollar range in recent months.
In the offshore Non Deliverable Forward (NDF) market, the dong's implied 12-month discount has narrowed by 2.2 percentage points from its post-devaluation peak in February. The dong's one-month NDF discount has also stabilised around 1.0 per cent.
"The State Bank of Vietnam (SBV)'s more aggressive stance on inflation and changes in its FX policy are behind the recent stabilisation," ANZ's report said.
However, ANZ expects the dong to be devalued by 3-4 per cent in 2012 as inflation remains in double-digits. The dong's real effective exchange rate (REER) - a measure of its cost competitiveness - has appreciated by 5.6 per cent since March, which will adversely impact on the trade deficit and exacerbate Vietnam's already fragile balance of payments position.
Vietnam's inflation climbed to 19.8 per cent year-on-year in May, marking a 29 month-high.
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