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Oliver Massmann
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INVESTMENT – Time needed for FDI story's happy ending
VIR
A 27.1 percent on-year drop in foreign direct investment (FDI) registered in Vietnam in the first six months of 2011 has signaled the first downturn in the FDI inflows since 2008. Is this a matter of concern? Nguyen Mai, former vice chair of the State Committee for Cooperation and Investment (now the Ministry of Planning and Investment - MPI), argues that only a long-term approach to FDI can bring a true answer.
Latest figures provided by the MPI's Foreign Investment Agency (FIA) revealed that FDI committed in Vietnam dropped 27.1 percent on-year in 2011's first half to $6.66 billion, fulfilling just 30 percent of the $20 billion expected to be registered by foreign investors in Vietnam this year. The figure alarmed some analysts, noting this was the first time FDI inflows had seen such a downward movement since 2008.
However, an analysis into the FDI situation should take into account the fact that investments are a long term game. Typically, assuming procedural and other conditions are all convenient, it takes a medium-sized manufacturing project capitalised at $10-20 million up to three years for construction before starting operations. For larger projects, implementation time will even be longer. This is very different to trade activities, where traders have to base on weekly and monthly forecasts to make quick decisions to get the best deals.
Therefore, there should be a long-term approach to processing FDI figures in the first six months of the year to have more accurate assessements appropriate with the particular features of investment.
Looking back at investments registered in the first half of the year, only projects in the service sector, including finance, insurance and distribution businesses, can be expected to become operational in 2012, while it will take at least two years for small- and medium-sized projects to complete construction. Thus, registered and disbursed FDI figures during the first six months of 2011 are measures of different benchmarks to compare, because the capital realised during the period was part of the FDI committed two to three years ago. As the result, comparing the two figures can merely show the gap between the committed and registered FDI.
In 2008, registered FDI in Vietnam amounted to $73 billion, while the disbursed amount hit $12 billion, resulting in a difference of $61 billion. The two subsequent years saw an equal difference of $11 billion per annum and the gap narrowed to just $1.36 billion in the first half of 2011. The sudden rise in the gap seen in 2008 was ascribed to record FDI commitments, with several multi billion dollar property and steel manufacturing projects licensed that year, but subsequently revoked because they were not implemented.
The plummeting FDI commitments during the first half of 2011 signaled a negative sign if looking into the FDI movements of the last four years. Yet it is still too early to say such a sign will become a negative trend because, as discussed earlier, investments are for the long run. Therefore, a proper observation can only be made after a fact-founded base is created upon full information gathered this year, and even the next year, and on the scrutiny of the global FDI movements in connection with domestic economic situations.
Meanwhile, the $5.3 billion disbursement in the first six months of 2011, an approximate figure to 2010, was an encouraging sign. Given domestic investors have faced severe difficulties with many projects having to suspend or delay due to capital shortages, foreign-invested enterprises (FIEs) have turned out to be bright spots. FIEs accounted for 54 percent of the nation's total export earnings of $42.33 billion in the year's first half and attained the fastest growth rate in recent years. They have consequently turned into the driving engine of the economy which is under the pressures of high inflation and growth slowdown.
Still, considering the National Strategy on Socio-Economic Development 2011-2020 which aims at fast and sustainable economic development to turn Vietnam into an industrialised country by 2020 and gradually building a knowledge-based economy, FDI in Vietnam in 2011's first half was not drastically restructured towards focusing on high technologies and qualified human resources to produce higher efficiency, productivity and quality, as well as to develop a low-carbon economy.
In reality, FDI inflows in sectors in dire need of capital to accelerate industrialisation remain low, though they are prioritised by the government for FDI attraction with many preferential policies. For instance, FDI in science and technology development hit just $84.46 million in the first six months of the year, education and training $3.09 million and health care and social assistance $40 million.
Construction of thermoelectricity plants has been luring many foreign investors thanks to Vietnam's increasing price of commercialised electricity and ever-improved investment climate. However, there is too little FDI into the renewable and clean energy sector, with existing projects being implemented slowly, though Vietnam boast great potential in wind and solar power.
Technical infrastructure development is an important direction in FDI attraction. The government has already promulgated temporary regulations on public private partnership (PPP), which has yet to get good feed-back from foreign investors.
FDI in the year's first half focused mainly on small- and medium-sized enterprises, with the absence of many multi-national companies with large high-tech and modern service projects. Vietnam should also have seen an increase in Japanese investment thanks to the two countries' Comprehensive Partnership Agreement inked in 2010. However, Japan's recent earthquake, tsunami and nuclear disasters had brought big losses to this country's leading coporations. Thus, it would be difficult to witness an upsurge in Japanese FDI in Vietnam in the short term.
Another matter of concern is that FDI from the US and Europe remains unchanged, despite better political and economic relations between Vietnam and these two partners. In the year's first six months, Vietnam just attracted 13 small projects from the US with total registered capital of $19.39 million, seven projects ($329.75 million) from the UK and five projects ($34.52 million) from Germany.
These unsatisfactory results largely stemmed from those countries' internal economic problems. For the US, it is the economic growth slowdown. The Federal Reserve System (FED) recently said the US economic growth had reduced by 0.2 percent against April's forecast. For big economies in the EU, it is Greece's colossal public debt that can expand to some other countries. This has forced EU governments to join efforts with the International Monetary Fund to seek a remedy, which even entails large banks having to earmark preferential credits within the EU.
Besides, Vietnam's internal socio-economic and institutional situations are also among the main caused to the decreased FDI inflows.
It is impossible to change the country's FDI direction and attraction policy within only six months. But Vietnam's experiences in the 21st century's first dcade and the country's FDI picture in 2011's first half, as well as issues currently tabled for the country's new era, have required a need to revamp the FDI direction and attraction policy in a more high-quality and effective manner.
Notable issues in FDI attraction
The MPI has deployed scores of targeted programmes to strengthen Vietnam's investment environment, investment promotion activities and boost investment from transnational companies into technical infrastructure development, education and training, scientific research and high technology.
The undertaking of these programmes requires the following concerns to be addressed.
Firstly, up to late June, 2011, around $130 billion in FDI had remained undisbursed, with many billion-dollar projects being implemented slowly. Thus, licensed projects should be reviewed and unviable investments must be revoked. For example, on February 24, 2011, Phu Yen People's Committee proposed the revoke of United Arab Emirates-backed Sama Dubai Group's giant project including three sub-projects licensed in 2008 with total registered investment capital of nearly $1 billion.
Though such a review may result in the slash of half of the undisbursed FDI, Vietnam's FDI picture will become clearer and more realistic. At present, many industrial parks and economic zones are "thirsty" for investment projects as nearly half of their areas are unoccupied. This situation also needs to be solved. Industrial parks and economic zones forecasted not to receive more investors need to return farm land to farmers or change the purpose of land uses to shun land waste. Establishing new industrial parks and economic zones over the next one or two years should be carefully considered.
Secondly, according to the Provincial Competitiveness Index 2010 conducted by USAID and Vietnam Competitiveness Initiative (VNCI) over 1,155 FIEs which represented 21 percent of operational FIEs in Vietnam, "FIEs are of relatively small scale and low margins. They mainly act as sub-contractors for bigger multinational companies. Thus they often take on the lowest parts of products' value chain". Some 5 percent of FIEs operate in industries with modern technology, 5 percent in scientific and technological services, and 3.5 percent in financing and management which need high skills.
Though the survey outputs may be not fully comprehensive, they have helped policy makers better understand Vietnam's existing FIEs' operation, which fails to meet the government's demand for economic restructuring carved in the National Strategy for Socio-economic Development 2011- 2020. Thus, the government needs to make a clear message about improving FDI, via a new FDI attraction strategy with suitable methods in order to attract high-tech investors and generate more high added values.
High-tech and modern service FIEs' reality has shown that though tax and land rent preferences are necessary, they are not crucial factors. It is the high quality and skilled human resources, good traffic system, adequate energy supplies and information and stabilised macroeconomy that are crucial factors for FIEs.
Besides, the law must be transparent and enforced fairly, without discrimination between local and foreign invested enterprises in participating in public procurement contracts and bidding state financed projects. Also, the laws on Copyrights and Intellectual Property Rights must be stringently implemented.
Directing FDI to building a low-carbon economy necessitates proper policies based on systematic approaches not only to projects' cost-effectiveness, but also to taking into account long-term benefits regarding ecological environment sustaibability, limited fossil energy sources, greenhouse gas effect and marginal economic growth, in order to address the energy consumption concern in line with sustainable development.
To successfully shift FDI improvement policies, the most importance is to know potential investors' demand. Before deciding to plant their investments in Vietnam, transnational companies with high technologies and modern services require sufficient specific information frequently updated, such as the distance and transportation time from the project's location to airports and seaports, power supplies and quality, the number of electronic portals connected internationally, establishments training workers, engineers and managers, and localities' labour supply capacity.
Thus, any investment promotion activity must attach great importance to providing accurate and necessary information for potential investors, not generally explaining the law and investment environment. This is a shortcoming that needs to be addressed.
Thirdly, the USAID and VNCI reported that 66 percent of FIEs surveyed had plans to expand production over the next two years. This has been manifested in the year's first six months' additional FDI, which promises to continue rising in the future. Nearly 70 percent of FIEs said the potential market expansion possibility is the decisive factor. Still, 52 percent of FIEs said they considered possibilities in investing in another country, 30 percent selected China, 10 percent selected Thailand and 8 percent selected Cambodia. This shows that, to win in a FDI-luring race, local agencies need to systematically and timely collect updated feedback from FIEs currently operating in Vietnam to better tailor investment policies and improve macroeconomic management.
Though FIEs saw Vietnam's positive movements in investment and business climate since the country's accession to the World Trade Organisation in early 2007, they keep complaining about the discrimination between FIEs and locally-invested enterprises, the retardation in goods and commodities export and import, as well as "undertable money".
At the dialogue between HCM City's government and FIEs held on April 26, representatives from the American Chamber of Commerce in Vietnam said that FIEs not only had to pay high costs but also face time-consuming customs procedures. The head of the external affairs department under South Korea Chamber of Commerce and Industry in Vietnam lamented over the impossible access to the electronic customs system for many times.
The same feedback has also been mentioned in the surveys by USAID and VNCI. Vietnam's administrative reform remains underway. But more attention needs to be paid to enterprises' feedback, including FDI and information from models with success stories in administrative reform, implementation of one-door policy and electronic customs, so that these stories can be multiplied nationwide. Heads of state agencies must be accountable to the people and enterprises for applying models already implemented successfully.
Vietnam has just become a middle-income country, a laudable achievement amid the country's strong international integration. But it also requires multi-faceted changes in policy, mechanism and direction, including a change in FDI attraction policy to ameliorate the development quality and lure new FDI generations, while encouraging FIEs contribute more to implementing the National Strategy for Socio-economic Development 2011-2020.
MERGERS AND ACQUISITIONS - Japan's Mizuho nears Vietnam's largest ever inbound deal
Reuters
Japan's Mizuho Corporate Bank is expected to buy an up to 20 percent stake in Vietcombank, sources familiar with the matter told Reuters, in a deal worth more than $500 million, marking Vietnam's largest-ever inbound acquisition.
Foreign investment in Vietnam has seen an uptick of deals, with multi-national corporations, private equity and hedge funds scooping up stakes in companies, eyeing low valuations and high growth, despite a long list of risks.
Mizuho and its Japanese rivals including Mitsubishi UFJ Financial Group have been stepping up overseas expansion to seek growth beyond their home markets.
Two sources familiar with the matter confirmed that Mizuho was the chosen buyer and confirmed the size of the stake, though they did not confirm the purchase price. Twenty percent of the bank at its current market capitalisation is worth $520 million, excluding a deal premium. Another source familiar with the matter said on Wednesday that Mizuho would pay around 60 billion yen ($760 million).
The deal, expected to announced by the end of the month, comes three months after Kohlberg Kravis Roberts & Co. signed Vietnam's largest ever private equity deal with a $159 million stake in Masan Consumer Group.
At $520 million or more, the deal would mark Vietnam's largest-ever inbound acquisition from a foreign company, according to Thomson Reuters. Mizuho, a unit of Mizuho Financial Group, and Vietcom declined to comment.
The government of Vietnam launched the auction this spring and invited first round bids by late May, sources previously told Reuters. The process was expected to attract private equity firms as well, sources said at the time.
Foreign investors seeking to buy 15 percent or more of a state-owned bank must have total assets of at least $20 billion in the year before the purchase, Vietnam's central bank said earlier this year. Foreign ownership can be increased to 20 percent with government approval.
Mizuho's total assets stand at 160 trillion yen ($2 trillion) as of the end of March.
The government owns 90.7 percent of Hanoi-based Vietcombank, or Joint Stock Commercial Bank for Foreign Trade of Vietnam, the nation's second-biggest partly private bank by assets.
Credit Suisse was the bank assigned to lead the Vietcombank stake auction. Credit Suisse also advised KKR in its Masan purchase. The bank declined to comment on Wednesday.
FOREIGN INTEREST
An investment into Vietnam gives Mizuho access to an economy poised to grow at 7-7.5 percent in the next five years and a mainly young population of more than 80 million.
Over the past decade, Vietnam has emerged from the hangover of war to play a central role on Asia's factory floor, producing everything from footware to computer parts.
While an underdeveloped consumer market and strong growth has attracted foreign interest over the years, heavy currency, political and economic risks have also turned investors away. Compared to other developing countries in Asia, inbound deal volumes into Vietnam are low.
Mizuho's stake in Vietcom bank alone would make up roughly one-third of Vietnam's total M&A volume last year.
In addition to KKR, British spirits group Diageo plc and investment fund Mount Kellett Capital invested in Vietnamese companies this year.
HSBC Holdings Plc, Malayan Banking Bhd (Maybank) and Societe generale each own 20 percent in a Vietnamese bank.
Several banks deals in Asia have fallen over on price differences, with sellers asking in excess of 3 times price to book, according to bankers involved with the deals and analysts. Vietcombank had a price to book value of 2.55 at the end March.
In an interview with Reuters earlier this year, Mizuho Corporate Bank CEO Yasuhiro Sato, who also became CEO of Mizuho Financial Group in June, said his bank plans to extend into Myanmar, Laos and Bangladesh as part of its Asia push. `
But Japanese banks face a challenge to quickly establish themselves in the broader Asia market against foreign lenders such as HSBC and Standard Chartered.
DISTRIBUTION - FIEs gather strength to distribution instead of manufacturing
VietnamBusinessAsia
It is a growing tendency that foreign invested enterprises (FIEs) have been shifting from manufacturing products to distributing imports on the domestic market, since the import tariffs have been lowered.
The tariff cuts made by Vietnam under the WTO commitments have clearly encouraged FIEs to import products to sell domestically instead of injecting money and spending time on production factories in Vietnam.
Dao Ngoc Hoang Giang, General Director of Sao Mai Office Equipment Company, a subsidiary of Sao Mai Group, said that it was foreseeable that FIEs, which have manufacturing factories in Vietnam, would push up the import of products under the form of complete built units (CBU) and the distribution of their parent groups’ products, made in the home countries or third countries
Mochizuki Kentaro, President of Sanyo HA Asean Corporation, said that previously, when importing household articles, importers were imposed the tax rate of 50 percent. The import tariff was later lowered to 20 percent has been slashed to five percent.
He said the low import tariffs would encourage investors to import products instead of making products in Vietnam. However, Sanyo still maintains the production of refrigerators and washing machines in Vietnam, because the consumption of the products in the domestic market is stable. Besides, Sanyo still receives the orders to make products for export to Japan, countries in the Middle East and ASEAN countries.
Sanyo plans to sell 460,000 washing machines in 2011, an increase of 100,000 products than in the previous year, through domestic distributors.
As for Sony Vietnam, the company has been determined to increase the sales after ending up the joint venture with Vietnamese Vietronics Tan Binh in late 2010.
According to Yuzo Otsuki, General Director of Sony Electronics Vietnam, the business has been going well. Sony has not thought of setting up factories in Vietnam, but it plans to strengthen trade in Vietnam in the immediate time.
In 2010, Bravia brand imported TVs alone made up 60 percent to Sony’s growth. At a new product launching ceremony held recently in HCM City, a representative of Sony Vietnam said Sony is moving ahead with the plan to expand its market share by establishing new retail centers in Hanoi and other big cities, where Sony’s import products will be on sale.
Other foreign manufacturers have also been hurrying to expand their distribution networks in Vietnam. According to the HCM City Planning and Investment Department, FIEs have been taking necessary steps to fulfill their plans.
Samsung Vina, for example, has followed necessary formalities to implement the right for distribution. Michelin Vietnam has also made similar moves.
Commenting about the activities of foreign household goods, electronics and office equipment companies in Vietnam, Dao Hoang Ngoc Giang said that many investors have obtained the licenses to wholesale, and to retail products. Fuji Xerox, the Japanese printer manufacturer, and Sharp Vietnam are the two examples.
“The market has become stiff with the participation of the companies which can act as manufacturers, importers and distributors,” Giang said.
In fact, foreign companies have to bear some limitations in distribution. They can only sell products to the clients who have tax codes, i.e private businesses and individual consumers, not the public administration sector. Nevertheless, analysts believe that they still can expand the market by cooperating with domestic distributors.
Foreign companies which are licensed to distribute products would directly contact the foreign invested enterprises operating in Vietnam, mostly in big cities such as HCM City, Hanoi, Hai Phong, Da Nang, Binh Duong and Long An. Meanwhile, they would reach out to farther localities by using sales agents.
Vietnam's trade deficit estimated at $200m in July
GSO
In July, 2011, Vietnam's export turnover was estimated to reach $8.4 billion while the import value was $8.6 billion, falling $60 million and $20 million from the previous month respectively, General Statistical Office (GSO) reported.
Thus, the country's trade deficit in July was $200 million, 25 percent higher than that of June.
Notably, in the month, exports of precious gemstone and metals gained $800 million after a strong export of $806 million in previous month.
Therefore, the country's export turnover for gemstone and metals in June and July reached some $1.6 billion, or 80 percent of the total export turnover in Jan-July
Apparel products continued to be Vietnam's key export item in the month with an export turnover of $1.3 billion, marking the single item gaining export turnover of over $1 billion in July.
Some major import commodities in July were fibre ($600 million), iron and steel ($520 million), and petrol ($770 million, down 5.7 percent month on month).
Totally in Jan-Jul, the country's export turnover reached $51.5 billion, up 33.5 percent from the same period last year and the country's import spending was $58.1 billion, up 26.2 percent year-on-year.
Thus, Vietnam's trade gap in Jan-July was posted at $6.64 billion.
ECONOMY - HCM CPI quickens 1.07pct in July 2011
Stoxplus
HCM City's Consumer Price Index (CPI) quickens to 1.07 percent in July compared to 0.69 percent in June, and rose 17.89 percent on year, the city's general Statistical Office (GSO) said.
Ho Chi Minh city consumer price index (CPI) is estimated to have increased by 1.07 percent in July and rose 17.89 percent against July 2010, driven by soaring prices of food and restaurant services, the Ho Chi Minh city Statistics Office said.
In July, 10 out of 11 baskets of commodities comprising the index saw the price hike except for prices of post and telecom services fell 0.01 percent.
The biggest price hikes in the month were seen in food and restaurant service group of which food prices rose 0.35 percent in the month and the foodstuffs advanced 1.92 percent.
Prices of other staples saw mild rises including garment and footwear staples, housing, utilities, fuel, construction materials, household utensils and appliances, medicine and healthcare services, transport, tourism and recreation services.
The July figure sent the index up 12.73 percent from December 2010 and on average, CPI rose 13.36 percent in the first seven months of the year. In Vietnam, inflation target is based on the average CPI increase.
In July, gold prices advanced by 0.85 percent on-month, 34.1 percent on year while those of US dollars fell by 0.03 percent on-month but up 8.01 percent on year.
Vietnam raised inflation target to 17 percent in 2011.
ENERGY - Wind power investors tangled by mineral exploitation rules
VIR
Vietnam’s wind power capacity is significantly potential, but its growth rate is deferred by many difficulties.
Many wind power projects in the central province of Binh Thuan have been deferred or canceled since the sites of the proposed wind turbines are also rich in titanium.
Grant of wind power project permit are set to be halted until the evaluation of the mineral deposit conducted by the Ministry of Natural Resources and Environment (MNRE) finishes, said the local authorities.
Binh Thuan province is expected to be Vietnam’s biggest wind power supplier, with 12 wind power projects having received investment permits. Their output will total around 1,500 megawatts.
Wind power investors at the neighboring province of Ninh Thuan are also struggling with permit issue.
“Wind power construction projects are usually set to be located at the coastal areas, where many households are living at. And it will cost a lot of time and money for relocation,” said director Nguyen Thanh Hoan of the province’s Department of Industry and Trade.
Figures from the Ministry of Industry and Trade show 21 wind power projects with the output of 30 megawatts have been conducted in Vietnam.
“The government approved to subsidise large wind power projects by some foreign investors, which were submitted in the last couple years. But they have not been carried out,” said director Tran Khang Thuy of Economic Science Research Centre.
Nearly 9 per cent of Vietnam’s area is appropriate for conducting wind power projects with an expected capacity of over 513,000 megawatts, according to the World Bank.
A decision approved by the Prime Minister on June 29 requires the country’s power monopoly Electricity of Vietnam (EVN) to buy all the power output of wind power projects at VND1,614 (7.8 US cents) per kilowatthour.
EVN will receive a subsidy of VND207 (around 1 UScent) for every kWh of wind power it buys via Vietnam Environment Protection Fund.
Under the decision, the wind power bought by EVN would remain VND388 (1.5 cents) per kilowatthour more expensive than the current market price for electricity.
Wind power projects in Vietnam so far have been hindered by the wide gap between wind power costs ($12.5 cents/kWh) and the market power price which is around 5.9 cents/kWh, according to estimates by the Ministry of Industry and Trade.
EVN has so far bought wind power at 6cents/kWh from Vietnam’s first and only wind power plant in the south central province of Binh Thuan, invested by Vietnam Renewable Energy JSC.
As of February this year, the plant, which joined the national power network last year, had put 12 wind turbines into operation, generating around 19 megawatts.
ENERGY - Energy giants to move with economy
VIR
Two state-owned energy giants remain upbeat despite having to curtail investment under government orders.
PetroVietnam and Electricity of Vietnam (EVN), which account for half of state-run groups and corporations’ total investment capital needed to be pared down in 2011 under the government’s Resolution 11, said they were upbeat despite being forced to trim most investment capital in response to the government’s bid to curb high inflation and stabilise the macroeconomy.
PetroVietnam’s general director Phung Dinh Thuc said PetroVientam would screw down many of its various projects worth VND7.25 trillion ($362 million) during 2011.
Those included one project worth VND10 billion ($500,000) in the gas industry, three oil and gas projects (VND83 billion-$4.15 million), 12 service and construction projects (VND703 billion-$35.15 million). PetroVietnam would also re-schedule four oil and gas projects, two electricity projects, 28 service projects and many other projects.
“The cut will not affect PetroVietnam’s business performance. We are quite optimistic about the performance,” Thuc said.
The group was also implementing a series of offshore gas projects to raise the group’s gas supplies to 15 billion cubic metres by 2015 from the expected 8.5 billion cubic metres this year.
PetroVietnam’s deputy general director Vu Quang Nam reported that the group would by the year’s end have exploited 15 million tonnes of crude oil, produced 770,000 tonnes of urea fertiliser, 12.51 billion kWh of power and 5.6 million tonnes of assort gasoline and oil. PetroVietnam’s total revenue would be $11.95 billion, up 45 per cent against last year’s.
Meanwhile, EVN and its subsidiaries have decided to cancel and re-schedule this year the construction of nearly 300 projects with total investment of VND12.6 billion ($628 million), down 15 per cent against the initial plan, in response to Resolution 11.
“EVN’s move will not affect the country’s power supply or investment into key constructions,” said a EVN release.
EVN reported that in the year’s first half, EVN commissioned six turbines of five power projects whose total capacity is 1,085 megawatt. Some 1,700MW was also added to the country’s power system and 56 power grids ranging from 110 to 500KV were also completed.
According to the Ministry of Planning and Investment (MPI), state-run groups and corporations’ investment forced to be truncated in 2011 totals over 39.21 trillion ($1.96 billion) for 907 projects.
MPI Minister Vo Hong Phuc said the cut would contribute to trimming the government’s investment from the initially-set 40 per cent of gross domestic product (GDP) to below 38 per cent of GDP in 2011.
WIND ENERGY - Greta to prove project not just load of hot air
VIR
Over the next three months, if Greta does nothing for the project, the project’s licence will be revoked
South central Ninh Thuan province has given an ultimatum to a Canadian firm’s delayed $74.4 million wind power project.
The provincial Department of Planning and Investment’s Economic Development Office (EDO) has just sent a document to Greta Energy Inc requesting it to boost the implementation of the 66 megawatt, 900 hectare project, which was granted an investment certificate in May, 2007.
“Over the next three months, if Greta does nothing, the project’s licence will be revoked,” an EDO source said.
“We have many times urged Greta to accelerate this project. However, nothing has been done since 2007. We cannot wait for it any longer as there are many other energy investors wanting to covet sites like this project [has],” the source said.
The project was expected to be the first of the kind in Ninh Thuan, which would help lure similar projects and contribute to ensuring the country’s national security.
Under Greta’s commitment, the 50-year project in Thuan Bac district, would complete its site survey procedures and install wind measuring stations in June, 2007. Construction of the project and equipment installation would begin in August and December, 2008 and the whole project would become operational in April, 2009.
According to EDO, any slowly-implemented projects based in the province would be examined and might face the same fate as the Greta project.
The provincial authorities have also sent documents as ultimatums to owners of four locally-owned delayed projects, Hung Gia Anh Company Limited’s Gas Extraction and Charge Station project in Ninh Son district and projects to build Hon Do Luxury Convalescence Tourism Area and Phuoc Hai wind power plant. If these projects failed to be implemented over the next three months, their licences would be revoked.
Ninh Thuan, 350 kilometres north of Ho Chi Minh City, is considered having the biggest potential for solar and wind power development in Vietnam. The EDO source said since early this year, there had been many foreign investors wanting to plant large-scale energy projects here.
“Land areas for energy projects in the province are few now. Thus, we have to select investors,” the source said.
He said Argentina-based Impsa Group recently got the nod in principle from the provincial authorities to make a wind power project site survey and pre-feasibility study report with expected total registered investment capital of $200 million.
Being a global company that provides integrated solutions for power generation from renewable resources, Impsa also wished to plant a grape-based wine producing project in the province.
In March this year, Belgium-based Enfinity, one of the world’s largest renewable power developers, received an investment certificate to build a $251 million wind farm in Ninh Thuan.
According to EDO, Enfinity would develop a 553ha wind power farm in Thuan Nam and Ninh Phuoc districts. The project would have total capacity of around 124.5MW.
It is Enfinity’s first power project in Vietnam and one of the largest wind power projects in the country.
Quang Binh launches Quang Trach Thermal Power Plant 1
VOV
The Quang Trach Thermal Power Plant 1 was launched by the Vietnam National Oil and Gas Group (VPN) and the Quang Binh provincial People’s Committee on July 19.
The thermal power plant will be built over 2 years with a total invested capital of more than VND33 trillion
It will have a capacity of 1,200 MW, capable of generating 8.4 billion KW/hours per year.
The plant’s first generator will be put into operation in June 2015.
Addressing the launching ceremony, Deputy Prime Minister Hoang Trung Hai said the Ministry of Industry and Trade (MoIT) should coordinate closely with the major investor and contractor to ensure the efficient progress of the project.
RESOURCES – Petrovietnam ties with Vietnam military firm on ammonia project
Reuters
State oil and gas group Petrovietnam will establish a venture with a military firm under the defence ministry to produce ammonia that is expected to use natural gas from the disputed South China Sea as feedstock.
The venture, 60% owned by Petrovietnam and 40% by the Hanoi-based General Army of Economic and Technology (Gaet), aims to produce 450,000 tonnes of ammonia a year and also 200,000 tonnes of ammonium nitrite using natural gas, Petrovietnam said in a statement on Thursday.
It did not detail the gas supply but Petrovietnam has been taking natural gas and crude oil from offshore fields in the Cuu Long and Nam Con Son basins of the South China Sea. Ammonium nitrite and ammonia are used in fertiliser production.
“Without help from the Defence Ministry’s forces it is tough for Petrovietnam to conduct exploration and search activities under the circumstance that the East Sea (South China Sea)situation is extremely complicated,” Petrovietnam Chairman Dinh La Thang was quoted as saying at a signing ceremony on Wednesday.
Vietnam and China have had territorial disputes over patches of the South China Sea since late May, including an incident involving Chinese patrol boats cutting a submerge cable used by a Petrovietnam survey vessel mapping in Vietnamese-claimed waters.
China, the Philippines, Malaysia, Brunei, Vietnam and Taiwan all claim territory in the South China Sea. China’s claim is the largest, forming a vast U-shape over most of the sea’s 648,000 square miles (1.7 million square km), including the Spratly and Paracel archipelagos.
China and Southeast Asian countries including Vietnam agreed on Wednesday to a preliminary set of guidelines in the South China Sea dispute, the Chinese side said, a rare sign of cooperation in a row that has plagued relations in the region for years.
Petrovietnam has also been working with the navy to build several projects at the Cam Ranh port, previously a U.S. navy base during the Vietnam War era, Thang said.
The group also worked closely with the Defence Ministry to install wind-power and solar power projects on the Spratlys as well as upgrading oil rigs in the South China Sea, Deputy Defence Minister Le Huu Duc said in the statement.
Petrovietnam did not say when the gas-fired plant run by its venture with military firm Gaet will start operations.
Gas is becoming an increasingly important power generation fuel in Vietnam. Natural gas has helped produce 36 billion kilowatt hours of electricity a year, or 40% of the national output and 100,000 tonnes of gasoline annually or 5% of domestic output, industry officials say.
Vietnam is projected to produce 14 billion cubic metres of gas annually by 2015, up 40% from last year, and will step up buying of liquefied natural gas by late 2013, a state-run newspaper reported earlier this month.
GAS - Honeywell wins $3 million assignment to automate offshore gas platforms in Vietnam
VIR
Honeywell (NYSE:HON) announced that it has been engaged by PetroVietnam Technical Services Corporation (PTSC) and the Bien Dong Petroleum Operating Company (BDPOC) to supply an integrated process control system for their new central processing platform currently under construction in Vietnam southern.
When fully operational by the end of 2012, the platform is expected to contribute significantly to meet Vietnam’s increased gas demands by providing two billion cubic meters of gasoline each year and up to 20,000 barrels of condensate daily. BDPOC is a subsidiary of state-run Vietnam Oil and Gas Group (PetroVietnam).
Honeywell Process Solutions (HPS) will implement its award-winning Experion® Process Knowledge System (PKS) with C300 Controller and Foundation Fieldbus capabilities to fully automate the facility.
Safety Manager will also be installed to improve process-safeguarding protocols, such as emergency shutdowns, fire and gas monitoring, and critical application control. By increasing efficiency and reducing downtime, the platform should be able to reach its optimal production volumes.
“In looking for the best automation system, we knew it was important to look not just at cost-effectiveness, but also the best technology that can survive a really tough environment where it is literally exposed to the elements,” said Phan Thanh Tung, PTSC MC director.
“HPS’ solution offered us the perfect partnership of economy and reliability while positioning us favorably for future expansion and development efforts because we’ll be building on excellence.”
“Given Vietnam’s rising gas demand, the country’s oil producers appreciate the importance of enhanced energy efficiency,” said Kelvin Tam, sales manager, Honeywell Process Solutions.
“Using HPS’ technology, BDPOC’s gasoline production and storage capacities can be improved and at the same time they should save quite a bit on maintenance costs.”
OIL - Nghi Son refinery getting breathing space
VIR
The $6.2 billion Nghi Son petroleum refinery last week received a two-month extension to negotiate a key contract.
Previously, refinery investor PetroVietnam risked being forced to reopen the engineering, procurement and construction (EPC) contract if a winning bidder could not be found before July 12.
PetroVietnam general director Phung Dinh Thuc said negotiations had taken longer than expected, because it was the biggest EPC contract to be negotiated in Vietnam’s petroleum industry.
Thuc strongly emphasised the participation of Kuwait Petroleum International, as Kuwait would provide crude oil to the refinery.
Thuc said PetroVietnam and proposed partners were parallel asking for Vietnamese government guarantee and negotiating with capital investment donors.
Thuc hoped that the refinery could start construction within 2011’s third quarter.
PetroVietnam initially planned to sign off on the EPC contract in the second quarter of this year, but failed to find a suitable partner.
It is now conducting negotiations with a consortium led by Japanese JGC Corporation, Japanese Chiyoda Corporation, French Technip SA, Korean SK Engineering and GS Engineering.
The major factor hindering the outcome was that partners were still waiting for more favourable conditions from the government, according to industry experts.
Thanh Hoa province’s $6.2 billion Nghi Son refinery will be Vietnam’s second refinery and the first with involvement of foreign partners. It is expected to go live in 2014.
PetroVietnam holds a 25.1 per cent stake in the project, while Kuwait Petroleum International has 35.1 per cent, Japan’s Idemitsu Kosan 35.1 per cent interest and Mitsui Chemicals 4.7 per cent.
When finished, the project will have a design capacity of 10 million tonnes of crude oil a year, or 200,000 barrels a day, 1.5 times more than the capacity of the existing Dung Quat oil refinery.
TNK-BP upbeat on inking long-awaited BP deal
VIR
The other assets, Nam Con Son Pipeline and the Phu My 3 Power Plant [where TNK-BP will not be perator] will be transferred shortly.
TNK-BP Management Company is close to inking a deal to buy BP’s assets in Vietnam.
Russia-based TNK-BP spokesman Thomas Kiehn told VIR that the deal was close to be sealed and was only waiting for the Vietnamese government’s final approval.
TNK-BP moved for BP in July last year, after the British firm decided to dissolve some of its global assets following the disastrous Gulf of Mexico oil spill in the southern United States in April 2010.
“The key asset of the deal is offshore gas Block 06.1. This is a major asset and TNK-BP will be the operator in this joint venture with PetroVietnam and India’s Oil and Natural Gas Corporation Videsh. The other assets, Nam Con Son Pipeline and the Phu My 3 Power Plant [where TNK-BP will not be operator] will be transferred shortly after the Block 06.1 approval is received,” Kiehn said.
“We anticipate that we will have a licence awarding ceremony in early August,” he added.
TNK-BP is a joint venture between BP and Russia companies.
BP’s asset which were due to be transfered to TNK-BP were upstream assets, stakes in gas production, pipeline and power station interest, with total cost of $1.8 billion. Those include Lan Tay-Lan Do gas field in block 06.1 offshore Vietnam, Nam Con Son pipeline system and Phu My 3 Power plant in Ba Ria-Vung Tau province. It was reported previously that India ONGC, Singapore’s Sinopec, Thailand’s PTTEP and Kuwait Foreign Petroleum Exploration Company (Kufpec) expressed interest in this sale.
PetroVietnam, the host partner in the BP’s joint venture, was given pre-emption rights to buy the stake first, however it refused, blaming that the price was not “proper”.
TNK-BP is Russia’s third largest oil company, formed in 2003 with 50 per cent stakes held by BP and the other 50 per cent held by the AAR Consortium (consisting of Alfa Group, Access Industries and Renova).
TNK-BP also owns close to 50 per cent of another Russian oil and gas company, Slavneft. TNK-BP accounts for approximately 16 per cent of Russia’s production.
MINING – Vietnam aims to start alumina production in September
Reuters
Vietnam will produce the first alumina from a bauxite complex in the Central Highlands in September after months of delays caused by adverse weather, power shortages and slow equipment delivery, the official Vietnam News Agency reported on Wednesday.
The country’s first alumina plant in Lam Dong province is now due to get its first product on Sept. 20, the report said, quoting Tran Duong Le, deputy director of the complex’s management board.
Last October officials said the US$460 million Tan Rai alumina plant, invested by state mining group Vinacomin, would start operations in February 2011 and being exporting in March.
“Construction progress has been far behind initial plans because of unfavorable weather with much rain, prolonged power shortages, a lack of labor and slow procedures for importing equipment,” Le said in the report.
The Tan Rai refinery is slated to produce 600,000 tonnes a year of alumina, a white powder made from bauxite ore for producing aluminium.
Construction, equipment installation and test-runs have almost been completed in connection with a thermal power plant that serves the complex, the report said.
Vinacomin, or the Vietnam National Coal and Mineral Industries Group, has also been developing the Nhan Co project in Lam Dong’s neighboring Province of Dak Nong, with projected initial output of 600,000 tonnes of alumina.
The bauxite works have triggered rare public criticism over potential environmental damage and Chinese involvement, but Prime Minister Nguyen Tan Dung has stood by the projects, saying they would pave the way for an aluminium industry in Vietnam.
Vinacomin has awarded the engineering, procurement and construction contract for both the complexes in Lam Dong and Dak Nong to China Aluminum International Engineering Co (Chalieco).
Chalieco is a subsidiary of state-owned Aluminum Corp of China, or Chinalco, the country’s top aluminium producer.
Vietnam’s mostly untouched bauxite ore reserves are estimated at between 5.6 billion and 8.3 billion tonnes, making it the world’s third-largest after Guinea and Australia.
Lam Dong alone has more than 1 billion tonnes, provincial authorities have said.
Vinacomin planned to start operating the Nhan Co complex in Dak Nong in 2012, Deputy Chief Executive Bui Van Khich was quoted as saying by the Saigon Times Online newspaper (www.thesaigontimes.vn) in April.
Vinacomin has also started a two-year exploration of the bauxite reserves in Cambodia’s eastern province of Mondulkiri bordering Dak Nong, the report said.
Lam Dong and Dak Nong are among Vietnam’s biggest coffee growing provinces but the bauxite mining areas would not hurt coffee trees, traders said. Vietnam is the world’s second-largest coffee producer after Brazil.
Ha Giang mineral firm gains 84b dong profit in H1
HGM
Ha Giang Mineral JSC (HGM) said it will advance 50 percent dividend in cash for the first phase of 2011.
On July 19, HGM's director board announced the business results in the first six months of this year with 98.52 billion dong revenue, or 82.1 percent of the year's plan.
Its pre-tax profit was 84 billion dong, surpassing 20 percent of the year's target.
Antimon metal output reached 365.9 tonnes, or 52.2 percent of the year's plan.
In the second half of this year, the company expects to produce minimum 350 tonnes of Antimon metal.
The company will spend 30 billion dong to advance 50 percent dividend in cash for the first phase of 2011. Currently, HGM has a chartered capital of 60 billion dong.
Being traded at 93,000 dong per share, HGM-coded share now has the highest market price on Hanoi Stock Exchange (HNX).
INFRASTRUCTURE - Bus system key to traffic problem
VNS
HCM CITY — Metros and sky trains in big cities like Ha Noi and HCM City can only play supplementary roles, an efficient bus rapid transit system is the real key to getting out of the current traffic quagmires they are trapped in, an expert says.
Pham Xuan Mai, head of the Automobile Technology faculty at the HCM City University of Technology (HCMUT), said for many reasons, the city has been slow in starting the construction of these projects.
Six metro lines and 10 monorail routes were planned to be built in HCM City, but they remained at the planning stage and a search was on for investors, the Sai Gon Giai Phong (Liberated Sai Gon) newspaper reported recently.
HCM City and Ha Noi are expected to have up to five metro and monorai lines each over the next 10 years, but these would only meet up to eight per cent of the transport demand, Mai said.
To have a public transport system that would be able to meet to more than 40 per cent of the demand by 2020, it is neccessary to develop the bus system in major cities, he added.
The Bus Rapid Transit (BRT) system should be the focus of public transportation planning and execution, according to Mai, because it has the advantages of transporting as many people as metro and monorail trains while costing much less, taking less time to build and requiring less ground clearance.
If a BRT system is implemented well, at elast another 10 per cent of the transport demand would be met in the five years, attracting more people to use public transportation and decreasing the large number of private vehicles, Mai told the Sai Gon Giai Phong.
Many seminars and conferences have been held in the past 10 years to find solutions to the trafifc problems that plague both major cities in Viet Nam.
These events have come up with many suggestions including restricting the number of motorbikes and cars, levying tolls, increasing registration fees, removing hospitals and schools to ease traffic congestion and so on. Almost all these suggested measures have remained on paper.
"The booming of motorbikes is the main cause of the traffic jam," said Mai.
Motorbikes play a major roe in causing a large number of road accidents, which is increasing this year, the HCMUT professor said.
Around 100 new cars and 1,300 motorcycles are added to the city's traffic everyday.
Meanwhile, architect Ngo Viet Son Nam said that the city's urban development planning approach should change, basing it on the public transportation framework. This approach has fostered sustainable development in many cities around the world, he told Sai Gon Giai Phong.
"This is, however, not yet done in Viet Nam as the public transportation system has been always done after, not synchronously with urban planning," he said.
The architect suggested that the city completes key traffic sections as soon as possible and puts them into operation. Then it should, gradually perfect local traffic systems before connecting them, Son said. He also said that priority should be given to developing the public transportation system, focusing on high-capacity vehicles.
Other experts cited in the report said co-operation between relevant ministries and sectors and a clear plan for implementation are important factors in realising public transportation goals.
The felt in addressing any traffic problem, authorities should clearly state a time frame within ehich it would be dealt with, instead of being ambiguous and noncommittal.
ENERGY EFFICIENCY - Better public transit could save energy
VNS
HCM City could save as much as 30 per cent of the energy it spends on transportation if it develops an efficient public transport system, a conference on energy saving heard yesterday.
With its public transport inefficient, people prefer private vehicles to buses, sending fuel consumption soaring as the number of private motorbikes and automobiles increases relentlessly.
The city of 10 million now have more than five million motorbikes and 500,000 cars and the numbers are expected to continue to skyrocket.
Figures from customs show that last year nearly five million tonnes of fuel were consumed for transportation, up from less than four million tonnes just three years earlier.
The city's Department of Transport admits that public transport can meet only 6 per cent of demand.
An official from the department, who spoke at the seminar, said thus there was a potential to reduce energy use by 30 per cent.
Huynh Kim Tuoc, head of HCM City Energy Conservation Centre, said: "A person who cho
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INVESTMENT – Time needed for FDI story's happy ending
VIR
A 27.1 percent on-year drop in foreign direct investment (FDI) registered in Vietnam in the first six months of 2011 has signaled the first downturn in the FDI inflows since 2008. Is this a matter of concern? Nguyen Mai, former vice chair of the State Committee for Cooperation and Investment (now the Ministry of Planning and Investment - MPI), argues that only a long-term approach to FDI can bring a true answer.
Latest figures provided by the MPI's Foreign Investment Agency (FIA) revealed that FDI committed in Vietnam dropped 27.1 percent on-year in 2011's first half to $6.66 billion, fulfilling just 30 percent of the $20 billion expected to be registered by foreign investors in Vietnam this year. The figure alarmed some analysts, noting this was the first time FDI inflows had seen such a downward movement since 2008.
However, an analysis into the FDI situation should take into account the fact that investments are a long term game. Typically, assuming procedural and other conditions are all convenient, it takes a medium-sized manufacturing project capitalised at $10-20 million up to three years for construction before starting operations. For larger projects, implementation time will even be longer. This is very different to trade activities, where traders have to base on weekly and monthly forecasts to make quick decisions to get the best deals.
Therefore, there should be a long-term approach to processing FDI figures in the first six months of the year to have more accurate assessements appropriate with the particular features of investment.
Looking back at investments registered in the first half of the year, only projects in the service sector, including finance, insurance and distribution businesses, can be expected to become operational in 2012, while it will take at least two years for small- and medium-sized projects to complete construction. Thus, registered and disbursed FDI figures during the first six months of 2011 are measures of different benchmarks to compare, because the capital realised during the period was part of the FDI committed two to three years ago. As the result, comparing the two figures can merely show the gap between the committed and registered FDI.
In 2008, registered FDI in Vietnam amounted to $73 billion, while the disbursed amount hit $12 billion, resulting in a difference of $61 billion. The two subsequent years saw an equal difference of $11 billion per annum and the gap narrowed to just $1.36 billion in the first half of 2011. The sudden rise in the gap seen in 2008 was ascribed to record FDI commitments, with several multi billion dollar property and steel manufacturing projects licensed that year, but subsequently revoked because they were not implemented.
The plummeting FDI commitments during the first half of 2011 signaled a negative sign if looking into the FDI movements of the last four years. Yet it is still too early to say such a sign will become a negative trend because, as discussed earlier, investments are for the long run. Therefore, a proper observation can only be made after a fact-founded base is created upon full information gathered this year, and even the next year, and on the scrutiny of the global FDI movements in connection with domestic economic situations.
Meanwhile, the $5.3 billion disbursement in the first six months of 2011, an approximate figure to 2010, was an encouraging sign. Given domestic investors have faced severe difficulties with many projects having to suspend or delay due to capital shortages, foreign-invested enterprises (FIEs) have turned out to be bright spots. FIEs accounted for 54 percent of the nation's total export earnings of $42.33 billion in the year's first half and attained the fastest growth rate in recent years. They have consequently turned into the driving engine of the economy which is under the pressures of high inflation and growth slowdown.
Still, considering the National Strategy on Socio-Economic Development 2011-2020 which aims at fast and sustainable economic development to turn Vietnam into an industrialised country by 2020 and gradually building a knowledge-based economy, FDI in Vietnam in 2011's first half was not drastically restructured towards focusing on high technologies and qualified human resources to produce higher efficiency, productivity and quality, as well as to develop a low-carbon economy.
In reality, FDI inflows in sectors in dire need of capital to accelerate industrialisation remain low, though they are prioritised by the government for FDI attraction with many preferential policies. For instance, FDI in science and technology development hit just $84.46 million in the first six months of the year, education and training $3.09 million and health care and social assistance $40 million.
Construction of thermoelectricity plants has been luring many foreign investors thanks to Vietnam's increasing price of commercialised electricity and ever-improved investment climate. However, there is too little FDI into the renewable and clean energy sector, with existing projects being implemented slowly, though Vietnam boast great potential in wind and solar power.
Technical infrastructure development is an important direction in FDI attraction. The government has already promulgated temporary regulations on public private partnership (PPP), which has yet to get good feed-back from foreign investors.
FDI in the year's first half focused mainly on small- and medium-sized enterprises, with the absence of many multi-national companies with large high-tech and modern service projects. Vietnam should also have seen an increase in Japanese investment thanks to the two countries' Comprehensive Partnership Agreement inked in 2010. However, Japan's recent earthquake, tsunami and nuclear disasters had brought big losses to this country's leading coporations. Thus, it would be difficult to witness an upsurge in Japanese FDI in Vietnam in the short term.
Another matter of concern is that FDI from the US and Europe remains unchanged, despite better political and economic relations between Vietnam and these two partners. In the year's first six months, Vietnam just attracted 13 small projects from the US with total registered capital of $19.39 million, seven projects ($329.75 million) from the UK and five projects ($34.52 million) from Germany.
These unsatisfactory results largely stemmed from those countries' internal economic problems. For the US, it is the economic growth slowdown. The Federal Reserve System (FED) recently said the US economic growth had reduced by 0.2 percent against April's forecast. For big economies in the EU, it is Greece's colossal public debt that can expand to some other countries. This has forced EU governments to join efforts with the International Monetary Fund to seek a remedy, which even entails large banks having to earmark preferential credits within the EU.
Besides, Vietnam's internal socio-economic and institutional situations are also among the main caused to the decreased FDI inflows.
It is impossible to change the country's FDI direction and attraction policy within only six months. But Vietnam's experiences in the 21st century's first dcade and the country's FDI picture in 2011's first half, as well as issues currently tabled for the country's new era, have required a need to revamp the FDI direction and attraction policy in a more high-quality and effective manner.
Notable issues in FDI attraction
The MPI has deployed scores of targeted programmes to strengthen Vietnam's investment environment, investment promotion activities and boost investment from transnational companies into technical infrastructure development, education and training, scientific research and high technology.
The undertaking of these programmes requires the following concerns to be addressed.
Firstly, up to late June, 2011, around $130 billion in FDI had remained undisbursed, with many billion-dollar projects being implemented slowly. Thus, licensed projects should be reviewed and unviable investments must be revoked. For example, on February 24, 2011, Phu Yen People's Committee proposed the revoke of United Arab Emirates-backed Sama Dubai Group's giant project including three sub-projects licensed in 2008 with total registered investment capital of nearly $1 billion.
Though such a review may result in the slash of half of the undisbursed FDI, Vietnam's FDI picture will become clearer and more realistic. At present, many industrial parks and economic zones are "thirsty" for investment projects as nearly half of their areas are unoccupied. This situation also needs to be solved. Industrial parks and economic zones forecasted not to receive more investors need to return farm land to farmers or change the purpose of land uses to shun land waste. Establishing new industrial parks and economic zones over the next one or two years should be carefully considered.
Secondly, according to the Provincial Competitiveness Index 2010 conducted by USAID and Vietnam Competitiveness Initiative (VNCI) over 1,155 FIEs which represented 21 percent of operational FIEs in Vietnam, "FIEs are of relatively small scale and low margins. They mainly act as sub-contractors for bigger multinational companies. Thus they often take on the lowest parts of products' value chain". Some 5 percent of FIEs operate in industries with modern technology, 5 percent in scientific and technological services, and 3.5 percent in financing and management which need high skills.
Though the survey outputs may be not fully comprehensive, they have helped policy makers better understand Vietnam's existing FIEs' operation, which fails to meet the government's demand for economic restructuring carved in the National Strategy for Socio-economic Development 2011- 2020. Thus, the government needs to make a clear message about improving FDI, via a new FDI attraction strategy with suitable methods in order to attract high-tech investors and generate more high added values.
High-tech and modern service FIEs' reality has shown that though tax and land rent preferences are necessary, they are not crucial factors. It is the high quality and skilled human resources, good traffic system, adequate energy supplies and information and stabilised macroeconomy that are crucial factors for FIEs.
Besides, the law must be transparent and enforced fairly, without discrimination between local and foreign invested enterprises in participating in public procurement contracts and bidding state financed projects. Also, the laws on Copyrights and Intellectual Property Rights must be stringently implemented.
Directing FDI to building a low-carbon economy necessitates proper policies based on systematic approaches not only to projects' cost-effectiveness, but also to taking into account long-term benefits regarding ecological environment sustaibability, limited fossil energy sources, greenhouse gas effect and marginal economic growth, in order to address the energy consumption concern in line with sustainable development.
To successfully shift FDI improvement policies, the most importance is to know potential investors' demand. Before deciding to plant their investments in Vietnam, transnational companies with high technologies and modern services require sufficient specific information frequently updated, such as the distance and transportation time from the project's location to airports and seaports, power supplies and quality, the number of electronic portals connected internationally, establishments training workers, engineers and managers, and localities' labour supply capacity.
Thus, any investment promotion activity must attach great importance to providing accurate and necessary information for potential investors, not generally explaining the law and investment environment. This is a shortcoming that needs to be addressed.
Thirdly, the USAID and VNCI reported that 66 percent of FIEs surveyed had plans to expand production over the next two years. This has been manifested in the year's first six months' additional FDI, which promises to continue rising in the future. Nearly 70 percent of FIEs said the potential market expansion possibility is the decisive factor. Still, 52 percent of FIEs said they considered possibilities in investing in another country, 30 percent selected China, 10 percent selected Thailand and 8 percent selected Cambodia. This shows that, to win in a FDI-luring race, local agencies need to systematically and timely collect updated feedback from FIEs currently operating in Vietnam to better tailor investment policies and improve macroeconomic management.
Though FIEs saw Vietnam's positive movements in investment and business climate since the country's accession to the World Trade Organisation in early 2007, they keep complaining about the discrimination between FIEs and locally-invested enterprises, the retardation in goods and commodities export and import, as well as "undertable money".
At the dialogue between HCM City's government and FIEs held on April 26, representatives from the American Chamber of Commerce in Vietnam said that FIEs not only had to pay high costs but also face time-consuming customs procedures. The head of the external affairs department under South Korea Chamber of Commerce and Industry in Vietnam lamented over the impossible access to the electronic customs system for many times.
The same feedback has also been mentioned in the surveys by USAID and VNCI. Vietnam's administrative reform remains underway. But more attention needs to be paid to enterprises' feedback, including FDI and information from models with success stories in administrative reform, implementation of one-door policy and electronic customs, so that these stories can be multiplied nationwide. Heads of state agencies must be accountable to the people and enterprises for applying models already implemented successfully.
Vietnam has just become a middle-income country, a laudable achievement amid the country's strong international integration. But it also requires multi-faceted changes in policy, mechanism and direction, including a change in FDI attraction policy to ameliorate the development quality and lure new FDI generations, while encouraging FIEs contribute more to implementing the National Strategy for Socio-economic Development 2011-2020.
MERGERS AND ACQUISITIONS - Japan's Mizuho nears Vietnam's largest ever inbound deal
Reuters
Japan's Mizuho Corporate Bank is expected to buy an up to 20 percent stake in Vietcombank, sources familiar with the matter told Reuters, in a deal worth more than $500 million, marking Vietnam's largest-ever inbound acquisition.
Foreign investment in Vietnam has seen an uptick of deals, with multi-national corporations, private equity and hedge funds scooping up stakes in companies, eyeing low valuations and high growth, despite a long list of risks.
Mizuho and its Japanese rivals including Mitsubishi UFJ Financial Group have been stepping up overseas expansion to seek growth beyond their home markets.
Two sources familiar with the matter confirmed that Mizuho was the chosen buyer and confirmed the size of the stake, though they did not confirm the purchase price. Twenty percent of the bank at its current market capitalisation is worth $520 million, excluding a deal premium. Another source familiar with the matter said on Wednesday that Mizuho would pay around 60 billion yen ($760 million).
The deal, expected to announced by the end of the month, comes three months after Kohlberg Kravis Roberts & Co. signed Vietnam's largest ever private equity deal with a $159 million stake in Masan Consumer Group.
At $520 million or more, the deal would mark Vietnam's largest-ever inbound acquisition from a foreign company, according to Thomson Reuters. Mizuho, a unit of Mizuho Financial Group, and Vietcom declined to comment.
The government of Vietnam launched the auction this spring and invited first round bids by late May, sources previously told Reuters. The process was expected to attract private equity firms as well, sources said at the time.
Foreign investors seeking to buy 15 percent or more of a state-owned bank must have total assets of at least $20 billion in the year before the purchase, Vietnam's central bank said earlier this year. Foreign ownership can be increased to 20 percent with government approval.
Mizuho's total assets stand at 160 trillion yen ($2 trillion) as of the end of March.
The government owns 90.7 percent of Hanoi-based Vietcombank, or Joint Stock Commercial Bank for Foreign Trade of Vietnam, the nation's second-biggest partly private bank by assets.
Credit Suisse was the bank assigned to lead the Vietcombank stake auction. Credit Suisse also advised KKR in its Masan purchase. The bank declined to comment on Wednesday.
FOREIGN INTEREST
An investment into Vietnam gives Mizuho access to an economy poised to grow at 7-7.5 percent in the next five years and a mainly young population of more than 80 million.
Over the past decade, Vietnam has emerged from the hangover of war to play a central role on Asia's factory floor, producing everything from footware to computer parts.
While an underdeveloped consumer market and strong growth has attracted foreign interest over the years, heavy currency, political and economic risks have also turned investors away. Compared to other developing countries in Asia, inbound deal volumes into Vietnam are low.
Mizuho's stake in Vietcom bank alone would make up roughly one-third of Vietnam's total M&A volume last year.
In addition to KKR, British spirits group Diageo plc and investment fund Mount Kellett Capital invested in Vietnamese companies this year.
HSBC Holdings Plc, Malayan Banking Bhd (Maybank) and Societe generale each own 20 percent in a Vietnamese bank.
Several banks deals in Asia have fallen over on price differences, with sellers asking in excess of 3 times price to book, according to bankers involved with the deals and analysts. Vietcombank had a price to book value of 2.55 at the end March.
In an interview with Reuters earlier this year, Mizuho Corporate Bank CEO Yasuhiro Sato, who also became CEO of Mizuho Financial Group in June, said his bank plans to extend into Myanmar, Laos and Bangladesh as part of its Asia push. `
But Japanese banks face a challenge to quickly establish themselves in the broader Asia market against foreign lenders such as HSBC and Standard Chartered.
DISTRIBUTION - FIEs gather strength to distribution instead of manufacturing
VietnamBusinessAsia
It is a growing tendency that foreign invested enterprises (FIEs) have been shifting from manufacturing products to distributing imports on the domestic market, since the import tariffs have been lowered.
The tariff cuts made by Vietnam under the WTO commitments have clearly encouraged FIEs to import products to sell domestically instead of injecting money and spending time on production factories in Vietnam.
Dao Ngoc Hoang Giang, General Director of Sao Mai Office Equipment Company, a subsidiary of Sao Mai Group, said that it was foreseeable that FIEs, which have manufacturing factories in Vietnam, would push up the import of products under the form of complete built units (CBU) and the distribution of their parent groups’ products, made in the home countries or third countries
Mochizuki Kentaro, President of Sanyo HA Asean Corporation, said that previously, when importing household articles, importers were imposed the tax rate of 50 percent. The import tariff was later lowered to 20 percent has been slashed to five percent.
He said the low import tariffs would encourage investors to import products instead of making products in Vietnam. However, Sanyo still maintains the production of refrigerators and washing machines in Vietnam, because the consumption of the products in the domestic market is stable. Besides, Sanyo still receives the orders to make products for export to Japan, countries in the Middle East and ASEAN countries.
Sanyo plans to sell 460,000 washing machines in 2011, an increase of 100,000 products than in the previous year, through domestic distributors.
As for Sony Vietnam, the company has been determined to increase the sales after ending up the joint venture with Vietnamese Vietronics Tan Binh in late 2010.
According to Yuzo Otsuki, General Director of Sony Electronics Vietnam, the business has been going well. Sony has not thought of setting up factories in Vietnam, but it plans to strengthen trade in Vietnam in the immediate time.
In 2010, Bravia brand imported TVs alone made up 60 percent to Sony’s growth. At a new product launching ceremony held recently in HCM City, a representative of Sony Vietnam said Sony is moving ahead with the plan to expand its market share by establishing new retail centers in Hanoi and other big cities, where Sony’s import products will be on sale.
Other foreign manufacturers have also been hurrying to expand their distribution networks in Vietnam. According to the HCM City Planning and Investment Department, FIEs have been taking necessary steps to fulfill their plans.
Samsung Vina, for example, has followed necessary formalities to implement the right for distribution. Michelin Vietnam has also made similar moves.
Commenting about the activities of foreign household goods, electronics and office equipment companies in Vietnam, Dao Hoang Ngoc Giang said that many investors have obtained the licenses to wholesale, and to retail products. Fuji Xerox, the Japanese printer manufacturer, and Sharp Vietnam are the two examples.
“The market has become stiff with the participation of the companies which can act as manufacturers, importers and distributors,” Giang said.
In fact, foreign companies have to bear some limitations in distribution. They can only sell products to the clients who have tax codes, i.e private businesses and individual consumers, not the public administration sector. Nevertheless, analysts believe that they still can expand the market by cooperating with domestic distributors.
Foreign companies which are licensed to distribute products would directly contact the foreign invested enterprises operating in Vietnam, mostly in big cities such as HCM City, Hanoi, Hai Phong, Da Nang, Binh Duong and Long An. Meanwhile, they would reach out to farther localities by using sales agents.
Vietnam's trade deficit estimated at $200m in July
GSO
In July, 2011, Vietnam's export turnover was estimated to reach $8.4 billion while the import value was $8.6 billion, falling $60 million and $20 million from the previous month respectively, General Statistical Office (GSO) reported.
Thus, the country's trade deficit in July was $200 million, 25 percent higher than that of June.
Notably, in the month, exports of precious gemstone and metals gained $800 million after a strong export of $806 million in previous month.
Therefore, the country's export turnover for gemstone and metals in June and July reached some $1.6 billion, or 80 percent of the total export turnover in Jan-July
Apparel products continued to be Vietnam's key export item in the month with an export turnover of $1.3 billion, marking the single item gaining export turnover of over $1 billion in July.
Some major import commodities in July were fibre ($600 million), iron and steel ($520 million), and petrol ($770 million, down 5.7 percent month on month).
Totally in Jan-Jul, the country's export turnover reached $51.5 billion, up 33.5 percent from the same period last year and the country's import spending was $58.1 billion, up 26.2 percent year-on-year.
Thus, Vietnam's trade gap in Jan-July was posted at $6.64 billion.
ECONOMY - HCM CPI quickens 1.07pct in July 2011
Stoxplus
HCM City's Consumer Price Index (CPI) quickens to 1.07 percent in July compared to 0.69 percent in June, and rose 17.89 percent on year, the city's general Statistical Office (GSO) said.
Ho Chi Minh city consumer price index (CPI) is estimated to have increased by 1.07 percent in July and rose 17.89 percent against July 2010, driven by soaring prices of food and restaurant services, the Ho Chi Minh city Statistics Office said.
In July, 10 out of 11 baskets of commodities comprising the index saw the price hike except for prices of post and telecom services fell 0.01 percent.
The biggest price hikes in the month were seen in food and restaurant service group of which food prices rose 0.35 percent in the month and the foodstuffs advanced 1.92 percent.
Prices of other staples saw mild rises including garment and footwear staples, housing, utilities, fuel, construction materials, household utensils and appliances, medicine and healthcare services, transport, tourism and recreation services.
The July figure sent the index up 12.73 percent from December 2010 and on average, CPI rose 13.36 percent in the first seven months of the year. In Vietnam, inflation target is based on the average CPI increase.
In July, gold prices advanced by 0.85 percent on-month, 34.1 percent on year while those of US dollars fell by 0.03 percent on-month but up 8.01 percent on year.
Vietnam raised inflation target to 17 percent in 2011.
ENERGY - Wind power investors tangled by mineral exploitation rules
VIR
Vietnam’s wind power capacity is significantly potential, but its growth rate is deferred by many difficulties.
Many wind power projects in the central province of Binh Thuan have been deferred or canceled since the sites of the proposed wind turbines are also rich in titanium.
Grant of wind power project permit are set to be halted until the evaluation of the mineral deposit conducted by the Ministry of Natural Resources and Environment (MNRE) finishes, said the local authorities.
Binh Thuan province is expected to be Vietnam’s biggest wind power supplier, with 12 wind power projects having received investment permits. Their output will total around 1,500 megawatts.
Wind power investors at the neighboring province of Ninh Thuan are also struggling with permit issue.
“Wind power construction projects are usually set to be located at the coastal areas, where many households are living at. And it will cost a lot of time and money for relocation,” said director Nguyen Thanh Hoan of the province’s Department of Industry and Trade.
Figures from the Ministry of Industry and Trade show 21 wind power projects with the output of 30 megawatts have been conducted in Vietnam.
“The government approved to subsidise large wind power projects by some foreign investors, which were submitted in the last couple years. But they have not been carried out,” said director Tran Khang Thuy of Economic Science Research Centre.
Nearly 9 per cent of Vietnam’s area is appropriate for conducting wind power projects with an expected capacity of over 513,000 megawatts, according to the World Bank.
A decision approved by the Prime Minister on June 29 requires the country’s power monopoly Electricity of Vietnam (EVN) to buy all the power output of wind power projects at VND1,614 (7.8 US cents) per kilowatthour.
EVN will receive a subsidy of VND207 (around 1 UScent) for every kWh of wind power it buys via Vietnam Environment Protection Fund.
Under the decision, the wind power bought by EVN would remain VND388 (1.5 cents) per kilowatthour more expensive than the current market price for electricity.
Wind power projects in Vietnam so far have been hindered by the wide gap between wind power costs ($12.5 cents/kWh) and the market power price which is around 5.9 cents/kWh, according to estimates by the Ministry of Industry and Trade.
EVN has so far bought wind power at 6cents/kWh from Vietnam’s first and only wind power plant in the south central province of Binh Thuan, invested by Vietnam Renewable Energy JSC.
As of February this year, the plant, which joined the national power network last year, had put 12 wind turbines into operation, generating around 19 megawatts.
ENERGY - Energy giants to move with economy
VIR
Two state-owned energy giants remain upbeat despite having to curtail investment under government orders.
PetroVietnam and Electricity of Vietnam (EVN), which account for half of state-run groups and corporations’ total investment capital needed to be pared down in 2011 under the government’s Resolution 11, said they were upbeat despite being forced to trim most investment capital in response to the government’s bid to curb high inflation and stabilise the macroeconomy.
PetroVietnam’s general director Phung Dinh Thuc said PetroVientam would screw down many of its various projects worth VND7.25 trillion ($362 million) during 2011.
Those included one project worth VND10 billion ($500,000) in the gas industry, three oil and gas projects (VND83 billion-$4.15 million), 12 service and construction projects (VND703 billion-$35.15 million). PetroVietnam would also re-schedule four oil and gas projects, two electricity projects, 28 service projects and many other projects.
“The cut will not affect PetroVietnam’s business performance. We are quite optimistic about the performance,” Thuc said.
The group was also implementing a series of offshore gas projects to raise the group’s gas supplies to 15 billion cubic metres by 2015 from the expected 8.5 billion cubic metres this year.
PetroVietnam’s deputy general director Vu Quang Nam reported that the group would by the year’s end have exploited 15 million tonnes of crude oil, produced 770,000 tonnes of urea fertiliser, 12.51 billion kWh of power and 5.6 million tonnes of assort gasoline and oil. PetroVietnam’s total revenue would be $11.95 billion, up 45 per cent against last year’s.
Meanwhile, EVN and its subsidiaries have decided to cancel and re-schedule this year the construction of nearly 300 projects with total investment of VND12.6 billion ($628 million), down 15 per cent against the initial plan, in response to Resolution 11.
“EVN’s move will not affect the country’s power supply or investment into key constructions,” said a EVN release.
EVN reported that in the year’s first half, EVN commissioned six turbines of five power projects whose total capacity is 1,085 megawatt. Some 1,700MW was also added to the country’s power system and 56 power grids ranging from 110 to 500KV were also completed.
According to the Ministry of Planning and Investment (MPI), state-run groups and corporations’ investment forced to be truncated in 2011 totals over 39.21 trillion ($1.96 billion) for 907 projects.
MPI Minister Vo Hong Phuc said the cut would contribute to trimming the government’s investment from the initially-set 40 per cent of gross domestic product (GDP) to below 38 per cent of GDP in 2011.
WIND ENERGY - Greta to prove project not just load of hot air
VIR
Over the next three months, if Greta does nothing for the project, the project’s licence will be revoked
South central Ninh Thuan province has given an ultimatum to a Canadian firm’s delayed $74.4 million wind power project.
The provincial Department of Planning and Investment’s Economic Development Office (EDO) has just sent a document to Greta Energy Inc requesting it to boost the implementation of the 66 megawatt, 900 hectare project, which was granted an investment certificate in May, 2007.
“Over the next three months, if Greta does nothing, the project’s licence will be revoked,” an EDO source said.
“We have many times urged Greta to accelerate this project. However, nothing has been done since 2007. We cannot wait for it any longer as there are many other energy investors wanting to covet sites like this project [has],” the source said.
The project was expected to be the first of the kind in Ninh Thuan, which would help lure similar projects and contribute to ensuring the country’s national security.
Under Greta’s commitment, the 50-year project in Thuan Bac district, would complete its site survey procedures and install wind measuring stations in June, 2007. Construction of the project and equipment installation would begin in August and December, 2008 and the whole project would become operational in April, 2009.
According to EDO, any slowly-implemented projects based in the province would be examined and might face the same fate as the Greta project.
The provincial authorities have also sent documents as ultimatums to owners of four locally-owned delayed projects, Hung Gia Anh Company Limited’s Gas Extraction and Charge Station project in Ninh Son district and projects to build Hon Do Luxury Convalescence Tourism Area and Phuoc Hai wind power plant. If these projects failed to be implemented over the next three months, their licences would be revoked.
Ninh Thuan, 350 kilometres north of Ho Chi Minh City, is considered having the biggest potential for solar and wind power development in Vietnam. The EDO source said since early this year, there had been many foreign investors wanting to plant large-scale energy projects here.
“Land areas for energy projects in the province are few now. Thus, we have to select investors,” the source said.
He said Argentina-based Impsa Group recently got the nod in principle from the provincial authorities to make a wind power project site survey and pre-feasibility study report with expected total registered investment capital of $200 million.
Being a global company that provides integrated solutions for power generation from renewable resources, Impsa also wished to plant a grape-based wine producing project in the province.
In March this year, Belgium-based Enfinity, one of the world’s largest renewable power developers, received an investment certificate to build a $251 million wind farm in Ninh Thuan.
According to EDO, Enfinity would develop a 553ha wind power farm in Thuan Nam and Ninh Phuoc districts. The project would have total capacity of around 124.5MW.
It is Enfinity’s first power project in Vietnam and one of the largest wind power projects in the country.
Quang Binh launches Quang Trach Thermal Power Plant 1
VOV
The Quang Trach Thermal Power Plant 1 was launched by the Vietnam National Oil and Gas Group (VPN) and the Quang Binh provincial People’s Committee on July 19.
The thermal power plant will be built over 2 years with a total invested capital of more than VND33 trillion
It will have a capacity of 1,200 MW, capable of generating 8.4 billion KW/hours per year.
The plant’s first generator will be put into operation in June 2015.
Addressing the launching ceremony, Deputy Prime Minister Hoang Trung Hai said the Ministry of Industry and Trade (MoIT) should coordinate closely with the major investor and contractor to ensure the efficient progress of the project.
RESOURCES – Petrovietnam ties with Vietnam military firm on ammonia project
Reuters
State oil and gas group Petrovietnam will establish a venture with a military firm under the defence ministry to produce ammonia that is expected to use natural gas from the disputed South China Sea as feedstock.
The venture, 60% owned by Petrovietnam and 40% by the Hanoi-based General Army of Economic and Technology (Gaet), aims to produce 450,000 tonnes of ammonia a year and also 200,000 tonnes of ammonium nitrite using natural gas, Petrovietnam said in a statement on Thursday.
It did not detail the gas supply but Petrovietnam has been taking natural gas and crude oil from offshore fields in the Cuu Long and Nam Con Son basins of the South China Sea. Ammonium nitrite and ammonia are used in fertiliser production.
“Without help from the Defence Ministry’s forces it is tough for Petrovietnam to conduct exploration and search activities under the circumstance that the East Sea (South China Sea)situation is extremely complicated,” Petrovietnam Chairman Dinh La Thang was quoted as saying at a signing ceremony on Wednesday.
Vietnam and China have had territorial disputes over patches of the South China Sea since late May, including an incident involving Chinese patrol boats cutting a submerge cable used by a Petrovietnam survey vessel mapping in Vietnamese-claimed waters.
China, the Philippines, Malaysia, Brunei, Vietnam and Taiwan all claim territory in the South China Sea. China’s claim is the largest, forming a vast U-shape over most of the sea’s 648,000 square miles (1.7 million square km), including the Spratly and Paracel archipelagos.
China and Southeast Asian countries including Vietnam agreed on Wednesday to a preliminary set of guidelines in the South China Sea dispute, the Chinese side said, a rare sign of cooperation in a row that has plagued relations in the region for years.
Petrovietnam has also been working with the navy to build several projects at the Cam Ranh port, previously a U.S. navy base during the Vietnam War era, Thang said.
The group also worked closely with the Defence Ministry to install wind-power and solar power projects on the Spratlys as well as upgrading oil rigs in the South China Sea, Deputy Defence Minister Le Huu Duc said in the statement.
Petrovietnam did not say when the gas-fired plant run by its venture with military firm Gaet will start operations.
Gas is becoming an increasingly important power generation fuel in Vietnam. Natural gas has helped produce 36 billion kilowatt hours of electricity a year, or 40% of the national output and 100,000 tonnes of gasoline annually or 5% of domestic output, industry officials say.
Vietnam is projected to produce 14 billion cubic metres of gas annually by 2015, up 40% from last year, and will step up buying of liquefied natural gas by late 2013, a state-run newspaper reported earlier this month.
GAS - Honeywell wins $3 million assignment to automate offshore gas platforms in Vietnam
VIR
Honeywell (NYSE:HON) announced that it has been engaged by PetroVietnam Technical Services Corporation (PTSC) and the Bien Dong Petroleum Operating Company (BDPOC) to supply an integrated process control system for their new central processing platform currently under construction in Vietnam southern.
When fully operational by the end of 2012, the platform is expected to contribute significantly to meet Vietnam’s increased gas demands by providing two billion cubic meters of gasoline each year and up to 20,000 barrels of condensate daily. BDPOC is a subsidiary of state-run Vietnam Oil and Gas Group (PetroVietnam).
Honeywell Process Solutions (HPS) will implement its award-winning Experion® Process Knowledge System (PKS) with C300 Controller and Foundation Fieldbus capabilities to fully automate the facility.
Safety Manager will also be installed to improve process-safeguarding protocols, such as emergency shutdowns, fire and gas monitoring, and critical application control. By increasing efficiency and reducing downtime, the platform should be able to reach its optimal production volumes.
“In looking for the best automation system, we knew it was important to look not just at cost-effectiveness, but also the best technology that can survive a really tough environment where it is literally exposed to the elements,” said Phan Thanh Tung, PTSC MC director.
“HPS’ solution offered us the perfect partnership of economy and reliability while positioning us favorably for future expansion and development efforts because we’ll be building on excellence.”
“Given Vietnam’s rising gas demand, the country’s oil producers appreciate the importance of enhanced energy efficiency,” said Kelvin Tam, sales manager, Honeywell Process Solutions.
“Using HPS’ technology, BDPOC’s gasoline production and storage capacities can be improved and at the same time they should save quite a bit on maintenance costs.”
OIL - Nghi Son refinery getting breathing space
VIR
The $6.2 billion Nghi Son petroleum refinery last week received a two-month extension to negotiate a key contract.
Previously, refinery investor PetroVietnam risked being forced to reopen the engineering, procurement and construction (EPC) contract if a winning bidder could not be found before July 12.
PetroVietnam general director Phung Dinh Thuc said negotiations had taken longer than expected, because it was the biggest EPC contract to be negotiated in Vietnam’s petroleum industry.
Thuc strongly emphasised the participation of Kuwait Petroleum International, as Kuwait would provide crude oil to the refinery.
Thuc said PetroVietnam and proposed partners were parallel asking for Vietnamese government guarantee and negotiating with capital investment donors.
Thuc hoped that the refinery could start construction within 2011’s third quarter.
PetroVietnam initially planned to sign off on the EPC contract in the second quarter of this year, but failed to find a suitable partner.
It is now conducting negotiations with a consortium led by Japanese JGC Corporation, Japanese Chiyoda Corporation, French Technip SA, Korean SK Engineering and GS Engineering.
The major factor hindering the outcome was that partners were still waiting for more favourable conditions from the government, according to industry experts.
Thanh Hoa province’s $6.2 billion Nghi Son refinery will be Vietnam’s second refinery and the first with involvement of foreign partners. It is expected to go live in 2014.
PetroVietnam holds a 25.1 per cent stake in the project, while Kuwait Petroleum International has 35.1 per cent, Japan’s Idemitsu Kosan 35.1 per cent interest and Mitsui Chemicals 4.7 per cent.
When finished, the project will have a design capacity of 10 million tonnes of crude oil a year, or 200,000 barrels a day, 1.5 times more than the capacity of the existing Dung Quat oil refinery.
TNK-BP upbeat on inking long-awaited BP deal
VIR
The other assets, Nam Con Son Pipeline and the Phu My 3 Power Plant [where TNK-BP will not be perator] will be transferred shortly.
TNK-BP Management Company is close to inking a deal to buy BP’s assets in Vietnam.
Russia-based TNK-BP spokesman Thomas Kiehn told VIR that the deal was close to be sealed and was only waiting for the Vietnamese government’s final approval.
TNK-BP moved for BP in July last year, after the British firm decided to dissolve some of its global assets following the disastrous Gulf of Mexico oil spill in the southern United States in April 2010.
“The key asset of the deal is offshore gas Block 06.1. This is a major asset and TNK-BP will be the operator in this joint venture with PetroVietnam and India’s Oil and Natural Gas Corporation Videsh. The other assets, Nam Con Son Pipeline and the Phu My 3 Power Plant [where TNK-BP will not be operator] will be transferred shortly after the Block 06.1 approval is received,” Kiehn said.
“We anticipate that we will have a licence awarding ceremony in early August,” he added.
TNK-BP is a joint venture between BP and Russia companies.
BP’s asset which were due to be transfered to TNK-BP were upstream assets, stakes in gas production, pipeline and power station interest, with total cost of $1.8 billion. Those include Lan Tay-Lan Do gas field in block 06.1 offshore Vietnam, Nam Con Son pipeline system and Phu My 3 Power plant in Ba Ria-Vung Tau province. It was reported previously that India ONGC, Singapore’s Sinopec, Thailand’s PTTEP and Kuwait Foreign Petroleum Exploration Company (Kufpec) expressed interest in this sale.
PetroVietnam, the host partner in the BP’s joint venture, was given pre-emption rights to buy the stake first, however it refused, blaming that the price was not “proper”.
TNK-BP is Russia’s third largest oil company, formed in 2003 with 50 per cent stakes held by BP and the other 50 per cent held by the AAR Consortium (consisting of Alfa Group, Access Industries and Renova).
TNK-BP also owns close to 50 per cent of another Russian oil and gas company, Slavneft. TNK-BP accounts for approximately 16 per cent of Russia’s production.
MINING – Vietnam aims to start alumina production in September
Reuters
Vietnam will produce the first alumina from a bauxite complex in the Central Highlands in September after months of delays caused by adverse weather, power shortages and slow equipment delivery, the official Vietnam News Agency reported on Wednesday.
The country’s first alumina plant in Lam Dong province is now due to get its first product on Sept. 20, the report said, quoting Tran Duong Le, deputy director of the complex’s management board.
Last October officials said the US$460 million Tan Rai alumina plant, invested by state mining group Vinacomin, would start operations in February 2011 and being exporting in March.
“Construction progress has been far behind initial plans because of unfavorable weather with much rain, prolonged power shortages, a lack of labor and slow procedures for importing equipment,” Le said in the report.
The Tan Rai refinery is slated to produce 600,000 tonnes a year of alumina, a white powder made from bauxite ore for producing aluminium.
Construction, equipment installation and test-runs have almost been completed in connection with a thermal power plant that serves the complex, the report said.
Vinacomin, or the Vietnam National Coal and Mineral Industries Group, has also been developing the Nhan Co project in Lam Dong’s neighboring Province of Dak Nong, with projected initial output of 600,000 tonnes of alumina.
The bauxite works have triggered rare public criticism over potential environmental damage and Chinese involvement, but Prime Minister Nguyen Tan Dung has stood by the projects, saying they would pave the way for an aluminium industry in Vietnam.
Vinacomin has awarded the engineering, procurement and construction contract for both the complexes in Lam Dong and Dak Nong to China Aluminum International Engineering Co (Chalieco).
Chalieco is a subsidiary of state-owned Aluminum Corp of China, or Chinalco, the country’s top aluminium producer.
Vietnam’s mostly untouched bauxite ore reserves are estimated at between 5.6 billion and 8.3 billion tonnes, making it the world’s third-largest after Guinea and Australia.
Lam Dong alone has more than 1 billion tonnes, provincial authorities have said.
Vinacomin planned to start operating the Nhan Co complex in Dak Nong in 2012, Deputy Chief Executive Bui Van Khich was quoted as saying by the Saigon Times Online newspaper (www.thesaigontimes.vn) in April.
Vinacomin has also started a two-year exploration of the bauxite reserves in Cambodia’s eastern province of Mondulkiri bordering Dak Nong, the report said.
Lam Dong and Dak Nong are among Vietnam’s biggest coffee growing provinces but the bauxite mining areas would not hurt coffee trees, traders said. Vietnam is the world’s second-largest coffee producer after Brazil.
Ha Giang mineral firm gains 84b dong profit in H1
HGM
Ha Giang Mineral JSC (HGM) said it will advance 50 percent dividend in cash for the first phase of 2011.
On July 19, HGM's director board announced the business results in the first six months of this year with 98.52 billion dong revenue, or 82.1 percent of the year's plan.
Its pre-tax profit was 84 billion dong, surpassing 20 percent of the year's target.
Antimon metal output reached 365.9 tonnes, or 52.2 percent of the year's plan.
In the second half of this year, the company expects to produce minimum 350 tonnes of Antimon metal.
The company will spend 30 billion dong to advance 50 percent dividend in cash for the first phase of 2011. Currently, HGM has a chartered capital of 60 billion dong.
Being traded at 93,000 dong per share, HGM-coded share now has the highest market price on Hanoi Stock Exchange (HNX).
INFRASTRUCTURE - Bus system key to traffic problem
VNS
HCM CITY — Metros and sky trains in big cities like Ha Noi and HCM City can only play supplementary roles, an efficient bus rapid transit system is the real key to getting out of the current traffic quagmires they are trapped in, an expert says.
Pham Xuan Mai, head of the Automobile Technology faculty at the HCM City University of Technology (HCMUT), said for many reasons, the city has been slow in starting the construction of these projects.
Six metro lines and 10 monorail routes were planned to be built in HCM City, but they remained at the planning stage and a search was on for investors, the Sai Gon Giai Phong (Liberated Sai Gon) newspaper reported recently.
HCM City and Ha Noi are expected to have up to five metro and monorai lines each over the next 10 years, but these would only meet up to eight per cent of the transport demand, Mai said.
To have a public transport system that would be able to meet to more than 40 per cent of the demand by 2020, it is neccessary to develop the bus system in major cities, he added.
The Bus Rapid Transit (BRT) system should be the focus of public transportation planning and execution, according to Mai, because it has the advantages of transporting as many people as metro and monorail trains while costing much less, taking less time to build and requiring less ground clearance.
If a BRT system is implemented well, at elast another 10 per cent of the transport demand would be met in the five years, attracting more people to use public transportation and decreasing the large number of private vehicles, Mai told the Sai Gon Giai Phong.
Many seminars and conferences have been held in the past 10 years to find solutions to the trafifc problems that plague both major cities in Viet Nam.
These events have come up with many suggestions including restricting the number of motorbikes and cars, levying tolls, increasing registration fees, removing hospitals and schools to ease traffic congestion and so on. Almost all these suggested measures have remained on paper.
"The booming of motorbikes is the main cause of the traffic jam," said Mai.
Motorbikes play a major roe in causing a large number of road accidents, which is increasing this year, the HCMUT professor said.
Around 100 new cars and 1,300 motorcycles are added to the city's traffic everyday.
Meanwhile, architect Ngo Viet Son Nam said that the city's urban development planning approach should change, basing it on the public transportation framework. This approach has fostered sustainable development in many cities around the world, he told Sai Gon Giai Phong.
"This is, however, not yet done in Viet Nam as the public transportation system has been always done after, not synchronously with urban planning," he said.
The architect suggested that the city completes key traffic sections as soon as possible and puts them into operation. Then it should, gradually perfect local traffic systems before connecting them, Son said. He also said that priority should be given to developing the public transportation system, focusing on high-capacity vehicles.
Other experts cited in the report said co-operation between relevant ministries and sectors and a clear plan for implementation are important factors in realising public transportation goals.
The felt in addressing any traffic problem, authorities should clearly state a time frame within ehich it would be dealt with, instead of being ambiguous and noncommittal.
ENERGY EFFICIENCY - Better public transit could save energy
VNS
HCM City could save as much as 30 per cent of the energy it spends on transportation if it develops an efficient public transport system, a conference on energy saving heard yesterday.
With its public transport inefficient, people prefer private vehicles to buses, sending fuel consumption soaring as the number of private motorbikes and automobiles increases relentlessly.
The city of 10 million now have more than five million motorbikes and 500,000 cars and the numbers are expected to continue to skyrocket.
Figures from customs show that last year nearly five million tonnes of fuel were consumed for transportation, up from less than four million tonnes just three years earlier.
The city's Department of Transport admits that public transport can meet only 6 per cent of demand.
An official from the department, who spoke at the seminar, said thus there was a potential to reduce energy use by 30 per cent.
Saturday 20 August 2011
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