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INVESTMENT - M&A growth remains strong this year

Thesaigontimes



Merger and Acquisition (M&A) transactions in Vietnam are expected to continue strong growth this year, industry experts said.

Mayooran Elalingam, head of Mergers & Acquisitions of Deutsche Bank for Southeast Asia, said at the M&A Vietnam Forum 2011 in HCM City last week that M&A transactions here in the nation had amounted to $1.57 billion since early this year, or 93 percent of the 2010 figure. So, the value of M&A deals is expected to rise to a new high this year, extending the rising streak.

The average size of an M&A transaction here is modest compared with other Southeast Asian markets but its growth is quite fast, said Elalingam.

According to Thomson SDC, the average M&A deal size in Vietnam was $5 million last year, compared with the mean size of $39 million in the region.

Elalingam noted M&A activity in Indonesia was growing well with deals worth $10 billion. He sees a similarity in Vietnam and Indonesia, meaning Vietnam will soon catch up with Indonesia in terms of M&A growth.

Foreign investors have had a lot of queries about Vietnam in the last two years, especially last year, showing their interest in the local market. Previously, they looked for deals in Indonesia, but now in Vietnam, said Elalingam. "However, many Vietnamese enterprises are still not ready for such deals."

To Hai, CEO of VietCapital Securities JS Company, forecast M&A activity would pick up in sectors such as consumer products production and retail. M&A deals in the banking sector this year will continue the growth trend of last year, with several M&A transactions expected to be forthcoming this year.

However, such transactions in the banking system are not publicised given the lack of a legal framework for the activity in the sector, said Nguyen Manh Dung, deputy general director of Deposit Insurance of Vietnam (DIV).

To Hai of VietCapital Securities projected small and medium enterprises would be targets for M&A this year.

According to the Vietnam Competition Authority, M&A deals in Vietnam last year numbered 345, with a total value reaching a record high of $1.75 billion.





Japan confirms no fall in ODA provision for Vietnam

Vietbiz24



Japan lately confirmed it would continue maintaining ODA for Vietnam despite they have certain difficulties because Vietnam is one important partner of Japan in the region, the Dau Tu newspaper [Vietnam Investment Review] reported.

On June 14, Japanese government's preferred credit exchange diplomatic note Phase 1 for the 2011 fiscal year will be signed with Vietnam. Nguyen Xuan Tien-Vice Head of Ministry of Planning and Investment's Department of Foreign Economic Relations said, following signing phases will be defined after Japanese delegation comes to Vietnam to consider portfolio of newly-proposed projects.

Minister of Planning and Investment, Vo Hong Phuc and Japanese Ambassador Yasuaki Tanisaki will a diplomatic note worth 58.18 billion yen for HCM City-Long Thanh-Dau Giay expressway construction project capitalised at $932.4 million (sourced from Japan ODA and ADB) and Da Nang-Quang Ngai expressway worth $1.472 billion including Japan's ODA loans, World Bank and corresponding loans of Vietnamese government.

The two projects are in the North-South expressway plan. On June 15, the capital borrowing agreement will be signed by Ministry of Finance and Japan International Cooperation Agency (Jica).

Three projects including Ben Luc-Long Thanh section of North-South expressway plan, Vietnam Universal Centre (Hoa Lac high-tech park) and Nghi Son power plant (Thanh Hoa province) will continue receiving ODA from Japan.

By the third quarter of 2011, Japan will send a delegation to appraise new projects before deciding following procedures.

Furthermore, Vietnam and Japan also agreed to continue discussions to soon make final decision on preferred credit exchange note for infrastructure of Hai Phong international port.





INFRASTRUCTURE - Special mechanism needed to attract FDI to infrastructure

VNA



The Ministry of Transport (MOT) has proposed to apply an additional special mechanism to call for foreign investment into the infrastructure sector.

Despite a lot of great efforts, Vietnam has not succeeded in calling for foreign investment into infrastructure projects. Dau tu has quoted an official from the Ministry of Planning and Investment as saying that to date, "no foreign direct investment (FDI) project in the aviation sector has been successfully implemented."

"It is necessary to apply an additional breaking mechanism in order to make the FDI projects in the aviation sector become realistic," MOT wrote in the report to the prime minister about the project on setting up a joint venture with foreign partners to upgrade the Phu Bai International Airport in Thua Thien-Hue.

MOT has made such a proposal after realising that the first FDI project in the aviation infrastructure sector is in the danger of "failing completely" right at the preparation works.

The research work conducted by the Middle Airports Corporation (MAC), the Vietnamese partner who has been chosen to team up with the Singaporean International Airport (IA) to set up a joint venture, showed that the project on upgrading the Phu Bai international airport has low financial feasibility.

As initially proposed, the joint venture would be set up with MAC's capital contribution of 51 percent of the total capital (which is mostly the value of the assets at the Phu Bai Airport). Meanwhile, IA would contribute 49 percent of the total capital of the joint venture. The airport has been planned to be upgraded to become capable to receive Boeing 777s, and have the capacity of five million passengers per annum with the total investment capital of 6087 billion dong in the first phase.

Two investment solutions have been put forward, but both of them are believed to have high financial risks.

In the first solution, the investment capital of the joint venture would make up 50 percent of the capital, while the other 50 percent of capital will come from commercial loans. In this case, the investors would incur the loss of 686 billion dong at least after 25 years of operation.

With the second solution, 100 percent of the capital needed for the project will be the joint venture's capital. The solution seems to be financially feasible, but no investor would make investment with the stockholder equity.

Currently, besides some information such as the conditions for capital contribution, the conditions on ensuring the efficiency of the project need to be clarified by IA. The lack of a mechanism for appraising the assets of airports, and the mechanism of using airports with the security and national defense purposes all remain barriers to the implementation of the ideas.

Prior to that, MOT also released a document; requesting South Korean Joinus to draw up initial proposals to facilitate the investment in the Quang Ninh airport under the mode of BOT (build -operation -transfer). The ministry has also asked the investor to consider another mode -BT (build -transfer) for more choices.

While IA and Joinus may fail to make investment due to the financial feasibility, the US Airis Holdings missed the opportunity to make investment in the T2 terminal at Noi Bai Airport, simply because they were late in making registrations.

According to MOT, the project on building T2 terminal at Noi Bai airport has been assigned to the Northern Airports Corporation. Some other projects have been found investors and they are under implementation.

If the projects can go smoothly, the infrastructure items of the Noi Bai airport would meet the demand for 5-10 years. Therefore, at this moment, MOT still does not intend to call for FDI into Noi Bai airport.

At present, the Long Thanh International Airport project which has the estimated construction cost in the first phase of 6.05 billion dollars, not including the expenses for site clearance, has caught the special attention from investors.

Under MOT's proposal, some infrastructure items would be open for private economic sectors who can invest under the mode of BOT, or PPP (private public partnership).





JICA aids Vietnam’s expressway construct

VOV

The Ministry of Finance and the Japan International Cooperation Agency (JICA) signed an agreement in Hanoi on June 15 under which JICA will provide 40.946 billion JYP in loan for Vietnam to carry out two expressway sections.

This second loan for fiscal year 2010 will be used for the building of Ho Chi Minh – Long Thanh – Dau Giay section and the Da Nang – Quang Ngai section, part of the North-South expressway.

They are expected to help boost the development of two economic zones in the southeast and south central regions once they open to traffic.

This year marks the Japanese government as Vietnam’s largest donor, which has provided official development assistance to the country 19 consecutive years.





PROPERTY - Property developers working on new strategies to boost house sales

Vietbiz24



Extending the payment to one year, factoring interest rates, funding principal debts and interests in six months are new house sales strategies which property developers are studying and planning to apply from now to the year end with an aim to stimulate demand.

Due to capital shortage from tightening up of property-backed lending, and the gloomy market segment of apartments, many investors have planned to seek way-outs for these difficulties. In order to convince customers to cooperate with enterprises to overcome challenges, investors and developers launched programmes of supporting entire loan rates for buyers. A survey of HCM City realty companies showed that the house loan rate averaged at 20-25 percent per annum.

General director of Techcomreal Company, Nguyen Xuan Loc told VnExpress.net, "We are discussing with the investor of a project in southern HCM City to distribute completed apartments, customers need to pay in advance only 300 million dong and then can get house for immediate use with the interest rate of 0 percent".

Along with above support items, investors and distribution agent will consider extension of paying principal debts if customers require, he added. The plan will be offered by the third quarter of 2011. Despite the apartment market segment is gloomy, the projects with affordability and almost completion, and suitable sales policies will help increase the competitiveness and create greater chance for output.

Investor of Sunrise City (District 7, HCM City) also has a special selling programme amid the interest rates stay at high levels. In details, the firm launched a programme of both leasing and buying right. Customers who choose houses, sign rental contracts will pay 20 percent of house value. As receiving houses, they will pay more 60 percent, and be presented a furniture package worth $5,000. Specially, customers can live in the chosen houses for trial. After two years of trial, customers will have options of selling or taking back money attached with interest rates if they do not want to buy.

According to specialists, developers now prefer seeking out new sales methods or accepting small losses to maintain the stability of products instead of delaying construction or standing still.





300,000sqm of retail space coming to Hanoi

Vietbiz24



300,000 sqm of retail space is likely to be added to the current retail space supply of over 420,000 sqm in Hanoi market within this year.

This year the capital city will see an array of completed property projects whereby the retail supply will be increased. Some big projects which are going to be used include Savio Mega Mall, Keangnam Landmark Tower, Indochina Plaza Hanoi and Vincom Centre Long Bien among others.

Extra 300,000sqm of retail space will be supplied to the market, equaling to two third of the current supply. However, the growth will slow down in 2012 as other big projects with 200,000sqm are under construction. By 2013, the retail space market of Hanoi will boom as Vincom Mega Mall-Royal City (200,000sqm), Vincom Mega Mall-Times City (230,000sqm), Usilk City....will supplement 700,000sqm to the market.

Data of CBRE realty consulting firm showed that total real retail space for lease reached 104,000sqm in the first quarter of 2011, vacancy ratio was 12.5 percent mainly in the projects located in developing areas, outskirts of Hanoi. In the areas inner the city, the fulfilling ratio was 100 percent.

On June 14, IndochinaLand and CBRE officially introduced the trade centre of Indochina Plaza Hanoi project with total floor area of 18,000sqm at No 239 Xuan Thuy St, Cau Giay Dist. The work is expected to be completed and operational by Q1 of 2012.

As reported by Savills and Colliers International, total retail space of Hanoi achieved 420,000-440,000sqm so far, up 17 percent year-on-year, mainly machinery supermarkers and shopping malls in surburb areas where the rental was cheaper a half than that of centre areas. Average leasing capacity in the city was 92 percent.





FINANCE - Vietnam's bonds gain on speculation banks have surplus cash

Bloomberg



Vietnam's bonds rose, driving down five-year yields to the lowest level in four weeks, on speculation banks have more cash to invest in government debt.

"Demand for bonds increased a lot from banks, especially private ones, as cash liquidity has improved lately," said Vu Anh Duc, a fixed-income dealer at Vietnam Bank for Industry and Trade. "Many banks chose to invest in bonds when lending is capped at 20 percent by the central bank."

Vietnam's State Treasury sold all of the 3 trillion dong ($146 million) of three- and five-year notes on offer at its most recent sale on June 10, according to the Hanoi Stock Exchange, where the auction took place. There were 18 bidders, compared with seven at a debt offering on May 12, when the Treasury only sold 100 billion dong of a planned 2 trillion dong, according to figures from the exchange.

The yield on the five-year securities dropped 17 basis points, or 0.17 percentage point, to 12.55 percent, the lowest level since May 19, according to a daily fixing price from banks compiled by Bloomberg.

The dong traded at 20,575 per dollar as of 4:38 p.m. in Hanoi, little changed from 20,565 yesterday, according to prices from banks compiled by Bloomberg.

The central bank set the dong's daily reference rate at 20,618, unchanged this week. The currency is allowed to fluctuate by as much as 1 percent on either side of the fixing.





VNBA GS denies proposing dollar slid intervention

StoxPlus



The Vietnam Bank Associations didn't propose the State Bank of Vietnam (SBV) to stop allowing dollar exchange rates to fall further, Duong Thu Huong, the VNBA's general Secretary told the local newswire HCM City Phap Luat to refute the bias.

Dollar exchange rates have recently kept falling down, even to the lowest level since the State Bank of Vietnam (SBV) devalued the dong on February 11, Huong said at a meeting with the central bank June 10 without mentioning any proposal on this issue.

Vo Tri Thanh, vice Chair of the Central Institute for Economic Management (CIEM) pointed out that there's no need to worry about the falling average inter-bank exchange rates as they haven't reduced to the threshold of 20,000 dong per dollar.

Sharing the same viewpoint, Tran Du Lich, member of the National Monetary Policy Advisory Council said that dollar exchange rates are still kept in check, adding that the dong's strengthening is a suitable movement and the central bank is still regulating forex market in line with flexible market-oriented regime.

Earlier, local media reported that the VNBA proposed the SBV not to let dollar exchange rates fall too deep as the strengthening dong is likely to boost up dollar credits, widening the gap between dong and dollar credit growth and posing risks to banks.









Reducing loans to non-production sectors an impossible mission

Vietbiz24



Commercial banks have been ordered to cut down the outstanding loans to non-production sectors to 22 percent by June 30. However, bankers say this proves to be an impossible mission.

How to take back loans?

Most of the outstanding loans given to fund securities investments have been listed as bad debts. Though commercial banks began putting a brake on securities loans one or two months ago, the outstanding loans to securities investors still account for several percents of total outstanding loans.

The plunge of the VN Index has forced many securities companies to sell stocks out to stop loss and get money to pay bank debts, since they cannot afford the sky high bank loan interest rates. This has helped banks reduce the securities loans by 40-50 percent in April and May 2011.

However, many other securities companies still cannot pay bank debts. With the electronic boards are always lightened red, showing the decreases in the stock prices, this seems to be impossible for the companies to get money to pay debts.

Banks complain that collecting debts from real estate companies proves to be a task which is even more difficult than..."climbing to the sky". The uncertainties on the real estate market over the last several months make bankers understand that they do not have high hopes to collect debts from the investors who cannot sell products. As the apartment market has been frozen for a long time, investors cannot get money to pay bank debts.

Nguyen Van Duc, deputy director of Dat Lanh Real Estate Company, admitted that real estate products have been selling very slowly, including the apartments with medium sale prices. Real estate developers now do not have money to develop projects and pay bank debts.

How much time do bankers need?

Bankers all say that they need some more time to collect debts and cut down the outstanding loans to non-production sectors to 22 percent by June 30, and to 16 percent by December 31, 2011.

Analysts have also commented on Xay Dung newspaper that banks have made every effort to cut down outstanding loans to non-production sectors, but the loans to the sectors remain at over 30 percent of the total outstanding loans. Therefore, they have every reason to believe that the target of 22 percent is beyond the capacity of many banks.

Governor of the State Bank of Vietnam, Nguyen Van Giau, when answering the questions during a TV interview on June 7, said by that time, 20 banks still reportedly had outstanding loans to non-production sectors at above 22 percent. Especially, he said two banks had the proportions at 50 and 52 percent.

Meanwhile, Thoi bao Kinh te Vietnam has quoted its sources as saying "that by the end of February 2011, the outstanding loans given to non-production sectors of the whole banking system had reached 431 trillion dong, accounting for 18.7 percent of the total outstanding loans. Of the 42 credit institutions, 18 had the outstanding loans to non-production sectors accounting for 25 percent and less, while 24 other institutions had higher proportions."

The analysts have also commented that thee months prove to be a short time for banks to cut down outstanding loans, therefore, this has put a hard pressure on many banks. In order to reach to the finish on time, many banks would have to go too fast, which could be a danger to them.

The State Bank has warned that if banks cannot cut down the outstanding loans to 22 percent by the deadline, they will face punishment. Especially, they may have to pay the compulsory reserve ratio which is two times higher than the normal level, and face restrictions in their operation in the last six months of the year and the whole year 2012.

A banker said that the compulsory reserve ratio of six percent instead of three would not be a big problem to banks. However, this would be really a big problem if banks face restrictions in their operation in the time to come.





Bad debts of Vietnamese banks account for 13pct of total outstanding loans: Fitch Ratings

Vietbiz24



Bad debt is corollary of the process of too hot credit growth in previous years, plus the lending fever for real estate and securities massively during 2006-2007.

Although the State Bank of Vietnam (SBV) has asked commercial banks to restrict too high credit growth, in fact, in recent 10 years, the credit growth has been always at over 20 percent per year (it was 19.2 percent only in 2006). Notably, in 2007, the credit growth was up to 51.39 percent and it was 37.7 percent in 2009 and slowed down to 29.8 percent in 2010. The loosening lending policy of the previous years has caused many corollaries, including the bad debt problems.

The deadline of June 30, 2011 is coming, but according to the SBV's governor, about 20 commercial banks still have non-production loans of over 22 percent and even it is up to more than 50 percent in two lenders.

At the mid-term donors' Consultative Group (CG) meeting for Vietnam held early June 2011, SBV's deputy governor Nguyen Van Binh said the bad debt of banks increased from 2 percent to around 3 percent and in the worst case it is only less than 5 percent for the whole year. According to Binh, this is still a safe and controllable level.

However, as announced by Fitch Ratings, a global rating agency, the bad debt ratio of Vietnamese banks is 13 percent of the total outstanding loans according to the international standards (under the international standards, if the debts are not paid when due, the entire debt must be classified in bad debts). And the risk of bad debt will become clearer in late Q2 or early Q3 this year.





ECONOMIY - RPT-ADB sees room for Vietnam rate hike as inflation set to slow

Reuters



The Asian Development Bank sees a bit of room left for policy rate hikes in Vietnam, but expects monthly inflation to start to come down this month and double-digit annual inflation to begin to ease in August.

Vietnam has been grappling with some of the highest inflation in the world. It has ratcheted up key interest rates since late last year and pledged a raft of other measures, including lower credit and money supply growth and fiscal tightening.

Still, the consumer price index rose to 19.8 percent in May from the same month last year.

"We expect that at least at the monthly level the inflation rate will start coming down from this month," Ayumi Konishi, the ADB's country representative in Vietnam, told reporters on Tuesday.

"The only thing is that last year the base numbers, monthly inflation between April to August, were very low. So even the slightest increase in the monthly rate will still keep pushing the year-on-year inflation rate up until August."

Asked if there was scope for further interest rate hikes, Konishi said: "Some of them I think can still be tightened a little more, but not much."

"How far interest rates should really be tightened all depends on how far the inflation rate, the inflation situation will aggregate further," he said.

The State Bank of Vietnam has increased the reverse-repurchase rate for seven-day open market operations by 800 basis points to 15 percent since November, and has also lifted the refinance rate and discount rates by several hundred basis points since February.

Inflation remains a problem, though, and analysts have been calling for the government to be more aggressive in pursuing its pledges to rein in state spending.

"Monetary policy alone cannot solve the problem. That's for sure," Konishi said.

"So the combination of fiscal measures I think is important... On the fiscal side I think the effort has got to be stepped up."

The International Monetary Fund last week delivered a similar message at a meeting of donors and the Vietnamese government, saying further policy rate hikes could be necessary and authorities should enhance fiscal support for the monetary tightening already under way.

Central bank deputy governor Nguyen Van Binh said the State Bank of Vietnam must raise rates further if "very high" inflation persists.





Hanoi looks to boost key industrial products

Tuoitrenews



The Hanoi People's Committee has ratified a programme on developing key industrial products to account for 10-15 percent of the city's total export revenue during 2011-15.

Under the programme, the city expects the key products to represent 30-35 percent of its total industrial production value and the annual growth rate of the products to be 5-10 percent higher than the city's average industrial growth rate.

In order to meet its targets, the programme focuses on measures for enhancing the management competence of State bodies within the industrial sector, boosting participation of the city's industrial producers and exporters in domestic and foreign trade promotion programmes in order to enlarge market shares.

Besides speeding up administrative reforms, the programme is set to assist science and technology as well as trademark building and development.

Director of the Hanoi Department of Industry and Trade, Trinh Thi Ngan, said that the programme is aimed at creating favourable conditions for the continued development of local industrial products using all available resources.

The capital initiated its first five- year programme for developing key industrial products in 2005, under which the city categorised 53 products from 47 businesses into six groups including mechanical engineering, electronics, chemicals and plastics, footwear, textiles, paper and packaging as well as processed food.

According to the department's statistics, the 53 selected industrial products made up 34.23 percent of the city's total industrial production value last year compared to 27.6 percent a year earlier.

Besides meeting domestic market demand, the selected products earned 760 million USD from exports last year, accounting for 10 percent of the city's export turnover.

Ngan said that, despite positive results, assistance had been poorly coordinated between agencies, especially within the land and environmental protection sectors. Assistance programmes had been too general and not all enterprises were informed of what they were entitled to, she said./.





Vietnam CPI forecast at 1pct in Jun

StoxPlus



Vietnam Consumer Price Index (CPI) is forecast to slow down to 1 percent in June from an increase of 2.32 percent in May, increasing 13 percent from December 2010 and 20 percent year-on-year

Vietnam Consumer Price Index (CPI) is forecast to slow down to 1 percent in June from an increase of 2.32 percent in May, increasing 13 percent from December 2010 and 20 percent year-on-year,the local newswire NDHMoney predicted on June 14.

The analysts show that the prices of essential goods including food and food stuff have declined from May, especially goods pressuring on the price level such as meat, seafood, vegetable.

The domestic industrial output and inventory increased by 3.9 percent on-month in May that likely to make the price level hard to accelerate in the near future. The prices of gas are in downward trend and the affects of the electricity, fuel prices hikes as in the recent months dropped significantly.

Earlier, the Ministry of Industry and Trade has said no to the proposal to raise electricity price by the Electricity of Vietnam.

The Ministry of Finance (MoF) announced that Vietnam fuel firms have to keep the retail prices unchanged and raise fuel stabilisation fund by 100 dong per litre of petrol, effective from June 10. Also, the diesel and kerosene are taxed by 5 percent each from 0 percent, the online newspaper VnExpress reported on June 9, citing the MoF.

The Price Management Department under the Ministry of Finance predicted that Vietnam June CPI will rise by between 0.7 percent-0.8 percent from May.

Deepak Mishra, Chief Economist of World Bank, forecast that Vietnam 2011 inflation will be around 15 percent after peaking at 22 percent in June.





Vietnam's trade gap still widens despite export increase

Tuoi Tre



Although the country's exports have made remarkable progress, the danger of the ballooning trade deficit is still threatening Vietnam, experts said at a conference on the trade policy for the stable development of Vietnam held Tuesday by the Ministry of Industry and Trade.

Many speakers said that because the domestic industries still need to import raw materials and machinery for their production before they can export, the trade gap would not stop if there is not a timely solution and policy from the government.

Dr Dinh Van Thanh, associate professor and head of the Vietnam Institute for Trade (VNIT), said the target to narrow the trade gap is a tough thing to achieve.

In 2001, the trade deficit was at 7.9 percent, but the number climbed to 17.5 percent last year, he said.

Dr Tran Cong Sach, deputy head of VNIT, said Vietnam has not made good use of its participation in over 85 trade agreements and seven free trade agreements (FTA).

He said the Vietnamese market share in China was 0.54 percent in 2004 and was 0.49 percent in 2010, seven years after joining the FTA Asean - China agreement.

Meanwhile, the Chinese market share in Vietnam has been rising, climbing from 14.3 percent in 2004 to 23.8 percent in 2010, becoming the largest foreign market shareholder in Vietnam.

Le Quang Lan, deputy head of the Department for Multilateral Trade Policies under the trade ministry, said only 12 percent of Vietnamese goods exported to Asean countries get the tax benefit agreed to in the FTAs Vietnam joined.

He added that the statistics are varied amongst countries, as the number of Vietnamese goods that have tax advantages in Korea is 78 percent, while it is only 28 percent in China.

Dr Tran Cong Sach said the cost to manufacture export goods for Vietnam is 1.7 times higher than the average in neighbouring countries.

Most of Vietnam's neighbours only need $500 to make a container, while Vietnam needs up to $700 for the same product, he said.

Vietnam is now an export processing country as the domestic industries have a great reliance on imported raw materials and machinery for their export production.

"This will lead Vietnam to the context that the increase of export could also widen the trade gap," Dr Le Quoc Phuong from the Ministry of Plans and Investment, said.

Associate professor Nguyen Van Nam, a former member of the prime minister's research board, suggested the government encourage domestic industries to manufacture the 20 major groups of imported products to reduce imports and narrow the trade gap.

Former deputy prime minister Vu Khoan also suggested the government restructure the economy to improve the trade deficit.





RESOURCES – Vietnam’s Petrolimex sets ipo for July

Reuters



Petrolimex, Vietnam’s top oil importer and distributor, is preparing an initial public offering (IPO) for July, state media quoted Vuong Thai Dung, the company’s deputy general director, as saying on Wednesday.

The IPO was approved in late May. The firm has said it would offer 27.43 million shares, or 2.56 percent of its registered capital of 10.7 trillion dong. The state will retain a 94.99 percent stake after the sale.

The online news website VNExpress (vnexress.net) said Petrolimex officials expressed confidence the IPO would attract investors despite the weakness of domestic stock markets in recent months.

Petrolimex, also known as the Vietnam National Petroleum Corporation, has around half of the domestic fuel and oil products market.

Vietnam imported 5.14 million tonnes of oil products between January and May, down 6.9 percent from a year before, government data shows.



Gas-cylinder fraud becomes rampant

VNS



Dozens of cases of illegal gas trading uncovered in recent months in HCM City have been caused by authorities’ poor management, industry insiders said.

A preliminary estimate by the Southern Gas Association showed that city authorities fined dozens of illegal gas traders from February 20 to May 20, seizing thousands of gas tanks with fake logos of established gas traders.

Le Thi Anh Man, chairwoman of the Southern Gas Association, said no measures had been taken to address rampant illegal gas companies.

Most of the shops that illegally produce these gas tanks cannot be traced.

Although random inspections conducted on city streets can at times discover vehicles transporting these tanks, they represent only a small percentage of the huge volume of illegally traded tanks, Man said.

She said illegal gas filling had led to a decline in the output of legal, registered gas traders.

No sign of abating

Nguyen Sy Thang, chairman of the Viet Nam Gas Association, said that the Decree on Gas Market Management had clearly specified responsibilities of agencies and sectors from central to grassroots levels.

But trade fraud remained popular and showed no signs of abating, he said, adding that administrative fines of a few million dong were not heavy enough to crack down on illegal gas traders that could earn big profits.

Ha Van Loc, business director of Vimexco Gas Company, said that fake and illegal gas products had been a headache for registered gas traders, who could hardly compete with the former in terms of price.

He said Vimexco had to cut as much as 20 per cent of its output in May. There have been many customer complaints about fraud. One customer on Mac Dinh Chi Street in District 1 called the Quang Vinh gas distribution agent in Binh Thanh District, complaining that her family’s 12kg gas cylinder weighed only 4.2kg after three days of use.

Another client in District 9 said she bought a 12-kg gas tank in the morning and the weight fell to 6kg in the afternoon.

But Nguyen Quang Vinh, owner of the Quang Vinh gas agent, said his agent had never distributed gas to these customers.

The customers said they realised they had been deceived after Quang Vinh staff offered explanations at their home.

The two customers said they had bought the gas tanks based on a telephone number printed on the flyer of Hoa Binh Minh gas agent.

But they could not locate where the Hoa Binh Minh gas agent was given the flyer which only displayed the telephone number for delivery without an address.

Customers angry

Many other customers showed their anger as they had bought underweight gas tanks, but did not know how to file complaints.

Registered, legitimate gas traders said they had incurred major losses, up to 50 per cent of market share, because of fake and underweight gas tanks.

Nguyen Sy Thang, chairman of the Viet Nam Gas Association, said that to stabilise the gas market, relevant authorities should fulfil their monitoring responsibilities, and gas agents and distributors must adhere to regulations on gas trading.

He said consumers should be aware of buying registered gas tanks with clear brandnames and not buy cheap ones to prevent the circulation of illgal and fake gas products.

Many gas traders are awaiting a Government draft decree that will set heavy administrative fines for illegal gas traders.





Vinacomin to import coal to meet demand

Vietbiz24



With the limited coal reverse in Dong Bac (North East) basin, Vietnam Coal and Mineral Group (Vinacomin) expectes that it could not meet the domestic coal demand by 2015, for which it will be forced to import about 6 million tonnes of black gold a year.

In Red River basin, the trial mining will be only conducted from 2018 at the earliest. Therefore, coal import to balance domestic demand is going to be for sure.

Reportedly, the first shipment of 9,500 tonnes of coal from Indonesia arrived in Cat Lai port (Dong Nai province), imported by Dong Bac Coal-Mineral Investment Joint Stock Co (under Dong Bac Coal Mineral Corp) on June 13. This was seen as the first coal shipment opening the following shipments of Vinacomin this year.

Deputy general director of Vinacomin, Nguyen Van Bien said that the first shipment will be used to feed the bauxite refiner in Bao Loc (Lam Dong highland province). Dong Bac Coal-Mineral Investment Joint Stock Co was appointed to discuss the entire import plan with Indonesian partner to ensure the long term coal supply with competitive price.

Currently, with the coal import price from Indonesia in addition to transportation costs, the supply to thermo power plants in the central and southern regions will be more economic compared with mining and transport costs from northern ores, he added. Factually, Vincomin proposed the government to use mainly imported coal source for Power Planning 7 of coal-fed thermo power plants in the southern region.

Vinacomin signed a principle agreement with some long term coal importers namely Indonesia, Australia...In his point of view, until 2015, the group will have to import 5.8 million tonnes for electricity production.

Ministry of Industry and Trade said it was completing the country's coal sector development planning to 2020 and vision to 2030. Also, the Power Planning 7 has been under the prime minister's consideration.

In the end of Q1 of 2011, the ministry predicted that Vietnam needs to import about 7.7 million tonnes of coal by 2015 for electricity production and in the period from 2011 to 2015, the coal export will reduce from 17 million tonnes (estimated in 2011) to 3-4 million tonnes in 2015. Bien also confirmed that Vinacomin will only export 16.5 million tonnes within this year, against 17.8 million tonnes exported last year, and 3 million tonnes by 2015.

Minister Vu Huy Hoang gave two reasons that's why Vincomin still recommended to export three million tonnes of coal in 2015 while importing 5-6 million tonnes as mentioned above. Firstly, coal volume that Vinacomin exported for years was mainly kinds of non-demanded or low-quality domestic coals. Secondly, coal price for domestic consumers has been equal to only 60 percent of the production costs.

From March 1, 2011, electricity price was adjusted up 15.28 percent whereas coal selling price to electricity producers was increased only 5 percent. In order to ensure financial balance, Vinacomin now still takes turnover from exports to offset domestic coal prices. Nguyen Thanh Bien remarked, from now to 2015, the group needs to invest $3 billion (15 trillion dong per year) to upgrade current ores and develop new ones with a view to increase mining output.





CONSTRUCTION - Construction projects stagnant, investors incur loss, worker lose jobs

Lao dong



The difficulties in accessing capital has caused thousands of construction projects to become stagnant. As a result, construction materials remain unsalable; project developers incur losses, while workers become jobless.

A vicious circle now can be seen on the market: despite the low demand, construction materials still keep rising in prices due to the increasing input costs, which has made real estate developers hesitant to implement projects.

Prices up, demand down

Binh, a well-known private construction contractor in Van Quan new urban area, complained that he has not got any orders since the beginning of the year, even though the construction season began one month ago.

In previous years, he always got enough orders to ensure stable jobs for him and tens of workers for the whole year, though the construction works were just small, worth hundreds of millions of dong. The number of orders was so big that right after finishing a construction work, he has to start another immediately.

However, things are quite different now. As Binh has not gotten any orders, he has to lay off many workers, though he fears that he will not be able to find such skilled workers in the future, when he gets orders.

Not only small contractors, but big contractors are also facing the lack of jobs. Many construction projects have been delayed or postponed due to the lack of capital, which has made contractors become half dead.

The Ministry of Transport has decided to postpone 70 big projects capitalized at 1400 billion dong, as a part of the program to cut down public investments to help curb inflation. As a result, many construction companies under the ministry have to lay off workers, while construction material producers cannot sell products, even in the construction season.

In principle, when the demand is low, construction material producers need to slash sale prices to stimulate the demand. However, in reality, producers have been rushing to raise the sale prices. Hien, the owner of a construction material sales agent on Nguyen Khuyen street of Ha Dong district, said that the Bim Son brand cement has increased by 400,000 dong per ton in price in comparison with that before Tet. The brick prices have increased by 500 dong. The steel price has also increased, though with slighter increases.

What to do?

The construction material prices have been increasing steadily, while banks have closed their doors to real estate developers; therefore, many state budget funded projects and private construction works cannot be implemented. A lot of individuals planned to build houses this year, but they have to delay the plan, hoping the prices would go down in some days.

According to the Vietnam Steel Association VSA, the production capacity of the member companies is at 900,000 tons per year, while the consumption level is just a half of that.

The Vietnam Cement Association has also reported that in the first two months of the year, only 6.2 million tons of products was sold, lower than the 7 million ton level sold at the same period of the last year. The low demand on the market has made it difficult for producers to sell products, especially the ones with the capacity of 100,000 tons a year.

When asked why producers do not lower sale prices to boost sales, they said that if they do this, they will incur losses, because the turnover will not be high enough to cover the input costs which have been increasing dramatically.

Meanwhile, if selling at high prices, producers can avoid losses, even though the sales go slowly. Many producers have to scale down the production, but this cannot save them, because they still have to pay wages and other regular expenses. Therefore, they still have not found a way out in the current circumstances.





Local builders good enough for key projects, expert says

SGGP



Despite the strong development of Vietnam’s construction, foreign builders are still in charge of most major construction projects as local firms do not have advantageous terms from the contract negotiation, said Dr. Vu Khoa, chairman of the Vietnam Association of Construction Contractors. Dau Tu Tai Chinh Newspaper has interviewed Khoa to find out Vietnamese contractors’ weaknesses.

Dau Tu Tai Chinh Newspaper: How is the actual capacity of Vietnam’s construction firms?

Dr. Vu Khoa: Vietnam’s construction sector has grown strongly in the last 25 years. Earlier we had to hire foreign construction experts to consult us about works on big projects, including the cement factory Bim Son and hydropower plant Song Da.

Now local builders, such as Licogi, Vinaconex, Cofico and Song Da, are main managers of many complicated projects including hydropower plants and traffic infrastructure.

Construction giant Lilama is an EPC contractor of projects on large hydropower and thermal power plants with an output of 750-1,200 Megawatts. [EPC stands for engineer, procure, construct. Such as contractor typically does the whole project from start to finish]

Therefore, I can say that the Vietnamese builders are skillful and have strong financial base and advanced techniques.

But most of crucial projects have been carried out by foreign firms. Why?

This is a fact that the Vietnam Association of Construction Contractors cares the most and we will hold a conference entitled “Vietnam’s construction contractors – How to win contracts” in Hanoi next week.

Local firms are good enough for large construction projects, except of ODA-funded ones which require contractors from the countries providing the funds.

At the conference, we will focus on discussing the process of negotiating contracts’ terms in order to find out the reason why the Vietnamese builders remain subcontractors of the country’s crucial projects.

Some experts said local builders’ management capacity was still weak for key projects. That’s the reason why they were not contractors of those projects. What do you think about that comment?

I think it is fair to say that Vietnam’s builders are not good enough for some new projects including the oil refinery Dung Quat.

However, foreign firms actually offered consultancy works to local builders, who were in charge of construction.

I believe that with experiences gaining from foreign firms, the Vietnamese builders will be soon capable of building construction projects, which have high requirements of scale and technology.

Some local constructions giants with strong financial base remain subcontractors of large projects due to the agreements between investors, relevant governmental units and contractors.

What are the biggest weaknesses of the Vietnamese construction contractors?

We lack a competition between local firms at the home ground. Local builders should try to train skillful human resources and to equip advanced technologies in order to boost their quality and brand name.

The government should assign local firms only to the construction projects that are funded by the government’s budget.

We also need to be sharp during the negotiation process of foreign contracts in an effort to avoid the requirement of choosing contractors.





ENERGY – Vietnam aims to cut greenhouse gases

VOV



Vietnam is set to phase out 100 per cent of hydro-chlorofluorocarbons (HCFC) substances by 2040 under a national programme launched in HCM City on June 14.

Speaking at the 2011 Meeting of SEAP Network of Ozone Officers, Nguyen Khac Hieu of the Ministry of Natural Resources and Environment said Vietnam already completed the phase-out of CFC in early 2010 and is starting its HCFC phase-out.

Hieu, deputy director of the ministry’s Department of Meteorology, Hydrology and Climate Change, said the Montreal Protocol’s multilateral fund has agreed to fund US$10 million for the first stage of the programme.

The programme will follow a roadmap to reduce 10 percent of HCFC use in 2013 and 32 percent in 2015. The country had 3,700 tonnes of HCFC substances by 2010.

Luong Duc Khoa from the department said the phase-out is scheduled for completion in 2040. “But if we can mobilise a fund of around US$200 million, we can complete the phase-out by 2025,” he said.

As coordinator of the global Ozone Protection Programme in Vietnam, Khoa said the country is the first in Southeast Asia to start the HCFC phase-out substances. He called for companies using HCFC substances to use new technology for the use of non-HCFC substances.

Three HCFC substances, including HCFC22, HCFC23 and HCFC141B, are used in air conditioning systems, sponge production and cold warehouses in Vietnam.

12 companies involved in the programme will receive funding and consultation to eliminate the use of HCFC. By 2015, no HCFC141B will be used in the country, according to Khoa.

The Ministry of Natural Resources and Environment will use a quota for import of HCFC141B this year and ban the import by 2013.





Low import tariffs drive electronics manufacturers to a standstill

TienPhong



The import tariff decreases have prompted foreign electronics manufacturers in Vietnam to narrow their production and shift to become distributors. Meanwhile, domestic electronics manufacturers have been pushed against the wall.

Foreign products invading domestic market

According to director of the Thien Hoa home appliance distribution chain Bui Tan Cuong, domestically made electronics once made up 70-80 percent of the total sales of the chain. However, the proportion has been halved. Meanwhile, the sales of import TVs have increased from 30 percent to 60 percent.

Similarly, foreign made air conditioners and washing machines account for more than 50 percent of the market share. Especially, household articles account for 80 percent; and digital equipments 100 percent.

Distributors all say that the lower import tariffs are the main reason which has led to the sharp increases of electronics imports. Vietnam has been cutting the import tariffs in accordance with the tax cut roadmap within the framework of the Asean Free Trade Agreement FTA.

The import tariffs have dropped to five percent on average, and they are expected to decrease further in the coming years. Vietnam plans to cut the import tariffs by 1-6 percent on 1000 electronic products.

Therefore, instead of investing money to set up production factories in Vietnam, foreign invested enterprises have shifted to import products and provide to domestic retailers.

Following Sony, which shut down its production in 2008, other foreign invested enterprises have also shifted to import and distribute instead of manufacturing and assembling. A representative from Toshiba Vietnam said the company stopped assembling LCD screens in 2010 and it has begun importing the products. Meanwhile, JVC Vietnam has also halted its production.

Meanwhile, the recent dollar price decreases have prompted enterprises to import electronics in big quantities.

The electronics imports with high quality and reasonable prices have pushed Vietnamese electronics manufacturers against the wall.

A manager of an enterprise revealed that the sales of the company in the first six months of the year is just equal to 56 percent of that of the same period of the last year. "We would fail to fulfill the business plan in 2011," he said.

Stopping production, selling assets

Since the production scale of foreign electronics groups is much bigger than that of Vietnamese enterprises, it is understandable why the production costs of foreign products are always lower by 5-7 percent than domestic products. Unable to compete with foreign products, domestic manufacturers have to narrow production and focus on making the products which are not the direct rivals of imports.

A senior executive of Vietronics, Tan Binh VTB said that the company now focuses on developing two main products, including karaoke player and refrigerator assembling. VTB develops karaoke player with the software developed by the company itself. This is the product which can bring big profits to the company.

As for refrigerators, Vietnam assembled products remain competitive, because the products are cumbersome which always take high transportation expenses, thus making the sale prices 5-7 percent more expensive than domestic products.

The executive said that a lot of domestic electronics manufacturers have to halt production; sell parts of assets to get money to deposit at banks. Some companies have been earning their living by leasing workshop premises to foreigners. Especially, some manufacturers now have to make low cost products to sell in remote and rural areas.

Nguyen Huu Thinh, former director of Viettronimex, also said that domestic enterprises are getting exhausted. In HCM City, the enterprises, which have premises in the inner city, have turned the premises into real estate projects which can bring money to them.

According to the general Department of Customs (GDC), by mid May 2011, the total import turnover of electronics, informatics and home appliances had reached two billion dollars. In the first four months of the year, the import turnover of the products was 1.76 billion dollars.





Over $970m thermo power plant project for Nhon Hoi EZ

Vietnambusiness asia



The investor worked with Binh Dinh provincial People’s Committee to prepare for a project to build a 700 MW thermo power plant in Nhon Hoi Economic Zone (EZ).



Previously, Thailand-based STFE Ltd Co and Khang Thong Service Construction Investment Joint Stock Co planned to build the 700 MW thermo power plant in the duty free area in Nhon Hoi EZ. The 100 hectare project has a total investment of about $972 million.

The construction on the project was expected to last from 2012 to 2014.





Two more hydropower plants join national grid

Vietnambusiness asia



Two more hydropower plants have joined national grid. These plants would add about 1.3 billion kWh of electricity output for Electricity of Vietnam (EVN) each year.

EVN has recently said that the first generator of An Khe-Ka Nak hydropower plant successfully joined the national grid on June 11.

Previously, in the morning of the same day (June 11), the second generator (with a capacity of 90MW) of Dong Nai 3 hydropower plant also joined the national grid successfully, making a meaningful contribution in ensuring the electricity supply during this rush dry season.

An Khe-Ka Nak hydropower plant has an estimated capacity of 173 MW with an average electricity output of 701.5 million kWh yearly.

Dong Nai 3 hydropower plant also invested by EVN is one of four existing projects on Dong Nai River including Dai Ninh, Srok Phu Mieng, Dong Nai 3 and Dong Nai 4. The plant with two generators with a total designed capacity of 180 MW will provide an average electricity output of 607 million kWh per year.





LEGAL NEWS - MOF proposes to defer and lower personal, corporate and dividend income tax

Stoxplus



The Ministry of Finance (MoF) has proposed to the government to defer and cut down the personal imcome tax, corporate tax and dividend income tax, the online newspaper Tuoitre reported on June 16.

The dividend income tax of 5 percent( 200-300 billion dong) is proposed to remove from this August amid the stock market has tumbled recently.

The government asks for the MoF to cut down corporate tax by between 20 percent-30 percent (or 2000-3,000 billion dong)on broader objects, especially small and medium enterprises (SMEs) using lots of labours in fields including manufacturing, outsourcing, processing, textile and garment, etc.

Ealier, the prime minister of Vietnam agreed to to defer the corporate tax of 7,000 dong on SMEs in order to stimulate enterprises as the lending rate currently stays high.

The corporate tax will be cut down by 50 percent if the enterprises keep the meal prices as December 2010.

Also, the personal income tax is urgently asked for adjustment.

All solutions will be summited to the National Assembly in July.





MOF plans to amend tax laws to fight against price transfer

Vietnamnet



Besides a series of newly issued documents on defining the values of goods, the Ministry of Finance (MOF) says it is considering amending the law on tax management in an effort to combat with the behaviors of "price transfer".

"Price transfer" is a term used to talk about the behavior that aims to evaluate financial performance of different business units (profit centers) of a conglomerate, and/or to shift earnings from a high tax jurisdiction to a low-tax one. generally, the price transfer is carried out when businesses want to evade tax.

Price transfer cases found in Vietnam

A lot of price transfer cases have been found and punished in Vietnam, including the case of 17 foreign invested enterprises which produce and trade tea in Lam Dong province.

The audited finance reports and tax finalisation reports of the 17 enterprises showed that the tea export volume in 2009 was 1522 tonnes which brought the turnover of 105 billion dong. The export prices were between 2.8 dollars and 4 dollars per kilo of tea, which was believed the reason behind the loss of 63.68 billion dong in 2009, and the accumulative loss of 317 billion dong by December 31, 2009.

Especially, the reported losses of some enterprises had been equal to their investment capital or had exceeded the investment capital.

However, the Lam Dong province Taxation Agency found out that with the fresh tender tea leave price at 35,000 dong per kilo, and the fixed production rate (5 kilos of fresh tea can make one kilo of O Long brand finished product), the material cost would be 175,000 dong per kilo. Meanwhile, the average export price was too low at 64,850 dong per kilo.

The Lam Dong province taxation body, after carrying out a series of other measures to clarify the issue, came to a conclusion that it found the practice of price transfer at the 17 enterprises and asked the enterprises to pay corporate income tax.

MOF has also made public the list of 82 enterprises subject to tax inspections due to the abnormal signs in profits in 2010. These include both foreign invested enterprises and Vietnamese enterprises. The enterprises named in the list of enterprises to be inspected are the ones which take losses in the last three consecutive years, or the losses have exceeded the investment capital.

Legal framework not powerful enough

Experts believe that price transfer deals have still been carried out in Vietnam partially because the legal framework is not powerful enough, though the currently applied tax management law stipulates that taxation bodies have the right to set up the tax sums enterprises have to pay, in case they find out that enterprises trade goods and post prices at the levels not in accordance with the popular market prices.

MOF has issued the Circular No 66 guiding taxation bodies to define the values of goods, showing five measures to define the market prices. The circular is believed to help tax officers find out the behavior of price transfer.

Especially, the ministry is considering amending the tax management law, while setting additional provisions to treat tax frauds and price transfer. It is expected that the amended law would be submitted to the National Assembly for ratification at the session in May of 2012.

One of the most important measures to be suggested is that taxation bodies would have the right to fix the tax sums on turnover, when they find out that enterprises make wrong tax declarations. When discovering the signs of price transfer, taxation bodies will have to prove the behavior of price transfer of enterprises and impose the tax sums.





Workers' medical allowance becomes tax-free

VnExpress



Workers' medical expenses paid by their employers will no longer be taxable, a circular issued by the Ministry of Finance has said.

It will apply only for the diagnosis and treatment of serious illnesses, but will cover workers' close relatives like parents, spouse, and children.

The regulation takes effect July 23.