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INVESTMENT – Vietnam tries to attract more FDI from Japan
The Saigon Times Daily
Local agencies are rushing to develop investment promotion programmes aimed at attracting foreign direct investment (FDI) from Japan as instructed by the prime minister, said a Ministry of Planning and Investment official.
Do Nhat Hoang, director general of the ministry's Foreign Investment Agency, told a press conference in Hanoi on Tuesday that several programmes in collaboration with Japanese partners have been put on the agenda.
The press conference was held to brief reporters of the conference titled "Japan's Recovery Scenarios - The Outbound Investment Trends" that would be held in Hanoi next month by the ministry and Japan's Nikkei newspaper.
Hoang told reporters that the conference and other forthcoming events were "programmes to be launched at the instruction of the prime minister."
The conference next month will have the participation of about 300 Japan-based enterprises and discuss investment opportunities in Vietnam.
The Ministry of Planning and Investment will also organise another conference in association with the Japan Business Federation, commonly known as Keidanren, on Vietnam's supporting industries in Tokyo, Hoang said. Currently, deputy minister Dang Huy Dong is in Tokyo to discuss the organising of conferences on investment in Vietnam's infrastructure projects under the public-private partnership.
Besides, some other localities have also prepared road shows to attract Japanese investors.
The HCM City government, for example, will organise an investment promotion trip to Tokyo in September or October, while Dong Nai Province would also schedule a conference next Friday to attract investment from Japan, Hoang said.
January-July FDI disbursement of Japan's projects in Vietnam dropped to $720 million from $1.3 billion of the same period last year, said the Foreign Investment Agency's head.
The Nikkei newspaper said many Japan-based enterprises wanted to invest overseas after their country was hit by the earthquake and tsunami last March. Besides, when considering investment opportunities in Vietnam, Japan would not take the unstable economy serious as inflation was a global issue.
HCM City, Delta show opportunities to investors
saigon-gpdaily
Investor when thinking of putting money into Vietnam's Mekong Delta should give top priorities to fisheries, then agriculture and forestry,Agriculture deputy minister Luong Le Phuong told an investment promotion conference in HCM City Tuesday
Phuong was addressing as a key speaker at the conference, held to introduce to both local and foreign investors potentials and advantages of HCM City and the 13 Mekong provinces.
The provinces are Ca Mau, An Giang,, Long An, Ben Tre, Dong Thap, Soc Trang, Bac Lieu, Hau Giang, Tra Vinh, Can Tho City, Kien Giang, Tien Giang, and Vinh Long.
The investment promotion conference, which saw more than 500 delegates, is part of the Mekong Delta Economic Cooperation-Ca Mau 2011 Forum.
Deputy minister Phuong said among fisheries, agriculture and forestry, the first one is the fastest profit-making area.
The sector includes catching fish and aquaculture, as well as processing aqua-products for export, he added.
The delta has seen its total aquaculture acreage increase from 233,500 hectares in 2000 to 746,000 hectares last year, with output soaring from 444,000 tonnes in 2001 to 1.94 million tonnes in 2011, said Phuong.
According to him, Vietnam houses more than 500 aqua-product processing factories. Of them, 330 have been put into the European Union-accepted list, and more than 70 percent of the EU-accepted factories are located in the Mekong Delta.
Vietnam's prime minister Nguyen Tan Dung established in March 2010 the Mekong Delta Economic Cooperation, or MDEC, to further support the whole region's development. MDEC-Ca Mau 2011 is part of MDEC.
The delta region contributes over half of the country's rice output, 90 per cent of rice export, 65 per cent of fisheries production and 70 per cent of fruit, according to the MDEC Secretariat.
In introduction, the secretariat says HCM City and the Mekong Delta hold lots of advantages for agriculture (agriculture, fisheries and forestry) and marine economy. The two regions are endowed with a convenient network of transportation that includes roads, air routes and waterways.
HCM City and the 13 provinces cover nearly 4.3 million square km, making up 13 percent of Vietnam's area.
The delta has about 2.63 million hectares of farmland, including 1.9 million ha fore rice, almost 576,000 ha for fruits and over 746,000 ha for aquaculture, according to the secretariat.
During the full-day conference in HCM City, investment promotion officials from all the 13 delta provinces displayed their economic potentials and advantages at a sideline show.
The delta has a total of 151 industrial parks. Can Tho City and the provinces of Long An and Kien Giang have attracted more investment capital from HCM City than others, the secretariat says.
Long An, which borders HCM City, has attracted from the city 420 projects worth more than VND60 trillion (US$2.9 billion) since 2000.
Kien Giang has received 103 projects worth VND88 trillion ($4.2 billion) over the past five years.
Can Tho City, the Delta's hub, reports it has attracted 61 investment projects worth VND23 trillion (US$1.1 billion) over the past 10 years. Most projects are in tourism, infrastructure development and retailing.
The investment promotion conference called for capital into such fields as high-tech agriculture; processing and preservation of post-harvest agricultural products; trade; infrastructure; agricultural services; development of material zones; and other agricultural activities.
Speaking at a meeting held Monday to review economic development cooperation between HCM City and the Delta, city chair Le Hoang Quan said the metropolitan government has actively promoted the Delta's business opportunities to foreign and local investors.
He said the city has worked with several sectors, including infrastructure development, environmental protection, healthcare, hydropower development and others.
After the investment conference, a workshop on policies for regional links will be held in Ca Mau in October, followed by a MDEC-Ca Mau CEO Conference also that month in the province.
October will also see a conference on promoting the delta's development and an International Economic Cooperation for the Mekong Delta, both in Ca Mau.
In addition, the province will host the Leaders Conference on MDEC-Ca Mau 2011 in the same month.
INFRASTRUCTURE - Japan, US agencies to sponsor major projects
BusinessAsia
The Japan International Cooperation Agency (JICA) and the US Agency for International Development (USAID) have agreed to jointly sponsor infrastructure development projects in Vietnam and other Southeast Asian Countries.
The Japan International Cooperation Agency (JICA) and the US Agency for International Development (USAID) have agreed to jointly sponsor infrastructure development projects in Vietnam and other Southeast Asian Countries under the public-private partnership (PPP) model.
JICA and USAID expect to implement their first project in Vietnam and are next year scheduled to propose a plan to the Vietnamese Government, to establish a new investment fund.
JICA plans to set up a fund worth 400-500 million USD in March 2012 for PPP projects and contribute to the fund with investments or loans.
USAID will guarantee half of the value of projects’ loans and seek cooperation from Vietnamese and US financial organisations.
The projects of the two agencies’ cooperative strategy include power plants and other energy establishments, information and telecommunications, roads, traffic and sewerage and water supply systems./.
Foreign firms now opt for imports over production
VIR
For example, UK-backed oil and gas maker Castrol BP Petco Company and French-backed tyre maker Michelin Group supplemented business codes to boost imports.
Swedish-backed Tetra Pak, the world’s leading food processing and packaging company, and Japanese-backed Panasonic AVC Vietnam have all stepped up importation business arms in Vietnam.
Meanwhile, South Korean-backed Samsung Vina supplemented its business codes to boost distribution in Vietnam.
The list also includes Japanese-owned electronics firms like Sony, Toshiba, Sanyo, Sharp, Hitachi and South Korean-backed Kumho Tire which have also been approved to import electronic products and tyres and then sell directly in Vietnam.
Yuzo Otsuki, general director of Sony Vietnam which disbanded its joint venture with locally-owned Tan Binh Electronics Company late last year to focus on importing electronic products into Vietnam, said: “The company’s business grew by 60 per cent in 2010 and is expected to continue growing at the same rate this year, with many new [imported] products marketed in Vietnam.”
Dao Ngoc Hoang Giang, general director of Ho Chi Minh City-based Sao Mai Office Equipment Joint Stock Company under locally-owned Sao Mai Group specialised in importing office equipment, said many FIEs like Japanese-backed Fuji Xerox and Sharp had applied for permission to wholesale and retail their imported products in Vietnam.
Mochizuki Kentaro, chairman of Sanyo HA Asean Corporation, said previously, firms were slapped an average import tax level of 50 per cent when they imported goods into Vietnam. When Vietnam joined the ASEAN Free Trade Agreement in 1995, the tax level was reduced to 20 per cent and then 5 per cent as is the case now. The reduction meant that investors would choose to become importers, not manufacturers.
Vietnam Customs reported that the foreign direct investment sector’s total import turnover in the year’s first six months was $27.5 billion, up 23 per cent against last year’s corresponding period.
Before Vietnam joined the WTO, FIEs enjoyed various priorities on the understanding that they invested into manufacturing in Vietnam to generate employment. They were allowed to import goods to serve their manufacturing in the country, not to directly trade and distribute them in this domestic market.
However, when Vietnam became a full WTO member, many FIEs took advantage of the distribution rights to import goods from their overseas companies and then resell them in Vietnam.
For example, with current import tariffs of 3-20 per cent for electronic components, and 5 per cent for completely-built electronic goods, electronics firms have chosen to become importers.
An expert from Thanh Hoa Provincial Department of Planning and Investment’s International Relations Division said with fewer employees and curtailed costs of manufacturing and land leasing, “it is clear that importing is more profitable than manufacturing.”
Deputy Minister of Industry and Trade Nguyen Thanh Bien said the Vietnamese government targeted to lure foreign direct investment into manufacturing sector, not in non-production sectors.
“It will need more time to revise all related regulations governing FIEs’ operations in Vietnam,” he said.
TRADE – GOOD NEWS - Most EU states want to terminate Vietnam shoe duties
Reuters
The European Commission is expected to decide in September whether to propose extending dumping duties on imports of leather shoes from Vietnam, but most EU states want them scrapped, EU sources said.
Last October, the Commission which oversees trade policy for the 27- country European Union extended duties of up to 10 percent on Vietnamese leather shoes and 16.5 percent on those made in China, pending a review.
A majority of EU countries had opposed that move.
Industry and diplomatic sources with knowledge of the case told Reuters last Friday they expected Brussels to complete its review and submit its proposal for approval by member states by the end of September.
The Commissions proposal is expected to be submitted to member states in September. But as it stands the majority, or at least 15 member states, favor termination, one source said.
Britain, Austria, Belgium, the Czech Republic, Cyprus, Denmark, Estonia, Finland, Germany, Ireland, Latvia, Luxembourg, Malta, the Netherlands and Sweden want the duties scrapped immediately, before the lucrative Christmas retail period, an EU diplomat said.
Major shoe-producing countries like Italy, Spain, France and Poland are all leading the charge to keep the duties, the diplomat added.
EU is the largest market for Vietnamese leather shoes and Vietnam is also the second biggest exporter of the products to EU, after China.
Last year the bloc imported US$2.5 billion worth of leather shoes from Vietnam, up 33.9 percent from 2006, figures from the Vietnam Leather and Footwear Association show.
The Ministry of Industry and Trade has asked local footwear exporters to strengthen their sales to EU as the demand for footwear imports of the bloc is expected to increase by 5.3 percent this year.
Vietnams total footwear exports in the first half this year dropped by 8.8 percent to $2 billion compared to the same period last year. However, the Vietnam Leather and Footwear Association noted that export figures have already improved since the second quarter.
EU split
The EU regularly splits over dumping cases between its member countries supporting freer trade and those worried about competition against their own manufacturers.
The shoe duties were introduced in 2006 only after a compromise deal to keep them in place for just two years, instead of the usual five. If extended again, Commission sources say the duties would last at least five years.
But the industry and diplomatic sources said a compromise being considered by EU Trade Commissioner Catherine Ashton a Briton would allow the duties to lapse once they expire on January 3.
This would give certainty either way to EU importers before the busy Christmas period and at the same time allow EU producers the time to adapt and plan against cheaper imports from Asia, another source said.
European retailers and global shoemakers, led by sports shoe producers such as Adidas, Asics, Nike and Puma want the shoe taxes axed given the gloomy economic outlook and dwindling consumer spending in Europe caused by the worst financial crisis in about 80 years.
But European manufacturers say they are unable to compete against low-cost producers in China and Vietnam and accuse those Asian governments of giving unfair subsidies that lower costs.
A review can take between 12 and 15 months, but the Commission had said it hoped to complete its work more quickly. It said it could reimburse the extra tariffs imposed during the review should it be proven that the duties were unnecessary.
If we get a termination, that will be enough. We are not going to try and make life any harder for ourselves and threaten the Commission, a representative from an EU importer said.
FIE losses turn to profits
VIR
The alarming tax evasion trend in foreign-invested enterprises is easing.
Nguyen Trong Hanh, deputy director of Ho Chi Minh City Department of Taxation, said while 60 per cent of foreign invested enterprises (FIEs) operating in the city had reported losses for many years, in the first seven months of 2011, 30-40 per cent of these enterprises reported profits.
The city’s tax collection reached 67 per cent of its annual plan of VND110.4 trillion ($5.3 billion) for this year and increased by 23 per cent compared to the same period last year.
Hanh said the department had worked with about 40 FIEs and found “fake loss” situations at most of the enterprises.
“After being inspected, most of these enterprises’ financial reports showed profits. Especially, an enterprise reported a profit of more than VND100 billion ($4.8 million) after reporting losses for 10 consecutive years,” he added.
It was a similar story at 17 FIEs who produced and traded tea in Lam Dong province. For the past 10 years, the Lam Dong Department of Taxation did not collect any corporate income tax (CIT) from these enterprises who reported losses for consecutive years.
However, Lam Dong Department of Taxation deputy head Phan Thi Vinh said after inspections, many FIEs admitted the” fake loss” situation by transfer pricing.
“After establishing that these enterprises made profits since 2005, the department collected tax arrears with the collected tax of VND8 billion ($386,473) because these enterprises still enjoyed a 50 per cent CIT tax reduction rate in accordance with Vietnam’s preferential tax policy for FIEs,” said Vinh.
According to a General Department of Taxation (GDT) report for the first half of 2011, it treated 107 FIEs as having reported fake losses for three consecutive years from 2008-2010 with tax arrears collection of VND2,230 billion ($107 million).
As planned this year, the GDT entrusted 63 local departments to inspect 870 FIEs which showed transfer pricing signals or reported losses for three consecutive years. The GDT’s Inspectorate will check 40 FIEs and 82 other units in a supplemented list from the Ministry of Finance (MoF) across 2011.
The MoF said it was considering amending the Tax Management Law which would set 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 by 2012.
ECONOMY - Vietnam inflation accelerates to 22.16 pct, highest level in Asia
Bloomberg
Food, transport and construction-material prices have stoked consumer-price growth in Vietnam.
Vietnamese inflation accelerated for an 11th month in July after the central bank cut a key interest rate even as the nation faces the fastest price gains in Asia.
Consumer prices rose 22.16 percent from a year earlier, compared with June’s 20.82 percent pace, data released by the General Statistics Office in Hanoi showed today. Prices climbed 1.17 percent from June.
The central bank reduced its repurchase rate to 14 percent from 15 percent on July 4 after a spate of increases since November to fight inflation, leading the International Monetary Fund to say the cut may confuse investors. The benchmark VN Index of stocks is down 16 percent this year, on concern price gains will hurt the economy.
“The markets were very surprised by the easing,” Prakriti Sofat, a Singapore-based economist at Barclays Capital, said before the release. “It’s too early to go into a full-blown easing cycle given that inflation and inflation expectations remain elevated.”
Vietnam will find it “very difficult” to slow inflation to 17 percent by the end of 2011, Ha Van Hien, head of the National Assembly’s Economic Committee, told the opening of the body in Hanoi on July 21. It may peak as high as 23 percent in August before slowing to 18 percent by year-end, Sofat said.
The VN Index fell 0.9 percent yesterday to 409.2, while the dong weakened 0.1 percent, according to data compiled by Bloomberg. The currency was devalued by about 7 percent in February, the most since at least 1993, risking costlier imports.
Food, transport costs
Food, transport and construction-material prices have stoked consumer-price growth, according to Australia & New Zealand Banking Group Ltd. Transport prices rose 21.7 percent from a year earlier in July, today’s data showed. July’s annual inflation rate is the highest in a basket of 17 Asian economies tracked by Bloomberg.
Prime Minister Nguyen Tan Dung in February cut the credit- growth target and ordered a tighter monetary policy to try to tame inflation, revive confidence in the economy and prevent another credit-rating downgrade. This month’s rate cut wasn’t a “policy signal,” the central bank said in a July 8 statement.
“We assume policymakers are again demonstrating their low tolerance for slower growth,” Christian de Guzman, a Singapore- based assistant vice president at Moody’s Investors Service, said in a note on July 11.
The nation’s economy expanded 5.6 percent from a year earlier in the first half of 2011. Moody’s said that a “tight” monetary policy would threaten the government’s full-year target of 6 percent.
‘A bit concerned’
“We are a bit concerned that the cut in rates will confuse the market about the government’s commitment to sustaining the stabilization effort under Resolution 11,” Benedict Bingham, the IMF’s senior resident representative in Vietnam, said this month. Resolution 11 refers to the steps Dung took in February.
“A strong commitment to sustaining this effort is essential to re-establishing confidence in the dong and restoring macro-economic stability more generally,” Bingham said.
The State Bank of Vietnam had increased the repurchase rate for the seven-day term from 7 percent at the start of November 2010 before this month’s cut. It appears to have become the benchmark for monetary policy, according to JPMorgan Chase & Co.
Price escalations should not be blamed on Chinese businesspeople
VNS
The consumer price index (CPI) sharp increases in the last few months have been blamed on Chinese businesspeople who have flocked to Vietnam to collect farm produce.
The consumer price index (CPI) sharp increases in the last few months have been blamed on Chinese businesspeople who have flocked to Vietnam to collect farm produce. However, experts have pointed out that the main reason behind the problem is the mismanagement.
The general Statistical Office (GSO) has announced that the CPI in July increased by 1.17 percent, which is higher than the 1.09 percent increase of June, raising the total CPI increase in the first seven months of the year to 14.6 percent.
Some analysts believe that the fact that Chinese businesspeople scrambling for farm produce has caused chaos in the market and pushed the CPI increase more sharply.
However, Dr Nguyen Van Nam, former Head of the Trade Research Institute, argued that when there are many buyers, farmers will have the chances to sell farm produce at higher prices. Meanwhile, the problems which have been arisen from the massive material collection should be blamed on the bad management of Vietnamese state agencies.
Foreign businesspeople have gained the upper hand over domestic enterprises in collecting materials in the market, while the scrambling for materials by foreign businesspeople has pushed the prices up.
According to Nam, there is no other country in the world which allows foreign businesspeople come to their countries to collect materials so easily. State management agencies should have learned to find out for what purposes the foreign businesspeople collect materials in Vietnam. It is really the thing that needs to be done. In the past, the campaigns of collecting anise roots and buffalo toenail, once sabotaged Vietnam's agricultural production.
Dr Nam believes that Vietnam should not prohibit serious foreign businesspeople, who plan long term business in Vietnam. However, they must be registered businesses and they must pay tax as stipulated by the current laws.
When carrying goods out of the national boundary, the businesses must pay tax. Meanwhile, other business activities undertaken by the businesspeople in Vietnamese territory must be supervised to be sure that the activities do not cause chaos to the domestic market.
While domestic businesspeople always bear strict supervision by the state management agencies, foreign businesspeople seem to be "given a free hand".
Dr Nam also thinks that this should be seen as a lesson for domestic enterprises and they should change the way they collect farm produce from farmers. The collection should be based on the principle of mutual benefit, while enterprises need to take act on their own initiative and don't sit at their office and ask farmers to bring farm produce.
Meanwhile, Vu Vinh Phu, Chair of the Hanoi Supermarkets' Association, has attributed the price escalations to the bad distribution network.
According to Phu, farmers sell farm produce at their fields very cheap, but customers still have to buy high. It is because the products go through many intermediary hands before reaching out to consumers. In general, the retail prices are 3-4 times higher than the original prices.
A kilogram of fish in Thanh Hoa is priced at 8000 dong, while it is selling at 30,000-40,000 dong per kilo in Hanoi. A kilogram of tomato is sold by farmers in the provinces neighbouring to Hanoi at 500 or 1000 dong, while Hanoians have to pay 8000 or 9000 dong.
In April and May, sugar refineries, which had 500,000 tonnes in stocks, sold to general sales agents at 16,000-17,000 dong per kilo only. However, the retail price on the market was 25,000 dong.
A question has been raised that why supermarkets do not cooperate with each other to force the prices down. If distributors can buy goods straightly from producers and then sell directly to consumers, the prices will be much lower.
The answer is, according to supermarket chains, they cannot contact producers and importers of essential goods.
The problem is that producers and importers do not sell goods directly to supermarkets, but they only sell to their general sales agents who will later sell the products to sales agents at lower levels.
As such, the loosened management over the wholesale activities has led to the consequences that Vietnam cannot control the retail activities.
Economic meltdown hits interior makers in central province
SGGP
An economic turmoil has force many furniture makers in the central province of Binh Dinh to reduce operation or shut down this year.
Statistics show there are 160 furniture manufacturers in the province with the total fabricating output of 345,000 cubic meters of wood per year.
Binh Dinh Province’s export turnover of furniture amounted to more than US$1.1 billion in the period of 2006 and 2010, an equivalent of nearly 61 percent of the province’s figure.
Most of local producers are small- and medium-size enterprise, which meet up quality requirements of big foreign traders.
“Local furniture makers focus solely on outsourcing. They are not eager to upgrade equipments and techniques to boost output, as well as create their exclusive patterns,” an expert told Dau Tu Tai Chinh Newspaper.
“Their competitiveness remains low due to a shortage of skilled workforce and poor cooperation with their counterparts.”
Therefore, local manufacturers struggle to weather the economic meltdown, he says.
So far this year, input cost of the furniture sector has surged more than 30 percent so far this year, while export prices have remained unchanged, according to furniture makers in Binh Dinh Province.
“A high lending rate combined with low profit margin are scaring off local producers,” says a director of a furniture maker, who asked to be unnamed.
Financial experts ask businesses should focus on interior furnishings in an effort to boost the interior output to 40 percent of the province’s figure by 2015.
The Binh Dinh Province People’s Committee announces it will subsidize 30 percent of the expense that interior makers are required to make for setting up the environment impact assessment of their investment projects.
It will also finance 15 percent of the cost of building waste water treatment system and 70 percent of the expense of training manual workers.
The local authorities help interior manufacturers to hire experts in order to improve their fabricating techniques twice a year.
The top export product from Vietnam to the EU last year was footwear, valued at 1.75 billion euros. It was followed by textiles and garments, coffee, seafood and furniture.
Developing industries and industrial zones
VOV
More than 60 percent of areas in industrial zones (IZs) and one-fourth of areas in industrial complexes (ICs) have been rented so far.
The information was announced at an international seminar on the development of industrial zones and complexes in Da Nang on July 27.
Since 1991, the country has established 260 IZs, more than 170 of which have been put into operation. IZs with an area of under 20ha account for nearly half, while IZs with an area of under 100ha make up one-fifth.
Coordination among foreign and domestic invested businesses is low, leading to weak competitiveness.
Vo Tri Thanh, Deputy Director of the Central Institute for Economic Research and Management under the Ministry of Industry and Trade, said that to further develop ICs, large international groups like Canon and Samsung need to increase their cooperation with domestic partners. He stated that by transferring technology which would help Vietnamese businesses to develop, competitiveness could be improved, thus contributing more to national GDP.
ENERGY - Vietnam expects to attain 6pct of renewable energy by 2030
Saigon Times Daily
Vietnam is determined to prioritise the development of renewable energy such as wind, solar and gas-fueled power so that this source of energy will account for 6 percent of the nation's total power output by 2030.
At the moment, the country produces a very modest amount of renewable power which is estimated at less than 3 percent of the country's total power capacity.
According to the 930 trillion dong (US$48.8 billion) national plan for power development between now and 2020 with a vision toward 2030 that was approved by the government last week, the country will produce and import 210 billion kilowatt hours by 2015 and up to 834 billion kilowatt hours by 2030 to meet the increasing power demand.
The nation, as part of the plan, aims to increase wind power capacity to up to 1,000 MW by 2020 and up to 6,200 MW by 2030 to reach 2.4 percent of total power production of the country, a remarkable development compared to a very small capacity at the moment.
The plan also prioritises developing hydropower plants, particularly ones with three combined functions of flood prevention, water supply and power production.
The capacity of hydropower generation is expected to increase to 17,400 MW by 2020, nearly double the present capacity of 9,200 MW.
Vietnam will also operate the first nuclear power generator in a decade's time. By 2030, nuclear power will contribute around 10 percent of the country's power output with total capacity of 10,700 MW.
Vietnam Electricity Group (EVN), Vietnam National Oil and Gas Group (PetroVietnam) and Vietnam Coal and Mineral Industries Group (Vinacomin) are the three companies with the responsibility of developing the power sources for the country, according to the plan.
POWER - Vietnam approves a 10 year national power development plan
VNA
VNA reported that Prime Minister Mr Nguyen Tan Dung has approved a 10 year national power development plan that targets production and import of 330 billion KWh by 2020.
Under the 2011-20 plan, 3% of this total will be imported. The remaining 97% will comprise 19.6% of hydropower, 46.8% of thermal power, 24% of gas generated power, 4.5% of renewable energy and 2.1% of nuclear power.
The competitive power market will be developed with various forms of investment in building power plants and trading of electricity. The monopolized State control of the transmission line system remains to ensure the national energy security.
Priority will be given to developing renewable energy sources including solar and wind power as well as energy production from biomass. The plan envisages electricity production from renewable sources to increase from 3.5% in 2010 to 4.5% in 2020 and 6% in 2030.
Wind power capacity will be raised to 1,000 MW in 2020 and around 6,200 MW in 2030, equivalent to 0.7% of the country’s total output in 2020 and to 2.4% in 2030. Hydropower generation will be increased from the current 9,200 MW to 17,400 MW in 2020.
By 2020, the first nuclear power plant in Viet Nam will be put into operation and in 10 years, the sector will produce a total of 10,700 MW, equivalent to 10.1% of the country’s total output.
The plan also aims to supply electricity to all families in the country’s rural areas by 2020.
RESOURCES - Dinh Vu IZ hooks big project
BusinessAsia
Drilling Mud Corporation (DMC), a PetroVietnam member and the Dinh Vu Industrial Zone (IZ) authorities have inked a land lease contract for a petrochemical service supply project.
With investment of VND270 billion ($13.04 million), the project consists of a propylene resin store, a container depot with an annual capacity of 100,000 20-foot equivalent unit (TEU) and a 5,760 square metre warehouse.
Construction of the project will be kicked-off in early fourth quarter of 2011 and the project will come online in the second quarter of 2012. The Dinh Vu petrochemical service supply base will be one of DMC’s key logistic service supply chains in northern Vietnam.
DMC’s Dinh Vu base is the fifth project of PetroVietnam’s member firms and the 35th project in Dinh Vu IZ.
DMC’s investment decision showcased the IZ’s compelling advantages with internal 20,000 dead weight tonnage general port system, convenient transport links to key areas and lucrative tax incentives for domestic and international investors, said Dinh Vu IZ Joint Stock Company deputy general director Do Thi Kim Thanh.
Petrolimex offering is well received
VIR
Petrolimex, Vietnam’s leading oil importer and distributor, raised VND412.3 billion ($20.1 million) via its initial auction on July 28 .
The state firm sold entire its offering of 27.43 million shares, representing for 2.56 per cent its registered capital, according to Hanoi Stock Exchange. The average price was VND15,032, little higher than the starting price of VND15,000.
Investors previously bid for 30.1 million shares, 10 per cent higher than the firm’s expectation. Some 304 individuals registered to purchase more than 22 million shares and three institutions bid for eight million.
That result outperformed that of big state-owned firms including Vietnam Steel in early June and Mekong Housing Bank a week ago. The steel giant sold more than 39 million shares, or 60 per cent of its total offer, at the price of just VND10,100 per share.
The state lender missed its target with 18 million shares sold, or 28 per cent of its offer, at an average price of VND11,025 per share.
Foreigners were not allowed, by Vietnam’s Ministry of Industry and Trade, to bid for the auction, due to energy security reasons.
INDUSTRY - Economic uncertainties make steel association worried
VNS
The Vietnam Steel Association (VSA) is worried that uncertainties in the national economy would deeply hurt the local steel industry despite agreeable growth.
Speaking at a seminar in Hanoi last Friday, VSA vice chair Dinh Huy Tam said steel consumption would decline compared to last year. The sector earlier targeted a growth rate of 8-10 percent in 2011.
"We can affirm that the target is unachievable and the figure may even decrease against last year," Tam said.
Tam attributed the gloomy forecast to concerns on shrinking foreign direct investment (FDI) capital disbursement while the real estate market has been frozen for a long time.
According to the Ministry of Planning and Investment, FDI disbursement in the first half of 2011 was $5.3 billion, or a slight fall of 2 percent year-on-year. Worse yet, the figure is on the downtrend, falling from $1.4 billion in March to $1 billon in April, $900 million in May and $750 million in June.
Tam also pointed out the challenges facing large steel projects in the country. The $4.5 billion Tycoon-E.United ISM steel mill project in Dung Quat, Quang Ngai Province is facing financial difficulties after the government approved it in May. "We are worried the project will be mired in unpredictable delays," Tam said.
Meanwhile, the government has withdrawn the investment license of a steel project in Ninh Thuan Province as investors Lion Group and Vinashin have failed to push it forwards. Meanwhile, the $7.5 billion Formosa steel project in Ha Tinh Province is in still its first steps of site clearance after being licensed for several years.
Last year, the local steel sector fetched $1 billion in export value while it spent up to $7 billion on imports of both materials and finished products.
In fact, the sector still posted growth in the first half of 2011. According to VSA, construction steel consumption reached over 2.4 million tonnes, a 12 percent year-on-year increase while steel output was 2.6 million tonnes.
Consumption of steel pipe, cold rolled steel and plated iron sheet grew by 20 percent, 24 percent and 43 percent respectively.
Industrial growth slows to just 8.8pct in Jan-Jul
VNS
The country's Index of Industrial Production (IIP) slowed during the first seven months of this year to 8.8 percent, according to a general Statistical Office (GSO) report.
Production lowered due to the modest 1.7 percent growth rate experienced by the mining industry while the manufacturing and power-gas- water sectors experienced growth rates of between 11.9 and 10 percent.
Unsatisfactory performance was additionally attributed to the slow consumption power experienced in the textiles, beverage, footwear, cement, fruit and vegetable processing industries, according to the GSO.
Meanwhile, the stockpile index of petroleum rose by 92.4 percent against the same period last year while the indices of furniture and beverages surged by 84.4 percent and 73.5 percent, respectively.
However, some industrial sectors did manage to record significant growth rates over the January-July period including 18.2 percent in fibre and cloth, 14.3 percent in steel and 14.2 percent in automobile production.
Earlier, minister of Industry and Trade Vu Huy Hoang said that local industries, already feeling the pinch, were set to experience more hardships during the next several months.
An increase in global commodity prices on the back of rising oil prices was expected to have a serious impact on local manufacturing and production sectors, Hoang said.
He continued by saying that, in order to maintain growth rates, industrial producers needed to strengthen measures aimed at controlling inflation, using only domestically produced machinery and materials in order to minimise negative impacts resulting from dependence on imports.
FINANCE - Vietnam money supply must increase to avoid stagflation
Reuters
Vietnam’s central bank should pump more money into the economy, while taking care to ensure it doesn’t fuel inflation, a senior Vietnamese government advisor said.
Money supply expanded at 2.45 percent in the first six months of the year, well below the government’s 16 percent annual target, which has also led to slowing credit growth in the country.
"Money supply has been too tight in the last six months. Money should be supplied equally throughout the year," Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee said.
"Raising money supply doesn’t mean loosening monetary policy," he said on the sidelines of a meeting on Friday.
Overly tight money supply could also reduce production of goods and therefore raise inflation, he said. "We need to avoid stagflation," Nghia said.
July’s consumer price index hit 22.16 percent year on year.
"The central bank is going to accelerate anti-dollarization measures," Nghia said, referring to the practice of making dollar loans less attractive by raising banks’ foreign currency reserve ratio, increasing demand for dong loans.
By June 20, dong-denominated loans have risen by a mere 2,76 percent this year, compared with 23,47 percent growth in dollar loans, central bank data shows.
The other fallout of the faster jump in dollar loans is the pressure on the exchange rate at the time of repayment, Nghia warned.
"This could create huge demand for foreign currency at the end of the year when dollars loans are due and if dollars supply from the export market is difficult at the same time it would cause tension to build in foreign currency market," he said.
"We have been informing the government to come up with measures right now to avoid that risk."
Six-month terms interbank interest rate falls over 4pct
SBV
On July 25, the interbank interest rate fell in most terms, of which the 6-month term interest rate decreased from 18 percent on July 21 to 13.88 percent per annum (p.a.), State Bank of Vietnam (SBV) posted on its website.
In particular, the overnight interest rate slipped from 12.78 percent p.a. to 12.73 percent p.a. and the interest rate for one-month term declined by 0.46 percent from 12.58 percent p.a. to 12.12 percent p.a.
Notably, the six-month term interest rate decreased from the highest 18 percent p.a. to 13.88 percent p.a. and the 3-month term interest rate stood at the highest 14.01 percent p.a.
In the previous week, while 6-month interest rate climbed to 18 percent p.a., the central bank net withdrew two trillion dong in the week.
According to Thang Long Securities Joint Stock Co, the central bank's move of money withdrawal made the interest rate on interbank market increase again, especially when refinancing terms fall due by the end of July.
Presently, the interest rate on open market operations (OMO) stands at 14 percent p.a. for 7-day term.
Petroleum fund comes under scrutiny
VIR
The State Audit of Vietnam (SAV) is looking into the use of the petroleum price stabilisation fund from July 22 to the end of August.
The audit will focus on nine petroleum wholesalers, including the state-owned Vietnam National Petroleum Corp (Petrolimex) and PetroVietnam Oil Corp (PV Oil).
The Ministry of Industry and Trade, along with the Ministry of Finance will also come under scrutiny for their responsibility in overseeing the fund.
The inspection, which focuses on period between 2009 and 2010, aims to find the details about how the fund was operated and used, as well as uncover any possible misuses.
The audit, it is hoped, will clear away doubts about Petrolimex’s transparency, following the recent release of its financial reports for the period from 2008 to 2010. After having claimed large losses for years, the state-owned petroleum trading firm released financial reports that showed profits.
Still, an anonymous SAV official said that the inquiry would not focus on these discrepancies in Petrolimex’s bookkeeping, but on the overall efficiency and use of the fund.
From October 22, 2010 through to February 24 this year, the country has used VND6.369 trillion ($307.7 million) from the petroleum price stabilisation fund to help stabilise the domestic petroleum market because of fluctuations in world prices.
CONSTRUCTION - New circulars regulate construction contracts
VNS
The Ministry of Construction issued Circular 09/20111/TT-BXD on June 28, establishing templates for construction contracts using 30 per cent or more of State capital, including funds from the State budget, official development assistance (ODA), State development credit, credit capital guaranteed by the State, and investments by State-owned enterprises.
The construction contract templates attached to Circular 09 guide the relationship between investor and contractor and between general contractor and subcontractor, and they include equipment installation contracts. The accompanying regulations on contract prices and payments vary depending on the type of contract, and a single contract may include various types of services and be subject to different regulations.
Regulations on contractual provisions, work volume, hiring consultants, advance payments, performance security, warranty, payment time limits, installment payments, suspension and termination of the contract, and other provisions are expressly subjected to Government Decree No 48/2010/ND-CP of May 2010. The new circular takes effect on August 15.
On the same day, the ministry also issued Circular 08/2010/TT-BXD, establishing a contract template for consultancy in construction works using 30 per cent or more State capital, including surveys, financial and investment consultancy, consultancy on preparation of technological reports or feasibility studies for construction works, and design consultancy.
Circular No 08 includes a construction consultancy contract template which can be modified by investor and contractor based on the specific consulting work to be offered for tender.
The circular also requires contracts to specify work volume, requirements of quality and quantity, payment provisions, contract performance security (if any), settlement, term, and termination. This circular also takes effect on August 15.
LEGAL NEWS - Tax return processing to be outsourced
VNS
The general Department of Taxation will speed up plans to outsource personal income tax accounting to make the work faster and more accurate, according to department IT section deputy director Nguyen Thi Thuan.
It is expected that around 10 million tax declarations will need to be dealt with this year.
FPT to supply tax management application
FPT Information System (FPT IS) has won a bid to carry out infrastructure for a personal income tax management application.
Deputy minister of Finance Pham Sy Danh recently signed the decision approving FPT IS as the provider of information equipment and implementation services for the technological infrastructure of a personal income tax management application worth nearly VND260 billion (US$12.6 million).
In this project, FPT IS will construct technological infrastructure, including hardware components and so
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INVESTMENT – Vietnam tries to attract more FDI from Japan
The Saigon Times Daily
Local agencies are rushing to develop investment promotion programmes aimed at attracting foreign direct investment (FDI) from Japan as instructed by the prime minister, said a Ministry of Planning and Investment official.
Do Nhat Hoang, director general of the ministry's Foreign Investment Agency, told a press conference in Hanoi on Tuesday that several programmes in collaboration with Japanese partners have been put on the agenda.
The press conference was held to brief reporters of the conference titled "Japan's Recovery Scenarios - The Outbound Investment Trends" that would be held in Hanoi next month by the ministry and Japan's Nikkei newspaper.
Hoang told reporters that the conference and other forthcoming events were "programmes to be launched at the instruction of the prime minister."
The conference next month will have the participation of about 300 Japan-based enterprises and discuss investment opportunities in Vietnam.
The Ministry of Planning and Investment will also organise another conference in association with the Japan Business Federation, commonly known as Keidanren, on Vietnam's supporting industries in Tokyo, Hoang said. Currently, deputy minister Dang Huy Dong is in Tokyo to discuss the organising of conferences on investment in Vietnam's infrastructure projects under the public-private partnership.
Besides, some other localities have also prepared road shows to attract Japanese investors.
The HCM City government, for example, will organise an investment promotion trip to Tokyo in September or October, while Dong Nai Province would also schedule a conference next Friday to attract investment from Japan, Hoang said.
January-July FDI disbursement of Japan's projects in Vietnam dropped to $720 million from $1.3 billion of the same period last year, said the Foreign Investment Agency's head.
The Nikkei newspaper said many Japan-based enterprises wanted to invest overseas after their country was hit by the earthquake and tsunami last March. Besides, when considering investment opportunities in Vietnam, Japan would not take the unstable economy serious as inflation was a global issue.
HCM City, Delta show opportunities to investors
saigon-gpdaily
Investor when thinking of putting money into Vietnam's Mekong Delta should give top priorities to fisheries, then agriculture and forestry,Agriculture deputy minister Luong Le Phuong told an investment promotion conference in HCM City Tuesday
Phuong was addressing as a key speaker at the conference, held to introduce to both local and foreign investors potentials and advantages of HCM City and the 13 Mekong provinces.
The provinces are Ca Mau, An Giang,, Long An, Ben Tre, Dong Thap, Soc Trang, Bac Lieu, Hau Giang, Tra Vinh, Can Tho City, Kien Giang, Tien Giang, and Vinh Long.
The investment promotion conference, which saw more than 500 delegates, is part of the Mekong Delta Economic Cooperation-Ca Mau 2011 Forum.
Deputy minister Phuong said among fisheries, agriculture and forestry, the first one is the fastest profit-making area.
The sector includes catching fish and aquaculture, as well as processing aqua-products for export, he added.
The delta has seen its total aquaculture acreage increase from 233,500 hectares in 2000 to 746,000 hectares last year, with output soaring from 444,000 tonnes in 2001 to 1.94 million tonnes in 2011, said Phuong.
According to him, Vietnam houses more than 500 aqua-product processing factories. Of them, 330 have been put into the European Union-accepted list, and more than 70 percent of the EU-accepted factories are located in the Mekong Delta.
Vietnam's prime minister Nguyen Tan Dung established in March 2010 the Mekong Delta Economic Cooperation, or MDEC, to further support the whole region's development. MDEC-Ca Mau 2011 is part of MDEC.
The delta region contributes over half of the country's rice output, 90 per cent of rice export, 65 per cent of fisheries production and 70 per cent of fruit, according to the MDEC Secretariat.
In introduction, the secretariat says HCM City and the Mekong Delta hold lots of advantages for agriculture (agriculture, fisheries and forestry) and marine economy. The two regions are endowed with a convenient network of transportation that includes roads, air routes and waterways.
HCM City and the 13 provinces cover nearly 4.3 million square km, making up 13 percent of Vietnam's area.
The delta has about 2.63 million hectares of farmland, including 1.9 million ha fore rice, almost 576,000 ha for fruits and over 746,000 ha for aquaculture, according to the secretariat.
During the full-day conference in HCM City, investment promotion officials from all the 13 delta provinces displayed their economic potentials and advantages at a sideline show.
The delta has a total of 151 industrial parks. Can Tho City and the provinces of Long An and Kien Giang have attracted more investment capital from HCM City than others, the secretariat says.
Long An, which borders HCM City, has attracted from the city 420 projects worth more than VND60 trillion (US$2.9 billion) since 2000.
Kien Giang has received 103 projects worth VND88 trillion ($4.2 billion) over the past five years.
Can Tho City, the Delta's hub, reports it has attracted 61 investment projects worth VND23 trillion (US$1.1 billion) over the past 10 years. Most projects are in tourism, infrastructure development and retailing.
The investment promotion conference called for capital into such fields as high-tech agriculture; processing and preservation of post-harvest agricultural products; trade; infrastructure; agricultural services; development of material zones; and other agricultural activities.
Speaking at a meeting held Monday to review economic development cooperation between HCM City and the Delta, city chair Le Hoang Quan said the metropolitan government has actively promoted the Delta's business opportunities to foreign and local investors.
He said the city has worked with several sectors, including infrastructure development, environmental protection, healthcare, hydropower development and others.
After the investment conference, a workshop on policies for regional links will be held in Ca Mau in October, followed by a MDEC-Ca Mau CEO Conference also that month in the province.
October will also see a conference on promoting the delta's development and an International Economic Cooperation for the Mekong Delta, both in Ca Mau.
In addition, the province will host the Leaders Conference on MDEC-Ca Mau 2011 in the same month.
INFRASTRUCTURE - Japan, US agencies to sponsor major projects
BusinessAsia
The Japan International Cooperation Agency (JICA) and the US Agency for International Development (USAID) have agreed to jointly sponsor infrastructure development projects in Vietnam and other Southeast Asian Countries.
The Japan International Cooperation Agency (JICA) and the US Agency for International Development (USAID) have agreed to jointly sponsor infrastructure development projects in Vietnam and other Southeast Asian Countries under the public-private partnership (PPP) model.
JICA and USAID expect to implement their first project in Vietnam and are next year scheduled to propose a plan to the Vietnamese Government, to establish a new investment fund.
JICA plans to set up a fund worth 400-500 million USD in March 2012 for PPP projects and contribute to the fund with investments or loans.
USAID will guarantee half of the value of projects’ loans and seek cooperation from Vietnamese and US financial organisations.
The projects of the two agencies’ cooperative strategy include power plants and other energy establishments, information and telecommunications, roads, traffic and sewerage and water supply systems./.
Foreign firms now opt for imports over production
VIR
For example, UK-backed oil and gas maker Castrol BP Petco Company and French-backed tyre maker Michelin Group supplemented business codes to boost imports.
Swedish-backed Tetra Pak, the world’s leading food processing and packaging company, and Japanese-backed Panasonic AVC Vietnam have all stepped up importation business arms in Vietnam.
Meanwhile, South Korean-backed Samsung Vina supplemented its business codes to boost distribution in Vietnam.
The list also includes Japanese-owned electronics firms like Sony, Toshiba, Sanyo, Sharp, Hitachi and South Korean-backed Kumho Tire which have also been approved to import electronic products and tyres and then sell directly in Vietnam.
Yuzo Otsuki, general director of Sony Vietnam which disbanded its joint venture with locally-owned Tan Binh Electronics Company late last year to focus on importing electronic products into Vietnam, said: “The company’s business grew by 60 per cent in 2010 and is expected to continue growing at the same rate this year, with many new [imported] products marketed in Vietnam.”
Dao Ngoc Hoang Giang, general director of Ho Chi Minh City-based Sao Mai Office Equipment Joint Stock Company under locally-owned Sao Mai Group specialised in importing office equipment, said many FIEs like Japanese-backed Fuji Xerox and Sharp had applied for permission to wholesale and retail their imported products in Vietnam.
Mochizuki Kentaro, chairman of Sanyo HA Asean Corporation, said previously, firms were slapped an average import tax level of 50 per cent when they imported goods into Vietnam. When Vietnam joined the ASEAN Free Trade Agreement in 1995, the tax level was reduced to 20 per cent and then 5 per cent as is the case now. The reduction meant that investors would choose to become importers, not manufacturers.
Vietnam Customs reported that the foreign direct investment sector’s total import turnover in the year’s first six months was $27.5 billion, up 23 per cent against last year’s corresponding period.
Before Vietnam joined the WTO, FIEs enjoyed various priorities on the understanding that they invested into manufacturing in Vietnam to generate employment. They were allowed to import goods to serve their manufacturing in the country, not to directly trade and distribute them in this domestic market.
However, when Vietnam became a full WTO member, many FIEs took advantage of the distribution rights to import goods from their overseas companies and then resell them in Vietnam.
For example, with current import tariffs of 3-20 per cent for electronic components, and 5 per cent for completely-built electronic goods, electronics firms have chosen to become importers.
An expert from Thanh Hoa Provincial Department of Planning and Investment’s International Relations Division said with fewer employees and curtailed costs of manufacturing and land leasing, “it is clear that importing is more profitable than manufacturing.”
Deputy Minister of Industry and Trade Nguyen Thanh Bien said the Vietnamese government targeted to lure foreign direct investment into manufacturing sector, not in non-production sectors.
“It will need more time to revise all related regulations governing FIEs’ operations in Vietnam,” he said.
TRADE – GOOD NEWS - Most EU states want to terminate Vietnam shoe duties
Reuters
The European Commission is expected to decide in September whether to propose extending dumping duties on imports of leather shoes from Vietnam, but most EU states want them scrapped, EU sources said.
Last October, the Commission which oversees trade policy for the 27- country European Union extended duties of up to 10 percent on Vietnamese leather shoes and 16.5 percent on those made in China, pending a review.
A majority of EU countries had opposed that move.
Industry and diplomatic sources with knowledge of the case told Reuters last Friday they expected Brussels to complete its review and submit its proposal for approval by member states by the end of September.
The Commissions proposal is expected to be submitted to member states in September. But as it stands the majority, or at least 15 member states, favor termination, one source said.
Britain, Austria, Belgium, the Czech Republic, Cyprus, Denmark, Estonia, Finland, Germany, Ireland, Latvia, Luxembourg, Malta, the Netherlands and Sweden want the duties scrapped immediately, before the lucrative Christmas retail period, an EU diplomat said.
Major shoe-producing countries like Italy, Spain, France and Poland are all leading the charge to keep the duties, the diplomat added.
EU is the largest market for Vietnamese leather shoes and Vietnam is also the second biggest exporter of the products to EU, after China.
Last year the bloc imported US$2.5 billion worth of leather shoes from Vietnam, up 33.9 percent from 2006, figures from the Vietnam Leather and Footwear Association show.
The Ministry of Industry and Trade has asked local footwear exporters to strengthen their sales to EU as the demand for footwear imports of the bloc is expected to increase by 5.3 percent this year.
Vietnams total footwear exports in the first half this year dropped by 8.8 percent to $2 billion compared to the same period last year. However, the Vietnam Leather and Footwear Association noted that export figures have already improved since the second quarter.
EU split
The EU regularly splits over dumping cases between its member countries supporting freer trade and those worried about competition against their own manufacturers.
The shoe duties were introduced in 2006 only after a compromise deal to keep them in place for just two years, instead of the usual five. If extended again, Commission sources say the duties would last at least five years.
But the industry and diplomatic sources said a compromise being considered by EU Trade Commissioner Catherine Ashton a Briton would allow the duties to lapse once they expire on January 3.
This would give certainty either way to EU importers before the busy Christmas period and at the same time allow EU producers the time to adapt and plan against cheaper imports from Asia, another source said.
European retailers and global shoemakers, led by sports shoe producers such as Adidas, Asics, Nike and Puma want the shoe taxes axed given the gloomy economic outlook and dwindling consumer spending in Europe caused by the worst financial crisis in about 80 years.
But European manufacturers say they are unable to compete against low-cost producers in China and Vietnam and accuse those Asian governments of giving unfair subsidies that lower costs.
A review can take between 12 and 15 months, but the Commission had said it hoped to complete its work more quickly. It said it could reimburse the extra tariffs imposed during the review should it be proven that the duties were unnecessary.
If we get a termination, that will be enough. We are not going to try and make life any harder for ourselves and threaten the Commission, a representative from an EU importer said.
FIE losses turn to profits
VIR
The alarming tax evasion trend in foreign-invested enterprises is easing.
Nguyen Trong Hanh, deputy director of Ho Chi Minh City Department of Taxation, said while 60 per cent of foreign invested enterprises (FIEs) operating in the city had reported losses for many years, in the first seven months of 2011, 30-40 per cent of these enterprises reported profits.
The city’s tax collection reached 67 per cent of its annual plan of VND110.4 trillion ($5.3 billion) for this year and increased by 23 per cent compared to the same period last year.
Hanh said the department had worked with about 40 FIEs and found “fake loss” situations at most of the enterprises.
“After being inspected, most of these enterprises’ financial reports showed profits. Especially, an enterprise reported a profit of more than VND100 billion ($4.8 million) after reporting losses for 10 consecutive years,” he added.
It was a similar story at 17 FIEs who produced and traded tea in Lam Dong province. For the past 10 years, the Lam Dong Department of Taxation did not collect any corporate income tax (CIT) from these enterprises who reported losses for consecutive years.
However, Lam Dong Department of Taxation deputy head Phan Thi Vinh said after inspections, many FIEs admitted the” fake loss” situation by transfer pricing.
“After establishing that these enterprises made profits since 2005, the department collected tax arrears with the collected tax of VND8 billion ($386,473) because these enterprises still enjoyed a 50 per cent CIT tax reduction rate in accordance with Vietnam’s preferential tax policy for FIEs,” said Vinh.
According to a General Department of Taxation (GDT) report for the first half of 2011, it treated 107 FIEs as having reported fake losses for three consecutive years from 2008-2010 with tax arrears collection of VND2,230 billion ($107 million).
As planned this year, the GDT entrusted 63 local departments to inspect 870 FIEs which showed transfer pricing signals or reported losses for three consecutive years. The GDT’s Inspectorate will check 40 FIEs and 82 other units in a supplemented list from the Ministry of Finance (MoF) across 2011.
The MoF said it was considering amending the Tax Management Law which would set 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 by 2012.
ECONOMY - Vietnam inflation accelerates to 22.16 pct, highest level in Asia
Bloomberg
Food, transport and construction-material prices have stoked consumer-price growth in Vietnam.
Vietnamese inflation accelerated for an 11th month in July after the central bank cut a key interest rate even as the nation faces the fastest price gains in Asia.
Consumer prices rose 22.16 percent from a year earlier, compared with June’s 20.82 percent pace, data released by the General Statistics Office in Hanoi showed today. Prices climbed 1.17 percent from June.
The central bank reduced its repurchase rate to 14 percent from 15 percent on July 4 after a spate of increases since November to fight inflation, leading the International Monetary Fund to say the cut may confuse investors. The benchmark VN Index of stocks is down 16 percent this year, on concern price gains will hurt the economy.
“The markets were very surprised by the easing,” Prakriti Sofat, a Singapore-based economist at Barclays Capital, said before the release. “It’s too early to go into a full-blown easing cycle given that inflation and inflation expectations remain elevated.”
Vietnam will find it “very difficult” to slow inflation to 17 percent by the end of 2011, Ha Van Hien, head of the National Assembly’s Economic Committee, told the opening of the body in Hanoi on July 21. It may peak as high as 23 percent in August before slowing to 18 percent by year-end, Sofat said.
The VN Index fell 0.9 percent yesterday to 409.2, while the dong weakened 0.1 percent, according to data compiled by Bloomberg. The currency was devalued by about 7 percent in February, the most since at least 1993, risking costlier imports.
Food, transport costs
Food, transport and construction-material prices have stoked consumer-price growth, according to Australia & New Zealand Banking Group Ltd. Transport prices rose 21.7 percent from a year earlier in July, today’s data showed. July’s annual inflation rate is the highest in a basket of 17 Asian economies tracked by Bloomberg.
Prime Minister Nguyen Tan Dung in February cut the credit- growth target and ordered a tighter monetary policy to try to tame inflation, revive confidence in the economy and prevent another credit-rating downgrade. This month’s rate cut wasn’t a “policy signal,” the central bank said in a July 8 statement.
“We assume policymakers are again demonstrating their low tolerance for slower growth,” Christian de Guzman, a Singapore- based assistant vice president at Moody’s Investors Service, said in a note on July 11.
The nation’s economy expanded 5.6 percent from a year earlier in the first half of 2011. Moody’s said that a “tight” monetary policy would threaten the government’s full-year target of 6 percent.
‘A bit concerned’
“We are a bit concerned that the cut in rates will confuse the market about the government’s commitment to sustaining the stabilization effort under Resolution 11,” Benedict Bingham, the IMF’s senior resident representative in Vietnam, said this month. Resolution 11 refers to the steps Dung took in February.
“A strong commitment to sustaining this effort is essential to re-establishing confidence in the dong and restoring macro-economic stability more generally,” Bingham said.
The State Bank of Vietnam had increased the repurchase rate for the seven-day term from 7 percent at the start of November 2010 before this month’s cut. It appears to have become the benchmark for monetary policy, according to JPMorgan Chase & Co.
Price escalations should not be blamed on Chinese businesspeople
VNS
The consumer price index (CPI) sharp increases in the last few months have been blamed on Chinese businesspeople who have flocked to Vietnam to collect farm produce.
The consumer price index (CPI) sharp increases in the last few months have been blamed on Chinese businesspeople who have flocked to Vietnam to collect farm produce. However, experts have pointed out that the main reason behind the problem is the mismanagement.
The general Statistical Office (GSO) has announced that the CPI in July increased by 1.17 percent, which is higher than the 1.09 percent increase of June, raising the total CPI increase in the first seven months of the year to 14.6 percent.
Some analysts believe that the fact that Chinese businesspeople scrambling for farm produce has caused chaos in the market and pushed the CPI increase more sharply.
However, Dr Nguyen Van Nam, former Head of the Trade Research Institute, argued that when there are many buyers, farmers will have the chances to sell farm produce at higher prices. Meanwhile, the problems which have been arisen from the massive material collection should be blamed on the bad management of Vietnamese state agencies.
Foreign businesspeople have gained the upper hand over domestic enterprises in collecting materials in the market, while the scrambling for materials by foreign businesspeople has pushed the prices up.
According to Nam, there is no other country in the world which allows foreign businesspeople come to their countries to collect materials so easily. State management agencies should have learned to find out for what purposes the foreign businesspeople collect materials in Vietnam. It is really the thing that needs to be done. In the past, the campaigns of collecting anise roots and buffalo toenail, once sabotaged Vietnam's agricultural production.
Dr Nam believes that Vietnam should not prohibit serious foreign businesspeople, who plan long term business in Vietnam. However, they must be registered businesses and they must pay tax as stipulated by the current laws.
When carrying goods out of the national boundary, the businesses must pay tax. Meanwhile, other business activities undertaken by the businesspeople in Vietnamese territory must be supervised to be sure that the activities do not cause chaos to the domestic market.
While domestic businesspeople always bear strict supervision by the state management agencies, foreign businesspeople seem to be "given a free hand".
Dr Nam also thinks that this should be seen as a lesson for domestic enterprises and they should change the way they collect farm produce from farmers. The collection should be based on the principle of mutual benefit, while enterprises need to take act on their own initiative and don't sit at their office and ask farmers to bring farm produce.
Meanwhile, Vu Vinh Phu, Chair of the Hanoi Supermarkets' Association, has attributed the price escalations to the bad distribution network.
According to Phu, farmers sell farm produce at their fields very cheap, but customers still have to buy high. It is because the products go through many intermediary hands before reaching out to consumers. In general, the retail prices are 3-4 times higher than the original prices.
A kilogram of fish in Thanh Hoa is priced at 8000 dong, while it is selling at 30,000-40,000 dong per kilo in Hanoi. A kilogram of tomato is sold by farmers in the provinces neighbouring to Hanoi at 500 or 1000 dong, while Hanoians have to pay 8000 or 9000 dong.
In April and May, sugar refineries, which had 500,000 tonnes in stocks, sold to general sales agents at 16,000-17,000 dong per kilo only. However, the retail price on the market was 25,000 dong.
A question has been raised that why supermarkets do not cooperate with each other to force the prices down. If distributors can buy goods straightly from producers and then sell directly to consumers, the prices will be much lower.
The answer is, according to supermarket chains, they cannot contact producers and importers of essential goods.
The problem is that producers and importers do not sell goods directly to supermarkets, but they only sell to their general sales agents who will later sell the products to sales agents at lower levels.
As such, the loosened management over the wholesale activities has led to the consequences that Vietnam cannot control the retail activities.
Economic meltdown hits interior makers in central province
SGGP
An economic turmoil has force many furniture makers in the central province of Binh Dinh to reduce operation or shut down this year.
Statistics show there are 160 furniture manufacturers in the province with the total fabricating output of 345,000 cubic meters of wood per year.
Binh Dinh Province’s export turnover of furniture amounted to more than US$1.1 billion in the period of 2006 and 2010, an equivalent of nearly 61 percent of the province’s figure.
Most of local producers are small- and medium-size enterprise, which meet up quality requirements of big foreign traders.
“Local furniture makers focus solely on outsourcing. They are not eager to upgrade equipments and techniques to boost output, as well as create their exclusive patterns,” an expert told Dau Tu Tai Chinh Newspaper.
“Their competitiveness remains low due to a shortage of skilled workforce and poor cooperation with their counterparts.”
Therefore, local manufacturers struggle to weather the economic meltdown, he says.
So far this year, input cost of the furniture sector has surged more than 30 percent so far this year, while export prices have remained unchanged, according to furniture makers in Binh Dinh Province.
“A high lending rate combined with low profit margin are scaring off local producers,” says a director of a furniture maker, who asked to be unnamed.
Financial experts ask businesses should focus on interior furnishings in an effort to boost the interior output to 40 percent of the province’s figure by 2015.
The Binh Dinh Province People’s Committee announces it will subsidize 30 percent of the expense that interior makers are required to make for setting up the environment impact assessment of their investment projects.
It will also finance 15 percent of the cost of building waste water treatment system and 70 percent of the expense of training manual workers.
The local authorities help interior manufacturers to hire experts in order to improve their fabricating techniques twice a year.
The top export product from Vietnam to the EU last year was footwear, valued at 1.75 billion euros. It was followed by textiles and garments, coffee, seafood and furniture.
Developing industries and industrial zones
VOV
More than 60 percent of areas in industrial zones (IZs) and one-fourth of areas in industrial complexes (ICs) have been rented so far.
The information was announced at an international seminar on the development of industrial zones and complexes in Da Nang on July 27.
Since 1991, the country has established 260 IZs, more than 170 of which have been put into operation. IZs with an area of under 20ha account for nearly half, while IZs with an area of under 100ha make up one-fifth.
Coordination among foreign and domestic invested businesses is low, leading to weak competitiveness.
Vo Tri Thanh, Deputy Director of the Central Institute for Economic Research and Management under the Ministry of Industry and Trade, said that to further develop ICs, large international groups like Canon and Samsung need to increase their cooperation with domestic partners. He stated that by transferring technology which would help Vietnamese businesses to develop, competitiveness could be improved, thus contributing more to national GDP.
ENERGY - Vietnam expects to attain 6pct of renewable energy by 2030
Saigon Times Daily
Vietnam is determined to prioritise the development of renewable energy such as wind, solar and gas-fueled power so that this source of energy will account for 6 percent of the nation's total power output by 2030.
At the moment, the country produces a very modest amount of renewable power which is estimated at less than 3 percent of the country's total power capacity.
According to the 930 trillion dong (US$48.8 billion) national plan for power development between now and 2020 with a vision toward 2030 that was approved by the government last week, the country will produce and import 210 billion kilowatt hours by 2015 and up to 834 billion kilowatt hours by 2030 to meet the increasing power demand.
The nation, as part of the plan, aims to increase wind power capacity to up to 1,000 MW by 2020 and up to 6,200 MW by 2030 to reach 2.4 percent of total power production of the country, a remarkable development compared to a very small capacity at the moment.
The plan also prioritises developing hydropower plants, particularly ones with three combined functions of flood prevention, water supply and power production.
The capacity of hydropower generation is expected to increase to 17,400 MW by 2020, nearly double the present capacity of 9,200 MW.
Vietnam will also operate the first nuclear power generator in a decade's time. By 2030, nuclear power will contribute around 10 percent of the country's power output with total capacity of 10,700 MW.
Vietnam Electricity Group (EVN), Vietnam National Oil and Gas Group (PetroVietnam) and Vietnam Coal and Mineral Industries Group (Vinacomin) are the three companies with the responsibility of developing the power sources for the country, according to the plan.
POWER - Vietnam approves a 10 year national power development plan
VNA
VNA reported that Prime Minister Mr Nguyen Tan Dung has approved a 10 year national power development plan that targets production and import of 330 billion KWh by 2020.
Under the 2011-20 plan, 3% of this total will be imported. The remaining 97% will comprise 19.6% of hydropower, 46.8% of thermal power, 24% of gas generated power, 4.5% of renewable energy and 2.1% of nuclear power.
The competitive power market will be developed with various forms of investment in building power plants and trading of electricity. The monopolized State control of the transmission line system remains to ensure the national energy security.
Priority will be given to developing renewable energy sources including solar and wind power as well as energy production from biomass. The plan envisages electricity production from renewable sources to increase from 3.5% in 2010 to 4.5% in 2020 and 6% in 2030.
Wind power capacity will be raised to 1,000 MW in 2020 and around 6,200 MW in 2030, equivalent to 0.7% of the country’s total output in 2020 and to 2.4% in 2030. Hydropower generation will be increased from the current 9,200 MW to 17,400 MW in 2020.
By 2020, the first nuclear power plant in Viet Nam will be put into operation and in 10 years, the sector will produce a total of 10,700 MW, equivalent to 10.1% of the country’s total output.
The plan also aims to supply electricity to all families in the country’s rural areas by 2020.
RESOURCES - Dinh Vu IZ hooks big project
BusinessAsia
Drilling Mud Corporation (DMC), a PetroVietnam member and the Dinh Vu Industrial Zone (IZ) authorities have inked a land lease contract for a petrochemical service supply project.
With investment of VND270 billion ($13.04 million), the project consists of a propylene resin store, a container depot with an annual capacity of 100,000 20-foot equivalent unit (TEU) and a 5,760 square metre warehouse.
Construction of the project will be kicked-off in early fourth quarter of 2011 and the project will come online in the second quarter of 2012. The Dinh Vu petrochemical service supply base will be one of DMC’s key logistic service supply chains in northern Vietnam.
DMC’s Dinh Vu base is the fifth project of PetroVietnam’s member firms and the 35th project in Dinh Vu IZ.
DMC’s investment decision showcased the IZ’s compelling advantages with internal 20,000 dead weight tonnage general port system, convenient transport links to key areas and lucrative tax incentives for domestic and international investors, said Dinh Vu IZ Joint Stock Company deputy general director Do Thi Kim Thanh.
Petrolimex offering is well received
VIR
Petrolimex, Vietnam’s leading oil importer and distributor, raised VND412.3 billion ($20.1 million) via its initial auction on July 28 .
The state firm sold entire its offering of 27.43 million shares, representing for 2.56 per cent its registered capital, according to Hanoi Stock Exchange. The average price was VND15,032, little higher than the starting price of VND15,000.
Investors previously bid for 30.1 million shares, 10 per cent higher than the firm’s expectation. Some 304 individuals registered to purchase more than 22 million shares and three institutions bid for eight million.
That result outperformed that of big state-owned firms including Vietnam Steel in early June and Mekong Housing Bank a week ago. The steel giant sold more than 39 million shares, or 60 per cent of its total offer, at the price of just VND10,100 per share.
The state lender missed its target with 18 million shares sold, or 28 per cent of its offer, at an average price of VND11,025 per share.
Foreigners were not allowed, by Vietnam’s Ministry of Industry and Trade, to bid for the auction, due to energy security reasons.
INDUSTRY - Economic uncertainties make steel association worried
VNS
The Vietnam Steel Association (VSA) is worried that uncertainties in the national economy would deeply hurt the local steel industry despite agreeable growth.
Speaking at a seminar in Hanoi last Friday, VSA vice chair Dinh Huy Tam said steel consumption would decline compared to last year. The sector earlier targeted a growth rate of 8-10 percent in 2011.
"We can affirm that the target is unachievable and the figure may even decrease against last year," Tam said.
Tam attributed the gloomy forecast to concerns on shrinking foreign direct investment (FDI) capital disbursement while the real estate market has been frozen for a long time.
According to the Ministry of Planning and Investment, FDI disbursement in the first half of 2011 was $5.3 billion, or a slight fall of 2 percent year-on-year. Worse yet, the figure is on the downtrend, falling from $1.4 billion in March to $1 billon in April, $900 million in May and $750 million in June.
Tam also pointed out the challenges facing large steel projects in the country. The $4.5 billion Tycoon-E.United ISM steel mill project in Dung Quat, Quang Ngai Province is facing financial difficulties after the government approved it in May. "We are worried the project will be mired in unpredictable delays," Tam said.
Meanwhile, the government has withdrawn the investment license of a steel project in Ninh Thuan Province as investors Lion Group and Vinashin have failed to push it forwards. Meanwhile, the $7.5 billion Formosa steel project in Ha Tinh Province is in still its first steps of site clearance after being licensed for several years.
Last year, the local steel sector fetched $1 billion in export value while it spent up to $7 billion on imports of both materials and finished products.
In fact, the sector still posted growth in the first half of 2011. According to VSA, construction steel consumption reached over 2.4 million tonnes, a 12 percent year-on-year increase while steel output was 2.6 million tonnes.
Consumption of steel pipe, cold rolled steel and plated iron sheet grew by 20 percent, 24 percent and 43 percent respectively.
Industrial growth slows to just 8.8pct in Jan-Jul
VNS
The country's Index of Industrial Production (IIP) slowed during the first seven months of this year to 8.8 percent, according to a general Statistical Office (GSO) report.
Production lowered due to the modest 1.7 percent growth rate experienced by the mining industry while the manufacturing and power-gas- water sectors experienced growth rates of between 11.9 and 10 percent.
Unsatisfactory performance was additionally attributed to the slow consumption power experienced in the textiles, beverage, footwear, cement, fruit and vegetable processing industries, according to the GSO.
Meanwhile, the stockpile index of petroleum rose by 92.4 percent against the same period last year while the indices of furniture and beverages surged by 84.4 percent and 73.5 percent, respectively.
However, some industrial sectors did manage to record significant growth rates over the January-July period including 18.2 percent in fibre and cloth, 14.3 percent in steel and 14.2 percent in automobile production.
Earlier, minister of Industry and Trade Vu Huy Hoang said that local industries, already feeling the pinch, were set to experience more hardships during the next several months.
An increase in global commodity prices on the back of rising oil prices was expected to have a serious impact on local manufacturing and production sectors, Hoang said.
He continued by saying that, in order to maintain growth rates, industrial producers needed to strengthen measures aimed at controlling inflation, using only domestically produced machinery and materials in order to minimise negative impacts resulting from dependence on imports.
FINANCE - Vietnam money supply must increase to avoid stagflation
Reuters
Vietnam’s central bank should pump more money into the economy, while taking care to ensure it doesn’t fuel inflation, a senior Vietnamese government advisor said.
Money supply expanded at 2.45 percent in the first six months of the year, well below the government’s 16 percent annual target, which has also led to slowing credit growth in the country.
"Money supply has been too tight in the last six months. Money should be supplied equally throughout the year," Le Xuan Nghia, vice chairman of the National Financial Supervisory Committee said.
"Raising money supply doesn’t mean loosening monetary policy," he said on the sidelines of a meeting on Friday.
Overly tight money supply could also reduce production of goods and therefore raise inflation, he said. "We need to avoid stagflation," Nghia said.
July’s consumer price index hit 22.16 percent year on year.
"The central bank is going to accelerate anti-dollarization measures," Nghia said, referring to the practice of making dollar loans less attractive by raising banks’ foreign currency reserve ratio, increasing demand for dong loans.
By June 20, dong-denominated loans have risen by a mere 2,76 percent this year, compared with 23,47 percent growth in dollar loans, central bank data shows.
The other fallout of the faster jump in dollar loans is the pressure on the exchange rate at the time of repayment, Nghia warned.
"This could create huge demand for foreign currency at the end of the year when dollars loans are due and if dollars supply from the export market is difficult at the same time it would cause tension to build in foreign currency market," he said.
"We have been informing the government to come up with measures right now to avoid that risk."
Six-month terms interbank interest rate falls over 4pct
SBV
On July 25, the interbank interest rate fell in most terms, of which the 6-month term interest rate decreased from 18 percent on July 21 to 13.88 percent per annum (p.a.), State Bank of Vietnam (SBV) posted on its website.
In particular, the overnight interest rate slipped from 12.78 percent p.a. to 12.73 percent p.a. and the interest rate for one-month term declined by 0.46 percent from 12.58 percent p.a. to 12.12 percent p.a.
Notably, the six-month term interest rate decreased from the highest 18 percent p.a. to 13.88 percent p.a. and the 3-month term interest rate stood at the highest 14.01 percent p.a.
In the previous week, while 6-month interest rate climbed to 18 percent p.a., the central bank net withdrew two trillion dong in the week.
According to Thang Long Securities Joint Stock Co, the central bank's move of money withdrawal made the interest rate on interbank market increase again, especially when refinancing terms fall due by the end of July.
Presently, the interest rate on open market operations (OMO) stands at 14 percent p.a. for 7-day term.
Petroleum fund comes under scrutiny
VIR
The State Audit of Vietnam (SAV) is looking into the use of the petroleum price stabilisation fund from July 22 to the end of August.
The audit will focus on nine petroleum wholesalers, including the state-owned Vietnam National Petroleum Corp (Petrolimex) and PetroVietnam Oil Corp (PV Oil).
The Ministry of Industry and Trade, along with the Ministry of Finance will also come under scrutiny for their responsibility in overseeing the fund.
The inspection, which focuses on period between 2009 and 2010, aims to find the details about how the fund was operated and used, as well as uncover any possible misuses.
The audit, it is hoped, will clear away doubts about Petrolimex’s transparency, following the recent release of its financial reports for the period from 2008 to 2010. After having claimed large losses for years, the state-owned petroleum trading firm released financial reports that showed profits.
Still, an anonymous SAV official said that the inquiry would not focus on these discrepancies in Petrolimex’s bookkeeping, but on the overall efficiency and use of the fund.
From October 22, 2010 through to February 24 this year, the country has used VND6.369 trillion ($307.7 million) from the petroleum price stabilisation fund to help stabilise the domestic petroleum market because of fluctuations in world prices.
CONSTRUCTION - New circulars regulate construction contracts
VNS
The Ministry of Construction issued Circular 09/20111/TT-BXD on June 28, establishing templates for construction contracts using 30 per cent or more of State capital, including funds from the State budget, official development assistance (ODA), State development credit, credit capital guaranteed by the State, and investments by State-owned enterprises.
The construction contract templates attached to Circular 09 guide the relationship between investor and contractor and between general contractor and subcontractor, and they include equipment installation contracts. The accompanying regulations on contract prices and payments vary depending on the type of contract, and a single contract may include various types of services and be subject to different regulations.
Regulations on contractual provisions, work volume, hiring consultants, advance payments, performance security, warranty, payment time limits, installment payments, suspension and termination of the contract, and other provisions are expressly subjected to Government Decree No 48/2010/ND-CP of May 2010. The new circular takes effect on August 15.
On the same day, the ministry also issued Circular 08/2010/TT-BXD, establishing a contract template for consultancy in construction works using 30 per cent or more State capital, including surveys, financial and investment consultancy, consultancy on preparation of technological reports or feasibility studies for construction works, and design consultancy.
Circular No 08 includes a construction consultancy contract template which can be modified by investor and contractor based on the specific consulting work to be offered for tender.
The circular also requires contracts to specify work volume, requirements of quality and quantity, payment provisions, contract performance security (if any), settlement, term, and termination. This circular also takes effect on August 15.
Saturday 20 August 2011
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