5.
[Thank you for your interest in this topic. This communication may be considered promotional in nature.]
With Compliments
Oliver Massmann
Rechtsanwalt
General Director – Duane Morris Vietnam LLC
Hanoi Office: 13th Floor, Suite 1307/08 Pacific Place, 83B Ly Thuong Kiet, Hoan Kiem District
Ho Chi Minh City Office: 15th Floor, Suite 1503/04, Saigon Tower, 29 Le Duan Street, District 1
PRIVATIZATION VIETNAM – QUO VADIS ?
RESPONSE TO QUESTIONS OF VIETNAM ECONOMIC TIMES (“VET”) ON EQUITIZATION OF STATE OWNED ENTERPRISES (“SOEs”)
By Oliver Massmann; Mai Thi Phan (Duane Morris)
1. SOEs’ equitization process is said to have been fairly slow over recent years? Do you agree?
If we take 2010 as the deadline for the equitization of the SOEs targeted under the Enterprise Law (2005), obviously, the equitization process does not even meet the government’s expectations.
Privatization is a natural process for an open market economy and therefore, it should be fostered to attract capital and modern technology and to bring more efficiency to the economy. The upcoming equitization of Vietnam Airlines, Mobifone, and Vinatex is a positive sign and shows that equitization has been and will be the right development path for SOEs.
2. What in your opinion are the major difficulties of the process?
We think the unfavorable economic conditions since 2008 have significantly delayed the process. Economic turmoil has made it difficult for SOEs to find financially capable strategic partners and has increased the risk of underpriced IPOs.
However, frankly speaking, major issues lie within the business conditions and legal impediments inherent in the equitization of SOEs.
The stock price should closely reflect the business conditions of a company. Although the expectation on future earnings growth is calculated into an investor’s decision, a company with weak financials cannot expect to get a large audience and an exorbitant stock price. We think that many state-owned enterprises should be realistic with equitization and focus on re-structuring their companies to bring more added value before equitization.
As for legal impediments, many investors and SOEs have voiced concerns over impractical aspects of the regulations on the valuation process and methods. In addition, the requirements on majority state ownership (more than 50% of the charter capital) in promising areas such as telecommunications, oil & gas wholesaling, mining, finance or insurance partially impede the equitization process. Foreign strategic partners, for example, would be reluctant to purchase shares of a state-owned company, in which they would become minority shareholders. There are good reasons to think that the state should control some companies for the purpose of public interests. However the government should understand that equitization is an ongoing process that helps bring in appropriate investment and contributes greater efficiency to the whole economy. Sound management of companies after equitization is more beneficial to their operation and the economy than maintaining companies with complicated and inefficient management.
The continuation of liabilities from pre-equitization companies, including all employment liabilities in the context of an employee-friendly legal framework, creates more burdens for the newly-converted enterprises.
Ambiguous legislation and regionally varied and time consuming practices relating to licensing after equitization, particularly in the event of foreign investors acquiring shares of SOEs, are also bottleneck points in the whole process.
3. As a partner, how would you like to comment on the related legal framework for SOE equitization? Do you think it needs to be improved to accelerate the equitization process?
Absolutely. As we have mentioned previously, the state’s status as a majority shareholder after equitization, the liabilities after equitization, and the complicated licensing process are among the myriad weaknesses of the legislation. Further, the absence of a clear legal framework on the issuance of shares in foreign markets also leads to the slowing down of equitization. Overseas IPOs are great opportunities for SOEs in Vietnam to approach global channels of capital and increase their public awareness. However, currently, overseas IPOs can only be approved on a case-by-case basis and there has been no clear guidance on the criteria, approval process, and other issues relating to the corporate, foreign exchange, accounting, and tax aspects of this process.
4. Do you think there is a consensus in terms of ideology from the top to the lower levels about the need to speed up SOEs’ equitization in Vietnam?
In our opinion, the government has sent pretty clear messages supporting equitization, particularly by setting up specific deadlines and roadmaps for state owned companies. However, implementation has not been up to its strategy. In this volatile economic situation, the government should be firm on the roadmap but also provide suitable stimulus and guidance for equitization. For example, the government should encourage the transfer of shares or the issuance of shares to a few strategic partners as well as overseas IPOs by providing practical, concise and business-oriented guidance to facilitate these transactions.
5. Some have said that Vietnam needs a breakthrough if the country wants to see the SOE equitization process become faster and better? What do you think the breakthrough might be?
We do not think there is a panacea to solve all problems in order to accelerate of the equitization process at this stage. It does not mean that there is no way to achieve progress but an instant and speculative measure cannot solve all the problems effectively.
The following are basic measures that the government and state-owned enterprises should implement to boost the process:
· A clear and predictable timeline for equitization.
· Improving equitization regulations is a must but should be put in the context of relevant legislation such as the enterprise, investment, accounting and banking laws. The inconsistencies between these laws should be addressed once and for all.
· Equitization should be viewed as an on-going instead of a finished process. The government and companies should consider added values after equitization as essential criteria in deciding when and how to equitize, as well as who the strategic partners should be.
· Instead of only focusing on the small domestic capital market, conducting IPOs in foreign markets is a good way to help SOEs access more capital channels. Although stricter conditions and liabilities, such as accuracy of financial reports, application of the International Standards on Accounting (ISA), liabilities of managers and periodic disclosures are born by issuers, SOEs have the opportunity to re-structure their operation to meet international standards and run efficiently. Duane Morris, with our substantial presence in major financial markets such as Singapore, London and New York, is working closely with SOEs and domestic companies in exploring overseas offering opportunities.
ENERGY - WB finances Vietnam’s national energy programme
VIR
The World Bank on July 5 approved a $2.37 million effective energy use and clean production for Vietnam to be funded by the Global Environment Fund.
The project will help improve the capability of the government and Vietnamese partners in implementing the national energy programme in order to improve the efficiency of energy utilisation and the reduction of green house gas emission.
The three-phase project will also map out an action plan to promote the effective use of energy in key industries and develop energy service suppliers. VIR
Power market debate rumbles on
BusinessAsia
Vietnam’s competitive trial power market operation has triggered concerns among industry insiders.
According to Electricity Regulatory Authority of Vietnam (ERAV) head Dang Huy Cuong, Vietnam’s competitive power generation market (VCGM) would operate under the mandatory cost-based gross pool scheme. Accordingly, power generators will take the initiative in launching price offers in the market. Successful candidates will be the ones offering most competitive prices.
Cuong said electricity price would still be managed by the state in the competitive power market’s trial operation which starts from July 1, 2011. Accordingly, power consumers pay their monthly electricity bills based on the on-going state regulated price bracket despite the price between power generators and the single buyer Electricity Power Trading Company (EPTC).
In light of Decision 24/2011/QD-TTg dated April 15, 2011, electricity prices will be fixed based on market rules from June 1, 2011. However, current electricity prices have yet to be set following the market mechanism.
This is partly because many sorts of debts and losses incurred by power generators and Vietnam’s power authority Electricity of Vietnam (EVN) were being suspended by the state, not counted on the power production cost in 2011.
“Electricity prices will sharply rise if all relevant expenses are accounted on the production costs. This will put serious pressure on inflation. Therefore, power price revisions must follow a roadmap, our intention to set power prices based on market rules may even be delayed until 2013,” said Minister of Finance Vu Van Ninh.
“Operating competitive power market means all relevant expenses will be fully and adequately counted into power production costs. If electricity selling prices to EVN are unchanged, power generators cannot give accurate price offers for healthy market performances,” said a power market regulatory expert.
That expert also voiced concerns over the fact manipulations might occur in the power market in the mid-trial period when power generators with the most competitive price offers will be selected, but payments for power volumes will still be made based on price levels set in earlier signed power purchase agreements.
Acknowledging the possibility of this, ERAV’s Electricity Price and Fee Department head Tran Tue Quang said no guiding document was in place to effectively control negative phenomena.
Vinacomin’s Power Holding Corporation deputy general director Pham Hong Khanh assumed a host of problems would arise when competitive power market was brought online despite the presence of a wide variety of relevant legal documents. Therefore, competent state agencies should be proactive in issuing suitable guiding decrees to ensure the market’s smooth performance, Khanh said.
INVESTMENT - Industry, real estate attract FDI
VNS
Foreign direct investment (FDI) topped $5.6 billion in the first half of the year, spreading over 455 different projects, with 205 of those industrial projects worth a combined $3.3 billion. Real estate followed closely, with 63 projects worth a total of $780 million. Singapore was Vietnam's leading source of foreign investment during the period. The Vietnam News Agency spoke to Do Nhat Hoang, director of the Ministry of Planning and Investment's Foreign Investment Agency, about the contribution of foreign investment to the nation's economic growth and how to improve the quality of investment.
The big gap between registered foreign investment and disbursements is always of considerable public concern. What are you doing to improve the quality and effectiveness of foreign investment and close this gap?
Disbursement in 2008 was $11.5 billion out of a total of $71.7 billion registered investment capital, a ratio of 16 per cent. It reached $10 billion out of a total of $21.9 billion, or 46 per cent, in 2009, and $11 billion out of $19.8 billion, or 56 per cent, last year. So, while registered capital has decreased over the years, the ratio of disbursement has increased. The global financial crisis in 2008 affected the business operations and investment plans of foreign investors all over the world, including in Vietnam.
The disbursement ratio may not be increasing now due to difficulties in the country's investment climate. Despite some progress in administrative reforms, shortcomings still exit in administrative procedures and land use policies. In addition, difficulties in capital arrangement and relationships among partners in joint ventures also slow disbursements.
The current structure of foreign direct investment (FDI) is unreasonable. Much of the capital is invested in the real estate sector, with many projects worth of billions of US dollars, while investment is modest in manufacturing, which creates more added value. What can be done to change this?
There are currently 12,776 foreign-invested projects worth $198 billion being carried out in Vietnam, of which the real estate sector alone accounts for 358 projects worth $48.2 billion. However, according to surveys by the Foreign Investment Agency, the industrial and manufacturing sector still attracts the greatest proportion of FDI capital. In the first six months of the year, FDI inflows in this sector made up 50 per cent of total FDI, with 205 projects worth $3.3 billion.
How are local governments handling the authority that has been vested in them to grant investment licences?
The government has had the right policy of decentralising administration and licensing in order to create new sources for regions to develop their own internal resources. However, in pursuit of rapid development, many regions have granted licences to poorly-conceived projects, based on inadequate information and appraisals, resulting in a number of slow-to-be-implemented, suspended, or even revoked projects.
Recently, the Ministry of Planning and Investment and local authorities have been more closely reviewing investment projects, particularly their potential impacts on localities. Projects with investors which are financially inadequate will have their licences revoked.
What is the contribution of foreign investment to the nation's economic development?
Foreign investors have brought new investment modes, arousing internal forces and investment activity in the country. Along the way, the image of Vietnam as an investment environment has been greatly improved. Foreign investment has also helped us recognise the need to adapt in order to join the global value chain, access international markets and further integrate into the global economy.
Foreign investment also contributes to the State budget, creates more value for the society, promote the transfer of scientific and technological know-how, and create jobs for local people.
What is the outlook for attracting foreign investment this year and in the coming years?
According to the assessments of international organisations, Vietnam still ranks 8th in the list of attractive investment destinations for 2010-12. In the eyes of Japanese investors, Vietnam ranks only behind China, Thailand and India as an investment destination.
In the context of the lingering global economic crisis which has crippled investment so far, this is both challenge and opportunity for Vietnam to further accelerate administrative reforms and improve the investment climate to increase its attractiveness to foreign investors.
Foreign direct investment declines
VNS
Few improvements in the investment climate are to blame for the reduction in foreign investment into the country in the first half of the year, industry insiders have said.
Figures from the Ministry of Planning and Investment's Foreign Investment Agency showed that total registered FDI capital for 455 foreign-invested projects along with capital added to existing projects reached over $5.6 billion in the first six months of this year, equivalent to just 56.7 per cent of the same period last year.
Reaching the target of $20 billion worth of FDI set for the year will be difficult, the department said.
Economist Le Dang Doanh said aside from volatile and unpredictable policies few reforms had been made in the investment environment in Vietnam, noting that reform must be efficient and can stabilise the macro-economy to be able to attract FDI flow into the country.
Experts said despite being a large labour market attractive to foreign capital sources, Vietnam can easily lose out opportunities due to its investment environment.
The recent instability in macro-economic policies has uncovered several weaknesses, causing investors to delay their decisions to do business, they said.
They attributed the decline in pledged FDI capital and the rate of FDI disbursement over the past six months largely to the big impact of the slumping domestic market as well as soaring input costs and an unstable macroeconomy.
The World Bank estimated in a report on Vietnam's economic development that the fall in FDI funds stemmed not only from the impact of the global economy but also from such macro-economic instability, power shortages and a scarcity of skilled labourers, among others.
A survey by the European Chamber of Commerce (EuroCham) on the second-quarter investment environment showed that EuroCham business members said their confidence in business prospects in Vietnam was dropping because of the lack of improvement in macro-economic policies.
EuroCham President Alain Cany said if improvement was not made effectively then Vietnam could lose its attractiveness compared with other Asean countries.
FDI sharp falls cause big worries
Vietnamnet
Macroeconomic instability, the electricity shortage and the lack of skilled workers have been cited to explain the sharp falls of the foreign direct investment (FDI) in Vietnam in recent months.
The general Statistical Office (GSO) has reported the sharp decrease of 50 percent in registered FDI capital in the first six months of 2011, in comparison with the same period of the last year.
According to the Ministry of Planning and Investment's Foreign Investment Agency, most of the newly registered projects belong to HCM City (124 projects) and Hanoi (108). The total FDI capital registered in the first half of the year was 4.4 billion dollars, and if counting on the registered additional capital of operational projects, the figure would be 5.6 billion dollars, equal to 56.7 percent of that of the same period of 2010.
The disbursement rate of foreign invested projects has also been decreasing.
As such, the FDI has been decreasing for the last three consecutive years. In 2008, the FDI capital reached the record high of 71.7 billion dollars. However, the figure dropped to 23.1 billion dollars in 2010. Meanwhile, experts think that the figure would be 20 billion dollars only in 2011.
Phan Huu Thang, former director of the Foreign Investment Agency, now is the director of the FDI Research Centre, a unit of the Hanoi National University, has attributed the decline in the FDI in Vietnam to the decrease of the global investment flow due to the global economic crisis.
Thang said that due to the economic difficulties, the countries, which provide FDI, now have to focus on stabilising the domestic situation and restructure the outward investments. Meanwhile, foreign invested enterprises in Vietnam are now facing big difficulties due to the high inflation and the financial policies.
As a result, many foreign investors, who plan to come to Vietnam, have delayed their plans. They wait for the situation in Vietnam to become stabilised to make investment.
"It was previously forecasted that the global FDI flow would be stabilised in 2011, but to date, no bright prospect has been seen," Thang said.
He went on to say that in order to better attract FDI in the time to come, Vietnam needs to perfect its legal framework on investment, and upgrade the infrastructure and the workforce. "Only when the national economy gets stabilised, the business environment becomes better, will foreign investors resume negotiations and begin seeking investment projects in Vietnam," Thang said.
In the report about Vietnam's economic development released by the World Bank, the financial institution pointed out that the FDI falls should not be attributed only to the global economic difficulties, but to macroeconomic instability, to the electricity shortage and the lack of skilled workers.
Investment environment getting worse?
Economists have expressed their worry that the declines in the FDI disbursement would badly affect the general payment balance, thus putting more pressure on the foreign currency supply, especially when the trade deficit has not been considerably improved yet.
Meanwhile, Nguyen Dinh Cung, deputy director of the Central Institute for Economic Management (CIEM), said that it is necessary to analyse the FDI falls in different fields.
"It should be seen a good thing if the FDI is into the real estate sector and into the projects which use much energy or apply low technologies," he said.
"The slowdown of the FDI capital flow to restructure the quality of the capital flow would open a new stage in attracting FDI in Vietnam," he added.
Dr Vo Tri Thanh, deputy Head of CIEM, said it is necessary to split the figure about the registered FDI capital and the figure about the disbursement rate. The figure about committed capital partially reflects the macroeconomic situation, and the newly released figure shows that the environment is weakening.
He also said that the implemented FDI capital shows that the current investment environment is a hindrance to the FDI attraction.
ENERGY – Projects on manufacturing power equipments may “die young”
TBKTSG
In order to ease the reliance on foreign technologies, Vietnam has been determined to manufacture equipment for power, cement plants and other industries. However, the projects on manufacturing equipments in the trial basis have not been successful.
The slow implementation of thermal power plants, the high trade deficit with China caused by the dominance of Chinese contractors in EPC (engineering, procurement, construction) contracts have worried the public.
A question has been raised that how far the project on researching and manufacturing synchronous equipment for coal-run thermo power plants has gone.
The project, or trial EPC project for short, was approved by the Government in 2009. At first, the project aims to manufacture equipments for 300 MW power plants. However, later, the manufacturers have asked to design the equipments for 600 MW power plants, because the latest power generation development plan does not include 300 MW plants any more.
It is expected that the results of the research and design would be applied to the Hai Phong 3 Thermal Power Plant (600 MW) and Long Phu 2 (600 MW) which is now under the preparations for construction.
The project has been launched after the government realized that the demand for equipment for coal-run thermo power plants is very big. It is expected that by 2015, the total designed capacity of coal-run power plant would reach 106,000 MW out of the total capacity of 170,000 MW (62 percent).
If Vietnam can design, manufacture and supply equipments for the power plants, it would be able to control the investments in the power plants, thus allowing to ensure the energy safety and help reduce the trade deficit.
As for hydropower plants, the values of equipment and installation just account for 20-30 percent of the total investment capital, while the technologies do not change regularly. Meanwhile, at thermo power plants, the money spent on equipment and technologies always account for high proportions of 75-80 percent, while technologies change regularly. It would be a heavy task to undertake the wok of EPC contractor, but the turnover proves to be very attractive.
According to Nguyen Van Thu, Chair of the Vietnam Association of Mechanical Engineering Industry (VAMI). Up to 30 Chinese enterprises are working as EPC contractors, or as big investment partners for 41 big projects in Vietnam, mostly in the field of thermo power.
“98 percent of the technologies are Chinese as well,” said Ta Van Huong, former Director of the Energy Department under the Ministry of Industry and Trade.
The decision to run the project on manufacturing equipments for the two power projects was applauded, because this was considered the good opportunity for domestic mechanical engineering companies.
However, Ngo Van Tru, Deputy Director of the Heavy Industry Department under the Ministry of Industry and Trade, has informed that the trial EPC project on the two power plants has finished. One year ago, the Government decided that domestically made equipments would be applied to Quynh Lap 1 in Nghe An province.
If domestically made equipment had been used for Hai Phong 3 Power Plant as previous planned, the EPC contract worth 500 million dollars would not have fallen into the hands of the joint name of Chinese Dongfang and Chinese Marubeni.
The decrease of the number of pilot projects (from two to one) can partially say that bad preparations of the involved parties in the implementation of the project. Quynh Lap 1 project is still under the stage of feasibility project compilation, and it is still not clear when it will be implemented in reality, according to Tru.
Meanwhile, Thu from VAMI said that the failure in the two pilot projects was caused by the problematic project management and the low capability of designing package deals.
Electronic markets battle to retain customers
SGGP
After the Wonderbuy Electronics Center went bankrupt, other electronic centers and retailers have stepped up promotional campaigns, but consumer confidence continues to decline.
Loss of Trust
Many participants of the ‘Purchasing in an American way’ program, started at the beginning of 2011, have contacted Wonderbuy on Tran Cao Van Street in District 1 in the past few days to recover their promotional rewards. There is a fear and a possibility that all promotional rewards may also sink as a result of the company’s bankruptcy.
Mr. C., a promotional reward earner, said he decided to buy an LCD worth nearly VND30,000,000 (approx.USD1,460) only because of the promotional offer attached to it, of 70 per cent money-back into his savings account after 3 years, which seemed at that time a great bargain.
When he heard about the situation at Wonderbuy, he immediately took his contract papers to his bank to check on the status of the offer but was told the account was valid only if the company was still in business. Logically he is right to demand and claim his offer but with such a flexibility clause in payment it will be impossible for him to claim the reward.
According to a director of a small electronic center in Go Vap District, there seems to be a shift in consumer confidence as a result of the Wonderbuy situation and now people prefer to buy direct merchandise than participate in promotional campaigns.
Customer Care Services
The electronics market is facing difficulties this year, from a diminishing purchasing power to high overheads, making investments in this business a high risk.
According to Dinh Anh Huan, general director of the electronics and household appliances chain store dienmay.com, since the end of the first quarter of 2011, purchasing power has dropped significantly. Even during these hot summer months, sales are lower by 50 percent than the same period last year.
Presently supply exceeds demand, competition amongst retailers, even the established ones, is quite fierce. The Wonderbuy incident has made all distributors reconsider their business strategies.
The gioididong.com stores will soon launch their Customer Relationship plan whereby they will strictly control information of customer promotion rewards as well as solve customer grievances.
The Nguyen Kim electronics center which has nearly 1 million loyal customers has just announced its customer care service which will comply with international standards. Even Thien Hoa, an electronics center famous for cheaper products, also plans
EVN urged to pay 1tr dong debts
Vietbiz24
Vietnam National Coal and Mineral Group (Vinacomin) has denounced the Electricity of Vietnam's delays in paying the debts of 1 trillion dong. Also 200,000 tonnes of coal used in electricity plants of EVN has not been paid to the coal miner.
Le Minh Chuan, general director of Vinacomin said that so far EVN has paid off the big debt of trillion dong to his group. From March 1, EVN was allowed to raise electricity price by 15.28 percent but electricity output Vinacomin sold to EVN only increased 5 percent in prices.
"EVN now owes Vinacomin 1 trillion dong in addition to unpaid cost for 200,000 tonnes of coal", he stressed.
Earlier, another giant PetroVietnam also announced the huge debts of 5 trillion dong that EVN owed the group but the national oil and gas holding expressed symphathy to big losses of the electricity industry because of selling at below cost price.
In many press meetings, EVN leaders kept crying for losses and confirmed that the March 1 increase of 15.28 percent in electricity price was not enough to offset costs. The electricity price should be hiked by 62 percent, the group gave point of view.
Vice general director of EVN, Duong Quang Thanh on Monday proposed ministries of industry and trade, finance, banks to help the group deal with financial difficulties at this time.
Without electricity price hike for second time, EVN may suffer loss of up to 40tr dong
Vietbiz24
From now till the end of this year, if Electricity of Vietnam (EVN) is allowed to adjust the electricity price of no higher than 5 percent each time, the loss will be lessened by over three trillion dong, according to the local newswire VnExpress.
In particularly, EVN said that if the electricity price is not adjusted for the second time, the accumulated loss till the end of 2011 may be up to 40 trillion dong. government's Decision 24 issued in February more or less gives the self-determination to EVN.
Under the regulations, at least 3 months, electricity price will be adjusted once of no higher than 5 percent, from now until the end of the year, EVN may be allowed to increase the electricity price for two times. And if EVN is allowed to do this, the losses will be lessened by three trillion dong.
In fact, from April till now, EVN repeatedly asked to adjust electricity prices for the second time due to financial difficulty. Even in most of the online briefings of industry and trade sector, EVN leaders also complained about hardships and continually mentioned the electricity price hike.
At the time of announcement of new electricity price on March 1, Ministry of Finance (MoF) said that this increase of 15.28 percent is not enough to offset the cost. This means that EVN is suffering tens of trillion dong losses, because if calculating all costs, power prices must be raised by 62 percent.
MoF said that without the electricity price hike on March 1, the power sector will suffer a loss of 29.5 trillion dong, bringing the accumulated losses of years to 57.417 trillion dong.
EVN is now also a debtor of a number of major partners such as the Vietnam National Oil and Gas Group (PetroVietnam-PVN), Vietnam National Coal and Minerals Industries Group (Vinacomin) and Hiep Phuoc Power with a total amount to trillions of dong.
RESOURCES - PetroVietnam to exploit five more oilfields to meet yearly target
Bernama
The Vietnam National Oil and Gas Group (PetroVietnam) will exploit five more oil fields in order to meet the yearly target of 23 million tonnes of oil for this year, said general director Phung Dinh Thuc.
At an online meeting on July 5, PetroVietnam general director Thuc affirmed that PetroVietnam's exploration of oil and gas in the East Sea is totally within the area of Vietnam's sovereignty and jurisdiction rights and within Vietnam's continental shelf and exclusive economic zone, Vietnam News Agency (VNA) reported.
In the first half of the year, PetroVietnam achieved a turnover of 340 trillion dong (US$16.6 billion), representing 68 percent of the yearly plan and a 45 percent year-on-year increase, said Thuc.
PetroVietnam's strong growth was attributable to turnover from oil sales of $6.05 billion, a year-on-year rise of 49 percent, as oil rose by $34 per barrel from 2010 to $115 on the world market, he added.
Revenues from oil and gas services reached 94 trillion dong, up 38 percent from the same period last year.
PetroVietnam is set to turn out three products in the remaining six months, namely the first ever 90m jack-up rig, fibre products for textile and garment industry and ethanol products, he said.
PetroVietnam maintains oil and gas exploration and drilling plan in Eastern Sea
BusinessAsia
PetroVietnam, the country’s oil and gas group, confirmed its petroleum exploration and drilling plan in Eastern Sea would not be unchanged because Vietnam’s territory was recognized globally. It also is considering whether it will buy back stakes of foreign partners in Eastern Sea projects or not.
The confirmation was made in the press meeting on July 5.
General Director Phung Dinh Thuc said that asset value of ConocoPhilips in Vietnam totaled at $1.5 billion. The foreign organization holds 23.3% of stake in a complex of five oil wells at Block 15-1; 36% stake of Rang Dong well at Block 15-2 in Cuu Long oilfield and 16.3% stake of Nam Con Son gas pipeline.
Replying VnExpress.net about the information that US’s third largest petroleum firm ConocoPhillips is planning to sell its stakes in three oil and natural gas wells offshore Vietnam, Thuc said that his group together with other partners are considering buyback of these stakes and may actualize the priority right of host country. But, he noted, it is necessary to concern why ConocoPhillipines wants to withdraw investment capital.
“They may be restructuring or in the complex period…”, Mr Thuc guessed.
During the first six months of 2010, total convertible oil output of PetroVietnam reached almost 12 million tons, including 7.23 million tons of crude oil and 4.7 billion of cubic meters of gas. In which, the group exported and sold 7.2 million tons (4.1 million tons for export, and 2.74 million tons being sold to Dung Quat oil refinery and 310,000 tons of crude oil being drilled and sold overseas).
Overall, the group earned total revenues of 340 trillion dong, paid 75 trillion dong to the state budget, growing 31% against one year earlier. This year, these figures are expected to be 640 trillion dong and 138.400 trillion dong, respectively.
From now to the year end, PetroVietnam will be focusing on such projects as Nghi Son oil refining complex, Quang Trach 1 thermo power plant, Hau River 1 thermal power plant, Southern petrochemical complex. The group also will start drilling in five oil and gas wells namely Visovoi-Nhennhexxky (in Russia), second phase of Te Giac Trang and Dai Hung, Chim Sao and Dana SK 305-Malaysia.
As planned, Dung Quat oil refinery will be stopped in operation on July 15 for first overall maintenance. It will restart operation on September 7 and full capacity from Sep 15.
PetroVietnam’s General Director Phung Dinh Thuc also emphasized, EVN owed the group seven trillion dong. In this difficult context, PetroVietnam is cooperating with EVN and requiring the electricity group to implement down payment.
ECONOMY – Inflation proves to be stubborn adversary
VIR
The government late last week revised up its inflation target, its second adjustment in a month, as price spiralling pressures continue to squeeze the economy.
Manufacturers will continue suffering tight credit lines as monetary tightening remains a priority
The inflation cap for this year has been adjusted to 17 percent from the 15 percent target announced in early June.
Inflation climbed to 13.29 percent in June against last December, or a 22.6 percent rise year-on-year, making the previously set 15 percent goal virtually unrealistic.
"There are many factors that could blow inflation up in the upcoming months. It is not easy to curb it in a short time," said Do Thuc, general director of the general Statistical Office (GSO), referring to increased prices of global input materials, food and fuel, and natural disasters.
Thuc said even if measures provided in the governmental Resolution 11/NQ-CP on stabilising the macro-economy and curbing inflation were seriously implemented, inflation would be 16 percent at a minimum.
The government last week reaffirmed to pursue tightened monetary and fiscal policies, including a limitation of annual credit growth at 20 percent while money supply growth was capped at 16 percent.
"We have not yet thought about easing monetary policies," said Nguyen Xuan Phuc, minister and Chair of government Office.
However, director of the GSO's Price Statistics Department Nguyen Duc Thang said if credit grew 20 percent, it would blow inflation out of control.
Some international financial institutions have even forecast Vietnam's inflation could be higher than the adjusted cap of 17 percent.
In a report released two weeks ago, Barclays Capital expected Vietnam's inflation would peak at 22-23 percent by July or August, driven by commodity prices, before heading lower in September on slower credit and money growth and end with a 18 percent rate for the whole 2011.
Tai Hui, a Singapore-based economist at Standard Chartered Bank, said the consumer basket was a reason for rising inflation rate in Vietnam.
Rising food prices may lead to CPI increase
VOV
If prompt measures are not taken to control food prices, the increase of the Consumer Price Index (CPI) is likely to surpass 1 percent.
The CPI slow down in June was a sign for Vietnam to expect a slight increase in the following months. However, during the past week, there has been a sudden increase in food prices, causing great concern among consumers.
Struggling with surging food prices
Consumers in Hanoi are worried about a sharp increase in the prices of vegetables. In many markets, vegetable prices went up by two or three times compared to the previous week. Prices of other foods are also rising, particularly the price of pork, which has seen nearly a 10-percent increase.
Retail markets in HCM City are also adjusting prices in line with fluctuations in food prices in the first week of July.
Reasons behind price hike
Economist Nguyen Dinh Anh from the Ministry of Finance's Market and Price Research Institute, pointed out the hidden reasons behind a sudden increase in food prices. He said that there is an imbalance between food supply and demand.
Recent national disasters and animal epidemics have led to a shortage in the supply of meat and vegetables in the domestic market. Moreover, he said, the difficulty in accessing investment capital also attributed to the severe shortage of foods.
Vu Vinh Phu, Chair of the Hanoi Supermarkets Association, cited that China are purchasing Vietnamese duck eggs at a hugely inflated price, which is more than 15 percent higher than on the domestic market.
Focusing on production and distribution
According to economist Nguyen Dinh Anh, to slow down food prices, it is necessary to increase supply sources. A temporary measure can be used to import foods and control export activity.
In addition, reasons for the increasing demand for food need to be discovered as it is causing a negative impact on ensuring balance between supply and demand, as well as driving up food prices in the local market, he analyzed.
Head of the Ministry of Agriculture and Rural Development's Husbandry Department, Hoang Kim Giao, said that the number of pigs in Vietnam decreased by 4 percent in the past six months.
Moreover, the price of pork in the north was higher than in the south, causing a shortage in the south as northern traders travelled to transport the meat for their local markets.
In a number of northern border provinces, Chinese traders are purchasing a large volume of farm produce as their country is facing a rising inflation rate and surging food prices.
However, Giao affirmed that current agricultural production is able to meet domestic demand for food if key livestock breeding areas are promoted to increase supply sources for the local market.
Vu Vinh Phu said that relevant agencies should take measures to improve the distribution network and stabilise market prices. More incentive policies should be provided for farmers to help them boost agricultural production, he added.
Phu also stressed that food products saw the highest inflation of any goods in the first half of this year. Hence, to control consumer prices in the second half, it is essential to curb prices of food.
RETAIL - Buyers now shop for value
VNS
Vietnamese consumers, compared to other Asian shoppers, are more inclined to seek promotions as inflation causes more people to become price-sensitive, according to the latest edition of the Nielsen Shopper Trends Study released on Tuesday.
Vietnamese shoppers are the most prolific promotion buyers in the Asia-Pacific, Nielsen survey shows. Promotions and convenience continue to be the key drivers of store traffic.
Vietnam has the most promotionally focused shoppers, with 87 per cent open to buying promotions compared to a regional average of 68 per cent.
Nielsen found that 56 per cent of Vietnamese shoppers actively search for promotions while shopping, compared to 38 per cent regionally. This is due in part to the rising costs of everyday consumer goods.
With inflationary pressures showing no signs of abating, Vietnamese consumers are adjusting to rising everyday costs by noticeably changing their shopping behaviour.
Under the survey, 60 per cent of Vietnamese consumers in HCM City and Hanoi said their household purchasing power had fallen due to rising prices.
Consequently, consumers said they are cutting back by reducing spending on entertainment activities such as dining out and leisure travelling.
Habits change
As consumers adjust to higher prices, certain changes in shopping habits can be seen as well, such as reducing the number of shops visited or the quantity of products per trip, buying more on promotion or visiting shops close to home to save on petrol expenses.
Consumers are moving to relatively bigger pack sizes for frequently used categories, such as laundry, shampoo, fish sauce and bouillon granules, in an effort to stretch their budgets.
Darin Williams, managing director of Nielsen Vietnam, said location continued to be the main factor in deciding where people shop.
Retailers should be aware that shoppers are increasingly looking for promotions and are more willing to change brands they buy and where they shop to find them.
He said retailers were well-advised to adopt more innovative promotions, point-of-sale displays and other tactics to attract and retain shoppers.
Private label market share-which changed very little over the past year-could stand to gain in several categories as shoppers look for other ways to save money without sacrificing quality.
"Those stores and brands that find the right combination of convenience, value and quality will be better able to ride out this challenging environment," he noted.
Despite some changes in shoppers' behaviour, one factor remained unchanged. Vietnamese shoppers still shop at different channels depending on what they are searching for.
Traditional markets are used for fresh foods, while snacks, personal care products and dairy products tend to be purchased in supermarkets and traditional grocery stores.
Where before most consumers planned their purchases and remained disciplined while out shopping, today consumers are buying more at the spur of the moment when it comes to Fast-Moving Consumer Goods.
Thirty-five per cent of consumers said they "walk up and down the aisles and pick the items they want," compared to 8 per cent who simply "grab and go."
Vietnamese consumers also seem to be more loyal to brands in several categories, most notably dairy, alcohol and personal care.
More than 45 per cent of shoppers said they would look elsewhere for a brand they know or with which they are familiar.
In contrast, more than 50 per cent of shoppers indicated they would substitute their regular brands of carbonated soft drinks and snacks with another if alternate brands were less expensive or sold on promotion.
Nielsen Shopper Trends is an annual study on consumer shopping behaviour that is conducted in the country's major cities, HCM City, Hanoi, Da Nang and Can Tho.
Seafood exports to surge beyond forecasts
VNS
Seafood exports will reach $6.2 billion this year, exceeding its earlier target of $5 billion, according to the Ministry of Agriculture and Rural Development.
Soaring exports are attributed to a rise in the global seafood price. Meanwhile, world demand is expected to increase by 1.4 percent against last year.
Phung Giang Hai, from the Agriculture and Rural Development Policy and Strategy Institute, said Vietnam's seafood exports would continue to increase due to growing demand in North America and the EU.
Tra catfish and shrimp, two of Vietnam's major exports, were expected to hit $2 billion each this year, Hai said.
In the first half of this year, Vietnam exported 616,000 tonnes of seafood, a year-on-year increase of 5.8 percent in volume. The volume earned $2.6 billion, a 28 percent year-on-year rise.
In the first six months, tra catfish exports reached a record volume of 300,000 tonnes, worth $800 million. Exports increased 4.7 percent in volume and 24.7 percent in value compared with the same period of last year.
Meanwhile, shrimp exports in the first five months surged 20.7 percent in volume to 95,000 tonnes and 40 percent in value to $900 million against the same period last year.
The Ministry of Industry and Trade expects seafood exports to reach 130,000-140,000 tonnes this month, worth $490-$500 million.
The US is Vietnam's largest seafood export market, followed by Russia and Ukraine. Vietnam also plans to enter the central African market in the near future.
Vietnam aims to diversify its aquaculture by applying new technologies for breeding tra and basa fish, which will also boost food safety and hygiene.
The country has signed a number of cooperation deals with Asean nations in the field of aquaculture. It has also signed agreements with Indonesia and Philippines and plans to enter similar deals with Myanmar and Malaysia in the near future.
Vietnam is currently in negotiations with Thailand on information exchange in aquaculture.
In 2010, the Vietnamese aquaculture sector earned $5 billion in exports. Tra exports alone were worth $1 billion.
BUSINESS - Audits find half of foreign firms make profits
Tuoitrenews
Over half of the foreign-invested firms in HCM City that claimed losses in 2010 do make a profit this year, according to an audit aimed at detecting whether or not they engaged in transfer pricing, an illegal technique to evade taxes.
According to the auditing result announced by the HCM City Tax Bureau on Tuesday, 1,342 foreign-invested firms in HCM City have reported profits, which is 55.14 percent of the inspected firms.
The remaining 44.86 percent still reported negative taxable incomes and were yet to make a profit, informed Nguyen Trong Hanh, deputy head of the tax bureau.
Earlier, the HCM City Tax Bureau had closely monitored over 2,400 foreign-invested firms in the city as they were suspected of transfer pricing, a fraudulent technique whereby companies spread profits and losses in a certain way so as to enjoy minimal taxes.
Hanh said most of these enterprises were asked to submit their financial reports as they had reported loss in so many consecutive years.
He said their awareness have improved after the tax authorities encouraged them not to engage in transfer pricing.
The tax bureau would continue strict measures to prevent transfer pricing activities in both foreign and domestic companies, he promised.
Recently, many foreign-invested firms were found to have engaged in transfer pricing, causing great losses to the state budget and putting pressure on those that strictly follow tax rules.
It also resulted in many recent strikes as the foreign enterprises usually reported high salaries compared to total revenues while the actual wages are even lower than those at domestic firms, he added.
INDUSTRY - Vietnam records $20b in industrial value
vietnamplus
Industrial production in the first six months of the year reached 418.4 trillion dong (nearly $20 billion), an increase of 14.3 percent over the same period last year, according to the Ministry of Industry and Trade.
Most of production materials and consumption products saw high growths. Electricity increased by 11.2 percent; cement, 14.7 percent; liquefied gas, 19 percent; petroleum, 25.3 percent.
In the reviewed period, the industrial sector earned an export value of $42.3 billion, a year-on-year increase of 30.3 percent.
Of them, the export of fuel and mineral products fetched $5.2 billion, 26.3 percent year-on-year increase.
The ministry forecast that the sector would see an export turnover of $85.5 billion by the end of this year with trade deficit of $14.5 billion, equal to 16 percent of the export value.
PROPERTY - Tight credit puts pinch on property market
VNS
High interest rates and tighter credit are lowering the liquidity of real estate and pushing a number of housing developers into bankruptcy, according to experts at a seminar held in Hanoi last week by the Vietnam National Real Estate Association.
Tran Kim Chung of the Central Institute for Economic Management said that after three years in the doldrums, the nation's real estate market was badly in need of capital to recover and continue developing.
In order to curb inflation and stabilise the economy, the government has ordered commercial banks to tighten credit for the real estate market and other non-manufacturing purposes. Last week, banks were required to show that such loans were less than 22 per cent of their total outstanding loans, a figure that they would be required to reduce to 16 per cent by the end of the year.
Because of this requirement, an estimated 10 trillion dong (US$477 million) has been diverted from lending to the real estate sector.
Deputy minister of Construction Nguyen Tran Nam also said that by tightening the real estate sector's access to credit, banks were increasing the likelihood that real estate developers would default on earlier loans. Projects were likely to become stagnant as developers were unable to work without access to financing, and many of these would likely be high-end residential projects that depend on bank financing being available to potential buyers.
Therefore, developers have complained that the market for their projects has dried up and that many were facing default on existing bank loans. Nam suggested that policies be more flexible to prevent this and ease the crunch on the real estate market.
Minister of Construction Nguyen Hong Quan has sent a letter to the State Bank of Vietnam seeking more favourable conditions for the market. The letter suggests that the central bank adjust the proportion of loans appropriate to each industry's legitimate needs instead of placing a moratorium on all non-productive sectors.
Outstanding loans to the real estate sector totalled 222 trillion dong ($21 billion) at the beginning of last month, according to the SBV.
Vietnam property market still safe
Thanhnien
Vietnam’s real estate market would not collapse even though it is now in a downturn and credit has been tightened, Deputy Construction Minister Nguyen Tran Nam said at press briefing Friday.
Nam said that many officials and the public have expressed concerns that the market could fall apart due to credit payment difficulties, but it was unlikely.
Market values of property products remain within safe levels and real estate companies are still capable of repaying bank loans, he said.
According to the Ministry of Construction, total real estate credit was recorded at around VND220 trillion (US$10.7 billion) at the end of May, down 7 % from December 2010. Real estate loans now account for less than 7 % of total outstanding loans in the country, the ministry said.
The State Bank of Vietnam has ordered local banks to cut lending for non-manufacturing purposes to 16 % by the end of the year.
Nam said credit tightening has affected many sectors, including real estate. But he noted that the local real estate market is actually small because only 30 % of properties in the country are available for trading.
The Ministry of Construction last week called for a ban on lending to luxury real estate projects, but said that the development of industrial projects, new offices and individual homes deserved to access bank loans. – Vietnam’s real estate market would not collapse even though it is now in a downturn and credit has been tightened, Deputy Construction Minister Nguyen Tran Nam said at press briefing Friday.
Nam said that many officials and the public have expressed concerns that the market could fall apart due to credit payment difficulties, but it was unlikely.
Market values of property products remain within safe levels and real estate companies are still capable of repaying bank loans, he said.
According to the Ministry of Construction, total real estate credit was recorded at around VND220 trillion (US$10.7 billion) at the end of May, down 7 % from December 2010. Real estate loans now account for less than 7 % of total outstanding loans in the country, the ministry said.
The State Bank of Vietnam has ordered local banks to cut lending for non-manufacturing purposes to 16 % by the end of the year.
Nam said credit tightening has affected many sectors, including real estate. But he noted that the local real estate market is actually small because only 30 % of properties in the country are available for trading.
The Ministry of Construction last week called for a ban on lending to luxury real estate projects, but said that the development of industrial projects, new offices and individual homes deserved to access bank loans.
CONSTRUCTION - Construction of high-tech building starts after long delay
BusinessAsia
Construction of the Brilliant Chip Internet Space building in Ho Chi Minh City’s High-Tech Park started this Monday after nearly 4 years of delay because of financial problems.
The project has a total investment of more than US$11 million from SACOM Investment and Development Corporation and Brilliant Chip Joint Stock Company.
The nine-storage building will provide working space for 2,000 high-tech employees as well as food, medical and banking services.
The building is scheduled to be completed and begin operation next January.
FOOD & BEVERAGE - Almost 7,500 DEHP-tainted products sold in city
BusinessAsia
Incomplete statistics of the HCMC Market Monitoring Bureau shows that nearly 7,500 food products tainted with DEHP toxic substance have been sold in the city recently.
Dang Van Duc, head of the agency, told the Daily last Friday that the food came in various types of cans, packs and bottles. The number was calculated after a working session with four Taiwan-made food importers and nine supermarkets in the city.
There were nine enterprises and supermarkets reporting imports of over 62,700 food units from Taiwan that were confirmed to have DEHP while four other organizations had yet to give exact numbers.
The enterprises and retailers so far have withdrawn or kept over 57,800 products in warehouses, Duc said.
The working session aims to supervise the recalling of the DEHP-tainted products given instructions of the HCMC Food Administration as local importers currently are allowed to recall the products by themselves. In the future, related forces will carry out inspections and confiscate toxic products on the market and impose punitive sanctions.
The city’s administration on June 14 released a document to ask companies involved in the sales of drinks and food additives originating from Taiwan to make a report on infected products found and DEHP content testing results before Monday. They are told to inform related agencies about the infected products within 24 hours, announce it to the public and withdraw them from shelves.
Three beverage importers in HCMC named Gia Thinh Phat, Nhat Phu Quy and Ha Thanh have so far reported that they have completed recalling DEHP-tainted products on the local market. They have withdrawn over 1,300 plastic bottles of 22 types of syrup and fruit juice.
The plasticizer DEHP is used in a type of food additive known as clouding agent that makes products more visually appealing to consumers. The substance is believed to cause cancer.
LEGAL NEWS - Tax incentives to boost support industries
VNS
From August 18, imports of equipment and machinery for technology assembly lines that are not made by domestic producers will be given import tax breaks as part of a government plan to enhance support industry development.
From August 18, imports of equipment and machinery for technology assembly lines that are not made by domestic producers will be given import tax breaks as part of a government plan to enhance support industry development, the Ministry of Finance has announced.
Circular 96/2011/TT-BTC, issued by the ministry earlier this week, will modify soft financial policies specified in government Decision 12/2011/QD-TTg issued in February to encourage support industry development in the machinery and manufacturing, electronics and information technology, automobile assembly and production, textile-garment and leather shoes sectors.
According to the circular, projects that support high-tech products will also be exempt from corporate income tax.
Imported commodities-including magazines and textbooks which are used in high technology research and development-will also enjoy tax breaks.
Imports to Vietnam must have certificates of origin
VOV
Starting on July 1, fruits and vegetables imported to Vietnam need certificates of origin (COs), announced deputy minister of Agriculture and Rural Development, Diep Kinh Tan, at a press briefing on June 30.
Deputy minister Tan said that the requirement of COs for imports to Vietnam goes in line with the country's commitments to the World Trade Organisation (WTO), showing equal treatment among WTO members.
Vietnamese exports must also follow strict regulations before entering foreign markets, he added.
According to Nguyen Nhu Tiep, deputy Head of the Seafood, Farm and Forestry Produce
Quality Control Department, it is important to require COs from all products imported to Vietnam to ensure food hygiene and safety.
By June 30, four countries namely the US, Canada, Australia and Thailand had registered to follow COs regulations of Vietnam.
Posts
No comments:
Post a Comment