Vietnam - News and Regulations

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Oliver Massmann

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General Director – Duane Morris Vietnam LLC



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INVESTMENT – FDI hit $5b in H1, slightly down on 2010

VNS

Foreign investors poured US$5.3 billion into the country in the first half of the year, down roughly 1.9 per cent against the same period last year, the Ministry of Planning and Investment’s Foreign Investment Agency reported.

During the period, foreign investors also registered to pump nearly $5.67 billion into 587 projects, equal to only 62.7 per cent of that invested in the same period last year. Of the investments, 455 were newly licensed projects with a total registered capital of $4.4 billion and the remaining 132 were existing projects accepting additional capital totalling $1.27 billion.

Processing and manufactur-ing topped the list of foreign direct investment targets, with 205 projects and $3.3 billion of registered capital, accounting for 58.8 per cent of the country’s total FDI registered capital in the first six months. The construction industry followed with 54 projects totaling $474.8 million.

Among 38 countries and territories invested in Viet Nam in the first six months of the year, Singapore was the largest investor with $1.33 billion, followed by South Korea and Hong Kong with $673.6 million and $631.8 million, respectively.

Attracting $1.47 billion of FDI registered capital in the first six months, HCM City was the country’s biggest destination for foreign investors. The southern province of Ba Ria-Vung Tau and Ha Noi ranked the second and third with $550.1 million and $498.5 million, respectively.

The agency also reported foreign invested firms fetched $22.95 billion from exports in the first half of the year, up 31.1 per cent over the same period last year. The firms also spent $21.36 billion for imports during the period, up 29.5 per cent.

Despite a decline in FDI attraction during the first half of the year, industry insiders expect a rebound, especially from Japan, in the coming months.

Director of the Foreign Investment Research Centre Phan Huu Thang said that many Japanese investors had recently sought further information on investing in Viet Nam, especially in the support industry, due to difficulties they faced in the wake of the recent tsunami.



Vietnam: investors losing patience

Financial Times

“Vietnam has a lot of potential,” the Vietnamese country head of a large American company told beyondbrics recently. “But it had a lot of potential 10 years ago and it’ll still have a lot of potential in ten year’s time.”

His attitude is typical of a growing number of international investors in Vietnam who have become frustrated by the ongoing financial instability and apparent inability of the government to drive through much-needed reforms in a timely fashion.

The macro-economic situation is challenging enough with annual inflation over 20 percent and the government facing big trade and budget deficits at a time when foreign currency reserves have shrunk to less than two months of imports.

But investors also have a long list of sector-based gripes, from power companies unhappy with unprofitably low electricity prices to hoteliers perturbed by Vietnam’s reluctance to ease its restrictive visa policy.

At a bi-annual meeting between the government and the private sector last month, one foreign investor after another stood up to pour forth their grievances. These veteran Vietnam investors were well aware that the government, represented at this forum by investment minister Vo Hong Phuc, prefers to discuss sensitive subjects behind closed doors. But they let fly regardless, in a sign of their sheer frustration trumping their usual pragmatism.

Economists, the World Bank and the International Monetary Fund have welcomed the government’s efforts to stabilise the economy in the short term via a package of fiscal and monetary tightening measures known as Resolution 11.

But investors are not so convinced that this fire-fighting approach will pave the way for necessary structural changes such as more independence for the central bank, reforms of bloated state-owned enterprises and cuts to inefficient public investment projects.

There remains widespread scepticism about the government’s apparently Damascene conversion from a focus on growth to stability, as summed up in a recent note to clients by Citi:

While monetary policy will need to manage the growth-inflation tradeoff, given the government’s poor track record of sustaining policy tightening in recent history, we think the market (and ourselves) remain wary that commitment to macro stability could prematurely ease the moment headline inflation comes off, and like before, unhinge expectations on the dong and inflation.

The challenges facing Vietnam are profound. Even if the government does have the political will to tackle vested interests in the state-owned enterprises, ministries and provinces, it will still likely take years to resolve these complex issues.

The Vietnam bulls argue that, as in other frontier markets, if you want to benefit from rapid growth in Vietnam, you have to adopt a long-term view and take the rough with the smooth.

But, in the five-star hotels and fancy restaurants of Hanoi and Ho Chi Minh City, the mood among the foreign money men is not good.

Oliver Massmann, a German lawyer who is one of a few foreigners in Hanoi who speak fluent Vietnamese, argues that the problem is partly one of expectations: some hope for too much too soon while others are too quick to write off a country that has come through tough times in the past.

“The outside world has always under-estimated and over-estimated Vietnam,” says Massmann, a partner at Duane Morris.

But even he believes that Vietnam is losing its reputation as an attractive investment destination and that the government must “walk the talk” or risk losing out once the free trade agreement between China and the Association of Southeast Asian Nations creates a level-playing field across the region from 2015.

“Vietnam must speed up reform or it will be left behind,” he says.



Thailand expands investment in Vietnam

VOV

A seminar on promoting trade ties between Vietnam and Thailand was held in Ho Chi Minh City on June 30 by the Vietnam Chamber of Commerce and Industry (VCCI) in co-ordination with the Thai Ministry of Industry.

Surasith Bungbhisand, Deputy Director of the Thai Department of Industrial Promotion, noted that the trade ties between Vietnam and Thailand have grown steadily over the years.

He said Thailand currently has 250 projects operating in Vietnam with a total capitalisation of US$5.8 billion, and is one of the top ten countries of most investment into Vietnam.

Vietnam has political stability and great economic potential for many Thai groups such as Tipco, Amata and Siam Cement Group to expand investment in Vietnam, he said.

Two-way trade turnover between the two countries in 2010 reached about US$7.5 billion, up 21 percent against the previous year with Vietnam’s exports to Thailand rising 10 percent to US$1.2 billion.

Nguyen The Hung, a representative from the VCCI, said the business circles of the two countries are keen to boost cooperation in many fields. Many Vietnamese businesses are opening representative offices in Thailand to seek investment opportunities and cooperation partners.



MPI Minister: difficulties still ahead

VnExpress

Minister of Planning and Investment Vo Hong Phuc believes that the personnel changes in the government’s apparatus will not greatly affect the macroeconomic management. However, he said the national economy is still facing big difficulties in the second half of the year, especially the high inflation, trade deficit and interest rates.

The economic indexes in the first six months of the year are all far different from the targets set by the National Assembly, and the government has many times adjusted its forecast figures. What would you say about that?

We submitted the economic plan for 2011 to the National Assembly last year, after analyzing the economic performance in the first nine months of 2010, when the national economy was stable and indexes were all good. Therefore, the National Assembly set up the growth rate at 7-7.5 percent and the inflation rate at 7 percent.

However, right after the National Assembly’s working session; uncertainties broke out in the world. The happenings in Africa and Middle East influenced the crude oil price, while the public debt in Europe has been badly affecting the global economy.

What are the difficulties Vietnam’s national economy will have to face in the last six months of the year?

There are three biggest problems. The biggest one is the sharp consumer price index (CPI) increase. The index has increased by 13.29 percent over the end of 2010. Last month, the government adjusted the CPI increase target, and decided that the CPI should increase by 15 percent at maximum in 2011.

However, the Ministry of Planning and Investment believes that it is very difficult to fulfill the task. Our experts think that 17-18 percent is the most feasible inflation rate scenario for 2011.

Bank interest rate also remains a big problem. The State Bank still sets a cap of 14 percent on deposit interest rates. However, in fact, commercial banks pay 18-19 percent for deposits, while the lending interest rates have climbed to 22-24 percent.

The third big problem is the trade deficit. The National Assembly decided that the trade deficit must not be higher than 18 percent of export turnover. The Government wanted 16 percent. However, in fact, the trade deficit in the first half of 2011 had exceeded 18 percent. The high trade deficit will threaten the payment balance and foreign currency reserves.

After five months of the year, the CPI increase target has been raised to 15 percent, while you have said the figure would be 17-18 percent in reality. What is the basis for the prediction?

The 15 percent target was set based on optimistic forecast, after the prices of the latest two months have cooled down. However, things are getting different. Our experts believe that the prices would keep rising until September, then cool down for a short time and then would rise again in the last months of the year.

Even the 17-18 percent would be a difficult task. However, it is still good in the current circumstances of Vietnam. In 2008, Vietnam’s GDP growth rate was 6.5 percent, while the inflation rate was 22 percent.

How do you think will the uncertainties in the East Sea affect Vietnam’s national economy, especially in the oil and gas exploitation?

The East Sea issue is always complicated and Vietnam needs to anticipate everything. There have been no big impacts on the national economy. The oil exploration and exploitation has still been carried out normally, while the output remains stable. In the long term, this will depend on the negotiations and the problem settlement of involved parties.

There will be personnel changes by the end of the year, when the National Assembly establishes a new cabinet. How will it affect the economic management?

If we can do the organization work well, there will not be big changes. In 2007, when the Prime Minister Nguyen Tan Dung took the office from former Prime Minister, Phan Van Khai, everything went smoothly, and the economy witnessed high growth rate in that year.



Vietnam apparel makers eye long term ties with india

Vietnamplus

Vietnamese apparel businesses sought for long-term mutually beneficial partnerships with Indian materials suppliers at a workshop in HCM City on June 29.

The workshop was jointly held by the Vietnam Chamber of Commerce and Industry's HCM City branch and the Indian cotton product export promotion association -TEXPROCIL.

According to Amit Ruparelia, TEXPROCIL President, India has long been a supplier of raw materials for Vietnam 's garment and textile industry.

Vietnam apparel producers doubled imports of raw materials from India in 2010, at the value of 55 million USD.

They learnt new types of raw materials from Indian suppliers during this workshop as they have to date imported up to 80 percent of raw materials for production.

Bilateral trade between Vietnam and India rose in recent years, reaching over 2.7 billion USD in 2010. Of the figure, Vietnam 's exports to India increased 136.34 percent to 991.63 million USD.

Vietnam is one of the world's top ten apparel exporters. In the first six months of this year, it raked in 6.16 billion USD from apparel export, up 30 percent over the same period last year.

The country expects to earn 13.2-13.5 million USD from apparels this year.





ECONOMY – Inflation set to hover near 20pct by end of year

DVT.vn

Vietnam's inflation this year would be over 16 percent, of which, in the remaining six months of this year, the CPI will increase by another 2.5-3.9 percent, Nguyen Duc Thang, head of general Statistical Office (GSO)'s Price Department said at the press conference reporting the socio-economic situation in the first half of this year held on June 29.

Thus, in comparison with the CPI rise of 6.65 percent in the last half of 2010, the country's inflation in H2 2011 is expected to slow down.

At the same time, Thang also said the government's target to curb inflation at about 15 percent this year is not feasible.

As a rule every year, after Q3 inflation tends to slow. But according to Thang, it is necessary to forecast unfavourable factors that make impacts on the CPI such as storms and floods causing crop failures, pushing up the food prices.

Previously, as forecasted by the minister of planning and investment, Vo Hong Phuc, this year inflation would be at 17-18 percent.

As assessed by the Asian Development Bank (ADB), CPI will continue to increase till the end of July and August and the peak maybe up to 16 percent. The average inflation would be about 13.3 percent during 2011 prior to dropping the average level of 6.8 percent in 2012.

Meanwhile, according to the World Bank (WB), Vietnam's inflation may slow down to increase 15 percent by the end of this year.

The official data from GSO showed the CPI in June surged 1.09 percent over May and increased 13.29 percent from last December.



Doubling reserve requirements to penalise banks not really best solution: economist

StoxPlus

Doubling reserve requirements for the lenders who failed cut non-production loans by June 30 is not really the best solution, although it may send a strong message from the State Bank of Vietnam (SBV), Vo Tri Thanh, CIEM 's vice Chair said.

Doubling reserve requirements for the lenders who failed cut non-production loans by June 30 is not really the best solution, although it may send a strong message from the State Bank of Vietnam (SBV), Vo Tri Thanh, vice Chair of Central Institute for Economic Management was quoted as saying by local media Dvt.vn.

Instead, the central bank should closely watch safety ratios of these lagged banks for a certain period of time: from now to the end of the year, or until the beginning of next year, Thanh suggested.

It may also restructure the banks in many different ways including merger and acquisition (M&A), the economist added.

Thanh cited an example of Wespack, an Australian weak financial institution which continuously made losses, but turned round to break even after replacing its managing director and started to generate profits in the following 2-3 years.



Vietnam's economy grows 5.6pct, inflation tops 16pct in first half

AP

Vietnam's gross domestic product grew at a slower pace in the first half of 2011 compared to the same period a year ago amid high inflation and a trade deficit.

The government's general Statistical Office said Wednesday the country's economy has maintained "reasonable" growth at 5.6 percent despite global and domestic economic turbulence. Vietnam's economic growth in the first half of 2010 was 6.2 percent.

Inflation for the first half of 2011 surged to 16 percent from 8.7 percent a year earlier. The trade deficit stood at $6.7 billion, just slightly down from a year ago.

The government has introduced a series of measures including raising interest rates and cutting public spending to try to tame one of Asia's highest inflation rates.



Trade gap down, but should we cheer?

Tuoitrenews

When the Financial Times reported that Switzerland enjoyed a $3.9 billion trade surplus in May due to less gold jewellery export from Vietnam, it caught the eyes of many Vietnamese economists.

The disappearance of the gold ornaments imported from Vietnam shaved Switzerland 918 million francs ($1.1 billion) off imports, said AFP, citing Swiss customs.

So, when the general Statistical Office of Vietnam (GSO) released its June monthly reports, stating that the country's trade gap has narrowed down sharply, mostly due to gold re-export. This, again, stirred up concerns.

June export revenue is estimated to reach $7.8 billion while the import gains $8.2 billion, representing a trade gap of $400 million, the lowest since September 2010. The trade gap of H1/2011 is around $6.65 billion, said GSO.

June's export turnover rose 7.8 percent against May, while import revenue fell 5.2 percent compared with the previous month.

The development is said to be a positive factor for macro-economic stabilisation after 4 months of trade deficit worth over $1 billion each.

But, statistics from general Department of Customs indicated that since the 2nd half of May, the export of precious stones, gemstone and jewellery suddenly surpassed $1 billion including 12 tonnes of gold, more than that in five months combined.

According to GSO, the re-export of gold created a sudden change in the export of this group of commodities, about $630 million in June alone. The sum is equivalent to 10 tonnes of gold.

If this trend keeps moving on, those who are worried about the rising trade gap may sigh in relief.

But, hang on, GSO has also warned that the status of gold re-export might change rapidly. Its service trade statistic department estimated the gold export in the second half of June at almost $100 million only.

Another question is: why Vietnam has recently boosted gold export while countries worldwide is stepping up in enriching their gold reserves to deal with the global spread of inflation by encouraging their people to buy gold and increase the import of gold.

Bucking the world's trend

It is not too difficult to recognise that the increase in gold exports is partially due to previous leakage of a central bank's regulation banning the precious metal to be traded. This has been turned out to be wrong, and gold can still be traded freely at central bank's appointed dealers and banks.

Along with the stabilised forex rate recently, the domestic gold price was at some time lower than the world price.

As a result, gold trading companies would not miss the chance to boost export profits.

Though many people blame gold trading company for the lack of foresight to focus on immediate interests, in a business perspective, taking advantage of every opportunity to maximise profits is comprehensible and sympathetic.

The root of the problem is a misleading message issued by the central bank when managing the domestic gold market in recent years, according to Thanh Nien.

The sudden announcement of the possible gold trading ban without issuing specific policies or guidance or clear explanation has driven the market into a state of bleak, which resulted in recent rising gold re-exporting by gold traders as mentioned above.

But Vietnam may pay a dearer price in importing gold since the country is not a gold producing country, and at the same time, itmay face surging trade gap and have to tackle other related uncertainties including forex rate, speculation and psychological effects.

Import more favourable than production

Trade deficit caused by foreign-invested (FDI) sector is on the rise, warned the Ministry of Industry and Trade.

According to HCM City's Department of Planning and Investment, the number of FDI firms licensed for importing has tripled from 73 ones in 2008.

The list now includes Japanese-owned electronics firms like Sony, Toshiba, Sanyo, Sharp, Pioner, Hitachi. Nike and Adidas, the two brands having large quantities of domestically-made goods in Vietnam, have also been approved to import their goods from other countries. South Korea and French tire makers, Kumho Tire and Michelin, have also started to import.

Representatives of the Japan External Trade Promotion Organisation (JETRO) in HCM City told Tuoi Tre that Japanese companies are turning to trade instead of production in Vietnam as before.

Statistics of the Foreign Investment Agency that shows that imports of FDI companies are on a constant rise from the beginning of the year, except in May.

Excluding crude oil exports, the sector caused a $200-650 million monthly deficit.

Dinh Anh Huan, director of the Electronic World chain specialising in merchandising electronic items and electrical appliances, told Tuoi Tre that currently, a majority of the businesses in the field imports electrical and electronic products.

Depending on the brand, those products are imported from Malaysia, Singapore, Thailand, Indonesia or the manufacturers import components for domestic assembly.

But Vu Duong Ngoc Duy, deputy director of JVC Vietnam, said with current import tariffs of 3-20 percent for electronic components, and 5 percent for completely-built electronic goods, electronics firms will choose to become importers.

An expert said that a domestic electronics manufacturer having switched to import has enjoyed sales jumped up twice as before.

"With less employees and reduced costs of production and land leasing, it is clear that importing is more profitable than manufacturing, he added.





RESOURCES - Vietnam's import for oil and gas up 67.6pct in H1

Vietbiz24

In the first six months of this year, Vietnam's import spending on oil and gas was $5.486 billion, rising 67.6 percent from the same period last year, according to general Statistical Office (GSO).

Particularly, the total petroleum import volume in H1 was approximately 6.12 million tones, up 16.5 percent.

In June alone, the country imported 980,000 tones of petroleum worth $895 million in comparison with 989,000 tones for $922 million in May.

Vietnam's import for liquefied petroleum gas (LPG) in Jan-Jun was 359,000 tones worth $334 million, rising 16.7 percent in quantity and 41.9 percent in value over the same period last year. The import for other products from oil and gas was $436 million, a year-on-year increase of 26.7 percent.



New white rhinoceros oilrig contract signed

VNS

An epCI contract based on the design, procurement, fabrication and installation of the H4 superstructure oilrig was inked between PetroVietnam, the Hoang Long Joint Operating company and the Petroleum Equipment Assembly & Metal Structure JSC in Hanoi yesterday.

The $44 million construction project will start on July 4 and run until late May, 2012.

The H4 oil rig's upper storey block, weighing 2,500 tonnes, will help ensure increased oil and gas extraction efficiently at the white rhinoceros oil field, situated in Block 16-1, based on a continental shelf around 100 km southeast of Vung Tau City and under contract and management of the Hoang Long Joint Operating company.

Oil field development will include a storage vessel, two clusters of oilrigs known as H1 and H4 and an internal system of underground pipelines to transport crude oil and gas.

Following successful project completion, the oil field is expected to welcome its first oil flow in August 2011.



Petronas finds oil in Vietnam

The Star

Petroleum Nasional Bhd and its partner PetroVietnam have been successful in their drilling campaign via the Diamond-4X exploration well in offshore Vietnam.

The Diamond-4X well, drilled to test the hydrocarbon potential in the prospect’s clastics reservoir and fractured granite basement, was spudded on April 27, 2011 and reached its final target depth of 4,564 m on June 1, the company said in a statement.

The well tested the flow rate of 5,200 barrels per day of oil.



Over $230m invested for Nghi Son Oil Refinery project

VietnamBusiness

The functional authorities has recently approved in principle for raising the investment capital for Nghi Son Oil Refinery Complex project to $235.66 million, a considerable increase in comparison with the initially proposed of $200 million. The investment capital also included infrastructure construction and compensation and support for resettlement works.

The investors explained surpass of $35.66 million against the initial was due to changes in compensation policies under Decree No 69/2009/ND-CP, high raw material prices and fluctuation in forex rates.

Nghi Son Oil Refinery Complex was sited in an area of 962 hectares in Nghi Son Economic Zone, Thanh Hoa province. The PetroVietnam Construction Joint Stock Corp was the general contractor responsible for ground levelling works in this project.

Posted by VBN on Jun 28 2011. Filed under Oil-Gas & Petroleum. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry



Vietnam seeks to upgrade deepwater port system

Vietnamplus

The prime minister has recently asked the Ministry of Transport (MoT) and the Vietnam Maritime Administration to concentrate resources to deal with a serious shortage of deep-water ports, which forces Vietnam 's import-export goods to transit other countries.

Accordingly, Lach Huyen port complex in the northern port city of Hai Phong and Cai Mep and Ben Dinh port complexes in the southern province of Ba Ria-Vung Tau will be the priority in the next five years.

The MoT is also assigned to focus investment in container ports and general ports in Cai Mep, Ben Dinh and Sao Mai in the Vung Tau Port, a gateway in the country's southern region.

In mid-March, the nation's first deep-water container port Tan Cang Cai Mep was officially put into operation in Ba Ria-Vung Tau, allowing businesses to directly ship their commodities to the US and Europe, reducing transportation time by 7-10 days.

This also creates a foundation for Vietnam to open a container transportation route linking the Mekong Delta region and Cambodia.

The Vietnam Maritime Administration reported that the country now has 266 seaports, most of them are small-scale ones, with a combined capacity of only 100 million tonnes while the total volume of goods going through the ports stood at 259 million tonnes last year.

Another problem is that Vietnam invested in only 13 metre-deep ports over the years, which are unable to receive regular large containers ships.

As a result, a large volume of commodities have to transit through third countries such as Singapore, Malaysia and the Republic of Korea, affecting Vietnamese goods' competitive edge and business efficiency, the administration said.



ENERGY - Vietnam to delay full market-based power price to 2013

Reuters

Vietnam, struggling with severe power shortages, may delay a plan to have full market-based electric prices by a year to 2013 on fears that power price hikes would deepen inflation, the finance minister said on Thursday.

State utility Vietnam Electricity (EVN) group has been facing serious losses and if there is no power price adjustment, it will face difficulties attracting investments, Finance Minister Vu Van Ninh was quoted by the online VnExpress newspaper (vnexpress.net) as saying.

But power prices will rise sharply if the market-based mechanism is applied, and it would greatly affect inflation, Ninh was quoted as telling a session of the National Assembly’s Standing Committee.

Vietnam said on Thursday it will strive to contain inflation this year to between 15 and 17%, raising its target for the second time in June, during which the annual rate reached 20.82%, the highest since November 2008.

In April an EVN official said power prices would jump 62% if they were adjusted under the new mechanism, which will set the electricity price based on market supply and demand without government intervention.

“That’s why the power price adjustment needs a roadmap,” he said. “A full market-based price mechanism would be delayed until 2013.”

Earlier this year, Ninh’s ministry said it expected electricity prices to be fully market-based next year.

EVN expects to make no profit this year with government-mandated power prices on par with production cost, after running into losses of 15 trillion dong ($731 million) in 2010, an EVN official said.

In March Prime Minister Nguyen Tan Dung approved a plan that would allow EVN to adjust power prices once a quarter, instead of once a year as has been the practice.

Vietnam raised average prices of electricity by more than 15% at the beginning of March in a step that industry officials said was necessary to help trim EVN losses.

The manufacturing sector is facing power shortages in 2011, coming as the economy is expected to grow at a slower pace of 6% this year and next.

The country has not been able to meet demand for electricity by about 3% in the past five years and EVN has said it will need to invest $3 billion a year for infrastructure between 2011 and 2015, during which 38 projects would come online.

Electricity consumption would nearly double to 175 gigawatt-hours in 2015 from 98 gigawatt-hours this year while supply will increase to 196 gigawatt-hours from the current 110.8 gigawatt-hours. ($1=20,510 dong)



World bank funds its first Vietnam hydro project

AFP

The World Bank will lend energy-hungry Vietnam $330 million to build a hydroelectric plant, the bank said Tuesday after a signing ceremony marking its first foray into hydro power for the country.

The Washington-based lender clinched a deal with the State Bank of Vietnam for the Trung Son development in northern Thanh Hoa province.

“It is the Bank’s first hydropower project in Vietnam,” the World Bank said on its website.

“The Trung Son Hydropower Project will help Vietnam meet growing demand from households and industry for electricity,” the Bank said, citing energy consumption growth of 15 percent annually.

The mid-sized plant will have a capacity of 260 Megawatts, and is intended to be fully operational by May 2017.

Construction of new power plants has not kept pace with demand, leading to worsening blackouts, the European Chamber of Commerce in Vietnam (Eurocham) told a forum backed by the World Bank last month.

Eurocham says the price that monopoly distributor Electricity of Vietnam (EVN) pays to producers is still far below neighbouring countries, giving foreign investors no incentive to enter the sector.

The country draws more than one-third of its electricity from hydropower but is trying to diversify its energy supply through coal-fired plants and other sources, including planned nuclear stations.

Vietnam plans to put 38 power plants into operation by 2015, the EVN’s head of planning, Trinh Ngoc Khanh, was quoted as saying last week in the official Vietnam News.



Investment in wind power investment still a far cry

Vietbiz24

Prime Minister last month approved in principle a mechanism to support wind power projects in Vietnam, in which, the electricity purchase price from the projects was approved at 1,630 dong per kWh (7.8 US cent) in 2011, according to the Vietnam Investment Review.
With the electricity price of 7.8 US cent per kWh, the door of investment has not been yet opened for wind power projects.

Under the mechanism, the state supports 209 dong per kWh produced by wind power plants, the money is sourced from the Vietnam Environmental Protection Fund (VEPF). The support level will be reduced gradually until the electricity selling price will be conducted in line with market price. Remaining part of wind power, 1,421 dong per kWh according to the mechanism, will be in the retail frame, meaning that the amount will be paid by the Electricity of Vietnam (EVN)—the wholesaler of power plants.

Thus, compared with the current average price of 1,242 dong per kWh, the wind power price is higher 388 dong/kWh. Anyway, investors have not felt secured to develop strongly the clean power energy.

As estimated by Vietnam Energy Institute, with the basic plan of European-US technology-used wind power plants sized at 30MW (with a designed capacity of 1.5MW/turbine), wind speed 7 meters per second (m/s) and right price of CO2 waste gas at 15 US cent per ton, and other indices….the investment cost for the projects is $2,250 per kWh. If using Chinese technologies, the cost will be $1,700 per kWh.

Basing on the above investment, the average electricity price should be 10.68 US cent per kWh and 8.6 US cent per kWh (including the capital return time of almost 20 years and equipment depreciation for 12 years), respectively to the technologies.

Overall, not many, even none of investors dare to pour capital in the costly industry because they foresee loss.

According to specialists, investors will be able to sell the right of CO2 waste at 15 US cent per ton, or 0.906 US cent per kWh. At the selling price of 6.8 US cent per kWh, the remaining needed to be offset is 3 US cent per kWh or 0.9 US cent/kWh depending on European-US equipments or Chinese. In order to compensate the gap, it is necessary to have the state’s subsidize via Vietnam Environment Protection Fund whereby the door of wind power investment is more open a bit for investors.

The country now has about 9 MW of wind power installed, in which 7.5 MW was put into the national grid on August 22, 2010 by Vietnam Renewable Energy Joint Stock Co in the south-central province of Binh Thuan. In addition, there are other 21 projects under pipeline , sized from 21 MW to 40 MW.

In line with the wind power development to 2015, the industry targets to generate 600MW. Thus, the funding to support these projects is estimated to average $20 million per year, Ministry of Industry and Trade reported.





INDUSTRY - 200 industries affected amid credit crunch

Tuoi tre news

Up to 200 realty-related industries, both in production and service, have been badly affected as banks are tightening lending for the real estate sector to meet the government's requirement in limiting non-production loans.

In early March, the State Bank of Vietnam (SBV) ordered that commercial banks have to gradually reduce loans to non-manufacturing sectors (mainly real estate, personal consumer and securities) to 22 percent of the total outstanding loans by 30 June to curb inflation.

Since then, many construction projects have halted.

Do Duy Thai, CEO of Thep Viet Corporation (Pomina), said the tightening credit policy has caused difficulties to certain production sectors related to real estate.

Taking the steel industry as an example, Thai said that many steel manufacturers have been forced to cut production as the total consumption has fallen by 50 percent year-on-year.

He said his workers in Pomina now had to work only 10 days a month due to lack of contracts.

A number of real estate projects have been suspended and have stopped ordering steel, he explained.

200 industries affected?

Vo Quoc Thang, chair of Dong Tam Long An Corporation, said the tightening policy is spreading negative impacts on as many as 200 industries.

Those included manufacturers in the fields of glasses, cements, bricks and wood.

"Many factories have to cut production, or even shut down, and a lot of workers have lost their job," he said.

For a solution, Thai proposed the central bank only restrict credit for newly-launched projects, or projects related to site clearance and infrastructure construction.

As for construction projects that have been underway, he said the central bank should loosen its policy to enable these to continue so that related industries will not be affected and workers being saved from unemployment.



Hanoi's $300m largest wastewater treatment factory to start operation by end of the year

Vietbiz24

As expected, Yen So wastewater treatment factory (Hanoi) will complete and start operations in Q4 this year with an estimated capacity of 200,000 cubic meters of wastewater per day and night.

The factory has been kicked off construction since January 2008 under the Build-Transfer (BT) method and invested by Malaysia-based Gamuda Berhad Group with total costs of some $300 millions, marking the largest wastewater treatment plant in Vietnam so far.



Wood exporters to cope with tougher rules

VNS

Vietnamese timber and wood product exporters will have to develop an elaborate system to ensure the legality of materials used to avoid the risk of losing their footholds in key markets like the US and the EU.

For instance, they would need to show they have procured wood from areas with approved forest management plans and appropriate cutting permits.

They would also need to ensure they are excluding illegal and other unwanted wood both at the forest where materials are acquired as well as at processing and manufacturing facilities.

These steps become necessary as the EU and US markets are set to toughen up import restrictions through the European Union Timber Regulation and the United States Lacey Act, a workshop held in HCM City heard yesterday.

The workshop presented participants with the salient features of the two pieces of legislation as well as with practical steps that would help reduce the business risk of illegal materials entering the supply chains.

The Forest Trust (TFT) and the Handicraft and Wood Industry Association of HCM City (Hawa) organised the workshop with support from the United States Responsible Asia Forestry and Trade (RAFT) programme under USAID.

The organisers said the steps outlined at the workshop would help local exporters gain market credibility.

They also said they would soon publish a handbook to instruct local wood product makers and traders to comply with the US and EU market requirements.

Michael Pescott of the TFT said the handbook would be based on practical experience draws from a pilot project conducted by TFT and Hawa at two factories in southern Binh Duong Province – Hiep Long Fine Furniture Company and Nguyen Thanh Furniture Company.

The book will include six steps, if implemented, “will provide a strong foundation to conform to US and EU legal requirements and therefore build … business marketability as a reliable and responsible supplier,” he said.

These include mapping out supply chains, refining Chain of Custody (CoC) systems, implementing wood origin control systems, conducting a risk assessment and monitoring progress.

The US and EU are the two biggest markets for Vietnamese wood products (38 and 44 per cent respectively), and both have adopted laws prohibiting the import of illegal timber.

Under the LACEY Act, all wood products must have certificates proving they are made from legally exploited wood. Without a certificate, the products could be seized or destroyed.

Under the EU Forest Law Enforcement, Governance and Trade (FLEGT) that will take effect in 2013, companies exporting wood products to Europe must provide documents proving that the timber was legally logged.

Documents must include the timber’s scientific name, the quantity being exported, and the country of harvest.

Companies found selling products made from illegally sourced timber will face severe penalties, such as confiscation of the goods, a possible jail term for those involved and a heavy fine.

Hawa deputy chairman Huynh Van Hanh said the Viet Nam and EU are currently discussing a voluntary partnership agreement on sourcing wood products to facilitate local wood product exporters.

The agreements will cover commitments and action by both parties to halt trade in illegal timber, notably with a license scheme to verify the legality of timber exported to the EU, contributing to sustainably managed forests and mitigating impacts of climate changes in the world, he said.

The two sides hope to sign a voluntary partnership agreement by the end of 2012, Hanh said.

Huynh Quang Thanh, director of Hiep Long Fine Furniture Company, said local wooden furniture makers are very dependent on imported wood.

Exporters, thus, have to clearly know about their sourcing and cannot simply rely on documents provided by sellers.

Viet Nam earned more than US$3.4 billion from wood products export last year, becoming Southeast Asia’s leading wood products exporter. Export revenues are expected to top $4 billion this year.





FINANCE - Gold sales increases in Hanoi

Vietnamnet

Gold companies in Hanoi have reported that gold sales increased when the prices have decreased and the policy on gold trade management became clear. Meanwhile, the HCM City gold market remains quiet.

Kim Anh, an officer of Bao Tin Minh Chau gold shop in Hanoi said that just after one hour of opening on July 27, the gold volume sold reached 40 taels (a tael is equal to 1.2 oz). Meanwhile, the volume of gold purchased from people was just 1/4, about 10 taels, mostly jewelries.

The officer said people began purchasing bullion gold last Saturday, when the gold price decreased to around 37 million dong. Prior to that, when the gold price climbed to over 38 million dong, people only sold and did not purchase gold.

Most of visitors to Bao Tin Minh Chau in the morning of June 27 asked to purchase gold instead of selling jewelries as previously.

Nguyen Van Hung, who lives on Dai Co Viet street in Hai Ba Trung district in Hanoi, said that right after hearing that the State still allows people to purchase and sell bullion gold, he has rushed to purchase gold.

"Several days ago, the gold prices were overly high, at over 38 million dong per tael and I did not dare to purchase. Meanwhile, it was unclear if the State prohibits bullion gold trade. Now everything is clear, while the prices have decreased, so I decided to purchase several taels of gold to hoard up," he said.

The SJC Gold Shop on Le Ngoc Han Street also received a high number of visitors on the morning of June 27. At 10 am, about ten customers were seen standing at the counter waiting to purchase bullion gold. The saleswomen here said in previous days, visitors just came to purchase jewelries, and no one intended to buy bullion gold.

Cong, who was waiting to buy bullion gold at the shop, said that he believed that it was the right time to purchase bullion gold, because the gold prices have eased. Also, he thinks that keeping gold is the best way to preserve assets.

"Now people can sigh with relief that the bullion gold purchase and sale are not prohibited, provided that people make transactions with the licensed enterprises," he said.

Le Thi Trang, Head of the SJC Shop on Le Ngoc Han Street said that in the first half of June 27, the shop sold about 200 taels of gold, while it purchased 40-50 taels. "The performance is absolutely different from the happenings in previous days, when we could only sell several taels," she said.

However, Trang said, the volume of gold sold on June 27 was just equal to 20-30 percent of that sold on the days before the information about the possible prohibition of bullion gold trade came out. "The sales are now better than some days ago, but remain much worse than several months ago," she said.

Meanwhile, the HCM City market remains quiet despite the good news about gold trade management policy. The owner of Van Nga Gold Shop at Ben Thanh Market in district 1 said that though the prices decreased late last week and continued decreasing earlier this week, there have been very few transactions.

"We sit idle all day long, because only some customers come and ask to buy jewellery," she said.

A gold shop owner at Ba Chieu Market also complained that the business has been very bad, because very few people come to buy bullion gold.

Ton The Vinh Quyen, Business director of Sacombank-SBJ said only 200 taels of gold had been sold at all retail agents of Sacombank in HCM City, even though the gold prices are at low levels.

Nguyen Cong Tuong from SJC also said that the demand has not increased yet after a long period of quietness. The total trading volume at SJC's chain stays at 3500 taels of gold, which is not much higher than previous days.

Some people have come to make transactions, but they are just individual buyers. Meanwhile, investors have not taken any moves after a long period of standing outside the market.