Vietnam - News and Regulations

ECONOMY - Industrial production increases



The country's total industrial production value in September is estimated to reach 62.56 trillion dong, up 2.9 percent month on month and 12.5 percent year-on-year, bringing the total figure of first nine months to 506 trillion dong, growing 6.5 percent against 2008, Ministry of Planning and Investment reported.

Regarding the industrial production index (IIP), the industrial production growth of Jan-Sep of 2009 gained 6.2 percent compared with the previous year, especially the ore mining, production and distribution of water electricity saw a fairly high gross.

In details, the ore mining industry surged 11.8 percent in the period while the production and distribution of water, electricity and gas were up 7.9 percent whereas the growth of processing industry only was 3.6 percent.

Meanwhile, the production of clean coal soared by 4.2 percent, crude oil up 17.6 percent, natural gas 2.1 percent, automobile tyres and tractors increasing by 1.7 percent, cement jumping 18.3 percent, kinds of round steel rising by 18.8 percent, air conditioners 48.2 percent, fridges 30.9 percent, motorbikes 6.2 percent, commercial water 9.7 percent and electricity growing by 11.3 percent against the same period of 2008.

Other, the production of LPG was down 1.8 percent, seafood processing falling 5.6 percent, powder milk tumbling 6.8 percent, refined sugar 21.2 percent, cotton fibre declining 16.3 percent, television 5.4 percent, and car manufacturing decreasing by 6.7 percent.

The crude oil price continued ranging between $60 and $70 a barrel, affecting the cost of transportation and prices of finished products in the domestic market. Notably, the prices of cement and steel were maintained.

As assessed, the state economy has not yet confirmed the important role in boosting the industrial production as only reaching the growth of 3.1 percent in first nine months of 2009 while the non-state economy and foreign invested companies posted an impressive gross of 8.4 percent and 7 percent correspondingly.

MPI forecasts that the total industrial production value of 2009 could be 693.8 trillion dong, rising by 7.2 percent year-on-year.TBKT





INVESTMENT IN POWER/TARIF/ENERGY/ELECTRICITY - Electricity price mechanism suffers from various problems



The mechanism for electricity prices still present various problems, impacting accumulations for investing projects under the electricity plan VI. This is the biggest difficulty for development of the electricity sector in general and formation of a competitive electricity market in Vietnam. Such an opinion was put forward in the draft supervising result report for realising the electricity development plan and strategy until 2015 conducted by the National Assembly's Economic Committee.

On September 23, the Economic Committee had a meeting and gave opinions about the supervising results.

As required by the electricity development plan and strategy until 2010, the electricity sector must obtain productivity of 88 billion to 93 billion kWh to meet the country's demand for energy that is forecasted to increase by 17-20 percent a year.

It is predicted that by 2015, because of high demand of over 150 billion kWh, Vietnam will likely import electricity from Laos, China.

Meanwhile, realising the targets in the 2009-2015 electricity plans is being adversely impacted by various unfavourable factors.

The 2006-2015 national electricity development plans where 2025 is also considered in 2006 – 2008 was assessed to have basically been completed.

This was the period that the electricity sector realised the ever biggest scope among six national electricity plans however some electricity works have not yet fulfilled their targets.

Various limitations, weaknesses were also pointed out, including no standby electricity, shortage of electricity for production and daily life of people in some periods of time, especially in hot, sunny or draught years or in case one of electricity plants encounter problems.

The subjective reason, according to the supervising agency, was illogicalness of calculating demand for electricity development based on the economic growth.

Difficulties in arranging capital, limited project management capacity of many investors and contractors, prolonged site clearance were also major reasons mentioned in the report.

Furthermore, another emphasized reason was slow development of the competitive electricity market, which has not yet settled problems related to the mechanism of electricity buying prices.

As for the period of 2006 – 2015, according to the electricity plan VI, some 54 electricity projects will be developed by investors outside the Electricity of Vietnam (EVN) in form of IPB/BOT. However, up to now only six projects have been completed, with the capacity of 2,059 MW, fulfilling 5.6 percent of the plan. Nine big projects with total capacity of 15,275 MW have not yet had investors.

The shortage of investment capital may lead to slow development of electricity in remaining years of the electricity plan VI, said the economic committee.

Total demand for investment and debt payment of EVN between 2009 – 2015 is 647.038 trillion dong. However, EVN can fund 264.108 trillion dong.

The reason for delay electricity development of investors outside EVN is their weak financial capacity. Projects with total investment of over $1 billion meet difficulties in capital, said the report.

"Currently, EVN's average electricity selling price of 5.2cent/kWh is very low," said the report. Meanwhile, EVN said that the long-run marginal cost to ensure profits and accumulations for development investment must be 7.5 cent/kWh.

For this reason, in short term, EVN may not look to accumulations from profits for investing projects described in the electricity plan VI but EVN must mainly rely on loans from the state budget. Nevertheless, according to EVN's recent report, the group is meeting various difficulties in borrowing domestic and foreign loans because of weak debt payment capacity when projects have low efficiency and electricity prices are low.

The cross compensation principle of electricity selling prices makes EVN find it hard to separate between business profits and fulfilment of public welfare activities. This also partly results in delay of equitisation. Up to date, only nine out of 33 member companies of EVN completed equitisation, which has impacted investment into projects under the electricity plan VI from share issue.

Upon seeing the low electricity price as the key point impacting the development of the electricity sector, the economic committee suggested the adjusting the electricity prices based on the market mechanism should follow the identified routes, ensuring investors, businesses to be able to compensate for costs and earn profits.

Regarding the organisation and management of the electricity sector, the supervising agency suggested the establishment of an authorised body to make macro-calculation for the whole national energy security strategy to handle planning, mechanism issues and others.TBKT



TRADE REVENUES - Sep export turnover touches $ 4.68b

Ministry of Industry and Trade reported that in September, the country's exports turnover touched $4.68 billion, down 11.3 percent year-on-year but increasing 3.5 percent from the previous month thanks to a surge in crude oil exports.

This month Dung Quat temporarily halted operation so the volume of drilled crude oil was for exports.

Thus, during the first nine months, the export turnover totalled over $41.7 billion, plunging 14.3 percent year-on-year, in which the non-crude oil commodities saw a fall of 7.4 percent.

Initially, the goods volume for export in Jan-Sep grew by 10.7 percent against the same period of 2008, helping the export turnover soar by $5.2 billion, but the export prices reduced by 22.5 percent on average, causing a decline of $12.1 billion in the total export turnover.

In details, the export value of crude oil tumbled by $4.8 billion sharply, rice down over $1 billion, rubber down $598 million and coffee $550 million in comparison with last September.

The full year's export turnover is estimated at $57-58 billion only, lower than the initially planned $64.65 billion.

Meanwhile, the September import spending was $6.2 billion, up 6 percent against August, bringing the total figures of Jan-Sep to $48.3 billion, falling 24.9 percent year-on-year and fulfilling 63.9 percent of 2009 target.

With the September trade deficit of $1.52 billion, the figure of first nine months was raised to $6.54 billion, accounting for 15.7 percent of total export turnover.

If the crude oil price is kept at $60-65 a barrel along with good prices of agricultural products, the year's export turnover could be $59 billion at maximum, down 6 percent from 2008. With the forecast that import spending could drop 13.3 percent y-o-y to $70 billion, Vietnam's 2009 trade gap will be recorded at $11 billion.SGT







REAL ESTATE - Seeking capital for real estate projects



Real estate is a sort of business field which requires sustainable capital strength and a long term financial plan, Vietnamese property firms however rely only on three capital supplies: ownership capital, bank loans and capital mobilisation from future customers.

However, because capital mobilisation from customers suffers many legislative obligations so real estate traders mainly depend on banks' short term loans and face a heavy pressure of debt payment. Thus, most property projects lack capital. The successfully raised money amount is only enough to ask for an investment license and then investors will have to launch a series of plans to call for investment cooperation to continue that project.

Le Chi Hieu, president of Thu Duc House said that there are many ways for real estate companies to seek investment capital, in which issuing corporate bonds is a solution that is launched effectively by a lot of companies.

In 2008, Saigon Thuong Tin Real Estate Joint Stock Co (Sacomreal) carried out three bond issue phases with a total 850 billion dong, which attracted many investors. Phat Dat property trader now plans to issue bonds to raise capital for the projects in HCM City's Dist 7.

Another popular solution is the real estate saving and Vietnam needs to refer the form. Currently, some traders implemented strange capital mobilisation methods in Vietnam. Notably, those capital mobilisation methods always give interests to project investors and pushed risks to customers because the legislative frame work has not yet caught up with the reality.

Dinh Van An, chief of Central Institute for Economic Management (CIEM) said that they are researching the real estate saving development policy focusing on managing clauses of real estate contracts, saving, borrowing or allocation of loans.NLD





Foreign Direct Investment - 9-month FDI attraction gains $12.541b



Total newly licensed and increased capital of FDI projects during the first three quarters of 2009 reached $12.541 billion, growing by 21.4 percent year-on-year. In which, 168 projects were increased in capital size with an extra of $4.86 billion (a year-on-year rise of 7 percent), reported Ministry of Planning and Investment's Foreign Investment Department.

Although only growing by 14.3 percent compared with 2008, Phan Huu Thang-head of Foreign Investment Department said that the newly licensed $7.67 billion was a satisfactory figure in the economic crisis context.

As estimated, the total actualised FDI attained $7.2 billion in first nine months, promising that the plan of $10 billion FDI disbursement can be reached in 2009.

Ba Ria Vung Tau is the largest FDI receiver in Jan-Sep with $6.6 billion newly licensed and increased capital, followed by Binh Duong $2.45 billion, HCM City $1.14 billion, Hanoi $383 million and Dong Nao $281 million.sggp





INSURANCE - BIC launches guarantee insurance service



Bidv Insurance Co (BIC) have launched guarantee insurance service on trial at all branches from September 2009, including bidding guarantee, guarantee for contract implementation, guarantee for refunding the advanced money, payment and warranty guarantee.

In the insurance sector, this is a fairly new specification differing from ordinary insurance products. Guarantee insurance contract is signed among three parties: guaranteed party, guarantee receiver and insurer. The insurance company will not insure sudden and unpredictable risks.

Naturally, the guarantee insurance product of insurance companies is similar to guarantee products of banks. However, deposit limit and secured assets at insurance companies are lower than banks' requirements, BIC analysed.TBKT





STOCK EXCHANGE - Another FIE successfully lists on Vietnam's stock market



In the past few days, Hanoi Stock Exchange (HNX) has welcomed one foreign direct investment (FDI) enterprise for listing shares on the northern bourse of Nagakawa Vietnam Joint Stock (coded NAG). Although NAG share code was introduced to public for the first time, it has made impression with the investors from the debut session of Sep 23 with a ceiling rise to 27,800 dong per share and plentiful buying orders.

Nagakawa Vietnam Joint Stock Co was formerly known as a joint venture between Anh Vu International Economic Development Co and China-based Huagao Air Conditioning Equipments Co Ltd This enterprise was changed from FDI firm to a joint stock company in March 2007.

Previously, there were other FDI enterprises to list shares on the country's two main bourses such as Mirae JSC (coded KMR), Mirae Fiber JSC (KMF), Taicera Ceramic Industry JSC (TCR), Chang Yih enamel brick JSC (CYC), Tung Kuang JSC (TKU), Taya Electrical Wire and Cables (TYA) and Full Power JSC (FPC). However, there have been no share codes of FDI enterprises to be considered as "blue-chips".

The listed FDI enterprises in Vietnam have the same features that most of the shares were owned by founding member groups or the parent foreign-owned company. Therefore, these enterprises can post one part of the circulating share volume, causing limitation in its shares' liquidity feature.

Meanwhile, there were various difficulties in business situation in those foreign-owned enterprises mentioned above last year due to the bad effects from the global economic crisis.

In spite of the increasing impetus in Vietnam's stock exchanges in the last month, most of the share codes in the group of FDI enterprises saw no significant changes. The analysts said in order to make deep impression of the shares of FDI firms on the market, there should be more large-scaled FDI enterprises listing shares on the local bourses in the near future. The fact that the listing mechanisms for FDI firms become more favourable now has been considered the good conditions for more qualified FDI enterprises to list shares on the stock market.

The good impression that Nakagawa Vietnam JSC has made when listing shares on the northern bourse is considered a good signal for the listing behaviour among the large FDI firms in the near future.

According to the current law, those FDI enterprises with foreign holdings of over 49 percent of the chartered capital can still keep the holding rate unchanged when listing shares on the market. This will allow the FDI firms to list all the current share volume instead of listing one part of share volume as some foreign enterprises had done previously. When the FDI firms list shares in large volume, their share liquidity may increase.SGDT





RETAIL/TRADE - AEON Malaysia plans to build retailing chain in Vietnam



AEON Co (Malaysia) Bhd, subsidiary of Japan's second largest retailing group AEON Co Ltd has announced plans to build a retailing chain in Vietnam, Laos or Cambodia, according to the member company's managing director Naghahisa. Oyama.

Now, the company is selecting investment markets and seeking potential partners in Vietnam.

In this October, AEON group wants to release a report on Vietnamese market; however the investment expansion could only be actualised in 2011.

South-eastern Asia is a highly potential region for AEON Co Ltd and the highest given priority destination is Vietnam, and then Indonesia and Cambodia. HCM City is a very attractive address, followed by Hanoi.intellasia







RICE EXCHANGE - Vietnam opens the first rice exchange floor on November 26



Vietnam, the second largest rice exporter in the world plans to open the first rice exchange in November with the purpose of reinforcing the trading activities of this type of agricultural product, said Nguyen Van Dong, director of Hau Giang province department of agriculture and rural development.

Dong said that the opening of Vietnam's rice trading centre was to create more favourable conditions for trading activities. The exchange would be located in Hau Giang province, Mekong Delta region.

Previously, Do Huu Hao, deputy minister of industry and trade revealed on August 6 that Vietnam plans to increase the rice export volume to 7 million tonnes within this year. According to the primary statistics given by general Department of Statistics, Vietnam has exported 4.7 million tonnes of rice in the first eight months, an increase of 43 percent year-on-year.

Up to now, about 30 enterprises have registered for transaction on the new rice exchange. Most of the registered members are the subsidiaries of Southern Food Corp (Vinafood 2), one of the two largest state-owned enterprises in the agriculture industry with function of management for domestic food supplies.

The new rice exchange will be put into operation under the control of Vietnam Food Association and Hau Giang province's functional authority.vietstock





TELECOMMUNICATION - No longer super promotion programme for pre-paid mobile subscribers



In the coming time, the pre-paid mobile subscribers will no longer get benefit from super promotion programmes of offering 100 percent-130 percent of the value of paid-in cards as previously.

Department of Trade Promotion, under ministry of industry and trade has lately issued official document in which the ministry required the mobile network providers to limit their promotion rate of below 50 percent value of the paid-in cards.

The three largest mobile providers of Viettel, MobiFone and VinaPhone affirmed that they had already received the document from Department of Trade Promotion since last week and they were working out the implementation methods. The three enterprises stopped their promotion period of offering 100 percent of the paid-in cards for pre-paid subscribers in mid-Sep. These mobile network providers plan to offer new promotion programme of 50 percent value of the paid-in cards at the end of Sep.

Being triggered from 2007, the race for the largest amount of mobile subscribers among the mobile network providers caused the enterprises to reduce the call charge and lower the value of simcards in order to attract customers. The amount of mobile subscribers increased rapidly and the mobile network providers and management authority cannot identify their real subscribers and imaginary subscribers to be in use at present.

In a latest development, Ministry of Information and Communication announced that the ministry would remove the criteria of "largest amount of subscribers" to select the best mobile network providers for Vietnam ICT Awards 2009, and replace it for criteria of "the largest amount of post-paid subscribers".

Pham Hong Hai, head of telecommunication department affirmed that the post-paid subscribers were the most loyal customers that help the telecommunication markets develop stably.

There are over 80 million mobile subscribers in Vietnam at present, in which VinaPhone, MobiFone and Viettel hold the large market shares. In previous years, the post-paid subscribers accounted for 10-15 percent among the total mobile subscribers. However, at present, the rate was posted at about 3-5 percent. Meanwhile, the revenue contributed by the post-paid subscribers for the mobile network providers accounted for 50 percent.VNEXPRESS