Vietnam - News and Regulations

FOREIGN DIRECT INVESTMENT - Forecast FDI for 2010

Forecasts for foreign direct investment funds in Vietnam next year have raised questions for policy-makers.

The Ministry of Planning and Investment's Foreign Investment Agency (PIA) last week announced its prediction for 2010's newly registered and expanded foreign direct investment (FDI) fund at $22-25 billion, a 10 percent rise against this year's projected result.

Meanwhile, the disbursed FDI capital next year was forecast to see similar 10 percent growth from $10 billion probably achieved this year.

The FIA's announcement was made after consulting cities and provinces nation-wide of how much they could expect for FDI capital in 2010.

"The forecasts may suit Vietnam's projected economic growth next year and ability to absorb the FDI funds, as well with a bit slow pick-up in 2010 of the global economic prospects that act as a decisive driver for the global FDI flows," said a PIA source.

Since its accession to the World Trade Organisation (WTO), Vietnam's newly registered and expanded FDI amounts gradually increased, from $12 billion in 2006, $21.3 billion in 2007 to significantly $71.7 billion in 2008. During the same time, the disbursed fund reportedly rose from $4.6 billion in 2006, $8 billion in 2007 and $11.5 billion in 2008.

However, the global financial turbulence resulting in a sharp decline in global FDI flows suspended Vietnam's such impressive FDI growth. FIA reported the country's newly registered and expanded fund at $19.7 billion during January-November, while the disbursed sum was approximately $9 billion for 11 months.

Local governments, which have witnessed stunted FDI growth due to global economic crisis this year, were cautious about charting 2010's FDI map.

According to the FIA, HCM City, the country's current leading FDI hotspot, drafted its disbursed FDI capital from $1.3 billion this year down to $1.1 billion in 2010 while Dong Nai, the nation's fourth best FDI performer, forecast a 4 percent decline in disbursed FDI capital next year against this year's figure of around $850 million. Hai Phong city in the north anticipated a sharp 40 percent drop in the disbursed fund next year.

In an opposite direction, Hanoi, which is now in the third place in the FDI locality list, expected a light increase in disbursed FDI from $500 million this year to $527 million in 2010.

Meanwhile, Ba Ria-Vung Tau and Binh Duong, presently in the second and fifth places in the FDI list, were both optimistic when predicting 2010's disbursed FDI fund to rise 25 percent and 70 percent against this year.

"We still have foundations to be optimistic for Vietnam's FDI fund to pick up next year though the percentage growth will be not as large as the last three years. This is because a lot of foreign investors remain confident in investing in Vietnam due to the country's stable political situation, surging economic growth, competitive labour costs and growing domestic market size," said the PIA official.

Piaggio, the world's fourth largest producer of scooters and motorcycles, expected to quickly expand its existing manufacturing facility in Vietnam next year when it recently decided to relocate the group's Asia-Pacific headquarters from Singapore to Vietnam.

Piaggio CEO Roberto Collanino said: "Significant success of Piaggio's facility in Vietnam just after six months of operations reaffirms our strategic decision to invest in Vietnam and make it the group's regional headquarters."

The World Investment Prospects Survey 2009-2011 released by the United Nations Conference on Trade and Development ranks Vietnam in the top 15 most FDI friendly countries in the world. According to the UK Trade & Investment report, Tomorrow's Markets, which examines global business attitudes to opportunities within the BRIC countries - Brazil, Russia, India and China, and other newer emerging markets, Vietnam is seen as the most attractive emerging market beyond the BRICs.intellasia

FOREX -- BANKING - Foreign currency reserve of Vietnam estimated at $16b

After SBV increased the basic rates of the dong and adjusted forex rate, specialists of Standard Chartered Bank on November 26 reported that SBV re-allowed the dong to continue depreciating against US dollar.

The adjustment helps stabilise people's belief in the value of dong in future by easing the worries on the depreciation of dong. Accordingly, investors prefer reserving the dong to US dollar, which will cause the pressure on liquidity of domestic US dollar reserve.

Tai Hui, head of Asia region research division of Standard Chartered cited the figures from SBV and assessed that Vietnam's foreign currency reserve in October was equal to the 12-week import value. According to calculation of Standard Chartered, the figure is about $16 billion, falling from June (2009)'s $20.3 billion as reported by International Monetary Fund (IMF).

The fall came from a reduction in inward remittance and FDI that is predicted to decline by 20 percent to $5.8 billion in 2009, the expert explained. Meanwhile, market regulators are seeking US dollar loans from World Bank, other economies of Asia and Asian Development Bank (ADB) in order to increase the reserve source. At present, Vietnam borrowed $500 million from ADB and has pursued another loan of $1 billion from World Bank.

While the foreign currency market is still controlled closely, we [Standard Chartered] believe that the increasing of FDI and overseas remittance in 2010 will help ease the pressure of international payment of Vietnam, Tai Hui said.

Concerning trade deficit, the expert gave his point of view that the sustainable prices of goods will curb the rising trade deficit of Vietnam. Compared with the first half of 2008 when the average trade gap was recorded at $2.4 billion a month and reached $3.3 billion in March. So the current trade deficit has not been alarming.

According to the foreign bank, prices of most commodities will not increase highly like 2008, including oil and steel prices. This will limit the import of refined oil and steel in the last half of 2009.

The initial operation of Dung Quat oil refinery will contribute to curbing the trade deficit based on rising demand for energy. In history, Vietnam was the country of exporting crude oil and importing refined oil.LD

POWER - Vietnam to have shortfall of 218b kWh of electricity by 2020

With the current socio-economic growth, Vietnam is expected to have shortfall of 112 billion kWh of electricity by 2010 and 218 billion kWh by 2020, according to the trade and industry ministry. Thus, in order to meet energy demand for the economic development, the National Assembly has approved a resolution on investment plan for Lai Chau Hydro-electricity Plant Project and NinhThuan Nuclear Power Plant Project.

Ta Van Huong, director of the trade and industry ministry's energy department, said that the government instructed the trade and industry ministry and relevant ministries, agencies to research, study Lai Chau Hydro-electricity Plant Project and NinhThuan Nuclear Power Plant Project long time ago and list the two projects into the master plan of Vietnam's electricity system development.

Huong said that building Lai Chau Hydro-electricity Plant would meet various favourable conditions because investor, Electricity of Vietnam Group (EVN), has much experience in building big hydro-electricity projects in previous time such as Hoa Binh, Yaly, Son La hydro-electricity plants.

"Particularly, almost all steps during development of Son La Hydro-electricity plant such as planning, designing, consulting, operating and so on were taken over by domestic experts. This was a decisive factor so that Son La hydro-electricity plant was completed on time as instructed by the government and was completed two years earlier than the National Assembly's target. Such experience would be applied for Lai Chau hydro-electricity plant," said Huong and believed that building Lai Chau hydro-electricity plant is even better than Son La Hydro-electricity Plant.

However, if the electricity system is supplemented electricity from the existing thermo-electricity, hydro-electricity plants only, it is likely that the country would be short of energy for socio-economic development.

Thus, according to the National Assembly's representatives the resolution on investing into building NinhThuan Nuclear Power plant by this time is absolutely correct.

Many representatives said that when deciding to build this plant, the National Assembly consider energy sources in the far future, conforming to the country's socio-economic development programme. Chair of the National Assembly's Committee for Science-Technology and Environment Dang Vu Minh said that in short term, hydro-electricity and thermo-electricity still continues to play a major role in supply of electricity however in the far future, nuclear power will play a crucial role in Vietnam's electricity system because the production cost for one kWh of nuclear power is not only stable but also is more competitive than thermo-electricity plants when Vietnam has to import coal to serve thermo-electricity plants.

Regarding safety issue, Le Van Hong, vice director of Vietnam's Atomic Energy Institute, said that in order to ensure safety construction and operation for a nuclear power plant, International Atomic Energy Agency set three phases with 19 strict criteria. In addition to construction sites, technologies, capacity, experience of plant operation of experts, engineers, workers play a crucial role. "That the National Assembly approved the development of Ninh Thuan Nuclear Power Project, according to IAEA's standards, proves that we have completed that first phase. In order to start the second phase, by early December, eight experienced experts in building nuclear power plants of IAEA will visit Vietnam to cooperate with the trade and industry ministry and the science and technology ministry to recheck the whole infrastructure to serve the plant development. If we follow the standards that IAEA set, there would not be many difficulties, challenges for safe construction, operation

of the first nuclear power plant," said Hong.

Regarding the construction site, Hong said that IAEA also put forward strict criteria and anticipate possible situations such as earthquakes, volcanoes, tsunami, and others.

"Selecting Ninh Thuan as the construction site for the nuclear power plant is based on the criteria IAEA set. In addition, we have asked for help from IAEA and learn experience from other countries with the same conditions to Vietnam such as Japan, Korea, and China in building nuclear power plants," Hong added.

Vice general director of EVN, investor of Ninh Thuan Nuclear Power Plant Project, Duong Quang Thanh said that in addition to hundreds of experts from Vietnam Atomic Energy Institute, Da Lat Nuclear Power Institute, EVN now has some 50 highly-qualified engineers in applying nuclear power in the economic sector.

"Together with continuing sending engineers to foreign countries with advanced nuclear power technology to take part in training courses such as Russia, France, Japan and others, in the future we will be absolutely able to hold the ownership in operating Ninh Thuan Nuclear Power Plant as well as other plants which would be built later," said Thanh.DT

TOURISM - More international tourists to visit Vietnam in 2010, forecast

There will be more international tourists visiting Vietnam in 2010, Nguyen Van Tuan, head of general Tourism Department spoke at the conference "Draft strategy of Vietnam tourism development till 2020 and vision to 2030" in Hanoi last Friday.

Reportedly, in November, 388,000 tourist arrivals came to Vietnam, jumping 70.2 percent month on month and 38.6 percent against last November. Since the year early, the number of foreign visitors to Vietnam has totalled at 3.4 million arrivals, down 12.3 percent year-on-year.

In his opinion, the country's tourism broadcasting programme held in seven big cities of China and three of Japan started to take effective. Particularly, in November, 64,700 arrivals visited Vietnam from China, 34,600 arrivals from Japan, 30,000 Korean tourists and 24,000 Taiwanese arrived in Vietnam

As per forecast, Vietnam will welcome 400,000 international tourist arrivals, bringing the full year's total figure to 3.8 million arrivals, a year-on-year dip from 2008.

If the domestic and global economies have no sudden movement, the number of foreign tourists to Vietnam in 2010 will surge 10 percent from 2009 to 4.2-4.25 million arrivals.

Apart from 25 billion dong a year invested in developing tourism products and human resources, over 15 billion dong will be added to the national tourism promotion programme in priority markets of Northeastern Asia and Asean.

NUCLEAR POWER - 200tr dong needed for nuclear power plants

The National Assembly yesterday approved a major national project to construct two nuclear power plants in Ninh Thuan Province with investment estimated at 200 trillion dong.

The legislators, however, said they would likely revise the invested capital as the plants require the most advanced technologies to ensure safety and economic gain. They suggested using the most modern reactor while the government had planned to use the advanced light water reactor, which has been widely used in Japan, a nation with a strong nuclear power industry.

Ninh Thuan 1 and Ninh Thuan 2 plants are slated for Thuan Nam and Ninh Hai districts in the central province respectively. They are designed to have two turbines each with combined capacity of 4,000 megawatts.

NA deputies added they would choose a starting date for the construction of Ninh Thuan 2 after the government finished a report on preparation. Construction of Ninh Thuan 1 is to begin in 2014 with operations beginning in 2020.

The Ministry of Industry and Trade earlier said the nation would choose only investors with strong technological and financial ability. Uranium providers are also required to ensure long-term material sources.

The NA suggested the government underscore criteria to ensure safety at the nuclear power plants, including preparation, modern technology, human resources training and good operational management. The investors were also warned to pay attention to other factors such as security and climate change while developing the projects.

Vietnam expects to develop seven nuclear power projects in Ninh Thuan Province and the central region by 2030, each consisting of 1,000-megawatt reactors fuelled by about 30 tonnes of 4 percent low-enriched uranium with a combined capacity of 15,000 to 16,000 megawatts. The plan aims to reduce the country's dependence on expensive fossil fuels and meet the rising power demand.

The government earlier approved a goal to generate 15 percent-20 percent of the country's total power output from nuclear power by 2050.SGT

FINANCING- Slowdown in issuing G-bonds

According to the Ministry of Finance's statistics, in 2009, the pressure and demand for raising capital under the method of issuing bonds was large, with total capital-raising demand of about 200 trillion dong, in which the State Treasury has demand of 126 trillion dong, Vietnam Development Bank of 40 trillion dong and Bank for Social Policies of 10 trillion dong.

However, up to the end of October, the total value of the newly issued bonds was estimated at about 20 trillion dong, fulfilling 14 percent of the proposed plan, in which the State Treasury contributed 14.47 trillion dong, equal to 10.3 percent of the plan and VDB of 4.6 trillion dong.

As for the issuing of government guaranteed bonds, the total value of issued G-bonds was about 2.7 trillion dong, in which Vietnam Expressway Corp has raised 617 billion dong and Bank for Social Policies of 2 trillion dong.

Meanwhile, in the first ten months, via the channel of issuing corporate bonds, the state-owned enterprises have raised total capital of 11.3 trillion dong.

RESOURCES - Siam Cement Thailand invests in petroleum projects in Vietnam

Siam Cement Group, one of Thailand's largest industrial groups, has recently decided to carry out the investment in petroleum project in Vietnam. Previously, this group had signed a contract with Qatar Petroleum International Co to set up partnership relation on November 25.

Kan Trakulhoon, Siam Cement's predident said the project had total value of $3.5-4 billion and would be finished in mid-2010.

The two groups of Siam Cement and Qatar Petroleum International agreed to hold 71 percent of the total shares in the petroleum project, meanwhile the National Oil and Gas Group (PetroVietnam) and Vietnam Chemicals Corp of the rest 29 percent.

At the beginning of this year, Siam Cement announced that the group would cease investing in the above-mentioned project for at least two years because the group worried that the world economic crisis may cause bad effects on its investment capital. Siam Cement had to halt the investment in two other similar projects in Indonesia and Cambodia.cafef

AVIATION - Indochina Airlines still given time to prove financial capability

The Civil Aviation Administration of Vietnam (CAAV) said yesterday the cash strapped Indochina Airlines still has more than one month to take off again and prove its financial capability for continuing services otherwise its traffic right will be withdrawn.

Vo Huy Cuong, director of CAAV's Air Transport Department, said the first operational private airline in Vietnam would lose its traffic right if it was unable to resume domestic service before January I, or more than one year since the carrier launched its maiden flight.

Cuong told the Daily on the phoney yesterday that Indochina Airlines said it planned to resume the HCM City-Hanoi flights on December 15 after several delays because of crippling debts and financial troubles.

Indochina Airlines had to return its only airplane Boeing B737 -800 to the firm Travel Service from the Czech Republic on Tuesday as it had been unable to take off since October 30. Although Indochina Airlines had returned the aircraft to save costs, the contract with the European leasing aircraft company remained valid and the carrier would lease the aircraft when it had completed restructuring, Cuong said.

Indochina Airlines did not answer the Daily's several calls yesterday to comment on the latest development at the carrier.

Do Anh Tuan, commercial director of the air carrier, had told the Daily one week earlier that the carrier had to pay $24,000 a day in fees related to the aircraft although the aircraft had sat idly at Tan Son Nhat Airport. He said that Indochina Airlines would soon launch a new version of the website www.indochinaairlines.vn to receive online air ticket bookings, but this website was inaccessible yesterday because of maintenance reasons.

CAAV is now waiting for Indochina Airlines' official written report on financial capability and its plan for take-off again before taking appropriate actions towards the carrier.

"Everything is still in the hands of Indochina Airlines;' Cuong said. "The airline is still allowed to continue flights if it proves capability and submit such reports before January 1, 2010 otherwise we will propose the transport minister to get its traffic right back."

Asked about the opportunity for new airlines to join Vietnam's aviation market, Cuong said the overall market was growing as the double-digit domestic growth could offset the decline in the number of international passengers.

Cuong demonstrated that Jetstar Pacific Airlines posted average growth of 30 percent in passenger number while the national flag air carrier Vietnam Airlines was preparing new aircraft for more domestic and international flights.

Cuong said Viet}et Aviation Joint Stock Co. (Viet jet Air) was taking active steps to make its maiden service possible in May 2010. This is five months behind the deadline for the valid period of two years for a license granted to a new airline as per aviation regulations.INTELLASIA

POWER - Hoa Phat Energy Co starts generating electricity

Hoa Phat Energy Joint Stock Co, one of the ten members of Hoa Phat Group plans to officially generate electricity in mid-December.

At present, the contractors of providing coke coal for the project under Hoa Phat Energy Joint Stock Co has concentrated on finishing the first phase of instalment and put into trial operation of the Boiler No 1. It's expected that the work will be completed in the next ten days. After that, the Chinese contractor will check for the last time to put into operation the plant's 15MW turbine.

Hoa Phat Energy Joint Stock Co officially started the project of coke coal and thermo power plant in Q1 of 2008. The total investment capital for the two phases of the project was 2.1 trillion dong with total designed capacity of 700,000 tonnes of finished coke coal per year.

The main purpose of this project was to supply energy for another member company of Hoa Phat Group of Hoa Phat Steel Joint Stock Co.DTCHK

TELECOM - SK Telecom transfers its capital contribution in S-Fone for SPT

The South Korea-based SK Telecom Group has lately agreed to transfer the group's capital contribution share in S-fone telecommunication centre project, under the BCC contract, for Saigon Post and Telecommunication Services Joint Stock Co (SPT).

The S-fone Telecommunication Centre project has total investment capital of $543 million, in which SK Telecom has contributed $218 million and the rest from SPT. From 2005 up to now, the project's partners have carried out negotiation sessions for many times about the new cooperation models for S-fone project. However, the involving parties have not reached the final decisions for benefits and responsibilities until now.cafef

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