Vietnam - News and Regulations

POWER - Power plants create opportunities
Vietnam will have a large market for domestic equipment manufacturing with the planned development of 70 coal-fired power plants within the next 15 years, according to mechanical engineering experts. Under the national electricity development plan for 2006-15, more than 40 coal-fired power plants with capacity of 600MW or more will be constructed in the country. Between 2015-25, another 30 coal-fired power plants will begin producing power. With this considerable development, demand for coal-fired power plant devices from now to 2025 will increase. On December 26, 2002, the prime minister approved a development strategy for Vietnam's mechanical engineering industry with the priority goal of developing key mechanical products. Deputy minister of Industry and Trade Do Huu Hao said the domestic mechanical engineering industry has seen significant growth in equipment manufacturing for thermal power, reaching capacity of 600MW. Vietnamese and foreign experts have done all the basic designs for the industry. Domestic businesses, such as the Corporation for Industrial Machinery and Equipment and Vietnam Engine Agricultural Machinery Corporation, have made a number of important devices such as engines, gear boxes and fan pumps. The domestic mechanical engineering industry has built around 50 to 70 percent of the country's standard equipment needs, such as lifting buckets, conveyor belts, storage devices and dust filtration equipment. Although Vietnamese enterprises have the capacity to produce a significant portion of the equipment needed for coal-fired power plants, generally only 40 percent of the equipment used by the coal-fired power projects that are under construction are from domestic enterprises, accounting for only 25 percent of the total value. If domestic enterprises do not develop, they will fail to take advantage of a great opportunity. Ngo Van Tru, deputy director of the Department of Heavy Industry under the Ministry of Industry and Trade said domestic firms without an understanding of design would not be able to contribute anything. Domestic firms need time to study in order to participate in power plant design. Director of the Centre for Design and Machinery Manufacturing Technology under the Ministry of Industry and Trade Hoang Van Got outlined some local production schemes and added that rather than becoming sub-contractors for foreign contractors, domestic firms should plan to work with foreign partners to design and manufacture boilers. Domestic firms could also manufacture the auxiliary devices for turbine generators with support from foreign consultants. This plan could lead to domestic production of 40 percent of project value, he said. He also proposed measures to assign domestic joint venture companies as Engineering, Procurement and Construction (EPC) contractors to ensure active implementation of Build and Transfer Technology plans. Engineering enterprises have also proposed an increase in domestic production of supplies for thermal power plants in Vietnam. Incentives should be offered by including required conditions in international bidding and encouraging the establishment of centres for mechanical equipment manufacturing. VNNEWS

OIL/GAS - TNK-BP looking at BP's Vietnam assets

Russia's No. 3 oil company TNK-BP may try to buy Vietnamese assets from its co-owner BP as it sells down its portfolio to pay damages in the Gulf of Mexico, company executives said on Wednesday.

"It's not a secret that TNK-BP is looking at some of BP assets," Chief Financial Officer Jonathan Muir told the Reuters Russia Investment Summit.

TNK-BP, has already said it would be interested in buying assets in Venezuela, where it has rights to develop part of Junin-6 with a consortium of other Russian oil companies.

But company executives rejected the idea of buying BP's share of Alaska's Prudhoe Bay field. Newspapers have reported it may be up for sale.

"We are looking for companies where the politics and our expertise are a good fit," chief operating officer Bill Schrader told the summit.

Russian companies regularly exploit Communist-era ties with Vietnam in business.

Russia's Zarubezhneft, a state oil company is developing fields there and in the telecoms sector, a cell phone operator which shares a shareholder with TNK-BP, Vimpelcom, recently expanded there.

Schrader said it was firming up its production growth targets for next year, aiming for a 1-2 percent range. Production growth was running ahead of target in 2010 at about 2.8 percent, he said.

But production will start to shift more rapidly from the old fields of west Siberia, which are declining at a rate of 2-3 percent a year, toward the new oil provinces of east Siberia and the Yamal peninsula in the far north. "The low-hanging fruit has been achieved," Muir said.

West Siberia's share of output will decline to 75-80 percent of TNK-BP's output over the next 3-5 years as east Siberia, whose barrels are shipped to Asian customers through a new pipeline to the Pacific region, grows.

West Siberia could come under further pressure from proposed tax changes which increase the extraction tax on oil from developed fields. Pinched by transport tariff inflation and taxes, Muir said, the company may need to cut investment in old fields.

TNK-BP, which produces 12 bcm of gas, plans to more than double gas output over the next 6-8 years, making it Russia's third largest gas producer after Gazprom <GAZP.MM> and Novatek <NOTK.MM>, Schrader said.

Its gas is sold exclusively to domestic customers by virtue of state controlled Gazprom's monopoly on the export pipeline.

"Our aim is to be number three and we have got the reserves to do it," Muir said. REUTERS

WTO - Seafood exporters oppose US tariffs

Seafood exporters say they will take action if the US imposes new anti-dumping tariffs on products of some Vietnamese seafood exporters.

Exporters made their views known on Tuesday at the office of the Vietnam Association of Seafood Exporters and Producers (VASEP) in HCM City after the US Department of Commerce (DOC) unofficially said the anti-dumping tariffs on Vietnamese tra fish could reach $4.22 per kilo, equalling 130 percent of the selling price of the Vietnamese tra fish in the US market.

Although VASEP had been informed of the news, the association's general secretary, Truong Dinh Hoe, said: "We absolutely oppose the (preliminary) decision made by the DOC in its last review of its tariffs."

Hoe said in the last review, the DOC used the Philippines, instead of Bangladesh, as the third-country market to determine the dumping tariff margins for Vietnamese tra fish, thus causing the tariffs to rise.

Hoe said that the comparison of tra fish product prices in the Philippines and Vietnam was inappropriate as fish feed in the latter was priced $0.5 per kilogramme compared with $2 per kilogramme for the former.

He added that production and management costs in the Philippines were also much higher than in Vietnam.

"It's not reasonable to impose the figures collected from 36 breeding ponds with a total of 12 tonnes per year in the Philippines with the breeding farms totalling 1 million tonnes of tra fish in Vietnam," said Hoe.

Duong Ngoc Minh, deputy chair of VASEP, said the association should prove that imposing such sky-high anti-dumping tariffs on Vietnamese tra fish would not only damage Vietnam's tra fish production but also cause losses for American customers.

If the new high tariffs are imposed in March next year, many tra fish exporters will certainly leave the American market, according to an official from the Ministry of Agriculture and Rural Development (MARD), who declined to be named.

He said the growing popularity of tra fish in the American market had resulted in the Catfish Farmers of America (CFA) lobbying against Vietnamese tra fish.

Andrew Schroth, attorney with Grunfeld, Desiderio, Lebowitz, Silverman&Klestadt LLP (the US), who has advised Vietnamese tra fish exporters on the anti-dumping case, said VASEP should consider all available options in the Phillippines to prove that using the Philippines as a third country as the benchmark was not appropriate.

Though the final rates will not be released until six months later, related sides must work very hard to divert the decision, according to Schroth.

MARD's deputy minister Luong Le Phuong said the Vietnamese government would take action to prevent the imposition of the new anti-dumping tariffs, which would affect tra fish exports to other markets around the world.

Phuong said the new tariffs could set a negative precedent by encouraging other markets such as the EU and the Middle East to follow suit.

In the previous DOC anti-dumping review, a majority of Vietnamese exporters enjoyed the lowest tariff of 0.52 percent.

The anti-dumping tariffs imposed on Vietnamese tra fish exports to the US have affected the local industry since 2003.

Vietnamese tra fish products sell well in many markets in the world.

According to figures from the Ministry of Industry and Trade, in the first nine months of this year, Vietnam attained export turnover of more than $1 billion for tra fish products, and the figure is expected to exceed $1.5 billion for the entire year.

In the first quarter of this year, the American market imported 12,000 tonnes of tra fish products from Vietnam, a 2.5-fold increase over the same period last year.VNNEWS

M&A – BANKING - Aussie bank seeks 20pct stake in VIB

Commonwealth Bank of Australia (CBA) will seek approval to increase its stake in Vietnam International Bank (VIB) to 20 percent, according to a CBA statement quoted by Dow Jones on Tuesday.

"Consistent with the strategic partnership agreement signed earlier this year, Commonwealth Bank intends to request an increase in the VIB investment to 20 percent at the earliest opportunity – the maximum investment allowed by the State Bank of Vietnam," said the statement.

No financial details of the transaction were disclosed.

VIB yesterday refused to give any comment on the statement but confirmed that all procedures had been finalised to sell a 15-per-cent of stake to CBA under a strategic partnership agreement announced last April.

CBA's acquisition of a 15-per-cent interest added 600 billion dong (US$30.8 million) to VIB's charter capital, bringing the total to 4 trillion dong ($205.2 million). VIB's assets have also increased by an annual average of 40 percent over the past five years.

CBA is the exclusive foreign strategic shareholder of the Hanoi-based bank and was expected to help VIB improve its performance in such critical business areas as retail banking, risk management, human resources, IT, and finance.

Commonwealth Bank has quietly been enlarging its footprint in Asia over the past decade. It is now one of the leading international banks operating in Indonesia, and it also has investments and partnerships in two Chinese banks – Qilu Bank in Jinan and the Bank of Hangzhou.vnnews

INSURANCE - Liberty launches online insurance service

The US firm Liberty Insurance Limited on Tuesday started launching an online automobile insurance service after three years of providing insurance products in the Vietnam market.

Carlos Vanegas, general director of Liberty Insurance, told a news briefing in HCM City on Tuesday that the increasing trend of online transaction services and payments using credit and debit cards had prompted the insurer to upgrade its website www.libertyinsurance.com.vn for the online service.

"We have looked for and put into operation the latest technical advancements in order to improve the quality of our products and services to ensure strong growth and to meet the increasing demands of customers," Vanegas said.

He described the interactive website as an online automobile insurance distribution channel, supplying new functions and links to its customers, staff, agents and partners with convenient tools and information.

The online service allows customers, particularly busy ones, to buy insurance and pay premiums anytime and anywhere by clicking on suitable insurance services for their automobiles. Besides the options to pay by cash or bank transfer, customers can also use their credit or debit cards to pay online.

"It takes only a few minutes for a customer to get an automobile insurance quotation with various options of insurance benefits and premiums," he said, adding this offers an easier and faster way to do business with the company.

The insurer's first 24/7 call centre in Vietnam can address all clients' specific needs and inquiries in both Vietnamese and English.

Liberty Insurance, which entered Vietnam in 2007, is among the top ten of 28 life insurers in Vietnam in the automobile insurance field, according to the company.VNNEWS

AIRPORTS/INFRASTRUCTURE - Airports make expansion plans

Tan Son Nhat Airport in HCM City is to be expanded to create space to service 10 additional passenger jets, while Hanoi's Noi Bai Airport also has plans to add more space for aircraft to meet an explosive demand for air travel.

The Southern Airports Corporation has submitted their plans to increase the capacity of Tan Son Nhat Airport to the Civil Aviation Administration of Vietnam (CAAV).

Nguyen Nguyen Hung, general director of the Southern Airports Corporation, said that capacity at Tan Son Nhat Airport is just enough to serve 20 million passengers a year, or 54,800 passengers a day. However during the traditional Tet holidays, Tan Son Nhat Airport received in excess of 58,000 passengers a day.

Under the new plan, Tan Son Nhat's present 42 bays will be increased to 52.

Noi Bai Airport currently has 24 parking bays, receiving nearly 90 flights a day. Nevertheless, the airport can become overloaded, meaning aircraft must queue up to take off or land, which leads to delayed flight or cancellations.

However, those plans were only a temporary solution while waiting for the construction of Long Thanh Airport in the southern province of Dong Nai. The project is expected to begin in 2011 and its first phase is expected to be completed by 2015.

Over the next few years, the national flag carrier, Vietnam Airlines and Jetstar Pacific Airlines plan to increase their fleets to over 100 aircraft. These companies and hundreds of other overseas airlines face major problems due to the country's limited aviation capacity. Two private airlines, Air Mekong and Blue Sky, are also set to join the domestic air market.

In 2009, Vietnam's airports handled over 26 million passengers and 445,800 tonnes of cargo, a four-fold increase on 2000.

In the first seven months of this year, air passenger numbers rose 33 percent over last year to 12 million, and this figure is forecast to increase by 35-40 percent this year alone.

Lai Xuan Thanh, deputy head of CAAV, said that his agency was working with carriers to formulate five and ten-year development strategies to install extra aircraft bays.

Forty-five domestic and foreign airlines are currently operating on 55 international air routes to and from Vietnam. Vietnam Airlines and Jetstar Pacific also service 40 routes nationwide.VNNEWS

Oliver Massmann

Rechtsanwalt

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Vietnam - News and Regulations

WORLDBANK on Vietnam - Vietnam uses over 739tr dong for public investment in 2006-2010 period

The World Bank (WB), Ministry of Planning and Investment (MPI), and Asian Development Institute on September 8 and 9 have jointly held an international seminar on strengthening public investment management, and enhancing the effectiveness of public investment. Participants also shared their experiences in mapping out strategies that could help countries improve public investment management.

According to MPI, around 286 trillion dong was used for public investment during the 2001-2005 period, accounting for over 23 percent of the total social investment. For 2006-2010 period, the figure is estimated at over 739 trillion dong, accounting for 24 percent of the total social investment. The proportion figure is expected to remain the same in the period of 2010-2015.

The state capital for public projects and programmes holds a large proportion. Hence, it is very important and necessary to manage and use this source effectively. Therefore, Vietnamese government should have suitable measures and policies to use the national capital source more efficiently.

Martine Rama, Acting director of the WB's East Asia Development Department said Vietnam is one of the countries having high public investment proportion, nearly 40 percent of the total GDP.

However, Martin also pointed out Vietnam's shortcomings in public investment management, such as insufficient attention to regional development in the overall investment plan; no strategic environment assessment to make key selections (e.g. mining sector); decentralisation leading to overlapping and ineffectiveness; disconnected relation between state capital and current budgetary expenditure; and overlapping among related laws such as State Budget Law, Construction Law and Bidding Law, etc.

Sharing Korean's reform experiences, Jay-Hyung Kim, Managing director of Public and Private Infrastructure Investment Management Centre, Korea Development Institute completely agreed with Vietnamese government's direction to follow the general trend. He added that the project appraisal would be better if it is decentralised to localities.

Director of MPI's Foreign Economic Relation Department Ho Quang Minh said, in order to promote the effectiveness of public investment in the future, Vietnamese government would focus on perfecting the guides on public investment management, especially investment from the state budget. Moreover, the government would also focus on improving the policies and mechanisms for the project consultation, supervision and management to be more transparent; specifically defining responsibilities of each area and each level; strengthening the inspection and supervision activities, correcting the ineffective projects and the investments not included in the overall planning, and overcoming losses and corruptions.

In addition, Vietnam would comprehensively carry out the measures such as assigning investment decision makers and investors to bear more responsibility, and accelerating the implementation of project constructions, etc. vietplus

FINANCING - PetroVietnam, foreign banks sign derivatives deals

State oil and gas group PetroVietnam has signed agreements with three foreign banks to help limit risks when it conducts derivatives transactions, the Vietnamese government said on Thursday.

PetroVietnam signed the International Swap and Derivatives Association Master Agreement with BNP Paribas (BNPP.PA), Sumitomo Mitsui Banking Corporation (8316.T) and Standard Chartered Plc (STAN.L) on Thursday, the government said in a statement.

The deal would help PetroVietnam "balance and limit changes, prevent risks of interest rates, exchange rates and prices of goods, and diversify the group's financial activities", the statement said.

It quoted PetroVietnam deputy Chief Executive Nguyen Tien Dung as saying the group would have high funding requirements in due course, and using derivatives transactions would help mitigate associated risks.

Dung did not detail upcoming investments, but PetroVietnam has been seeking funding for the construction of several major projects, including two oil refineries, after Vietnam's first such facility started running at full capacity earlier this year.

CAPITALISATION - SBV to review capital rules

The State Bank of Vietnam will review new strict capital adequacy requirements imposed on commercial banks by Circular No 13, following an outcry from the banking sector and a directive from the government.

The announcement late Wednesday helped boost shares on the nation's stock market yesterday.

The review and analysis of Circular No 13 would aim to address shortcomings in various risk management provisons, including the imposition of stricter capital adequacy ratios, the State Bank said.

A deadline for conclusion of the review was not disclosed. However, last month, prime minister Nguyen Tan Dung ordered the State Bank to review the circular and report its findings and possible solutions before the new regulations were scheduled to take effect on October 1.

Circular No 13 would require commercial banks to increase their capital adequacy ratios from 8 to 9 percent, as well as impose other risk management measures.

For instance, the circular would restrict banks from lending out funds from non-term deposits made by the State or State entities, the social insurance fund or commercial lending organisations.

According to media reports, many commercial banks and the Vietnam Banking Association complained that this last provision would require commercial banks to leave idle as much as 35 percent of deposited funds. They urged the central bank to extend the deadline for complying with the circular in order to give banks more time to restructure investment portfolios.

Fiachra Mac Cana, managing director of the research department of HCM Securities Co, predicted that the review would not result in any significant changes to the requirements but would allow banks more time to comply and adjust loan and capital ratios.

A central bank official who asked to remain unnamed told Vietnam News yesterday that Circular No 13 was indeed the opening salvo of what would be an ongoing programme of stricter risk management measures to be imposed on the nation's banking system.

Many economists, the official noted, have complained that the capital adequacy ratios in Circular No 13 were still too low to adequately guard against risk. The newly passed Law on Credit Institutions to take effect in January includes provisions stricter than those in Circular No 13, he noted, but still short of the Basel standards for finance and banking.VNNEWS

RENEWABLE ENERGIES - Finland wants to develop clean technologies in Vietnam

A delegation representing 15 Finnish enterprises said here on Tuesday they wanted to look for local partners to develop renewable energy, wastewater treatment, industrial waste management and other environmental technologies.

Some of the Finnish companies introduced their clean technologies at a seminar held here on Tuesday were Neste Oil Corporation, Cargotec, GD Power, Kemira, Fincumet, YIT and Outotec.

"We identify Vietnam as a key market in Southeast Asia and want to have direct partners in developing our innovative clean technologies to address Vietnam's energy and environmental challenges," said Santtu Hulkkonen, executive director of Cleantech Finland who represented the Finnish delegation.

He told the seminar that the clean-tech sector in Finland included some 2,000 enterprises operating in energy efficiency, clean industrial processes, renewable energy, and waste management and treatment.

Janne Mielck, vice president of the New Ventures of the Neste Oil Corporation, told the Daily on the sidelines of the seminar that his corporation was seeking suppliers from Vietnam for producing environmentally friendly diesel.

Neste Oil is a refining and marketing corporation specialising in low-emission technologies, especially high-quality oil products for vehicles.

"By the end of this year, we will open a plant producing renewable diesels in Singapore with an annual capacity of 800,000 tonnes, so we are here to seek partners for supplying raw materials such as vegetable oil and non-edible oil for our plant in Singapore," said Janne Mielck. He added his company expected to buy some 100,000 tonnes per year from Vietnam.

Huynh Kim Tuoc, director of the HCM City Energy Conservation Centre, told the seminar that "Vietnam targets renewable energy to account for 7 percent of the total energy supply by 2020 and up to 11 percent by 2050 compared to less than 3 percent now."

"While the hydropower source as an important renewable energy of the country has been fully tapped, Vietnam should urgently exploit other renewable sources such as wind power, solar power, and other bio-fuels," he said.

Tuoc added that Finnish enterprises with good technologies could definitely find a lot of opportunities to develop projects of solar energy around the country.

Besides, Tuoc also encouraged Finnish enterprises to invest in wind power projects, including the manufacturing of equipment for wind power plants.

According to the city's energy conservation centre, it has become very urgent for Vietnam to develop renewable energy as power shortage is a big worry for all economic sectors.SGTD

POWER - Construction on Bac Lieu wind power plant starts

Cong Ly Construction, Trading and Tourism Co Ltd has officially started construction works on a wind power plant in Bac Lieu province yesterday Sep 9, 2010.

The plant is situated in an area of about 500 hectares in NHa Mat Ward, Vinh Trach Dong Dist, Bac Lieu province, near Vinh Chau Dist, Soc Trang province. With designed capacity of 99 MW, Bac Lieu wind power plant project has been included in the general power development plan for 2006-2015 period.

The total investment capital to build this power plant is estimated at about 5 trillion dong.TBKT

Korean group wishes to invest in thermo power plant in Vietnam

Early this week, Lee Daebong, chair of the South Korea-based Charmvit Group revealed that his group was planning to invest in a thermo power plant in Vietnam. "We were waiting for adjustment in power selling mechanism from Vietnam's ministry of industry and trade that allows the power generators to adjust the sales price for distributors in case there are changes in retail prices", he added.

Charmvit Group plans to cooperate with the largest power generator in South Korea to carry out thermo power plant in Vietnam, if the project's feasibility is ensured. Lee Dae-bong refused to release any information relating to the planned thermo power station, but affirmed that the mechanism about adjusting the wholesales price would play a key role for realising the project.

Oliver Massmann

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This e-mail is from Duane Morris Vietnam LLC (a law firm). We can provide a list of our partners upon request. If this e-mail has been sent to you by mistake, please let us know, and then delete this message.

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Vietnam - News and Regulations

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ENERGY - Vietnam Oil And Gas Report Q4 2010 - New Market Report Published
The latest Vietnam Oil & Gas Report from BMI forecasts that the country will account for 1.52 percent of Asia Pacific regional oil demand by 2014, while providing 4.19 percent of supply. Regional oil use of 21.42mn barrels per day (b/d) in 2001 is set to reach a forecast 27.15mn b/d in 2010, then to rise to around 30.21mn b/d by 2014. Regional oil production was around 8.35mn b/d in 2001 and is forecast to average an estimated 8.82mn b/d in 2010. It is set to increase only slightly to 8.89mn b/d by 2014. Oil imports are growing rapidly, because demand growth is outstripping the pace of supply expansion. In 2001 the region was importing an average of 13.07mn b/d. This total will rise to a projected 18.32mn b/d in 2010 and is forecast to reach 21.32mn b/d by 2014. The principal importers will be China, Japan, India and South Korea. By 2014 the only net exporter will be Malaysia. In terms of natural gas, in 2010 the region will consume an estimated 496bn cubic metres (bcm) and demand of 625bcm is targeted for 2014. Production of a forecast 415bcm in 2010 should reach 522bcm in 2014, which implies net imports rising from around 81bcm to 104bcm. This is thanks to many Asian gas producers being major exporters. Vietnam's estimated share of gas consumption in 2010 is 1.84 percent, while its share of production is put at 2.20 percent. By 2014, its share of gas consumption is forecast to be 2.56 percent, with the country accounting for 4.60 percent of supply. We continue to predict a 2010 OPEC basket oil price level of $83.00/bbl. This equates to Brent at just under $85.00, WTI at almost $87.60, Urals averaging $83.60 and Dubai at $83.55. The 2011 OPEC assumption is $85.00/bbl, rising to an average of around $90.00 in 2012 and beyond. For the whole of 2010, we are currently assuming an average global jet fuel price of $95.50/bbl, compared with around $70.66 in 2009. The 2010 average global gasoil price, calculated by BMI, is $92.67/bbl, against $68.96 in 2009. The 2010 average naphtha price is estimated at $83.09 - compared with $59.30/bbl in 2009. For global unleaded gasoline, BMI is now forecasting an average $95.66/bbl in 2010, up from around $70.17/bbl in 2009. Vietnamese real GDP growth in 2010 is assumed by BMI to be 4.4 percent, followed by a forecast average annual 5.9 percent increase during 2010 to 2014. Exploration success has been on the rise in Vietnam, with a growing number of international oil companies (IOCs) teaming up with PetroVietnam and finding and developing hydrocarbon resources - particularly gas. We are assuming oil and gas liquids production peaking at 400,000b/d in 2010, before easing back to 372,000b/d by 2014. Beyond 2009, consumption is forecast to increase by around 5-7 percent per annum to 2014, implying demand of 460,000b/d by the end of the forecast period. Gas production is forecast to increase from the estimated 2010 figure of 9.1bcm to 24.0bcm by 2014 - providing a basis for exports. Between 2010 and 2019, we are forecasting a decline in Vietnamese oil production of 18.75 percent, with crude volumes peaking at 400,000b/d in 2010, before slipping to 325,000b/d by 2019. Oil consumption between 2010 and 2019 is set to increase by 68.13 percent, with growth beyond 2009 ranging from 5.0 percent to 7.0 percent per annum and the country using 625,000 b/d by 2019. Gas production is expected to rise from an estimated 9.1bcm in 2010 to 34.0bcm in 2019. With 184 percent demand growth, we see potential for exports later in the period. Details of BMI's 10-year forecasts which provide regional and country-specific projections, can be found at the end of this report. Vietnam takes fourth place, behind China, in BMI's composite Business Environment (BE) league table, which reflects largely its strong upstream position. The country now holds third place, behind India, in BMI's updated upstream Business Environment Ratings, with its ranking reflecting a reasonable resource position, better-than-average growth outlook, attractive licensing terms and an IOC-friendly competitive environment. There is a comfortable seven-point gap between Vietnam and fourth-placed Papua New Guinea (PNG), which should keep it safe from any near-term challenges. Vietnam ranks 12th, just behind Hong Kong and Pakistan, in BMI's downstream Business Environment Ratings, reflecting its modest (but growing) refining capacity, above-average oil and gas demand growth outlook, and low level of retail site intensity. please see weblink for more info on this topic: Vietnam Oil and Gas Report Q4 2010: http://www.companiesandmarkets.com/r.ashx?id=73558897I342700&prk=b36991e0f7e857abbdbce25da3034ecb http://www.officialwire.com/main.php?action=posted_news&rid=211353

FINANCE - Vietnam's deposits soar, interest rates fall till August 17

By mid-August, deposit interest rates in dong at commercial banks have fallen 0.3 percent, while loan interest rates was down by 0.4 percent against June 30, 2010, the Vietnam Financial Times quoted the State Bank of Vietnam's Governor Nguyen Van Giau as saying in his report yesterday September 2.

Although interest rates were down from last June, total mobilised deposits in dong continued increasing, by 1.13 percent in July after a rise of 5.97 percent in June.

The volume and speed of capital mobilisation by organisations was larger than loan disbursement as most credit institutions all have ensured the liquidity and ability to expand lending.

According to Giau, currently the pace of deposit rate reduction has slowed down as loan interest rates cannot be reduced quickly, but credit institutions are actively raise capital with financial support from the central bank to meet credit demand of the economy.

The SBV Governor said that short-term interest rates would drop significantly, while medium and long term lending rate will require more time due to partly the mobilised funds that are usually growing slowly and making up a very low proportion of the total mobilised capital.

The SBV is continuing to allow credit institutions use 30 percent of short-term moblised capital to offer medium and long term loans.

The central bank said, that by August 17, total mobilised capital of the dong rose 17.44 percent, while total outstanding loans increased 14.15 percent.

The SBV Governor said that Vietnam would be able to control inflation at around 8 percent, GDP growth of about 6.5 percent this year and thereby the credit will grow by 25 percent as the proposed goals.

According to statistics from the State Bank, deposit rates now average at 11 to 11.2 percent per annum for a term of three months - 12 months, and 10.5 to 11.2 percent for terms of more than 12 months.

The lending interest rate of agricultural sector, rural and exports is from 12 percent to 15.5 percent per year (short terms from 12 percent to 14.5 percent, medium and long terms from 13 percent to 15.5 percent per year).TBTCH

Banks should be cautious in lending dollars: Economists

Outstanding loans in US dollars at commercial banks in HCM City reached 172.5 trillion dong, making up 28.2 percent of total outstanding loans, up 44.2 percent compared to the same period last year, while outstanding loans in dong rose 20.5 percent, according to the HCM City Statistics Office.

Nguyen Huu Dang, director general of HD Bank said that, export companies are now borrowing dollars at an interest rate of 5 percent - 5.5 percent per year (3-6 months) and import companies are offered with dollar loans at 5.5 percent to 6.5 percent per year, which is seen quite attractive in comparison with dong negotiable interest rates ranging from 13 percent to 14 percent a year.

"If no big changes from now to the end of this year occur, the demand for loans in US dollar from export and import businesses would be higher than loans in dong," Dang forecast.

However, according to economic experts, at this time, commercial banks should be also careful to promote the development of the dollar credit, especially in the context of outstanding US dollar loans of the entire banking system to total mobilised dollars in excess of about 40 trillion dong at present.

Thus, the increased deposit rates in the dollar by banks are recently also aimed to again balance the supply - demand, especially banks have boosted lending in dollars during the past seven months.

On the other hand, many financial experts say that companies who need to borrow the dollar loans used for billing purposes must also carefully calculate the growth rate of outstanding loans at a high level in seven months is also a issue of concern. The reason is the possibility of rising dollar demand to repay bank debts (when more dollar lending contracts matures) would affect the supply of dollars, which may put more pressures on interest rates.

Therefore, the best is that only companies, who have revenues in dollars, should consider new loans in dollars. Moreover, banks also need to select customers for greenback loans, especially for businesses that are importing raw materials to produce goods for sales in the domestic market and have no revenues in dollars. In addition, enterprises should use foreign currency exchange rate hedging measures.

Dr Tran Du Lich, member of National Currency - Financial Advisory Council says that after the inter-bank rates increased recently, importers that do not have revenues in the foreign currency will surely have to switch to borrow dong loans. Specifically, compared to before August 30, the exchange rates of many commercial banks are now higher than 300-400 dong/US dollar (reaching 19,500 dong/US dollar - sold out).

In fact, many export companies are continuing to choose dollar loans, rather than switch to dong ones as predictions were made previously. Thus, banks are continuously raising deposit interest rates in the greenback aimed at drawing dollar capital to meet the needs of businesses.

Most recently, Southern Bank has increased interest rates on dollars savings, with the extra rate increase from 0.4 percent to 0.7 percent per year. Previously, Vietnam Eximbank raised deposit rates in US dollars to the maximum of 4.45 percent per year, while the Asia Commercial Bank also increased the rate from 0.15 to 0.20 percent per annum for US dollar deposits. The savings interest rates in US dollars are also adjusted higher at small-scale banks.DAUTU

BANKING - Vietnam's lending rates to drop - central bank's governor

Short-term lending rates in Vietnam are expected to come down, thanks partly to funds the central bank has extended to banks, State Bank of Vietnam governor Nguyen Van Giau was quoted on Wednesday as saying.

Lending rates were not falling quickly at present because banks were cutting deposit rates slowly, Giau said in an interview published by the finance ministry-run Vietnam Financial Times newspaper.

"But credit institutions are actively raising funds in coordination with funding support from the State Bank to meet credit demand for the economy," Giau said in the interview.

"So, short-term lending rates will fall significantly, while the reduction of medium- and long-term lending rates requires time because long-term deposits often rise very slowly and account for a low proportion of overall deposits," Giau said.

The central bank injects funds into banks via open market operations. For details of the transaction this year click on .

Bank deposits in Vietnam as of August 17 had risen 17.44 percent from the end of 2009, while credit expanded 14.15 percent, Giau said without giving any values.

Credit demand is expected to rise as usual in the last months of the year, Giau said, pledging further steps to keep annual inflation at around 8 percent, economic growth of 6.5 percent and an annual credit growth at 25 percent, as targeted.

The average rate for one-month interbank loans dropped to 8.56 percent during the week ending August 26, from 8.67 percent a week ago, and the rate on three-month loans also eased to 9.74 percent from 9.99 percent, central bank reports said.VNNEWS

FOREIGN DIRECT INVESTMENT - Japanese investors evince interest in Vietnam

Apart from three large groups of Itochu, MOL and NYK, many other Japanese investors have evinced interest in investing in Vietnam.

A leader in Japan-based Itochu Group, during his business trip to Vietnam in early last week revealed that his group was interested in Vietnamese markets via conducting four projects in Vietnam such as setting up a joint venture with Vinalines (Vietnam) and two other Japanese groups of MOL and NYK in realising Hai Phong's Lach Huyen Port; and cooperating with Phu Thai group, and Family Mart to build a chain of convenience stores in Vietnam.

The group has already set up detailed plans for the two fore-mentioned projects. If the prime minister approves for the Lach Huyen Port project, in early September, Itochu Group and other partners will cooperate closely to follow all the terms in the joint venture, re-valuate the projects and adjust the proposed design so that Lach Huyen Port can receive the cargo ships with loading capacity of 80,000 to 100,000 tonnes, instead of 50,000 tonnes as being approved previously.

Meanwhile, as for the project of setting up a chain of convenience shops, Itochu Group has lately released that the group and Phu Thai Group and Family Mart had already submitted the application profile for investment licence to HCM City People's Committee.

The other two projects that Itochu Group were keen on including Long Son oil refinery and Hanoi-Noi Bai Airport railway.

With total investment capital of $3.7 billion, Long Son oil refinery project was supposed to be conducted by Thailand-based Siam Cement Group, and other two Vietnamese groups of the National Oil and Gas Group (PetroVietnam) and Vietnam Chemicals Group since 2008. However, there appeared some problems relating to ground clearance works. By the end of last year, Siam Group, with holdings rate of 71 percent of total investment capital, signed a cooperation contract with Qatar Petroleum International Co to make capital contribution to carrying out the project. At present, Siam was seeking another partner and Itochu Group would likely be the chosen one.

Meanwhile, as for Hanoi-Noi Bai Airport railway project, the official proposals have already been submitted to ministry of planning and investment, and the ministry also sent document to Japan International Cooperation Agent for considering the feasibility of the project. It was expected to have Jica's response by the end of this year.

Apart from the three Japanese groups, there were other large groups from Japan showing their interest in making investment in Vietnam such as Tokyo Electricity, Chubu Electricity, Kansai Electricity, Toshiba, Hitachi, Mitsubishi and Japan Nuclear Energy Group with main focus of atomic energy.

As planned, in October, those seven leading groups would establish an international nuclear power development Co in order to meet all Vietnamese demands relating to constructing and developing nuclear power industry. These groups would like to set up the second nuclear power station in Vietnam, to be located in Ninh Thuan province.

This is one of the plans under supporting package from Japanese government to help Vietnam develop nuclear power, said Masayuki Naoshima, Japanese minister of Economy, Trade and Industry mentioned in his visit last week.VNNEWS

POWER- VSH boosts Kon Tum plant project construction

Vinh Son – Song Hinh Hydropower JSC (VSH) would seek approval in the period of Sep 10 to 25 for designing and building package of Kon Tum hydropower's energy system invested by the firm, said Nguyen Van Thanh, chair of management board.

VHS will sign the 1.137 trillion dong and $25 million contract with two Chinese bidders: East China Investigation and Design Institute, the Railway Administration No18.

As planned, the project would be finished after 36 months of construction at total investment of 5.744 trillion dong with two 220 megawatt – turbines (average output volume 1.094 billion kWh per year. The first turbine is planned to be put into operation in the third quarter 2013 and two rest turbines a following year.DTCHK

HIGHWAY - Duc Long Gia Lai Group to upgrade National Highway No 14

On Sep 11, the southern bourse-listed Duc Long Gia Lai Group Joint Stock Co (coded DLG) would kick off the upgrading project of National Highway No 14, from Bridge 20 (Km 817) to Cay Chanh (Km 887), Dak Nong province at a total investment capital of about 1.4 trillion dong.

The project will be carried out under BOT method. The road has total length of 57 kilometres, road width of 21.6 metres and designed speed of 80 kilometres per hour, to be built under level 3 standards for delta road. Vietnam Bank for Industry and Trade (Vietinbank) - Gia Lai Branch has committed to fund credit for DLG in realising this project.

In addition, the group also plans to start rubber tree plantation of 6,000 hectares, exploiting 10 mines of construction materials and coloured metals, constructing Dong Nai hydropower plants No 6 & 6A with designed capacity of 250MW) and other traffic roads under BT, BOT methods in Dak Nong province.VIETSTOCK

RAILWAY - Government determined to pursue express railway project

The government has reiterated its intention to press ahead with a controversial big-ticket project to build the country's first express railway linking the two biggest cities, Hanoi and HCM City, but two priority stretches will be studied first.

"(Vietnam) cannot help having a second north-south (express) railway after the existing one," minister of Transport Ho Nghia Dung told reporters in Hanoi on Tuesday, days after news reports said the project had resumed though the National Assembly disapproved of it two months ago.

Dung said the project should start with the reservation of land for a dozen years later but when the government would forward the project to the legislature for approval remained unknown because it would take years to collect as sufficient data as needed.

Local media has in recent days reported that the ministry was considering developing the first two sections of the cross-country railway, with one connecting Hanoi and Vinh and the other linking HCM City and Nha Trang, instead of the whole line worth around $56 billion as originally proposed.

The government approved in principle a proposal on July 23 to allow the ministry and the Vietnam Railways Corporation to get technical assistance and grants from the Japanese government to conduct a feasibility study for the two said sections and that for a rail line between Hanoi and Noi Bai International Airport.

"This is a feasibility study and it will take three to four years to finish before it goes before the National Assembly," said the transport minister.

He went on to say that the government had found it necessary to study the project to make clear the points questioned by National Assembly duties during their meeting in Hanoi in June, including scale, time frame, efficiency and financial viability.

There is concern that once Vietnam receives Japanese grants to do the feasibility study, it will have no choice but to opt for Japanese contractors and technology suppliers. minister Dung, however, said, "We will reserve the right to choose technology and contractors."

But Japan is now Vietnam's largest bilateral aid donor and its aid normally goes to key social and economic infrastructure.VNNEWS

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POWER - Electricity market reform to be piloted next year

Vietnam would launch a pilot competitive market for electricity generation during the first six months of next year, deputy Trade and Industry minister Do Huu Hao revealed in Hanoi yesterday.

The preparation for the market was now "basically done," he told a workshop organised by the Electricity Regulatory Authority of Vietnam (ERAV).

It included market design, the way it would work and plans for its implementation.

The pilot market would provide a low-risk way to test market structure, its rules and procedures as well as identify and provide remedies for any deficiencies, the deputy minister said.

It would also allow participants to learn, practise and develop their skills for a competitive market

ERAV says the final market will start only when all generators can be paid in accordance with Vietnam Competitive Generation Market (VCGM) Rules and any deficiencies in those rules and procedures have been identified and remedied.

The gathering was used to introduce the VCGM's approved design; operation mechanism; market-based tariffs and implementation plan to industry representatives; international consultants and representatives of international organisations.

Cost-based model

The ERAV Electricity Market Unit director Pham Quang Huy said that after years of research, nine workshops and formal consultation with Electricity of Vietnam, PetroVietnam, the State-owned Lilama Corporation; the World Bank and the Asian Development Bank, the cost-based Gross Pool had been chosen as the market model for Vietnam.

The approval was embodied in Trade and Industry Ministry Decision 6713 of December 31, 2009 and its Circular 18 of May 10 this year, he said.

VCGM participants include entities competing in electricity generation and are: Power plants linked to the national grid with a capacity equal or higher than 30MW - excluding wind farms and geothermal plants, the Single Buyer - the Electricity Power Trading Company (EPTC); the Systems and Market Operator (SMO) - the National Load Dispatch Centre and service providers.

All the electricity generated by competing providers would be sold to the Single Buyer (EPTC), said marketing director Huy.

Their dispatch schedule would be based on their variable cost-based bids with the payment for the electricity made at either a contract or spot-market price.

ERAV's international consultant William Derbyshire told the workshop that the SMO would have primarily responsibility for collecting and managing market data.

Market monitoring and public data would be published weekly, monthly and yearly.

An independent auditor would make periodic checks of the SMO data and its compliance with VCGM rules.

ERAV would have responsibility for monitoring compliance with VCGM rules and penalties.

The penalties, as set in Decree 68/2010/ND - CP, include fines of up to VND40 million (US$2,100) as well as repair of the consequence and compensation for damage. INTELLASIA

FINANCE – BANKING - Vietnam banks race to maximise US dollar selling band

Just two days after the State Bank of Vietnam's decided to adjust up the dong/US dollar exchange rate by 2.1 percent, the US dollar sold by many commercial banks has officially skyrocketed to the ceiling price, while the average inter-bank rate stands still.

In the morning of August 19, many commercial banks has set the listed selling price in US dollar at 19,500 dong, dramatically maximising the allowed ceiling band of +/-3 percent based on the average inter-bank rate on the same day 18,932 dong. This ceiling took place at many members such as Eximbank, Asia Commercial Bank, DongA Bank, SeAbank, Saigon Commercial Bank and others.

Meanwhile, just very few banks that have offered lower US dollar rates included Vietcombank as this bank sold one dollar for only 19,460 dong, lower by 40 dong against other aforementioned members and this price was also offered by Sacombank.

According to Intellasia data, the purchase price of US dollars on August 19 also increased respectively, ranging from 19,400 to 19,430 dong per dollar against the previous day's about 19,100 dong.

Normally, the US dollar buying - selling price reflects a part of commercial bank's foreign currency status. And the simultaneous increase in both the US dollar purchasing and selling prices, especially the maximisation of the US dollar ceiling price, after the first day the new adjustment took effects, which has reflected more clearly on the shortage of their Forex status.

Regarding the significant price difference amongst bank members, a representative of a large size commercial bank that had sold out the US dollar for less than 19,500 dong, said that this might depend on the initiative of foreign currency resources of each bank member.

"Earlier, we forecast that the forex market might fluctuate strongly, so we decided to actively buy in more US dollars for forex reserves. On the other hand, our credit policies to support exports have shown much effectiveness as exporters are focusing on collecting sources of the greenback to sell to our bank. In addition, the growth of our remittance resources and large remittance market share has facilitated favourable conditions for us to buy in this source. Such advantages have helped us offer a lower dollar selling price," the representative said.

However, some sources are continuing to reflect that although the exchange rate has witnessed a strong growth, in fact there are circumstances where businesses must purchase at a higher listed US dollar price. On the other hand, the supply of the foreign currency is limited, so large creditors whose the selling price is considerably lower than many other smaller may find it difficult to keep up this move in the future.

"The foreign exchange rates suffer from many potential risks of sudden changes," Le Xuan Nghia, vice chair of Vietnam's National Financial Supervision Commission said. "There may be problems of foreign currency liquidity, and if the country isn't careful, it may have to cope with a shock of foreign currency liquidity."TBKT

COMPUTER /SOFTWARE - Hanoi announces software park urban area project
Hanoi Department of Architecture Planning officially introduced to public the detailed plan of Hanoi Software Part urban area of 1/500 and handed over to Long Bien Dist People's Committee and the project investor. Hanoi Electronic Corp (Hanel) is the main investor for this 413 hectare project to be sited in wards of Phuc Loi, Phuc Dong, Viet Hung and Gia Thuy, Long Bien Dist, Hanoi. In this project, the investor will focus on developing a modern urban area, combine with constructing a software park, in which 343 hectares will be used to construct the urban area including apartment buildings, green park, lake and other public facilities such as school, hospital and trade centre. Among the remaining 69 hectares, the investor will build the city's software park in an area of 32 hectares.INTELLASIA INDUSTROAL PRODUCTION - HCM City's industrial production value reaches 323tr dong HCM City's industrial production value gained over 323 trillion dong in first seven months of this year, contributing to a 13.6 percent rise over the same period last year, according to Hochiminh Industry and Trade Department. In only July, the value increased 3.8 percent over last month, rising nearly 17 percent year-on-year. At least 24 of the total 27 industrial sectors saw a rise against the same period last year, 12 ones contributed a sharp increase against the average one such as electric equipment, electric production, and delivery sectors. In first seven last months of this year, the sector of export software production obtained $500 million. As planned, the city's industry structure will get a sharp growth from now up to late 2011, said Nguyen Van Lai, director manager of the department.VNNEWS

INSURANCE - Insurance provider gains Jan-July profit of 38b dong

At the end of July, BIDV Insurance Co (BIC) reported gaining accumulative revenue of 413.95 billion dong, increasing by 54 percent against the same period of last year; and pre-tax profit of 38.24 billion dong, up 59 percent year-on-year.

In details, the company reported gaining revenue from insurance premium of 274.64 billion dong, up 62 percent over last year and profit from this business activity of 5 billion dong.

Up to late July, BIC's total asset value was estimated at 3.533 trillion dong, surging by 195 percent in comparison with that of December 31, 2009, and up 176 percent year-on-year. The ownership capital was posted at 548.27 billion dong, up 18 percent against the same period of last year, and standby fund of 203.61 billion dong, an year-on-year increase of 39 percent.

On August 5, Hanoi Stock Exchange (HNX) held the session to auction BIC shares with the average share price of 11,225 dong per share. At present, the company was preparing for organising the first shareholders meeting in early Sep 2010, and making auditing and capitalisation to transform into a joint stock company from October 1, 2010 and officially list shares in Q1 of 2011.VNNEWS

RESOURCES - PetroVietnam: Signed oil cooperation MoU with TNK-BP

State-run Vietnam Oil and Gas Group, or PetroVietnam, said Thursday it has signed a memorandum of understanding on oil and gas cooperation with Russia's TNK-BP.

PetroVietnam said in a statement the pact will enable the two companies to study the possibility of setting up an exploration and production joint venture in Russia.

TNK-BP will also study the options for expanding Vietnam's Dung Quat oil refinery, the company said.

State media said earlier this month deputy prime minister Hoang Trung Hai has approved a plan to raise the refinery's capacity to 10 million metric tonnes of crude oil a year, or 200,800 barrels a day, from the current of 6.5 million tonnes.

The company also said in the statement that TNK-BP will analyse the possibility of supplying crude oil to PetroVietnam, or its trading arm, PV Oil.ATM

POWER - Malaysian group wishes to invest $1.5b in thermo power industry

The Malaysia-based Janakuasa Holdings Group has entered the final phase of preparation progress for conducting investment project in Duyen Hai 2 thermo power plant, Quang Ninh province.

Ti Chee Liang, chair cum executive manager of Janakuasa Holdings has revealed that his group started negotiating about signing the electricity purchasing contract and BOT in mid-August. If there are no problems, the foreign investor will have completed all the negotiations by Q1 of 2011 and begin the construction works after that.

Duyen Hai 2 thermo power plant was one of the projects in Duyen Hai thermo power centre in Tra Vinh. Janakuasa Holdings planned to invest $1.5 billion in this 1,200 MW thermo power plant. The group expected to continue expanding business in Vietnam's energy markets via the success of this thermo power plant.VNS

Rotor installment for first turbine of Son La hydropower plant

The rotor for first turbine of Son La hydropower plant project is supposed to be officially installed on August 20, marking the important milestone for preparing to put into operation the first turbine of this hydropower plant by the end of 2010.

The rotor of Son La thermo power plant has total weight of 1,000 tonnes, with diameter of 15.8 metres and total height of 3.2 metres. It's the heaviest part among the equipment to be installed in the hydropower plant. Before installing the rotor, the contractors have already finished installing other equipment such as turbines, stato, lifting system etc.

After completing the rotor installation process for Son La hydropower plant, the contractors will start trial running for the supporting system in November, so as to start operation of the first turbine of Son La hydropower plant on December 25, 2010 to help solve the power shortage problems in dry season of 2011.

RESOURCES – MINING - Newmont considers IPO for 10pct of Indonesia unit
Newmont Mining Corp (NEM.N) is considering an initial public offering (IPO) for a 10 percent stake in its Indonesia unit PT Newmont Nusa Tenggara, and will decide at a shareholder meeting on Thursday, a shareholder document seen by Reuters showed. "We will hold an extraordinary shareholders meeting this week to decide an IPO plan to broaden PTNNT's financing options," said Rubi Poernomo, a spokesman for Newmont Indonesia.REUTERS