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BUSINESS IN BRIEF 28/2

Exports of handicraft products would likely reach US$1.8 billion this year, up 12 per cent over last year, said deputy chairman of the Viet Nam Handicraft Exporters Association (Vietcraft) Le Ba Ngoc.

The Government has listed handicrafts as one of the country's export staples during the 2011-15 period, leading Ngoc to believe the industry would easily meet the target.

Products placed on the list of export staples benefit from the Government support to boost exports.

Handicrafts have been prioritised as key export items for the next five years because they have made significant contributions to increasing incomes and reducing poverty in rural areas.

According to the Ministry of Agriculture and Rural Development, more than 1,500 handicraft villages nationwide employ roughly 70,000 workers. Income earned by craftsmen triples or quadruples that of farmers.

Viet Nam had high potential for handicrafts exports in comparison with other regional countries due to its natural resources and in fact, Viet Nam had one of the region's highest numbers of craft villages, Ngoc said.

With these advantages, Viet Nam is one of the largest exporters of fine art and handicraft items in Asia, with an annual average export growth of 13 per cent in recent years.

Vietnamese fine art and handicraft products are currently being exported to 163 countries and territories. Europe, ASEAN, the US, Australia, China, India, Malaysia, Germany and Ukraine are some of the key export markets for Vietnamese handicraft exports such as handbags, umbrellas, hats, bamboo, porcelain, rattan, pottery and wooden goods.

To boost exports, Vietcraft has also planned to help domestic handicraft exporters gain better access to these markets this year by participating in international fairs and expos.

In April, Vietcraft would hold one of the largest home decor and gift fairs in Southeast Asia, LifeStyle Viet Nam 2011. The event would feature more than 1,000 booths from Vietnamese and overseas exhibitors and was expected to attract roughly 2,000 importers, Ngoc said.

However, he admitted the industry still faced a number of difficulties such as a limited number of designs, poor corporate governance and small handicraft firms that might not have the capacity to win large contracts.

To help the industry develop more effectively, Vietcraft would set up a design centre to develop handicraft products, Ngoc said.

Besides offering credit at preferential interest rates to help craft villages, especially in production using natural materials, the agriculture ministry has also helped craftsmen upgrade their skills through training.

France invests more in Vietnamese industries

Vietnam agencies have recently worked with the Electricity of France (EDF) on a contract to build the O Mon thermal power station in the Mekong Delta city of Can Tho.

A delegation of the Ministry of Industry and Trade and the Ministry of Planning and Investment, headed by MPI Minister Vo Hong Phuc visited France from February 16-18 to make the final preparations for signing the contract.

The delegation met with Economics, Finance and Industry Minister Christiane Lagarde and the State Secretary for Foreign Trade, Pierre Lellouche.

Minister Phuc confirmed that the Vietnamese Government’s selection of EDF as investor for the project was based on the groups’ capacity and abilities, which are recognised in the world market, as well as its experience in building the Phu My 2.2 thermal power station in Vietnam .

He encouraged EDF to continue to invest in thermal power projects in the Southeast Asian country, particularly coal fueled ones.

He told the French officials that the Vietnamese Government will create the best possible conditions for negotiations between Vietnam Airlines and Airbus on the purchasing of A380 aircraft. He also hailed French enterprises’ proposals to get involved in building nuclear power plants in Vietnam and said he hoped that France would soon be involved in Vietnam ’s nuclear power programme.

The French officials praised Vietnam ’s decision on choosing EDF, describing it as a major contribution to boosting cooperation between the two countries.

State Secretary Lellouche said that France targeted increasing its economic presence in Vietnam and boosting trade between the two countries.

They also said that France had helped with tax problems from the EU on Vietnamese goods being sold in the EU market and that it was an important time for France to regain its market share and influence in the Vietnamese market as economic cooperation between the two countries remains at a modest level.

During their meetings, French assistance to equip the Can Tho general hospital was also discussed, as it will be built in the near future.

Fertiliser industry aims to curb speculation

Efforts to stabilise fertiliser prices and avoid speculation will ensure demand is met for the winter-spring crop, the Fertiliser Association of Vietnam said.

"The association will take all necessary steps to avoid price volatility and speculation as it has occurred in previous years," association chairman Nguyen Hac Thuy said.

The nation's stockpile of fertiliser was more than 750,000 tonnes, he said.

"The country needs to import almost 200,000 tonnes of fertiliser to meet the demand."

The association has also proposed that the government encourage companies to increase productivity and to temporarily stop exporting fertiliser. The association urged the State Bank of Vietnam to increase the supply of foreign currency to import fertiliser.

The association said now was an important period for the winter-spring crop. In the Mekong Delta about 1.5 million hectares of paddy had been harvested. Farmers needed fertiliser to plant another 500,000 hectares which decided the productivity of the crop.

Meanwhile, the demand in the northern region is increasing. Although committing to stabilise the price, the association admitted there were many challenges to be faced. Since the beginning of the year, the price of fertiliser had kept increasing due to high price on the world market and dong devaluation, Thuy said.

"It is a big challenge for the domestic fertiliser industry to stabilise the price at such a volatile time."

For example, the price of urea fertiliser had jumped by 7.35 per cent in Can Tho city in the Mekong Delta over the last month, 5 per cent in central Danang and 4.1 per cent in HCM City.

Another challenge originated in China, the biggest urea exporter in the world.

"China increased the export tax on its urea from 10 per cent to 100 per cent," Thuy said.

Vietnam imports up to half of its urea requirements, 70 perc ent of its diammonium phostphate fertiliser and 100 per cent of potassium and SA fertiliser.

Tax exemptions for bamboo, rattan items

Growers of rattan and bamboo for handicraft production would be charged lower land use taxes beginning April 5, under a recent Prime Minister Decision.

Following Decision 11/2011/QD-TTg, growers of rattan and bamboo products for daily use will be free from paying a land use tax. Those growing bamboo and rattan for other purposes will be subject to a 10 per cent resource tax.

New growers will receive 100 per cent support to buy rattan and bamboo for the first time from provincial People's committees.

Enterprises will also benefit from the decision, as they will not be charged import tax on an approved list of specialised machines and equipment used to produce rattan and bamboo products.

Interested enterprises are also eligible for the National Foundation for Science and Technology Developments' sponsorship equal to 50 per cent of project investment to research new technology and 30 per cent to implement the new project upon approval from authorities.

However, as most enterprises are small or medium-sized enterprises, managers said they would not benefit greatly from the new Decision.

"Our products are made mostly by hand. We do not need imported machines," said Nguyen Ba Thuc, manager of Ba Thuc, a company that produces woven rattan and bamboo products.

Tran Thu Hien, manager of Hien Luong company was of similar mind since it would be unrealistic for her company to research ideas for product improvement.

Nevertheless, Thuc and Hien agreed that the Decision would help develop rattan and bamboo production.

Rattan and bamboo are considered to have significant commercial potential for Viet Nam. They now account for about 10.5 per cent of the country's total forest area.

About 723 of the country's 2,017 total craft villages are involved in producing rattan and bamboo products, making it the largest handicraft category.

Fake feed producers face fines

Counterfeit animal feed producers will face a fine of VND35 million ($1,700) as of March 15 this year under a recent governmental decree.

Additionally, fake producers will have their products withdrawn from sale and destroyed.

Under the new regulation, those producing livestock feed without business licences or engaged in the import and trade of livestock feed not permitted for production and circulation in Vietnam will be liable for a fine of between VND30-40 million ($1,500-2,000).

A fine of between VND35-40 million will be applied to animal feed processing factories that continue to produce animal feed while under suspension by authorised agencies.

Animal feed trading companies found to have no shops, signs or clear trading addresses will be subjected to a fine of between VND1-2 million ($50-100).

This is the first time specific disciplinary regulations related to livestock feed production and trade has been issued, said Nguyen Van Thanh, head of inspection office of the Ministry of Agriculture and Rural Development's Department of Animal Husbandry.

"The regulation is expected to help prevent the production and trade of low-quality animal feed, as at present inspectors are using regulations only related to violations of agriculture and rural development rules," he said.

Trade fair to promote ties with Japan

“Opportunities for Vietnam and Japan businesses” trade exchange-exposition opened in Ho Chi Minh City on February 22, drawing 70 leading enterprises from the world’s third largest economy.

The Japanese businesses, covering a variety of industries, from 3D programming to pork processing, aimed to conduct market surveys and seek partners.

Some Japanese businesses have set up their own pavilions to showcase their products.

Vo Tan Thanh, Director of the Vietnam Chamber of Commerce and Industry in HCM City (VCCI-HCM), from the organising board, said Japan is always a major market and has emerged as one of five strategic partners of Vietnam.

“At the event, Vietnamese businesses will have a chance to see with their own eyes products made by Japan, exchange information, set up partnership and look for business opportunities,” Thanh said.

Hiroshi Shimada from the TI-DA Square Co. Ltd., which is operating a project on apparels, cosmetics and functional foods in Vietnam, said he has been looking for Vietnamese partners to build a local distribution network.

Do Hoang Trung from the IDEA Company, which has multi-year experiences in working with Japanese businesses, said Japanese businesses’ interest in the Vietnamese market has been increasing these years, especially in hi-tech industry, mechanical engineering and cosmetics.

“An increasing number of Japanese businesses have come to Vietnam to conduct market surveys, promote trademarks and look for partners,” he added.

Local brand names help sell cheap Chinese phones

Chinese-made mobile phone handsets with Vietnamese brand names have overcome consumer doubts about poor quality and gained a toehold on the lower end of the domestic market – with the past two years witnessing the appearance of affordable mobile phones with such brands as Hanel, Q-Mobile, F-mobile, WellcoM and MobiStar.

Appealing to a low-end market segment, these brands still had enormous potential to develop, said CMC Distribution marketing director Ho Quoc Hue.

CMC also put its Blue Phone mobile phone onto the market early this year with the ambition to become a leading Vietnamese mobile phone brand in the future.

"Customers are now willing to use made-in-Viet Nam mobile phones if they are offered at reasonable prices and have good quality," Hue said.

The successful debuts of new mobile phone brands had demonstrated the increasing efforts of domestic companies to better meet domestic demand, said An Binh Telecommunication (ABTel) director Nguyen Quang Minh.

Q-Mobile, developed by ABTel last year, already accounts for about 20 per cent of all mobile phones sold on the domestic market, ranking second in terms of the domestic market share behind market leader Nokia, Minh asserted.

"We target to surpass Nokia and acquire 50 per cent of domestic market share by year's end," he said.

Although a sales success, many of these Vietnamese brands continue to have a bad reputation with the public, which view the handsets as having "Vietnamese covers and Chinese hearts". Many of the phones are indeed Chinese imports bearing a Vietnamese brand.

But Minh doesn't see this as a problem, arguing that many foreign companies with famous brand names only focused on research and development or design, while outsourcing production to other partners, Minh said. CMC admits that it does not manufacture Blue Phone models in Viet Nam but outsources production to China. However, Minh said proprietary technology and trademark development often accounted for 80 per cent of a product's value, while production accounted for just 20 per cent.

"A completed mobile phone requires many components and we cannot produce them all by ourselves," said Hue. "The most important is that you choose the right producers to ensure the quality of your products."

What we were striving for was that Vietnamese-branded mobile phones would became so cheap that even the taxi motorbike driver could afford one, said a representative from another Vietnamese mobile brand.

Vietnamese mobile phones could offer major price advantages, while offering applications similar to more expensive smartphones which allowed people to play games or read newspapers online, he said.

Itochu Group to bite into market

Japan-based Itochu Group announced it would inject around $630,000 into Vietnam-based Phu Thai Group’s food distribution chain to expand its footprint in the country.

Phu Thai Group’s general director and chairman Pham Dinh Doan said Itochu Group would contribute 15 per cent stake, or around $630,000, on establishing Phu Thai Food which has an estimated total investment of $4.2 million.

Doan said there were two reasons for which Itochu's investment into Phu Thai was not big.

First,Phu Thai Group’s leadership wanted to hold dominant shares in joint venture deals with foreign partners. Second, the 15 per cent stake was just initial investment which would be expanded later based on actual business conditions.

Itochu and Phu Thai Group reportedly clinched a memorandum of understanding for cooperation in April, 2008.

According to Itochu’s Food Products Marketing and Distribution Division chief operating officer Shuichi Hoshi, joining hands with Vietnamese firms was the shortest way to penetrate the country’s potential distribution market which Itochu considered its strategic market.

Itochu, however, has only established a convenience store chain in Ho Chi Minh City in cooperation with Phu Thai Group and Japan-based Family Mart retailer. In 2011, the involved parties intend to expand Family Mart stores from 4 to 20.

Reality shows that investing into Vietnam’s food distribution faced a number of challenges. “Vietnamese consumers as well as producers do not pay due attention to food sanitation standards. Besides, the legal system relevant to this field is unclear and lacking sanction measures,” Doan said.

Doan also noted that Phu Thai incurred losses in all of safe food distribution ventures it did before.

Therefore, Doan said capitalising on Itochu Group’s strong brand value, experience and technology in developing international standard food distribution network alone might be insufficient to ensure success of Itochu-Phu Thai food distribution network venture in Vietnam.

“Alongside transferring Vietnam quality food distribution technologies, Itochu was proposed by Phu Thai leadership to work with relevant Vietnamese agencies to compile a set of food quality sanitation standards based on Japan experiences,” Doan said.

He said the group would also step up efforts with an aim to ameliorating general awareness about food sanitation in Vietnam with support from producers and retailers.