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BUSINESS IN BRIEF 29/9

Firms forced to leave inner Ho Chi Minh City are facing many difficulties to resume operations.

Wood furniture maker Thai Ngan Production Trading has removed one of its three production factories in District 12’s Tan Thoi Nhat ward to the city’s suburbs, but cannot operate its new factory as it has yet to get an environmental certificate, said director Nguyen Thi Kim Loan.

Loan said every six months the firm must pen a report assessing impacts of its production into the surrounding area, causing a headache for  the firm’s leadership.

Ho Chi Minh City Handicraft and Wood Industry Association (HAWA) deputy chairman Dang Quoc Hung said new businesses operating in handicraft and wooden furniture manufacturing were obliged to author environmental impact assessment reports.

The Ministry of Natural Resources and Environment reportedly gave the nod to the proposal that small firms making wood products only have to undertake to take care of the environment and be certified by local competent bodies instead of making environmental impact assessment reports.

Reality shows that it is not easy for small- and medium-sized enterprises to spend over VND60 million ($2,900) into making such reports to get an environmental licence before they build new factories.

Parallel to procedural issues, financial difficulties are impeding the removal progress.

Shoe sole-maker Minh Dieu Production Trading was also told to leave the city’s Nguyen Van Quy road in District 7.

Six years ago, the firm acquired a land plot in Dong Nai province’s Sonadezi Industrial Park as the leadership thought it would be convenient for the firm to head to the new location when construction of beltway 3 and the Ho Chi Minh City-Long Thanh-Dau Giay expressway was finalised.

Company general director Le Quang Doan said the firm had changed the function of its land area in Nguyen Van Quy road into a mixed-use complex.

The dormant property market had made sourcing additional incomes from land function transfers plummet.

Besides,  construction of relevant roads is still underway, which will drive the firm’s transport expenses once removed.

Thanh Cong Textile Garment Joint Stock Company (TCM) is yet to remove factories to the city’s suburbs though its existing land area got the decision to be turned into a mixed-use complex.

A company representative said though the firm had acquired two land plots in Tay Ninh and Long An provinces to set up new factories it would be hard for it to source sufficient workers to start operations in the new locations.

Long Son complex’s financial difficulty

The $4.5 billion Long Son petrochemical complex wants new partners to address its financial difficulties.

The plea was voiced by Siam Cement Group (SCG) chairman Kan Trakulhoon on the sidelines of Thailand Sustainable Development Conference 2011 in Bangkok on September 19. SCG is the Ba Ria-Vung Tau-based petrochemical complex’s largest stakeholder (71 per cent).

Kan said SCG planned to source capital from the business community and is working with some partners, including those from Vietnam such as PetroVietnam, on the issue.

“We need finance and support from the banking sector first. Positive changes may appear early next year,” said Kan.

He confirmed scores of foreign partners wanted to jump into the project.

Long Son petrochemical complex is worth $4.5 billion in total investment capital.

A PetroVietnam executive told VnExpress.net that a 29 per cent stake in the Long Son complex was seized by Vietnamese partners with PetroVietnam holding 18 per cent and Vinachem 11 per cent.

Construction of the 400 hectare complex kicked-off in 2008 in Vung Tau city. Once online, the project will help the country save $1 billion each year on importing raw materials for local plastic manufacturing industry.

The project’s initial capital was set at $3.7 billion, but later scaled up to over $4.5 billion.

SCG currently operates 13 subsidiaries in Vietnam focusing on petrochemical, paper, cement, building materials and distribution fields. The group’s total asset value in Vietnam reportedly exceeds $382.6 million.

Fluctuating EU, US markets drop textile, garment export earnings  

The textile and garment industry in Vietnam had targeted its export earnings at US$13.5 – 14 billion this year, however, the economic downturn in the US and EU countries may drop the figure to $13.1 billion.  

During the first eight months of the year, Vietnamese textiles and garments made a breakthrough in their export turnover, crossing $1.4 billion a month.  With this in mind, the Vietnam Textile & Apparel Association (Vitas) set its annual target at $13.5 – 14 billion.

Unexpectedly, the situation worsened in September and export orders were reduced substantially. EU and the US, the two main markets for Vietnamese textiles and garments, have reduced their orders by 20 percent in spite of an agreement early this year.

Exporters say that exports to Japan have improved because Japanese importers have taken advantage of tax incentives in the trade agreement between the two countries, with Japan now diverting more orders from China to Vietnam.

With the unexpected changes in the EU and the US markets, Vitas says that this sector can only reach a target of $13.1 billion in 2011.

Meanwhile, even though enterprises face difficulties, they still have to pay for production costs, health and social insurance for laborers as well as workers basic salary, which will increase from VND1.35 million to VND2 million per month ($95) from October 2012.

In fact, companies have raised the basic salary to attract more laborers. The increased expense will be an added burden on these companies who employ thousands of workers.

Textile and garment companies hope that the government will adopt a preferential policy for this sector to reduce their burden and help them to further develop.

Australian Business Awards to come out November  

This year's Annual Business Awards will be held in November to recognize the success of Australian and Vietnamese organizations having made outstanding contributions to the development of the business environment in Vietnam, the Australian Chamber of Commerce in Vietnam announced September 21.

AusCham will host the event at the Reunification Palace on November 10 in Ho Chi Minh City. The awards are sponsored by ANZ Bank (Vietnam), the Australian Trade Commission, Origin Energy Company, RMIT University Vietnam, Interflour Vietnam and the Australian Consulate General in HCMC.

Each award category has clearly defined criteria enabling applicants to select their relevant business category. All applicants must have AusCham membership and will be required to show their business links to Australia.

The event is an opportunity to recognize and reward outstanding local organizations as well as foreign-invested enterprises.

The Award categories this year are:

Overall Business Excellence Award will be made to an organization that has achieved the most outstanding performance in their field in the past year.

Hospitality Award will be made to an organization that has a made a substantial contribution in promoting hospitality or tourism in Vietnam in the past year.

Innovation Award will be made to an organization that has demonstrated advancement in their industry in the last year i.e product, process.

Corporate Social Responsibility Award will be made to an organization that has shown excellence in supporting or initiating sustainable projects which eliminate economic, social or environmental issues within Vietnam in the past year.

Professional Services Award will be made to an organization that has shown excellence in the professional services sector in the past year.

Alumni Award will be made to an individual who has graduated from any Australian higher education institution whether in Vietnam or Australia, not fewer than 5 years prior, who has shown excellence in any given industry or occupation.

“Developing successful Australian businesses in Vietnam is integral to strengthening the relationship between our two countries. It is important we recognize those who have made outstanding contributions, not only in their field, but to this country’s growing economy,” AusCham national president Wayne Bannon said in the announcement.

Applications close on October 7.  Winners will be announced at the Australian Business Awards and Gala Dinner on November 10. Tickets are US$120 each. For further information, please contact events@auschamvn.org  or visit www.auschamvn.org
 
EU keeps its eye on Viet Nam shoemakers
 
Exporters of leather-upper shoes face new obstacles to accessing the European market, ever though the EU lifted its anti-dumping tariff on April 1, said Viet Nam Leather and Footwear Association (Lefaso) general secretary Nguyen Thi Tong at a workshop held in Ha Noi on Tuesday.

The end of the 10-per-cent tariff, which had been imposed for four years, promised to make Vietnamese-made shoes more comptetitive with rival producers like India, Bangladesh, Indonesia, Thailand and Cambodia, which had not been slapped with anti-dumping tariffs and may have even enjoyed tariff preferences, Tong said.

Nevertheless, the EU has announced a programme under which it will continue to monitor leather-upper shoes exported to the EU from Viet Nam for one year, according to a representative of the Multilateral Trade Assistance Project (MUTRAP III).

If the monitors find that the quantity of shoes imported into the EU from Viet Nam has increased a great deal while prices have decreased, the EU might view it as evidence of "continuation or repetition of dumping" by Vietnamese exporters and would re-impose the tariff without any further investigation.

Therefore, exporters should report to Lefaso and the Viet Nam Competition Authority (VCA) to avoid the reimposition of anti-dumping duties, said Vu Ba Phu, deputy director of Viet Nam Competition Authority (VCA) under the Ministry of Industry and Trade. Reports should include the quantity and value of products exported to the EU and reflect reasonable increases in monthly export value, Phu said.

Exporters should also seek contracts to produce high-quality, high-value products rather than target a massive increase in export volume to the EU, he said.

They should focus on building trademarks and diversifying designs to meet market demand, and they should familiarise themselves with regulations and market developments in the EU to avoid sudden spurts in exports to that market, experts said at the workshop.

Other dangers remained, Phu said, since the EU has not yet lifted the 16.5-per-cent anti-dumping duty imposed on leather-upper shoes from China. This large gap in tariffs could result in the illegal transportation of Chinese shoes to Viet Nam which would then be exported to the EU under the lower tariffs applied to shoes of Vietnamese origin.

According to Phu, there has been a shift of contracts from Chinese to Vietnamese companies because of higher production costs in China, a promising sign for local businesses.

But he cautioned them to remain alert to trade barriers.

He said the number of investigations into emerging markets' adherence to WTO regulations would increase.

He warned that the EU would focus more on anti-dumping and anti-subsidy investigations and would impose more short-term anti-dumping and anti-subsidies policies.

Viet Nam's footwear exports grew 20 per cent overall in the first eight months of this year, reaching a value of US$4.2 billion, according to Lefaso. Export value to the EU reached a record high of $1.9 billion during the period. The US market followed, with export value of $1.2 billion.

The sector had exported 495 million pairs of shoes and 115 million leather items the last eight months of the year, Tong said.

Exports to the EU accounted for 45 per cent of the total, while exports to the US and Japan were 29.3 per cent and 4.1 per cent, respectively.

The exports resulted in a stable income for 685,000 staff and workers employed in registered businesses.

However, she noted that certain challenges lay ahead, including a labour shortage and increases in production costs because of inflationary pressure and dependence on imported materials.

The industry experts will speak at a conference in HCM City today, organised by the Viet Nam Competiveness Authority, MUTRAP III and LEFASO.

Real-estate firms must look to private sector
 
The construction sector needs to intensify technological application and attract investment from non-State-owned sources to better satisfy the domestic demand, according to Deputy Prime Minister Hoang Trung Hai.

Discussing targets set for 2011-15 with the Ministry of Contruction, Hai pointed out that weaknesses in urban area management, the low quality of urban areas, unstable development of the real estate market and inconsistency in construction regulations needed to be addressed.

In the next five years, Hai stressed that planning remained one step ahead of population growth and the increasing demand for accommodation in rural and urban areas.

Suitable regulations were also needed to mobilise the maximum amount of social resources for infrastructure implementation, he added.

Minister of Construction Nguyen Dinh Dung said that during the next five years, the sector would focus on improving the quality of construction material production industries and construction equipment manufacturing while expanding construction markets abroad.

At the same time, it would make all efforts to develop urban infrastructure systems, including transportation networks as well as water supply and solid waste treatment facilities.

The ministry would continue its rural planning programmes as scheduled, which would be a fulcra for socio-economic development and narrowing the gap between rural and urban areas.

Plans are currently underway for the ministry to actively co-operate with relevant authorities in inspecting people's abidance to legal documents of investment, housing development and real estate business to timely detect speculation and price distortion activities.

The construction sector has done much to cut public investment, save expenditure, boost social housing programmes and stabilise the materials market, Dung said.

Currently, the average house size per capita was 18.3 sq.m, while 77 per cent of urban residents had access to clean water, he added.

To date, the production value of ministerial enterprises has been estimated to have reached VND100 trillion (US$4.7 billion), a rise of 10.3 per cent over the same period last year.

Handicrafts under pressure

A shortage of workers, skyrocketing costs and harsher competition from foreign rivals, especially China and India, are handicapping Viet Nam's handicrafts industry, Ha Noi Department of Industry and Trade deputy director Dao Thu Vinh told a press conference held in the capital on Tuesday.

This is despite a steady growth rate of 11 to 15 per cent in business in the last decade, reflected in exports which have jumped from US$200 million in 2000 to more than US$1.5 billion last year.

Vietnamese handicrafts are now shipped to 120 countries and territories with the US, Russia, Japan, South Korea and Taiwan being the biggest customers.

"However, out-of-date technology, low production capacity and weak designs have become a problem," she said.

However, she said in recent years, the department had helped handicraft makers design unique handicraft products, and organised overseas business trips for firms to seek new importers.

From November 8 to 12, the department will join Ha Noi Industrial Promotion and Development Consultancy Centre and Bac Ha Trade and Media Group in running the Ha Noi Craft Show 2011.

"Ha Noi's first handicrafts exhibition will be a good chance for producers in the north to reach international markets," Vinh said.

The show is expected to attract 300 businesses, showcasing pottery and porcelain, wooden and bamboo-made handicrafts as well as silk.

The management board will also offer new handicraft designs for firms interested, said Le Ba Ngoc, vice chairman of the Viet Nam Handicraft Exporters Association.

On the sidelines of the exhibition, experts from Spain and France will advise on ways to produce better designs.

A conference will also be held on opportunities available in the United States and northern Europe.

There are about 1,400 craft villages across the nation. They provide jobs for 70,000 workers and produce 300 different products, including those made from bamboo, pottery, and precious stones.

Building machinery sales plummet
 
The trading activities in domestic construction machinery have been strongly effected by public investment cutbacks.

A report from the Ministry of Industry and Trade said that since the beginning of this year, imports of construction machinery have significantly tumbled.

The ministry reported the volume of imported construction machinery in August was only 900 units, worth about US$27 million.

The figures were down by 57.9 per cent in volume and 38.24 per cent in value over the same month last year.

This was the third consecutive month where both import volume and value decreased, with the figure for August being the lowest of 2011.

In the first eight months, nearly 11,650 units were sent to the country, worth more than $318 million, a year-on-year drop by 31.2 per cent in volume and 18.6 per cent in value.

Regarding the domestic market, traders also confirmed a downturn in sales.

"There has not been an official report. However, according to our calculations, the sales may currently decrease between 15-20 per cent over late last year ," said IT staff Nguyen Huy Cong who works for a website supplying construction equipment.

"Currently the sales are slow again," Cong said.

He explained that the construction machinery market developed like the real estate market.

"When the Government tightens public investments, it affects the real estate market. The construction machinery market is in the same situation," he said.

This trend is predicted to continue to the final months of the year as the Government's policies in controlling inflation persist.

Until now, 90 per cent of the construction machinery imported to the country is second hand, mainly from Japan, South Korea, China, the US and Thailand.

As of this time, Viet Nam has about 645 companies which have imported construction machinery.

Viet Nam Steel finally begins equitisation

State-owned Viet Nam Steel Corporation will reorganise as a joint stock company next month, chairman Mai Van Tinh announced on Tuesday, vowing no more delays to its equitisation process.

"We've been behind schedule for the past nine months, so the first fiscal year under the joint stock model will begin on October 1 of this year," said Tinh.

The State currently holds nearly 94 per cent of the corporation's charter capital of VND6.8 trillion (US$328 million). As the company equitises, 39.1 million shares, representing a 5.76-per-cent stake, will be sold to investors. Another 29 per cent will be offered to foreign strategic investors, leaving the State with a controlling interest of 65 per cent.

"We will finish finding foreign strategic partners in the fourth quarter of next year," said General Director Le Phu Hung, noting that Viet Nam Steel would be offering the maximum interest to foreigners allowed by law.

Viet Nam Steel has already received feelers from potential Russian investors such as Novolipetsk Steel Corporation and Evraz Group SA, Hung said.

"Next month, we will learn more about the interest of some major Japanese steelmakers, including Nipon Steel, JSE, Tokyo Steel, Kobe Steel, Mitsubishi and Marubeni-Itochu," he added.

Upon equitising, Viet Nam Steel expects to increase its charter capital to VND8 trillion ($386.5 million). Expecting earnings this year of VND14 trillion ($676.3 million), it targets to pay a dividend of 7 per cent on this year's profits and dividends of 9-11 per cent over the next two years.

New industrial zone starts

The DNN-Tan Phu Investment Joint Stock Company has started construction of an industrial zone of the same name in the southern province of Long An's Duc Hoa District.

The project, which will cost VND510 billion (US$24.5 million) covers an area of 262ha. The zone is about 40km from Tan Son Nhat airport and City's centre districts.

The first phase of the project will be completed late next year.

Refinery seeks new investor

Can Tho Oil Refinery Company has asked the Department of Planning and Investment for permission to co-operate with Mekong Petrochemical Co in the building of the Can Tho Refinery.

If approved, Mekong Petrochemical Co will invest 70 per cent of the capital for the project. Investment capital of the project will be reduced from US$538 million to $350 million because the refinery will now cover only an area of 50ha, 200ha less than the initial plan.

Marina opens in Phu Quoc

The Phu Quoc Marina Company has opened the first stage of its Duong Dong-Phu Quoc marina on Phu Quoc Island in the Cuu Long (Mekong) Delta province of Kien Giang.

The marina includes a terminal, coffee bar, five-star floating restaurant and a five-star hotel. Total first-stage investment amounts to VND100 billion (US$4.8 million).

The marina can receive and dock about 50 high-class motor or sailing boats. Its capacity will be expanded to 100 vessels.

Concrete vessel launched

Bach Dang Shipbuilding Industry Corporation in Hai Phong on Tuesday launched a 14,600-tonne concrete vessel built for Nghi Son Cement Corporation.

The vessel is 139.8m long, 25m wide, 11m high. It has a speed of 14.5 nautical miles per hour.

Its technical system was designed by Japan's AZ Company.

Wholesale centre opens

Metro Cash&Carry Viet Nam opened another wholesale centre yesterday in Vinh City, Central Nghe An Province.

The centre, with total investment of US$13.3 million, has a sales area of 5.600sq.m. It will provide buyers with more than 25,000 food and non-food products from domestic and foreign manufactures.

This is the fourteenth wholesale centre opened by Metro Cash&Carry in Viet Nam.

Delta provinces on show

An exhibition to showcase the Cuu Long (Mekong) Delta region's development achievements in the last decade will be held in Can Tho next April, the Southwestern Region Steering Committee has said.

It will highlight the region's successes in the economic, cultural, educational, healthcare, defence, and religious spheres.

The event will feature seminars to promote investment in the delta and co-operation for sustainable development of agriculture, art shows, and traditional cuisines from the south.

Hanoi FDI closes in on $1 bln

Hanoi has attracted foreign direct investment worth an estimated US$999.6 million in the year to date, three times up year-on-year, the city General Statistics Office reported.

It includes 190 new projects with an investment of $493.5 million.

One of them is the Yen So wastewater treatment project worth $322 million by Malaysia’s Gamuda Land Vietnam LLC.

Vietnammobile telecom and GTEL telecom pumped an additional $385 million and $117 million into their operations.

Full-year FDI is expected to rise by 75.5 percent to $1.5 billion.

The office also said the city economy grew by 9.4 percent in the first nine months.

Industry and construction achieved the highest growth of 10.1 percent, followed by services sector, which rose by 9.3 percent.

Agriculture-forestry-seafood saw a 4.3 percent rise.

Former US treasury secretary to visit Vietnam

The Hanoi-based Link World Unlimited International Co has invited a former US treasury secretary to vist Vietnam to meet government officials and businesses in November at a hefty fee of US$1 million.

Dr John W. Snow, 71, was Secretary of the Treasury from February 2003 to June 2006, and currently serves as non-executive chairman of Cerberus Capital Management LP, a private investment fund, and president of JWS Associates, a consulting firm.

Anna Nguyen, Link World’s CEO, said Snow would meet with Vietnamese entrepreneurs seeking investment from Cerberus and government officials to discuss about public policy and economic stabilization and speak at the College of Economics, Vietnam National University, Hanoi.

He will also share his experiences in building global brands at a meeting with businesses in Hanoi and Ho Chi Minh City. Admission will cost $400 per person.

Ministries argue over fuel price management

The Ministry of Industry and Trade has blamed the Ministry of Finance for exacerbating oil distributors’ losses by first cutting fuel prices and then refusing to hike them, but the latter has rejected this saying distributors are still making profits.

At a conference on fuel price management held in Hanoi Tuesday, Nguyen Loc An, deputy head of the Ministry of Industry and Trade’s Domestic Market Department, criticized the finance ministry’s decision to cut retail prices in late August.

It had earlier ignored his ministry’s recommendation to cut fuel prices on July 8 when global prices slumped but “imposed the cut on August 26 when wholesalers were making losses. This is incomprehensible.”

But Minister of Finance Vuong Dinh Hue rejected it out of hand: the wholesalers were making profits at the time of the cut; the chairman of Petrolimex, whom he had consulted before announcing the decision, had given the green light; and the price cuts were completely in accordance with regulations and market developments.

Besides, he was willing to take personal responsibility for the decision, he said.

The wholesalers claimed to be making losses but customs data showed that they were earning a profit of VND780 per liter, he revealed.

Deputy Minister of Industry and Trade Nguyen Cam Tu attacked the finance ministry saying, “[the ministry] is managing prices without any aims or targets.

“Their method is to keep prices stable regardless of distributors’ losses.”

The ministry had failed to cut or hike prices at appropriate times, and made price adjustments without a clear rationale, he said.

“We will never be able to resolve any problem if we do not address the root cause: that fuel wholesalers are incurring massive losses.

“We have to gradually hike prices.”

Bui Ngoc Bao, chairman of the Vietnam National Petroleum Corporation (or Petrolimex), the country’s largest fuel wholesaler, blamed the Ministry of Finance for the losses his company had suffered.

Petrolimex posted a loss of VND1.8 trillion (US$90 million) in the first eight months of this year while the figure for September alone was expected to be VND200 billion, he said.

“The Ministry of Finance should consider easing distributors’ losses.”

Le Xuan Trinh, deputy CEO of PetroVietnam Oil, said the distributors’ losses were not due to their inefficiency.

“It is the management mechanism that causes the losses.”

Hue said the price cut has would help combat inflation as well as reduce lending rates.
“There will be no more fuel price hike this year,” he declared.

“If any fuel wholesaler may not be able to ensure supply and wants to withdraw from the market because of losses, just let the Ministry of Finance know.”

The ministry was willing to dissolve even Petrolimex, which has more than 60 percent of the market, if the giant distributor was unwilling to toe the price line, he warned.

E-commerce proposal from Africa can be a scam

Vietnam’s entrepreneurs should be careful of accepting e-business proposals from Africa, Ly Quoc Hung, an official from the Ministry of Industry and Trade, told Tuoi Tre.

Hung, head of the ministry’s Africa, West Asia and South Asia Market Department, said most of the business scams originating from Africa were e-commerce proposals in which the Vietnamese companies were not asked to hold meetings with their African counterparts in person.

He said the bogus African companies usually offer to sign export and import contracts with Vietnamese businesses worth millions of US dollars. Tempted by the prospect of landing a lucrative contract, local businesses that failed to conduct comprehensive verification on their African partners would fall victim to the scam, the official said.

Hung explained that in the African tradition of doing business, both partners are supposed to have face-to-face meetings to discuss and examine the products carefully before placing orders.

Since the internet infrastructure in African countries is rather poor, e-commerce transaction is not common there.

“If any African companies insist on doing business only through the internet, there’s a very strong possibility that they are setting a trap for Vietnamese firms,” he said.

“I’m sure 99 percent of such cases are just a scam.”

One of the most common tricks used by bogus companies is to ask the Vietnamese partners to pay in advance certain fees, such as import and transaction fees.

After the money is paid into their accounts, the phantom companies begin to reveal their true colors by abruptly stopping all communication with the Vietnamese counterparts.

Hung said most of the swindle cases reported by the local businesses to the Ministry of Industry and Trade were from West African countries, including Nigeria, Ghana, Benin, Togo, Senegal, Burkina Faso and the Ivory Coast.

All communication between the African fraudsters and the Vietnamese businesses was made via email and through internet websites. The bogus companies also used fake certificates and addresses to convince local businesses, he said.

In one case, a Ho Chi Minh City-based agriculture company received an order from a Cameroonian company with an import license granted by the Cameroon’s Ministry of Industry and Trade Development and was asked to pay an import fee of EU1,000.

The HCMC company later discovered that the license was fake and Cameroon has no regulation requiring import fees.

To reduce the risk of falling victim to business scams from African conmen, Hung advises that Vietnamese businesses should demand to see the business and import and export licenses of their African partners as well as the address of the bank where they have their bank accounts.

“After that the local businesses should ask the Ministry of Industry and Trade and Vietnam’s commercial agencies in those African countries to verify the information for them,” he said.