BUSINESS IN BRIEF 20/1

  • 03:50 - 2015/01/20

VBMA wants bond holding cap rule amended

The Vietnam Bond Market Association (VBMA) has proposed the Government and administering agencies review and amend some regulations in Circular 36 governing bond ownership caps to keep this market from plunging into troubles this year.

In its petition submitted to the Government Office, the Ministry of Finance and the central bank, the association requests the central bank to delay the implementation of Circular 36 (from next month) to give bond investors, most of them banks, more time to upgrade technology and maintain safety ratios required for their operations.

VBMA expects domestic commercial banks and branches of foreign banks to be offered a common maximum ratio of 35% for the short-term capital sources they use to buy Government bonds.

Article 17 of the circular regulates the highest ratios of 15% for commercial banks with a majority State ownership; 35% for commercial joint stock banks, joint venture banks and wholly foreign-invested banks; 15% for branches of foreign banks and 5% for non-banking credit institutions.

According to VBMA, there should be a common ratio for commercial banks and branches of foreign banks to ensure fairness among banks in terms of managing liquidity and safety ratios.

The central bank should adjust the G-bond holding ratios based on indicators with high stability like chartered capital, equity or total capital inclusive of short-term and medium- to long-term capital sources instead of the short-term one only as this capital source at commercial banks is highly volatile.

A survey of VBMA points out all of its members believe Circular 36 will badly affect liquidity of the bond market, 93.3% think the circular will not support development of the G-bond market, and all predict the coupons of G-bonds will rise.

The Ministry of Finance is urged to ask the Government to propose the National Assembly consider a road map for a rule regarding issuing G-bonds of five years or longer to reschedule debts in line with the country’s economic conditions.   

According to banks, the rule in Resolution 78 will make commodities on the market less diverse. They expect the Government can flexibly implement the rule so as to realize the goals of mobilizing capital successfully and fueling development of the market.

After the central bank issued Circular 36, bond investors expressed concerns over the bond market in the coming time. The implementation of Resolution 78 and Circular 36 may pose many challenges for the bond market in the future, especially capital mobilization for the State budget.

Banks said in recent surveys that Resolution 78 and Circular 36 would restrict the participation of bond investors, especially commercial banks, due to the ceiling bond holding percentage the central bank sets in the circular.

Banks are also afraid that the new policy may increase liquidity risks for bond investors who are commercial banks due to the imbalance between investment capital (of short terms normally) and investment assets (of five years or more).

Banks lower borrowing rates

A number of banks have cut their borrowing rates amid ample liquidity though experts said the rates are unlikely to dip further this year.

The Bank for Investment and Development of Vietnam has adjusted down the deposit rates of under-one-year tenors by 0.15 to 0.55 percentage point, and lowered the annual rates for one-month and six-month deposits from 4.55% to 4% and from 5.55% to 5.3% respectively.

However, the bank maintains the rates of deposits with terms of more than 12 months.

Starting from January 5, the one-month deposit rate at Eximbank fell from 4.7% per year to 4.5%, while the rate at VIB dropped from 4.7% to 4.25%.

On December 22, Vietcombank lowered its borrowing rates, with the rate for one-month deposits slashed to 4% per year.

State banks like BIDV, Vietcombank and Agribank offer the lowest rates for one-month deposits, around 4% per year. The rates are higher at banks such as OCB with 5.3%, HDBank 5.8%, DongABank 4.8% and Techcombank 4.6%.

But Sacombank on January 14 slightly increased the rates of short-term deposits, from 4.65% to 4.7% for one-month deposits and from 4.7% to 4.75% for two months.

Though the one-month deposit rates are low, BIDV and Vietcombank offer the rates of three-month and six-month deposits higher than those at other commercial banks. OCB and HDBank still offer the highest borrowing rates. The six-month rates at OCB and HDBank are 6.3% and 5.92% per year respectively.

The overall mobilization rates of 12-month, six-month and one-month deposits are 6-7%, 5-6% and 4-5% respectively.

Tran Hoang Ngan, vice president of the HCMC University of Economics and member of the National Advisory Council for Financial and Monetary Policies, said the deposit rates could hardly go down further but the lending rates need to be lowered to buoy enterprises.

According to Nguyen Thanh Minh from the Banking University of HCMC, the central bank buying stakes and joining the restructuring of commercial banks may not be a right decision. At weak banks, the most important thing is to reshuffle management, especially risk management. Such a task is suitable for foreign banks which are good at managing risks.

As a result, letting foreign banks get involved in the restructuring process will be an appropriate solution. The number of banks to be restructured is small and it is unlikely that foreign investors will dominate the local banking system.

Meanwhile, when changing the way risk is managed at weak banks, the central bank will apply the Vietnam risk management model and thus foreign investors may not want to get involved.

According to Minh, after restructuring, it is likely that the central bank will divest and sell shares to domestic investors rather than foreign ones.

Meanwhile, according to a source from the central bank, if the central bank does not intervene in restructuring weak banks via share purchases, losses would be huge as depositors would be affected.

Real estate inventory value drops 21.8%

Rising demand has led property inventory value to decline 21.8% against a year ago to more than VND73.8 trillion (US$3.46 billion), according to a recent report of the Ministry of Construction.

The ministry said in the report that there were around 11,450 successful housing transactions in Hanoi and some 10,350 transactions in HCMC last year, a two-fold increase in the capital and a surge of 30% in HCMC.

In general, housing prices were stable last year as the investors of many property projects slashed their prices 30% in the 2011-2013 period. But apartments of the projects in prime locations in Hanoi inched up 1-2% in price in 2014.

As of October 31 last year, outstanding property loans had amounted to more than VND299 trillion (US$14 billion), rising over 14% compared to 2013 and higher than 13.13% of credit growth.

Last year, real estate was the second most attractive sector to foreign investors after manufacturing-processing.

As for the VND30-trillion preferential home loan program, the ministry said as of December 15, five banks had pledged to lend more than VND9.4 billion to homebuyers and property project investors and over VND4.88 trillion of which had been disbursed for borrowers. The disbursements in the second half of the year doubled the first half.

To date, investors have registered to convert 60 commercial housing projects into social housing projects with a total of more than 38,890 apartments and reduce the size of condos at 74 projects to meet demand.

Despite some positive results, the ministry noted there remained challenges for the property market and the property glut was still high, especially in the medium and luxury segments.

There have been 102 social housing projects completed nationwide, including 38 projects with more than 19,680 apartments for low-income earners and 64 projects with over 20,270 apartments for workers. At present, 150 projects with 55,830 apartments for low-income buyers and 59 projects with 66,753 units for workers are under construction.

The ministry said 75 housing buildings have been developed to offer accommodation for around 145,000 students.

But the ministry noted social housing projects have not attracted many investors as expected and the supply of this segment is much lower than needed, especially housing projects for workers at industrial parks.

Last year saw the total housing floor space nationwide increase by 92 million square meters against the previous year, and the national per capita housing area rise by one square meter to 20.6 square meters.

There were 800,000 more square meters (equivalent to some 12,000 apartments) at social housing projects last year, bringing the total area to 1.8 million square meters.

There had been 75,998 enterprises in the construction, building material production, construction consulting and property trading areas last year, up 3,770 firms against the previous year.

The ministry put construction value at VND849 trillion last year, rising 10.2% compared to 2013. The State sector accounted for VND84.3 trillion, falling 8.9%, while private firms contributed VND709.9 trillion, up 10.3%.

Binh Duong announces co-operation with Dutch firm

The southern province of Binh Duong late last week signed a co-operation agreement with Eindhoven in the Netherlands, opening many opportunities for the province to welcome more investors.

Under the agreement, the two sides will strengthen their relationship as well as co-operation in the fields of planning, infrastructure and urban development, energy, economy, science and technology, health care and education.

Initially, they will focus on activities in science and technology, trade promotion and high-technology. They will set up research and entrepreneur centres and improve human resources.

Speaking to Viet Nam News, Eindhoven`s Deputy Mayor Mary Ann Schreurs said they would initially see what Binh Duong needs and then decide the details.

She also revealed that in the autumn of 2015, there would be a business delegation visiting the province to seek investment opportunities.

Along with co-operation between Binh Duong and Eindhoven, Binh Duong`s Becamex IDC Corp signed a co-operation agreement with the latter`s Brainport Development. The two sides will work together in human resources, technology, business and other sectors.

According to Binh Duong`s leaders, the co-operation will support the province`s development and modernisation as Eindhoven is considered a "smart" city that has a well-developed industrial sector with many big companies like Philips and DAF Trucks.

Along with the Netherlands, Binh Duong has developed strong co-operation ties with cities in Laos, Cambodia, China, Italy, South Korea, France and Japan.

Experts offer suggestions for tackling bad debt

Several measures have been suggested by economic experts to help the banking sector reduce the non-performing loan (NPL) ratio to less than 3 per cent in 2015, as required by the Government.

According to the State Bank of Viet Nam`s (SBV) data, by the end of the third quarter in 2014, the banking sector`s bad debt ratio accounted for 4.7 per cent of the economy`s total outstanding loans.

Over the last three years, domestic commercial banks applied measures to settle bad debts but the results were modest and the bad debt ratio continued to rise.

Analysts said the target of reducing the bad debt ratio to under 3 per cent would be difficult to meet since the volume of bad debt was increasing.

Truong Thanh Duc, chairman of the Viet Nam Banking Association`s Legal Club, said enterprises` current production and business activities were still difficult, thus seriously affecting their debt payment capacity.

In addition, the banks` restructuring of existing loans and classification of them in the same debt group would end in April 1, as required by the SBV. This means the banks` debts are likely to increase.

"Because of these hurdles, the banking sector would not be able to realise the set target of reducing the bad debt ratio to less than 3 per cent if it has no measures that are more effective than those being applied," Duc told Viet Nam Economics Times.

Truong Van Phuoc, vice chairman of the National Financial Supervisory Commission, however, said: "The domestic economy had shown some signs of strong recovery, including an economic growth rate of 5.9 per cent in 2014; low inflation; satisfactory export growth; and stable exchange rate. Meanwhile, enterprises` production activities are on the path to recovery. This means that lowering the bad debt ratio may be realised."

But he noted that it was necessary to continue implementing the restructure of enterprises and public investment, and improve the domestic investment environment in order to realise the goal of lowering the bad debt ratio.

As someone who is in charge of settling bad debts, Nguyen Quoc Hung, chairman of Viet Nam Assets Management Company (VAMC), said that despite having many challenges, the target of reducing the bad debt ratio to less than 3 per cent would likely be realised this year.

"Credit institutions have acted on their own initiative, implementing the roadmap of settling bad debts. In addition, the government is considering some adjustments on Circular 53/2013/ND-CP on the establishment, organisation and operation of VAMC in ways that would give the company more favourable conditions to settle bad debts," Hung said.

In 2014, VAMC settled bad debts worth VND98 trillion (US$46.13 billion), VND28 trillion higher than the planned figure, he added.

Hung also said that the important factor for VAMC was to have a specific legal framework for resolving bad debts that it had already bought.

Tran Du Lich, member of the Monetary and Financial Policies Advisory Council, stressed the need to improve the market`s aggregate demand.

"The resolution of bad debts would be further accelerated if we can realise several measures at the same time. They include stimulating demand, reducing lending interest rate for enterprises with good projects, simplifying administrative procedures to easily sell collateral assets, and setting up a real debt buying and selling market," Lich said.

But he said that among the new measures, demand stimulation, particularly in the real estate area, would be one of the most important.

This is because most bad debts, 85-90 per cent, are in the real estate area.

He also agreed that VAMC needed to be given more rights to buy and sell bad debts.

Speaking about the measures to reduce the bad debt ratio, SBV deputy governor Nguyen Thi Hong revealed that the central bank had set up several scenarios, one of which was that the central bank would ask credit institutions to continue settling bad debts in combination with the implementation of the restructuring process.

For the central bank, it would focus efforts on improving the legal framework in ways that would create favourable conditions for commercial banks and VAMC to buy or sell bad debts and settle assets used as collateral.

The central bank would also have close supervision of credit activities, debt classification and risk provision of commercial banks.

Other possible measures included the creation of a debt buying and selling market and the encouragement of both domestic and foreign investors to participate in buying and selling bad debts, Hong told Tai Chinh & Ngan Hang (Finance & Banking) newspaper.

She also admitted that restructuring and helping enterprises settle difficulties as well as supporting the market, were needed to be done to resolve the banking sector`s bad debt problem.

Draft law sets out regulations for gas trading

The State has maintained the number of general sales agent in the domestic gas trading system in its third draft on gas-trading regulations.

This draft is an amendment to Decree 107/2009, released by the Ministry of Trade and Industry.

In this third draft, the ministry has also added business conditions for general sales agent of gas, reported Nguoi Lao dong newspaper.

The conditions are similar to those mandated by existing regulations, including obtaining a business registration certificate and a warehouse with a minimum of 2,000 gas tanks in inventory. The general sales agent must have a gas distribution network, including shops selling gas tanks, stations providing gas, and a group of at least 10 other agents who meet existing regulations. They must also have a current sales agent contract with a gas dealer, effective for at least one year.

Initially, the second draft had outlined two levels for the system: dealers and sales agents. General sales agents were excluded. In theory, this measure would reduce the number of intermediaries, leading to cut the selling price and help dealers properly monitor the delivery of goods to customers.

However, in practice, some dealers in the local market have sold gas to customers via general sales agents who offer cheaper selling prices than the dealers selling directly to retail outlets.

In addition, under existing regulations, general sales agents must contribute a hefty investment to meet operating requirements, especially for meeting conditions that ensure fire safety.

Therefore, many general gas sales agents have been worried about whether they will be able to stop running the business in view of the regulations listed in the second draft.

The general sales agents, dealers, the southern branch of the association of gas traders, and the HCM City Trade and Industry Department have jointly proposed that the removal of general gas sales agents from the local market should be reconsidered.

Under the third draft, the gas dealers have the right to choose a distribution system that is most compatible with their business. They can distribute gas via general sales agents or sell directly to gas retail outlets, or both.

The new draft has also tightened regulations for retail sales, stipulating that sales agents or retail outlets are only permitted to buy gas from a single source - either a general sales agent or a dealer - rather than from sources as they do at present.

In HCM City, gas retail outlets, which are considered household traders rather than enterprises, must buy gas from a single general sales agent only.

This regulation could restrict the business rights of gas retailers but would help enterprises and state management offices to easily control the gas distribution system in the future. Gas companies would then compete fairly in the domestic market.

Lenders say good run to continue

A majority of lenders is of the view that the business environment and their performances improved significantly last year and will continue to see positive progress this year.

The State Bank of Viet Nam (SBV) announced this in a statement on Thursday, based on its quarterly survey of business trends for credit institutions and foreign bank branches in Viet Nam.

About 89 per cent of them said their liquidity was better in 2014 and that they expect this situation to continue throughout 2015.

They also expressed optimism for their outlook on economic recovery and stability, with the gross domestic product growing higher than expected at 5.98 per cent and inflation controlled at a low level last year.

Most expect to mobilise more capital from the economy, with deposits likely to grow by approximately 4.5 per cent during the first quarter of 2015 and by about 14.35 per cent over the year.

The expected growth rates for deposits in the dong are 4.7 per cent and 15.37 per cent respectively, and for deposits in foreign currencies are 3.87 per cent and 6.53 per cent respectively.

"The capacity of credit institutions to mobilise capital witnessed more sustained and reasonable improvements in 2014, although the SBV adjusted the policy interest rates twice last year," the statement added.

Interest rates in the market fell by 1.5 to 2 per cent last year from the previous year`s levels, and are likely to remain stable or decrease slightly in 2015.

However, bank deposits are expected to continue expanding as they are considered a secure and efficient investment channel in the context that the stock market is still displaying potential risks and the real-estate market is yet to see any significant recovery.

The credit institutions observed that customers` demand for banking products and services is also growing, and their demand for loans has clearly surged since the fourth quarter of 2014.

Up to 97 per cent of the lenders forecast that outstanding loans will expand at high rates in 2015, with the average lending growth for the entire banking system expected to hit 3.5 per cent in the first quarter of 2015 and 14.57 per cent at the end of the year.

Almost all credit institutions are of the view that bad debt ratios remained stable or declined during the fourth quarter of 2014 and predicted that bad loans will shrink during the first quarter of 2015. A majority of them also believe that their non-performing loans will be lower than three per cent of their total lending amounts this year.

Vietnam attends Berlin Agriculture Ministers’ Meeting

A Vietnamese delegation led by Minister of Agriculture and Rural Development Cao Duc Phat has participated in the 7th Berlin Agriculture Ministers’ Meeting in Germany as part of the Global Forum for Food and Agriculture (GFFA).

At the January 17 meeting, ministers issued a statement calling for the formation of a political framework for a sustainable bio-based economy as well as joint hands in the fight against poverty and malnutrition.

The statement stressed that parties concerned should set up a framework for agriculture to meet the increasing demand on food and renewable resources, with focus on strengths of bio-based economy, sustainable production and use and food security.

The event drew the participation of 70 countries, including representatives of Food and Agriculture Organisation (FAO) and the World Bank (WB).

During January 15-17, the GFFA, an international forum on central issues of global agriculture and the food sector, was held with tens of discussions addressing the future opportunities, potential and challenges of the world agriculture in the direction of developing bio-based economy.

The forum focused on the role of agricultural development to ensure food security for people all over the world, Minister Phat told Vietnam News Agency correspondents in Berlin on the sidelines of the event.

Delegates stressed that taking advantage of new opportunities to develop eco-economy should be combined with sustainable development and food security, he added.

Project supporting wind power use approved

The Prime Minister has recently approved a project on support for wind power use with a total investment of 7 million EUR from the German Government’s non-refundable official development assistance.

The project will be carried out within four years.

The main objective of the project is to improve legal framework for developing, boosting and expanding the development scale of wind power in Vietnam, contributing to achieving the national target on promoting renewable energy and green growth.

In particularly, it will support State agencies to collect data and propose projects when making decisions in order to improve the planning process and the legal framework for wind power development in Vietnam.

The project will also enhance capacities of State agencies from the central to local levels and the private sector to help wind power develop rapidly.

Technological cooperation and research will be implemented to create opportunities to localise wind power equipment and raise their value.

Garment sector expected to bring 118 million USD to Can Tho

The Mekong Delta city of Can Tho has set to earn 118 million USD from selling garments abroad in 2015, up 2.7 percent over last year, thus bringing total exports of the city for the whole year to over 1.45 billion USD.

As part of efforts to fulfil the goal, the city will raise the rate of domestic materials in garment products to 55 percent, while investing more in modernising garment production to increase quality of products, said Duong Nghia Hiep, Vice Director of the municipal Department of Industry and Trade.

At the same time, Can Tho will continue speeding up trade promotion activities to strengthen its trademark in both domestic and foreign markets, thus maintaining traditional markets and expanding to new ones, he said.

Throughout 2015, the city’s garment sector is expected to ship abroad 9 million products, including 8 million to traditional markets of EU, the US, the Republic of Korea and Japan, and the rest to new ones such as India, Canada, New Zealand, Australia and Middle East.

Meanwhile, local firms are encouraged to improve their design and material quality, while choosing suitable market segments and using more domestic materials to reduce their dependence on imported sources, he said.

Hiep also revealed that Can Tho will implement quality monitor measures to ISO standards and enhance enterprises’ environmental and social responsibilities by applying advanced technology and investing more in organising training courses for labourers.

According to the municipal Department of Industry and Trade, in the first fortnight of this year, local firms produced 375,000 garment products, a rise of 22.4 percent over the same time last year. The products are worth 4.8 million USD, up 20.8 percent year on year.

Garment has been among Can Tho’s hard currency earners over the past years. In 2014, the sector exported as many as 8 million products for 104 million USD, a year-on-year rise of 41.9 percent.-

Petrochemical and oil refinery project to start in Binh Dinh

The People’s Committee of the coastal Binh Dinh province has worked with relevant ministries and departments on the implementation of Nhon Hoi petrochemical and oil refinery project (known as Victory project) in the locality.

The US$22 billion complex will be is located on an area of 1,400 hectares in Nhon Hoi economic zone.

The Victory project will be implemented by Thai petroleum firm PTT Public Company Limited - the main investor - in coordination with other foreign partners.

The investor expects to prepare the ground and construct an office building in late this year.

Construction of workshops in the Nhon Hoi petrochemical and oil refinery complex is scheduled for late 2016 or early 2017.

Vinachem seeks 7.2 percent rise in this year’s revenue

The Vietnam National Chemical Group (Vinachem) targets a 7.2 percent yearly increase in its industrial production value to more than 45 trillion VND (2.14 billion USD) and an equal rise in revenue to over 49 trillion VND (2.33 billion USD) in 2015.

Vinachem posted an industrial production value of roughly 42 trillion VND (2 billion USD) and a revenue of 46 trillion VND (2.19 billion USD) last year, up by 2.2 percent and 5 percent against 2013, respectively.

Meanwhile, its export turnover stood at 231 million USD, the group reported.

At a January 16 conference setting tasks for this year in Hanoi, Vinachem General Director Nguyen Gia Tuong said the 2014 figures were still lower than expected, adding that three out of its 29 affiliates suffered from losses while some others reduced production, affecting employees’ income.

To realise objectives for 2015, the group plans to employ comprehensive measures to boost its subsidiaries’ performance, step up restructuring its organisation, and accelerate key projects such as the expansion of the Ha Bac Nitrogen Fertilizer Plant and the building of antibiotic material and ammoniac factories, said Nguyen Anh Dung, Chairman of the group’s member council.

It will also embark on development plans designed for key products as well as the group as a whole, he added.-

PetroVietnam told to take flexible response to global oil prices changes

Deputy Prime Minister Hoang Trung Hai has instructed the Vietnam National Oil and Gas Group (PetroVietnam) to monitor global oil prices closely and have flexible solutions to respond to changes.

At a January 16 meeting held by PetroVietnam to review the oil industry in 2014, the Deputy PM said the world situation has become more unpredictable with many unstable factors that will influence the whole economy in general and the petroleum industry in particular.

He also urged the group to enhance the competitive capacity of its member companies so that they are able to survive amidst fierce competition brought on by the coming into effect of several free trade agreements between Vietnam and other countries.

Last year, PetroVietnam reported total revenues of 745.5 trillion VND (34.8 billion USD). The group also contributed 178.1 trillion VND (8.3 billion USD) to the State Budget.

In the context of many international organisations and experts predicting the oil prices will continue their downtrend this year, many member companies of PetroVietnam have proposed setting the 2015 targets equal to or even lower than the levels of 2014.

The group plans to pump around 16.68 million tonnes of crude and 9.8 billion cu.m of gas in 2015.

HCM City targets 700 mln USD in investment in IZs

HCM City is targeting to lure 700 million USD of investment into its industrial zones and export processing zones in 2015, said the management board of the city’s Export Processing and Industrial Zone Authority (Hepza).

According to the Head of Hepza Investment Management Office Tran Viet Ha, the zones attracted a total of 752 million USD of investment in 2014, up 23 percent compared to 2013.

Vietnam will see a new investment wave in the time ahead, he predicted, citing forecast that the global garment and textile market will expand by 3.5 percent this year and the expected conclusion of the Trans-Pacific Partnership Agreement (TTP).

The official noted that several foreign investors have poured money into major garment and textile projects in anticipation of the TPP, such as the 300 million USD plant of Worldon Vietnam.

Hepza plans to start work on the construction of high-storey workshops in four industrial zones namely Dong Nam, Hiep Phuoc, Linh Trung, Tan Thuan to accommodate more investors.

Last year, domestic investment capital in the city’s IZs and EPZs experienced a surge of 65 percent against 2013, focusing on high-tech and environmentally-friendly industries such as electronics, manufacturing mechanical engineering, fashion design, and high quality food processing.-

WTO membership - a major contributor to exports and economic growth

Vietnam’s admission to the World Trade Organization (WTO) as an equal member has positively impacted the country’s economic development, notably in foreign investment attraction, boosted exports and improved the business environment, say domestic and foreign experts.

In 2007, Vietnam officially became the 150th WTO member after years of negotiation efforts, marking an important milestone in the process of its international economic integration.

In a recent interview granted to a Radio Voice of Vietnam (VOV) reporter, International Monetary Fund (IMF) Chief Representative in Vietnam Sanjay Kalra touched upon limitations and challenges facing Vietnam in its international integration process after it joined the WTO eight years ago.

The results achieved after 8 years of Vietnam’s entry to the world largest trade body are of paramount importance as the nation has become an attractive destination for foreign investors. More and more major foreign enterprises and groups are bent on investing in Vietnam to take advantage of incentives investment policies.

Increased foreign investment has significantly contributed to export growth and economic stability of Vietnam over the past years. On a more positive note, Vietnam’s drastic changes in laws and institutions have helped simplify procedures and improve the business and investment environment, he said.

The Southeast Asian nation’s underway commitments after its admission to the WTO such as cutting taxes, opening the market for goods and services have offered Vietnamese consumers plentiful opportunities to enjoy better products at cheaper prices, the IMF official noted.

Regarding Vietnam’s sustained efforts for international integration by conducting negotiations and signing bilateral and multilateral agreements, Sanjay Kalra said the international economic integration process is an inevitable trend for Vietnam. Free trade agreements provide a wealth of opportunity for both consumers and businesses, helping Vietnamese goods and services have easier access to the most demanding and potential markets.

“I hope that Vietnam will speed up negotiations and is likely to conclude important free trade agreement (FTA) agreements and the Trans-Pacific Partnership (TPP) Agreement in the time ahead and the international economic integration is a long process.” he added.

Concerning measures to cope with challenges and capitalize on the advantages presented by the WTO, Sanjay Kalra underlined the need to reform and improve the competitiveness of Vietnamese enterprises both domestically and internationally in a bid to make better use of the advantages of the WTO.

There is much that needs to be done in connection with institutional and procedural reforms, infrastructure improvement and investment cost reduction for businesses. But the forefront is the necessity to improve the capacity and skills of Vietnamese workers, enabling them to grasp better employment opportunities and keep pace with the waves of foreign investment coming to Vietnam.

Talking about prospects for Vietnam`s economy in 2015, the IMF representative said the national economy would continue its steady growth since 2014 with low inflation, relatively stable exchange rates and deeper economic integration. However, future challenges require the Vietnam Government to make stronger reforms for 2015- 2016.

For example, banking reform will help stabilize the financial market while reform and equitization of State-owned enterprises (SoEs) will help attract more capital and improve business governance and reduce the burden on the state budget.

It is essential take into account the impacts of the global economy in 2015 as declining oil prices benefit the economy but will affect Vietnam’s budget revenues.

Generally, the outlook for 2015 is positive but the nation needs to spare no effort to maintain macroeconomic stability and improve infrastructure facilities, he noted.

Vietnam’s shrimp exports target the EU

Vietnamese shrimp exports to the EU market have maintained a high growth rate.

In the first eleven months of 2014, the country’s shrimp exports to EU rose by 71.7% compared to the same period in 2013.

Last year, Vietnamese shrimps were more advantaged than those from Thailand and India.

The Thai prawn industry was badly affected after the Guardian UK carried adverse information in June 2014 accusing Thailand of slavery in its fishing industry. "If you buy prawns or shrimp from Thailand, you will be buying the produce of slave labour," says Aidan McQuade, director of Anti-Slavery International.

Immediately after that, in June, France’s Carrefour Group, the second largest retailer in the world stopped buying shrimps from Thailand.

Moreover, since last year, Thailand’s processed shrimps to the EU no longer enjoyed GSP (Global Strategic Priorities) and therefore the tax was up to 20%.

In the first eight months of 2014, India’s shrimp exports to the EU showed a year-on-year increase of 83.5% and it was one of the ten leading shrimp suppliers to the market.

However, in the remaining months of last year, EU warning of non-therapeutic use of antibiotics in shrimp raising caused difficulties to India in exporting shrimps to the market.

Bright prospects for Vietnamese fruit exports in 2015

Vietnamese fruit exports see bright prospects in 2015 after the first batch of fresh longan exported to the US last December, followed by eight others early this month.

The country is implementing necessary technical steps to export its lichees to the US this year. Mangos and star apples may also be approved to enter the highly lucrative market.

Several other demanding markets have also opened to a number of Vietnamese fruits. Vietnam and Japan are negotiating certain conditions for Japan to import red-flesh dragon fruits.

The Republic of Korea has already imported Vietnamese mangos and is considering importing star apple fruits from Vietnam.

Meanwhile, necessary procedures are underway for Vietnam’s mangosteen and plums to enter China’s markets.

Japanese investors getting fond of Vietnam

Vietnam has become one of the more favoured investment destinations for Japanese small and medium sized business enterprises (SMEs) as they seek to diversify their investments throughout ASEAN member nations.

The latest official statistics show they have poured US$36 billion into 2,400 projects across the country.

A recent survey of Japanese business enterprises reflects that over 70% of them consider Vietnam as one of the top investment destinations in ASEAN and those that have invested are satisfied with the results.

The governments of Japan and Vietnam are now implementing stronger measures to boost the comprehensive partnership between the two nations and create yet more conducive conditions for their business communities to prosper.

To attract Japanese foreign investment there are several important factors for Vietnamese enterprises to consider. The first is that Japanese firms are quality oriented and they are only looking for a high caliber product.

The second is that negotiations take time and Japanese investors are meticulous and detailed in their deliberations. They don’t leave a lot to chance and work through all of the details upfront when they are hammering out the deal.

Tran Thi Minh Trang, general director of the Vietnam-Japan Consultancy Co Ltd and director of the Japan Circle project, recently said Vietnamese enterprises often complain they spend too much time, even years, working out a deal only to have it fall through.

Trang added, that some of this delay can be avoided if Vietnamese enterprises better prepare and recognize the importance of understanding Japanese culture and behaviors and, most importantly, have a member of their staff that can speak fluent Japanese.

She also underscored the point that out of the ASEAN member nations, Japan highly appreciates the investment potential in Vietnam, so domestic businesses should be cognizant of this fact and use it to their advantage.

Cooperation projects can be mutually beneficial and result in a win-win situation for both sides, if enterprises adequately prepare and are patient in the negotiating process, she concluded.

Vietnamese tea industry sees recovery brewing

When the Ministry of Agriculture and Rural Development (MARD) released its most recent statistics for the tea industry, it had a blunt warning: Vietnamese tea production has been stymied by a lack of branding and niche marketing.

Vietnam’s tea exports for calendar year 2014 dipped 5.30% in volume and 0.20% in value on-year to 134,000 tonnes valued at US$229 million MARD reported.

According to MARD unfavourable weather conditions in the early months of 2014 including prolonged droughts and heavy rainfall in several key tea-growing areas during the main cropping season had a negative impact on tea production for exports in many localities.

Other factors impeding the industry were that countries like Taiwan applied stricter rules of origin and globally there was an over supply. However, more importantly MARD pointed out that Vietnamese producers have been stymied by a lack of branding and niche marketing.

Domestic tea producers have yet to develop a consumer oriented marketing strategy aimed at adding value and marketing select brands targeting specific foreign markets. Most producers still take a strategy of selling tea in bulk with low to no added value.

MARD cautions that the tea industry will remain vulnerable to downward demand-led price pressure as long as it continues to be treated as a commodity – fungible and indistinguishable from tea of any other country.

But after all the dire warnings, MARD believes the market has reached a bottom with prices and sales likely to rise in 2015.

To assist Vietnam’s tea producers open up new markets abroad, MARD has teamed up with the Ministry of Industry and Trade (MoIT) to help them regularly conduct  trade promotion and marketing activities at international fairs, expos and trade events.

Doan Trong Phuong, Chairman of the Management Board under the Lam Dong Tea Joint Stock Company (Ladotea) in turn said Vietnam has even encountered difficulties over  the past year exporting black and green tea products to traditional markets such as Taiwan, Russia, the Middle East and Pakistan.

Last year, the price of Vietnamese tea in the global marketplace jumped 5.76% compared to the sales price in 2013 and stood at US$1.711 per tonne.  However this was only  65% of the top world price for the highest quality tea.

Many traders have been reporting that the sales prices of Vietnamese tea is at bargain basement level prices because it is being plagued by rumours of high levels of pesticides and as a result is considered poor quality.

Fortunately, more and more tea growers have become aware of the pitfalls of the indiscriminate use of pesticides and this problem can be rectified through the use of more modern technologies they said.

An added complication has been the fact that 90% of tea was exported in bulk with no added value. In simple terms, they said a strategy of trying to compete in the world marketplace based solely on price is fruitless and futile and going forward – quality needs to be the buzzword in the industry.

Product differentiation, niche marketing, branding and customer focus have a proven track record as effective strategies adopted by the most successful producers in the industry world-wide they added. In addition, each successful tea producer has its own set of strategies, which differentiate it from others to give it competitive advantage.

Moreover, oversight in controlling the number of tea factories and the setting of quality control standards within the country needs to be strengthened, leading to more coordinated industrialised zones and investment in the industry.

The Vietnam Tea Association (Vitas) reported the country is one of the world’s top five tea producers trailing India, Sri Lanka, Kenya and China with a cultivation area of 135,000 hectares. However, Vietnamese tea products are experiencing difficulties as markets around the globe are becoming  more demanding.

According to the results of recent surveys, old tea varieties are not in line with the modern requirements for higher quality organically grown and chemical free products. The association also emphasised the need for innovative varieties.

Vitas helped the industry make great advances by leading a delegation of tea producers to an international tea exhibition held in Moscow, Russia last September. With eight booths at the exhibition, they expanded their markets and located several partners in Eastern Europe, particularly the Far East and Siberia.

Prof. Dr. Nguyen Duy Thinh from the Institute of Biological and Food Technology under Hanoi University of Technology added that tea product quality can be achieved by farmers modifying their cultivation and harvest methods.

For his part, Dr. Nguyen Huu Tai, Vitas Chairman proposed that a value chain should be formed and fully developed in the time ahead for tea growers and processing enterprises to progressively develop the tea sector sustainably.

Le Van Duc, deputy director of the MARD plantation department is bullish on a recently established steering committee that has been formed to coordinate development of a sustainable tea industry and focus on removing difficulties for the tea sector by expanding the variety of teas and markets.

From now till 2020, the tea sector is expected to maintain 140,000 hectares of cultivation area and devise a zoning plan for tea development in the provinces of Nghe An, Son La, Yen Bai and apply Vietnamese Good Agricultural Practices (VietGAP) standards to improve the quality of tea exports.

The steering committee is confident that though current tea production is down with prices much too low, the Vietnamese tea industry is resilient and on the comeback trail with a revival brewing.

VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR

Source: VietNamNet

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