September, 12 2014 08:42:00
Viet Nam is said to be in the hot zone for fast moving consumer goods with strong growth expected to continue.— Photo tinmoi
HCM CITY (VNS) — Viet Nam, with its 90 million population and growing affluence, and more focused efforts to equitise State-owned enterprises and restructure banks, offers great opportunities for portfolio investors despite some hurdles, a seminar that opened in HCM City yesterday heard.
Georges Joseph Ghorra, an executive from the IFC, a World Bank arm, told the two-day Gateway to Vietnam: Rediscovering New Investment Opportunities that his institution "is convinced of the long-term growth prospects in Viet Nam."
He spoke about the country's "golden demographic structure" with an abundant workforce of 76 per cent of its population and a young and growing middle class with increasing disposable incomes.
Macroeconomic stability has been restored with single-digit inflation while the reform process continues, he pointed out.
The Vietnamese market is currently trading at attractive earnings multiples compared to other markets in Southeast Asia, he said, pointing out further that Moody's and S&P have upgraded the country's ratings respectively to B1 and BB-, indicating stable.
The financial market with the recapitalisation and consolidation of banks under way; the infrastructure sector including hydropower/renewable energy, waste treatment, and logistics; manufacturing; agribusiness; and services all offer investment opportunities, he said.
Doan Hansen of global management consultancy McKinsey & Company said with the rapid urbanisation, 10 million people are expected to move to urban areas by 2030, doubling the number of consuming households.
"Viet Nam is primarily in the hot zone for fast moving consumer goods with strong growth expected to continue," she said, asking, "Are you well positioned to meet the rapidly changing needs of Viet Nam's consumers, and how can you proactively support and benefit from the growing infrastructure needs?"
Labour cost is still low but so is productivity, she said.
"The country needs transition to manufacturing and exporting more complex and higher value products."
Ghorra listed Viet Nam's underdeveloped capital markets and cap on foreign ownership in listed companies (30 per cent for banks and 49 per cent for others) as the main challenges facing investors.
The slow pace of bank restructuring and SOE privatisation, underdeveloped infrastructure, and low competitiveness when the country joins free trade agreements are the other challenges, he said.
More than 430 SOEs were earmarked for equitisation in 2014-15, but in the first half of this year only 31 made initial public offerings.
According to stock brokerage Saigon Securities Inc – which is organising the seminar attended by around 400 participants — foreign investors' participation in those IPOs was insignificant, with only two of them, Viglacera and Cienco 4, attracting their interest.
Vo Tri Thanh, deputy director of the Central Institute for Economic Management, said it is more important that the assets of equitised companies are used efficiently than the number of equitising SOEs.
Valuation of the SOEs to be equitised is a challenging task, he added.
Alan Phan, managing director of Alan Phan Associates, said the valuations should be decided by the market. He supposed that the IPO of Vietnam Airlines would be made in a foreign stock market with underwriting by an international institution since it would encourage investors both in and outside Viet Nam because of the transparency norms there.
Vu Bang, chairman of the State Securities Commission, said the systems employed by the country's two stock exchanges in HCM City and Ha Noi and securities companies are capable of handling the IPOs of SOEs.
"It is regulated that equitised companies must list within a year after their IPOs, and when a SOE makes its equitisation plans, it must have a listing plan as well."
But he wants the time frame reduced, proposing to the Government that equitised companies should list or trade on UpCom not later than 60 days after their IPO to facilitate liquidity to attract investors. The Government is considering his recommendation.
Bad debts or non-performing loans also offer opportunities for foreign investors, experts told the seminar.
Nguyen Khac Hai, deputy CEO of SSI Asset Management Company, said the Vietnam Asset Management Company has bought VND50 trillion (US$2.38 billion) worth of debts from banks since it began operation over a year ago, but has yet to resell any of it.
Obstacles to reselling include a lack of clarity on how to value the debts and how foreign investors can buy them. — VNS
September, 12 2014 08:47:00
PTT group is moving forward with its plan to invest US$22 billion in a petrochemical refinery complex in Viet Nam.— Source photo vietpress.vn
BANGKOK (VNS) — PTT group is moving forward with its plan to invest US$22 billion in a petrochemical refinery complex in Viet Nam.
The company said in a statement that a delegation led by group chairman Piyasvasti Amranand and president Pailin Chuchuttaworn on September 8 arrived in the country to submit its feasibility study on the project to the Vietnamese government. During the trip, they also met Prime Minister Nguyen Tan Dung.
The study was originally expected to be submitted in April.
PTT won the government's permission for the study in May 2013. Since August, it has carried out surveys and assessments on geology, seaports, logistics and transport systems, and potential environmental impacts.
The feasibility study includes commercial, technical, financial, social and environmental impact details, as well as strategies and partner selection. The project was initially expected to require a total investment of $28 billion, to be located on 2,000 hectares of land and to operate with the capacity of 660,000 barrels of crude oil per day.
The feasibility study lowered the investment sum to $22 billion, and refining capacity to 400,000bpd. At that capacity, it would produce 260,000bpd of refined petroleum products and 5 million tonnes of petrochemical products annually. The plant will be located in the Nhon Hoi Economic Zone in Binh Dinh province, designed to be Viet Nam's first petrochemical refinery complex. — The Nation/ VNS
VietNamNet Bridge – Domestic steel manufacturers, already suffering heavily from oversupply and competing with low-quality Chinese imports, fear they may be “crushed” by Russia which will enter Vietnam once a free trade agreement is signed.
In the negotiations on the free trade agreement (FTA) between Vietnam and the Custom Union of Russia, Belarus and Kazakhstan (VCUFTA), Vietnam promises to cut import tariffs on 167 steel products from three countries to zero percent from early 2015. The commitments have put domestic steel manufacturers on tenterhooks.
Signing an FTA with Russia, Belarus and Kazakhstan is a top priority for Vietnam, which is now negotiating 10 FTAs with many important trade partners. The seventh round of negotiations is scheduled to take place in mid-September, while the agreement is believed to be signed by early 2015.
They have reached agreements on most issues, except ones related to steel manufacturing and petroleum products.
Russia wants to reduce the tariffs on 167 steel products to zero percent as soon as the FTA takes effect. These include ingot steel, structural steel and galvanized steel, products in oversupply in Vietnam.
Meanwhile, Vietnam promised a more cautious tariff cut schedule for the ASEAN-China FTA (ACFTA). The 15 percent tariff would still be imposed on some steel imports until 2018, while ingot steel imports would only see a tariff reduction to 15 percent by 2020.
However, the pressure of ACFTA has been tough for Vietnamese steel manufacturers, who have had to struggle to resist the massive volume of imports from China.
A report from the General Department of Customs showed that in 2013, Vietnam imported $8 billion worth of steel products from China, thus leading to a trade deficit of $5.6 billion in the steel industry.
Therefore, analysts have every reason to warn that if VCUFTA is signed, Vietnamese steel manufacturers could be dislodged from their home market.
Steel manufacturers shout for help
According to the Vietnam Steel Association (VSA), domestic steel manufacturers were shocked after they were informed about the tentative tariff cuts. The association has sent a petition to the government, the Ministries of Finance and Industry and Trade, requesting to reconsider the tax cut roadmap.
VSA’s deputy chair Chu Duc Khai said Russia, the fifth biggest steel manufacturer in the world (68.7 million tons a year), would be a big threat to Vietnamese steel manufacturers.
He said Russian steel products, with 70 percent steel products made of reverter furnace and 8.1 percent of Asian market share, would flood into Vietnam when they are backed by VCUFTA.
It is obvious that China is closer to Vietnam than Russia, and therefore, Chinese imports have advantages in the transportation.
However, an expert said that it takes 12-15 days only to ship cargo from the Vladivostok port to Vietnam, just a little longer than the time needed to bring steel products from Chinese mills to Vietnam.
It costs $20 to ship one ton of steel from Russia to Vietnam by sea, the same as sea shipping from China.
VietNamNet Bridge – Vietnam has not allowed banks to go bankrupt, leaving many virtually dead banks, or as some people call them, “zombies”.
Government agencies cannot give a reasonable explanation why these zombies still exist.
A report from the Ministry of Planning and Investment (MPI) showed that 37,162 businesses were dissolved or suspended operations in the first seven months of the year, an increase of 9.8 percent over the same period the last year.
The increasingly high number of dead businesses has pushed banks into a more miserable situation.
“Businesses went bankrupt but their unpaid debts still exist, which have turned into banks’ bad debts,” said the director of a commercial bank which has a bad debt ratio of approximately 20 percent.
“Banks have been told to hold out because of the government’s policy on not letting banks go bankrupt,” he said.
The State Bank of Vietnam has never admitted the policy. Its senior officials, when speaking at official events, repeatedly sat that commercial banks must take responsibility for their operations and follow the market economy’s rules.
However, an analyst said that the central bank deals with weak banks in different ways rather than allowing them to go bankrupt, which may create negative impact on society.
Under international practice, a commercial bank will be put under the central bank’s special control once its bad debt ratio accounts for one percent of its outstanding loans, and it will be dissolved when the bad debt ratio reaches 3 percent.
However, the analyst noted that in Vietnam, banks with the high bad debt ratios of 5-7 percent still exist.
Reports from the eight biggest listed banks in Vietnam, Vietinbank, Vietcombank, ACB, Military Bank, Sacombank, Eximbank, BIDV and SHB, showed that their bad debts had increased by VND13.4 trillion by the end of the second quarter of the year.
The figure would be even higher and account for 9.71 percent of the total outstanding loans, if the banks applied the Decision 780 when classifying their non-performing loans.
The decision is believed to follow international practice in debt classification, setting up higher requirements for the classification.
The analyst noted that many commercial banks have not been punished even though they broke the laws. Some banks stayed safe though they lent money at interest rates higher than the ceiling lending interest rates.
Under the Civil Law, the ceiling lending interest rates offered by commercial banks must not be higher than 150 percent of the prime interest rates stipulated by the State Bank of Vietnam.
Keith Pogson, deputy CEO of Ernst & Young Hong Kong, noted that Vietnam should apply the bankruptcy law when dealing with zombie banks, i.e., the banks which do not exist in reality, in order to ensure the healthy operation of the banking system.
The Bankruptcy Law, to take effect on January 1, 2015, contains provisions on the bankruptcy of banks. However, as a lawyer pointed out, the provisions are not enough to solve banks’ problems, because commercial banks are different from businesses.
September, 08 2014 08:15:00
Vietnamese exports of textiles and garments to Japan experienced encouraging growth of 6.5 per cent, valued at over $1.6 billion.— VNA/VNS Photo Trong Dat
HA NOI (VNS) — Viet Nam saw a trade surplus of nearly US$1.86 billion from exports to Japan in the first eight months of 2014, representing a 40 per cent increase over the same period last year.
According to data released by the Ministry of Industry and Trade, Viet Nam has exported an estimated $9.74 billion in goods to Japan during the eight month period, a yearly increase of 11 per cent.
Bizlive.vn quoted the ministry as saying that Vietnamese exports of textiles and garments to Japan experienced encouraging growth of 6.5 per cent, valued at over $1.6 billion.
Trade experts forecast that the country's apparel exports to Japan would likely reach $2.7 billion by the year-end due to increasing orders from Japanese importers and the positive influence of Japanese participation in negotiating the Trans-Pacific Partnership, which would assist in bringing Vietnamese garment exports to the market.
Besides leather and footwear, seafood, bags and suitcases, exports of agricultural products to Japan also witnessed a healthy growth, as Vietnamese enterprises gradually adapted and then met Japan's technical barriers and standards.
In the January to August period, Viet Nam's imports from Japan hit $7.88 billion, surging 6 per cent against last year's corresponding period. Among major imports included machinery equipment and their parts, computers and components, electronics, steel and steel products, as well as plastic.
Four years after inking the Viet Nam-Japan Economic Partnership Agreements (VJEPA), many Vietnamese export businesses have effectively exploited the advantages of preferential tariffs to boost exports to the Japanese market.
However, in order to enhance the share of Viet Nam's goods in this difficult market, exporting companies must study the market for a better understanding of the commitments of the free trade agreements. They must also be prepared to face the challenges of meeting high technical standards, especially in overcoming the strict barriers imposed on food products entering the Japanese market. — VNS
VietNamNet Bridge – While the Ministry of Industry and Trade (MOIT) attempts to control beer production and consumption, the leaders of many provinces and cities are encouraging people to drink beer.
In a draft decree on beer production and consumption, MOIT stipulates that the activities of selling beer at schools, hospitals, offices, on the pavement, or to those who show “signs of getting drunk”, pregnant women, breast-feeding women, or to those who have abuse alcohol, will be considered illegal.
The ministry believes that if the beer production and market can be controlled with measures suggested in the draft decree, the brewery industry will develop well and increase revenue from beer for the state budget.
It estimates that once the decree takes effect, taxes will increase by VND3.1 trillion a year. The fee expected to be collected from beer production licensing would be about VND3.5 billion.
The draft decree which has been opened for public opinion has been described as “impractical” and “unfeasible”.
Phan Chi Dung, director of the MOIT’s Light Industry Department, admitted that it is difficult to clarify “the people with signs of getting drunk”, “pregnant women” and “breastfeeding women”.
He said that the enforcement of the decree, if it is approved, will depend on people’s awareness, and that the same difficulties with such sales have occurred in many other countries.
He also said that the intention of prohibiting to sell beer on the pavement has faced the strongest opposition from the public, especially from beer shop owners.
In fact, pavement beer shops are still allowed in many countries, but regulations on security and food hygiene are respected. Meanwhile, in Vietnam, these standards are often not met.
Another official of MOIT also commented that it is not feasible to prohibit selling beer on the pavement in Vietnam, because drinking beer in the open air on pavement is a typical characteristic of Vietnamese, which cannot be changed immediately.
In the past, competent agencies once prohibited sales of beer products at bus stations, and prohibited sales of beer after 8 pm, but the ban was never really enforced.
In related news, the Nghe An provincial authorities have issued a dispatch, calling on people to increase consumption of Hanoi, Saigon and Vida branded beer.
Nguyen Huy Quang, director of the Ministry of Health’s Legal Department, noted that he had never seen such a “strange” document, saying that the document needs to be removed because it is “abnormal”.
While economists believe that the instruction by the provincial authorities violates the Competition Law, Nghe An province’s Chair Nguyen Xuan Duong denied this, saying that it was similar to calling on Vietnamese people to use Vietnamese goods.
VietNamNet Bridge – Local experts have more grounds to believe that the Government’s target of curbing inflation at 6-7% this year is achievable given a slight consumer price index (CPI) rise this month as announced by the General Statistics Office (GSO).
Le Dang Doanh, former head of the Central Institute for Economic Management (CIEM), said aggregate demand remains low while industrial goods stockpiles are high and retail sales are lower than in the previous year due to weak purchasing power.
In addition, the nation has posted a low credit growth rate in the year to date. Fuel price drops in the world market have led to gasoline price cuts in the country but shipping charges, goods and service prices have yet to follow suit.
Therefore, low inflation has brought about positive signs but reflected a stagnation of the economy, Doanh told the Daily after GSO put the national CPI growth at 0.22% this month against the previous month and 4.73% over the same period last year.
Doanh projected inflation would stay at around 5.5% this year given no sudden changes in credit growth and global oil prices.
Dinh Tuan Minh from the National Institute for Science and Technology Policy and Strategy Studies said CPI usually goes up slightly in September and October and fluctuates strongly in the last two months of a year. This year, the nation’s CPI is expected at around 5%.
It is a good sign for Vietnam to maintain inflation at 5-6% after running high inflation in many years. “This supports macro-economic stability and structural reform,” Minh said.
This month, the national CPI has increased by a mere 0.22% against July and only 1.84% over late last year, according to GSO. This month’s CPI rise is the lowest level recorded for August in the past nine years
Do Thi Ngoc, deputy head of GSO’s CPI Department, said as numerous factors have curbed price increases this month.
The world prices of numerous essential goods remained stable or declined while domestic petroleum prices decreased thrice in nearly a month since July 18, Ngoc was quoted by Vietnam News Agency as saying.
In August, there are month-on-month decreases of 0.16% in fuel prices, 0.15% in public traffic service prices and 0.31% in housing and building material prices.
Meanwhile, food costs and restaurant services are up by 0.45% from the previous month due to higher rice demand for export. Rice exporters in the south have increased rice purchases to fulfill their contracts amounting to two million tons.
Festivals in August and rising breeding costs have caused food prices to go up by 0.54%, and greater demand for clothes, shoes and school materials also pushed up the prices of garment and footwear products by 0.32% beyond the new school year.
Gold prices have declined by 0.34% month-on-month and by 0.06% year-on-year. The U.S. dollar likewise fell by 0.26% month-on-month and 0.07% year-on-year.
September, 01 2014 09:30:59
Investors watch index developments at IRS Securities in Ha Noi. The VN-Index jumped 2.7 per cent to reach 636.65 points last week.– VNA/VNS Photo Tuan Anh
HA NOI (VNS) — The stock market continued to gain strongly last week. On the Ha Noi Stock Exchange, the HNX-Index jumped 4.4 per cent compared with the previous Friday's close to 87.04 points.
The average trading value and volume reached VND3 trillion (US$141.7 million) and 165.8 million shares.
On the HCM City Stock Exchange, the VN-Index added 2.7 per cent to end at 636.65 points. Trading value averaged VND1.1 trillion on a volume of 87.7 million shares daily.
In some of the first trading sessions last week, profit-taking took place, weakening the indices' increase, but the selling pressure was not widespread and buying power in general was retained.
Shares of the oil and gas sector joined those of real estate, pharmacy, rubber and blue chips to lead the market. On Friday, large-cap stocks such as those of PetroVietnam Gas (GAS), property developer Vingroup (VIC) and Vietcombank (VCB) assisted the VN-Index.
One of the sources of support last week were foreign investors, who were net buyers on the southern exchange. Their net purchases reached nearly VND913 billion ($43 million), largely because of VIC buying activities. However, they were net sellers in Ha Noi.
"The VN-Index is testing its resistance of 635 points," said FPT Securities Company's Le Thi Bich Hang.
With high liquidity, a positive investor sentiment, repeat purchases of foreign investors and favourable economic factors, Hang predicted that the market would maintain its momentum this week. However, if it reaches another resistance point at 640-650 points, trading could become rocky.
"Short-term investors may consider selling if the index comes to 640 points, while medium- and long-term investors should buy after that," she said.
The economy has signaled recovery. The consumer price index in August rose by 0.22 per cent compared with the previous month, a 4.73 per cent increase over that of the same period last year and a 1.84 per cent increase compared with that of last December. This has been the lowest rate in the last 13 years.
Meanwhile, a number of banks have reduced their deposit rates. On August 25, Vietcombank reduced rates for deposits in the dong by 0.2 per cent. The lowest deposit rate belongs to the Bank for Investment and Development of Viet Nam, with a one-month rate of 4.5 per cent per year. Banks are also expected to reduce lending rates in the coming months. — VNS
VietNamNet Bridge – A modern passenger terminal will be built on Phu Quoc island, a tourist destination in the south and Kien Giang province, to accommodate luxury cruise liners.
Phu Quoc island is a stopover of the 19 cruise ships departing from Singapore and traversing Thailand, Vietnam and other countries in North East Asia.
Without a port terminal, Phu Quoc receives small cruise ships bringing less than 1,000 passengers and crewmembers.
Recently Saigontourist, a leading travel operator in Vietnam, implemented a pilot scheme to bring 516 passengers and a 370-member crew aboard five-star Europe 2 ashore.
However, Europe 2 had to anchor off the coast and small boats were used to transport passengers to the island, causing inconvenience and security problems.
The Vietnam Maritime Administration is completing its review of detailed planning documents for the Phu Quoc Passenger Terminal for submission to the Ministry of Transport for approval in August 2014.
The terminal will be built at an estimated VND1,257 billion with the first phase alone costing VND400 billion.
The terminal is designed to receive luxury ships carrying 5,000-6,000 passengers such as Allure of the Seas, and Mariner of the Seas.
The sheer size and magnitude of the project requires a careful and comprehensive review, said Pham Tuan Anh, Deputy Director of Portcoast Consultant Corporation, which is hired to provide consultancy for planning.
At a recent working with the Ministry of Transport, Vice Chairman of the Kien Giang provincial People’s Committee Nguyen Thanh Nghi vowed to allocate land for the project.
It is forecast that the number of international sea travelers to Phu Quoc is likely to reach 105,000-190,000 each year by 2020, and even to 350,000-550,000 by 2030.
Last update 12:39 | 27/08/2014
VietNamNet Bridge – Some real estate developers have decided to invest in agriculture, usually considered a risky and unprofitable business field. This is seen as a positive sign by some, but others see the trend as worrisome.
The 2013 finance report of Hoang Anh Gia Lai showed that sugar projects brought VND840 billion in turnover just after the first year of implementation. The group has a vast sugar cane growing area of up to 10,000 hectares and a sugarcane pressing plant with the capacity of 7,000 tons of sugarcane per day.
Duc Long Gia Lai, the group well known for its real estate and hydropower plant projects, has surprised the public with the announcement that agriculture production will be one of its main business fields.
Duc Long Gia Lai has set up a subsidiary, Duc Long Gia Lai Agriculture, with the chartered capital of VND360 billion, which would develop projects to grow maize, sugarcane and rubber.
Thu Duc House is reportedly boosting forestry exports to Japan, including wood shavings for paper manufacturing and cassava for alcohol making.
The Tan Tao Group, a big industrial zone developer, has also jumped into agriculture production by setting up a company making fragrant rice. Tan Tao creates new rice varieties, provides varieties and capital to farmers, and takes responsibility for product sales.
The decision by the big real estate firms to invest in agriculture projects, in the eyes of economists, who had repeatedly warned that the state investments in agriculture were too modest, is a good sign.
Agriculture production, which is thirsty for capital, can benefit from real estate firms, which are very financially powerful.
Small developers jump on bandwagon
Licogi 14, a company which lists its shares on the Hanoi Stock Exchange, has made public a resolution of its shareholders’ meeting that besides real estate development, which is a core business field, it will also invest in agriculture production as well, especially aquaculture and seafood processing projects.
The announcement of Licogi 14 has caused a big surprise to everyone. Agriculture is quite unfamiliar for Licogi 14. It would be risky to invest in the sector, especially as a small enterprise.
Sources said some other real estate developers are also considering injecting money into agriculture projects. Since the real estate market is still sluggish with very weak demand, companies think profits are to be made in agricultural production.
However, some experts call the movement to invest in agriculture as an “abnormal tendency”. Agriculture is a risky production sector which brings low profits, and therefore, will be a tough playing field for small enterprises that lack experience, money, land fund and advanced technologies, which are all needed to achieve success.
An economist said it was time to ring the alarm bell over the “agriculture rush”, warning that overproduction would lead to poor sales of farm produce and the collapse of businesses, which would then adversely affect the entire economy.