Last update 18:00 | 01/05/2014
VietNamNet Bridge – Of the more than 500,000 operating enterprises in Vietnam, up to 95-96% are small and super-small ones. If household-scaled businesses are added to the statistics, the percentage of small, super-small and micro-enterprises may account for 99.9%.
VCCI Chair Vu Tien Loc.
Speaking at the dialogue between Prime Minister Nguyen Tan Dung and the business community on Monday in Hanoi, President of the Vietnam Chamber of Commerce and Industry (VCCI), Mr. Vu Tien Loc, said that of over 500,000 enterprises currently operating in Vietnam, 3,000 are state-owned enterprises, nearly 8,000 are enterprises with foreign investment and the remaining majority (97-98%) are private firms.
According to Loc, despite nearly 30 years of innovation with booming business opportunities, particularly in the areas of natural resource development, real estate, securities and banking, Vietnam has not yet had a generation of big companies and big brands that can compete with international rivals.
Vietnam also lacks mid-sized businesses, ones which are able to access new technology and become partners of transnational corporations and engage in the global value chain.
Loc added that of more than 500,000 operating businesses, large enterprises account for only about 2% and the ratio is similar for midsize enterprises. The remaining 95-96% of firms are small and super-small enterprises. Micro-enterprises (with less than 10 employees) account for 66-67%. If household-sized businesses are taken into account, the percentage of micro-enterprises may account for 99.9%, Loc said.
Given the problems that the business community is facing, VCCI gathered and submitted a report to the Prime Minister with over 300 specific recommendations. Among the petitions, the business community asked the government to continue innovating the legal system on business to guarantee property rights, business freedom and equal competition of businesses.
Last update 13:42 | 29/04/2014
VietNamNet Bridge – The Government will create favorable conditions for the business community to increase productivity, competitiveness, quality and competitiveness and make contribution to the nation’s socio-economic development.
PM Nguyen Tan Dung -- Photo: VGP
PM Nguyen Tan Dung made the statement on April 28 at his conference with businesses in 2014.
The PM applauded efforts, achievements and contributions of the business community to the nation’s socio-economic development over the past time.
The nation has fulfilled goals set in the five-year-plan in the phase from 2011-2015 such as stabilizing the macro-economy, controlling inflation, guaranteeing social security, improving people’s lives, ensuring national defense and raising Viet Nam’s status in the world.
PM Dung also pointed out difficulties and shortcomings facing these businesses such as the number of enterprises is still low in comparison to the population and 97-98% of businesses are Small and Medium-sized Enterprises (SMEs).
The PM suggested ministries, agencies and localities work with the business community to further improve the investment and business environment.
The Government has paid due attention to completing the market economy regulations, setting up mechanisms and policies and implement administrative reforms for these businesses to develop, stressed the PM.
The PM instructed the banking sector to help enterprises get access to credits. He asked the Governor of the State Bank of Viet Nam to develop the capital market and create a close connection between banks and businesses.
The leader required these enterprises to raise their competitiveness, increase labor productivity, apply technology into production and enhance business management competence.
Besides, businesses are suggested to coordinate with functional agencies in preventing and controlling counterfeits and low-quality products as well as expand domestic and foreign markets, establish business culture and strictly follow the State’s regulations and rules.
Last update 16:15 | 28/04/2014
VietNamNet Bridge – The US fast food giant McDonald’s may not gain market share as quickly as planned, due to its late arrival in Vietnam vis-à-vis its rivals, experts say.
The biggest rivals of McDonald’s are Lotteria, KFC and Jollibee, all of which have had a presence in Vietnam for a long time, and now command 80 percent of the fast food market segment.
Lotteria is taking the lead in demonstrating that the invasion of the Double Arches is nothing to fear. The chain is opening a series of shops on the most crowded streets of HCM City – Nguyen Du and Ly Chinh Thang.
The fast food chain and KFC are now moving ahead with their business expansion plans by marching on towards other developed cities, including Phan Thiet.
The Asian Jollibee, encouraged by its success in the struggle with McDonald’s in the Filipino market, is staying calm, continuing its plan to open a new shop in District 3, targeting children.
A branding expert, when asked about the future of McDonald’s in Vietnam, noted that this depends on the number of shops McDonald’s plans to set up in the coming years.
If it plans to have 10-20 shops throughout the country, it will surely succeed. However, it would be impractical for it to open hundreds of shops.
In principle, once a fast food chain decides open many shops, it had better be sure it can bring the average prices of it products down to a level that fits the average Vietnamese income. That is because the company is forcing itself to target the majority of fast food customers rather than a small demographic with high incomes.
In other words, McDonald’s will succeed only if its products are positioned as valuable products.
McDonald’s has revealed that it will open its second shop in Vietnam on April 30, also in HCM City.
The first challenge for McDonald’s when opening the second shop, according to the above said branding expert, is that the customers in HCM City will have two shops to go to. In the worst scenario, customers would flock to one shop, leaving the other more deserted than usual.
That scenario is very likely to happen. Observers have noted that most of the customers going to the first McDonald’s shop are those who drive motorbikes, i.e., customers with medium incomes and young customers under the age of 25.
Moreover, the most outstanding feature of the customers under 25 is their modest income and fickle tastes. They lack the two most important characteristics that McDonald’s needs – high income and loyalty.
Tamnhin.net has quoted a foreign newspaper as commenting that McDonald’s McPork, priced at $3.10, is proving to be too expensive in light of the modest average Vietnamese income of $150 and the average food price in Vietnam.
McDonald’s has been trying to attract an upscale segment with its drive-thru service, which targets high income earners who come to the shop in their cars. However, a businessman noted that fast food is not the kind of thing that he and his colleagues, mostly middle-aged, like.
In newly emerging markets, the nouveau riche tend prefer using those services or products which can display their high status in society. iPhone is an example. Meanwhile, young upscale diners eat at McDonald’s but may not think of returning, because wolfing down a Big Mac just doesn’t bring the same “intangible value” as wandering down a street with iPhone in hand.
Last update 09:14 | 28/04/2014
VietNamNet Bridge – At the April press conference of the State Bank of Vietnam (SBV) on Friday, the non-performing loans of the banking sector by the end of February were announced at VND122 trillion ($5.8 billion), accounting for 3.86 percent of the total debt balance.
However, Mr. Dao Quang Tinh, SBV’s vice chief supervisory inspector, said the bad debts would be up to nearly VND308 trillion ($14.66 billion), accounting for 9.71 percent of the total debt balance, if restructured bad debts were included.
Earlier, the National Financial Supervisory Commission said that the bad debt of the banking system is approximately 9 percent, instead of the 15 percent as reported by Moody's.
The central bank also said that deposit growth is currently five times higher than credit growth. By the end of March, loans for the [real] estate business grew 3.95 percent, compared to 1.09 percent of the first 3 months of the year.
Regarding a VND30 trillion package to aid low-income earners in buying homes, the State Bank said that so far credit agreements worth VND3.29 trillion had been signed, of which VND1.89 trillion has been disbursed.
The national industrial production during Jan-April 2014 saw a 5.4 per cent year-on-year increase. — Photo cafef.vn
HA NOI (VNS) — The national industrial production during Jan-April 2014 saw a 5.4 per cent year-on-year increase, a positive sign of production recovery at enterprises, noted the General Statistics Office (GSO).
The office claimed that the index of industrial production (IIP) in April surged 6 per cent against the corresponding period last year, according to the Thoi bao Kinh te Viet Nam (Vietnam Economic Times).
Of the total reported rise, the growth rate of industrial production was 0.4 per cent for the mining industry, 7.5 per cent for the processing and manufacturing industry, 10.6 per cent for electric production and distribution, and 3.3 per cent for water supply and wastewater treatment.
During the period, the industrial production rose 7.4 per cent for the processing and manufacturing industry, 9.6 per cent for electric production and distribution, and 5.4 per cent for water supply and wastewater treatment.
Also, in the initial four months, many products registered a growth rate in production, such as television up 32.9 per cent, footwear up 31.1 per cent, rolled steel up 22.4 per cent, auto up 16.7 per cent, and processed seafood products up 13.7 per cent.
However, some other products registered a decline in production, such as raw steel down 11 per cent, motorbike down 7.4 per cent, coal down 5.8 per cent, and textile down 3.1 per cent.
The office also reported that the consumption index of the local industry for the first quarter rose 5.5 per cent in comparison to the same period last year.
The production sectors having high consumption were electric equipment production with a growth rate at 21.8 per cent, leather and related products (up 19.8 per cent), products made from prefabricated metal (up 13 per cent), and vehicles (up 1.28 per cent).
The inventory index of the processing and manufacturing industry at April 1 posted a month-on-month increase of 13.9 per cent and a year-on-year surge of 13.1 per cent.
Other sectors reporting higher inventory than the same period last year were electronics, computers, tobacco products, medicines, pharmaceutical products and materials, leather, and paper. — VNS
It said that the prices of food, which accounts for 40 per cent of the goods basket used to calculate the CPI, declined by 0.26 per cent. — Photo 24h
HA NOI (VNS)— The country's consumer price index (CPI) in April inched up 0.08 per cent against the previous month thanks to the abundant sources of supply amid low demand.
Deputy Director of the General Statistics Office's (GSO) CPI Department Do Thi Ngoc said that the slight rise of the CPI this month was in line with the country's price-changing rule for the past 17 years, when the CPI often inched up or down in April only.
However, the office noted that compared with December last year, the index rose 0.88 per cent, the lowest rise for the past 13 years. Except for an acceleration of 9.64 per cent in 2011, the CPI in the 2002-13 period averaged between 2.5 per cent and 5.4 per cent.
The marginal rise in April was because the prices of many necessities fell or rose slightly, the office said.
It said that the prices of food, which accounts for 40 per cent of the goods basket used to calculate the CPI, declined by 0.26 per cent.
The prices of housing and construction materials, including rent, electricity, water, fuel and construction materials, also slid by 0.56 per cent, while the prices of both postal services and telecommunication baskets eased by 0.14 per cent, the data showed.
Many other goods and services also reported a marginal rise in April, such as education which was up 0.06 per cent; medicine and health care which went up by 0.04 per cent; and culture, entertainment, and tourism which rose by 0.02 per cent.
During the month, the prices of traffic services reported the highest hike of 0.33 per cent. The garment, footwear and hat sector followed with a rise of 0.26 per cent in prices.
Not included in the CPI components, the gold prices in April dropped by 1.04 per cent, month on month, while the US dollar prices edged down by 0.06 per cent, month on month.
In urban areas, this month's CPI edged up by 0.06 per cent, month on month, while in rural areas, it was a rise of 0.11 per cent. — VNS
Last update 10:00 | 25/04/2014
VietNamNet Bridge – While the State Bank of Vietnam believes that the merger of small and weak banks into larger and stronger ones will help speed up the bank restructuring process, experts don’t think this is a perfect solution.
Local newspapers have quoted an official of the State Bank as saying that, instead of buying weak banks’ shares to recover them, the watchdog agency now tends to encourage small banks to merge into big ones. The official said the new solution can help speed up the banking system restructuring process because it allows for savings on costs and time.
As the central bank has “turned on the green light”, commercial banks have been trying to find suitable matches. PG Bank plans to merge into VietinBank, and Southern Bank into Sacombank, while Maritime Bank is considering taking over Mekong Bank. Vietcombank, one of the largest Vietnamese banks, is also considering taking on a small bank, but the name of the bank remains a secret.
Meanwhile, economists, remaining skeptical about the effects of the merger and acquisition (M&A) agreements on the bank restructuring process, have commented that the M&A deals look more like rescue missions than sound business deals.
What they mean is that, in the deals, big banks are serving more as the rescue team in charge keeping the small banks afloat, while not receiving any benefits in return.
Regarding the Southern Bank–Sacombank M&A deal, an analyst said there is no need for Sacombank to “take on” Southern Bank, a small and weak bank with a non-performing ratio of over 4 percent, the majority of which are irrecoverable.
The analyst thinks that the central bank wants to see banks merge into each other to cut down on the number of weak banks and reduce the degree of circular ownership, a big problem of the banking system. If so, the liquidity problems and bad debt settlement would be sped up.
If everything goes smoothly, the number of Vietnamese banks will be halved by 2015, from 45 to 20.
However, the analyst commented that the lowering of the number of banks is not enough to restructure and strengthen banks.
Yun Hang Jin, from Korea Investment & Securities, noted that after an M&A, the bad debt of the new bank would be worse, as it would now equal the total bad debts of the two banks. Therefore, one cannot say that an M&A would help improve the “health” of the banks or help them escape from liquidity problems.
Dau Tu newspaper has quoted Dr Nguyen Duc Thanh, Director of VEPR, an economics research center, as saying that the takeover of the state owned banks over small banks may weaken the competitiveness of the whole banking system.
Thanh explained that if the big banks have more power, they will have greater influence in the policy making process, which would allow them to control the market.
He noted that the State Bank has been trying to save weak banks by encouraging M&A deals instead of bringing the weak banks to bankruptcy, because bankruptcies of banks may lead to immeasurable consequences to the financial market and society.
Compiled by K. Chi
To create a safe investment environment for foreign investors, Vietnamese laws guarantee their right to legally transfer profits abroad after completely discharging their financial obligations to the State.
One provision of the relevant law says foreign investors need not pay tax on overseas remittance of profits. This aims to prevent double taxation because only profits after tax can be remitted abroad, which means foreign investors are required to pay income tax before transferring profits overseas.
In this case, the responsibility to pay such income tax does not belong to the foreign investors individually, but to the enterprise through which they make their investment.
Profits that can be remitted abroad are net profits gained from direct investment activity. Foreign investors may remit eligible income overseas either annually or on termination of corresponding investment activities in Viet Nam. Such profits are determined in audited financial statements and corporate income tax (CIT) finalisation declarations lodged by the enterprise (in which the foreign investors contribute capital) to the tax authority directly managing it.
Profits eligible for annual overseas remittance are those that are distributed to or obtained by foreign investors from direct investment activity in a fiscal year, plus (+) other amounts including profits that have not been remitted in previous years, minus (-) the amounts foreign investors have used or committed to use for reinvestment in Viet Nam and other amounts spent on expenses for production and business activities or on their personal needs in Viet Nam.
Profits that qualify for remittance abroad on termination of direct investment activity in Viet Nam are the total profits earned by foreign investors during the implementation of such activity, minus (-) the amount used for reinvestment, the amounts remitted overseas throughout the operation of the investors in Viet Nam, and the amounts used for other expenditures in Viet Nam.
It should be noted that foreign investors are permitted to remit overseas the profit portions earned from direct investment activity of a profit-making year only when the enterprise in which foreign nationals participate by investment has completely deducted accumulated losses in accordance with CIT laws and regulations.
In case the pre-tax profit earned by an enterprise in a fiscal year is less than losses carried over from previous years, it cannot be remitted abroad by foreign investors.— PLF- LAW FIRM
Last update 11:20 | 23/04/2014
VietNamNet Bridge – The National Assembly Standing Committee yesterday (April 22) took a close look at draft revisions and amendments to the 2005 Investment Law.
Steel sheets produced at the Siam Steel Viet Nam company. The National Assembly has approved revisions to the 2005 Investment law that will cut more red tape and create a more open and favourable environment for investors.
Eight years after the law came into being, domestic and foreign investors still face a lack of transparency, as well as clear conditions and procedures for investment. The revision of the law aims to cut unnecessary administrative procedures and create a more open and favourable environment for investors, while simultaneously dealing with enterprises' difficulties.
The NA Standing Committee members said the board should take into consideration international agreements currently under negotiation between Viet Nam and foreign partners, so that the revised law would not become out of date when those deals are signed.
The NA Economic Committee, which is in charge of examining the draft revised law, was of the opinion that the law should include a list of specific areas where investment is banned, thus making it easier for investors to make decisions and facilitating the enforcement of the law.
Minister of Planning and Investment Bui Quang Vinh said there were several dozen areas banned from investment and around 330 other fields that required certain conditions for investment. He added that the drafting board was currently verifying whether the investment ban in these fields was in line with the Constitution.
NA Vice Chairwoman Nguyen Thi Kim Ngan requested that the drafting board further research potential problems facing the implementation of the law to ensure that it was comprehensive and specific and would ensure a fair environment for both domestic and foreign investors.
Change in judicial system
National Assembly Standing Committee members have also agreed with a proposal by the Supreme People's Court to establish regional People's Courts and a four-level court system to replace the present system.
The move was made to handle the overload of work at current courts. It was part of the draft of revised law on the organisation of People's Courts discussed by the Standing Committee yesterday.
The revised law suggests that the People's Court system be divided into four levels: the Supreme People's Court, the High-Level People's Court, the Provincial People's Court, and the First-case regional People's Court.
There was some concern that regional People's Courts, which would be the first to judge, would have to cover a larger area, forcing people to travel more.
Chief Judge of the Supreme People's Court, Truong Hoa Binh, said that the regional People's Court would be set up to curb overloading at current courts.
Chairman of the NA Law Committee, Phan Trung Ly, said he was concerned about a regulation relating to the management of the Supreme People's Court over the organisation of all courts.
"The regulation will force the Supreme People's Court to take over too many tasks, which will possibly result in overloading and reduce performance," he said.
The revised Institution regulates three tasks of the Supreme People's Court, including judgements, reconsidering judgements made by other courts on appeal and supervising the judicial process.
Members of the NA Standing Committee also agreed with setting and applying legal precedents in judgements, especially with decisions made after the Supreme People's Court reconsidered cases.
They said that the decisions would be considered samples for other courts to learn and follow.
Vice NA chairwomen Tong Thi Phong urged the draft compilers to clarify the definition of "legal precedent" to ensure the consistency of the legal system.
Normally, legal precedent is known as a judicial decision that may be used as a standard in subsequent similar cases.
The lawmakers also agreed that the retirement age of judges working in the Supreme People's Court should be extended to 65 for men and 60 for women.
The retirement age of judges at other courts still follows the Labour Code.
This is the second time that the revised Law on the Organisation of the People's Court has been submitted for consideration during an NA general session.
Last update 11:21 | 23/04/2014
VietNamNet Bridge – Legendary investment advisor Marc Faber, also known as Mr Doom, will speak to local and international investors whether the terminal phase of a gigantic global credit and asset bubble has been reached at an event on June 19 in Vietnam.
Marc would raise deep-rooted concerns over a possible global bubble burst and define opportunities for emerging markets and Vietnam.
He is scheduled to reiterate how global bubbles are created and predict when they will burst at the Vietnam Investment Forum (VIF) 2014 to be co-organised by VIR, Malaysian-owned HVS Securities Co. and Hong Kong-based Asia Frontier Capital (AFC).
Dr Marc Faber, publisher of the Gloom, Boom & Doom report and writer of the best-seller Tomorrow’s Gold: Asia’s Age of Discovery, will also predict how global funds would flow as the consequence of such a collapse.
Marc is one of the world’s most noted market contrarians. In a television interview late last year, he said “Given all the money printing that is going on globally – and not just in the US – and given that the total credit as a percent of the advanced economies is now 30 per cent higher than in 2007 before the crisis hit, I think that gold is a good insurance.”
“I’d rather buy something that is reasonably priced. And, I think gold shares are very inexpensive. So a basket of gold shares I think next year (2014) could easily appreciate 30 per cent. “I think the Vietnamese stock market will continue to rise.”
“The Rise of Emerging Markets and Opportunities for Vietnam” will include AFC CEO Thomas Hugger speaking on investment strategies in frontier markets and Vietnam. Thomas is slated to talk about how Asia and particularly frontier markets will become more tempting as developed markets face increased risks.
His talk will focus on perspectives and investment strategies in frontier and emerging markets and Vietnam in particular.
A panel will discuss the rise of emerging markets and opportunities for Vietnam. Marc and other high profile people will sit in the panel on the most pressing issues for debate.
The full-day event would gather together 500 participants, including local business leaders and global fund managers, said VIR Editor-in-chief and VIF chief organiser Dr. Nguyen Anh Tuan.
“We’re doing our best to make Vietnam better known internationally and provide venues for international investors and local business leaders to exchange ideas and investment opportunities,” Tuan said.