- Updated : 4/25/2015 6:39:48 PM
(VOV) - Vietnam saw auto industry revenues surge in 2014 amid the rapid expansion of a young, style-conscious middle class following 15 consecutive years of economic growth of over 5%.
While major regional vehicle markets Indonesia and Thailand experienced annual declines in sales last year, revenues in Vietnam shifted into high gear, lunging 43 per cent on-year, according to the Vietnam Automobile Manufacturers Association (VAMA).
Toyota, Mercedes-Benz, Ford and Honda all reported solid annual sales increases, despite relatively high import taxes imposed on both completely built-up (CBU) vehicles and completely knocked down (CKD) imports.
Completely built-up and completely knocked-down
Quite simply, when a resident purchase a foreign vehicle brand in Vietnam, they have the option of choosing either a CBU or a CKD version.
In order to protect the local auto industry the government has levied higher import duties on all CBU foreign vehicles. This, in substance, serves as a penalty tax and has created an economic incentive for the manufacturer to opt to sell the CKD version.
A CBU vehicle is imported as a fully finished unit, ready to drive once it arrives on Vietnam’s shores. One can think of it as 100% foreign made, being that it was assembled by a foreign workforce generally using parts made in its country of origin.
In short, no Vietnamese labour or assembly were involved. As such, the import duty levied on a CBU vehicle is determined in accordance with the ASEAN Trade in Goods Agreement (ATIGA).
The ATIGA pact, signed in February 2009, came into effect on May 17, 2010. Under it, Vietnam has agreed to phase out vehicle-import duties from ASEAN countries from 50% this year to 40% by 2016, 30% by 2017 and completely eliminate it in 2018.
Although there is a common belief that a CBU vehicle is completely manufactured and assembled in its country of origin, this is not always the case. Quite a few CBU models – particularly from Honda and Toyota – imported into Vietnam have been assembled in Thailand.
A CKD vehicle is imported as a knock-down kit that relies on local assembly. While most of the individual parts have usually been manufactured in the vehicle brand’s country of origin, the assembling of the vehicle was performed in a local plant by a Vietnamese workforce.
To receive additional tax preferences, many manufacturers have also incorporated local content (Vietnamese-made parts like tyres, windows, and headlights) into the vehicle. In view of the jobs created by CKD vehicles, the import duty imposed on them has been significantly lower.
A number of leading importers have said that while high taxes have put the brakes on Vietnam's domestic auto market in the past, the complete elimination of tariffs on the other hand, will most likely destroy the market entirely.
Yoshihisa Maruta, general director, of Toyota Vietnam said the situation has put his company’s business strategy in limbo and it has not yet decided which path to follow, either to continue assembling vehicles in Vietnam or importing vehicles for domestic sale.
With the tariffs being phased out, it obviously will be less expensive for the customer to import a CBU vehicle as opposed to the current CKD model the company has been following.
In addition, the reduced tariffs are also certain to bring about stiffer competition from other manufacturers in the industry – especially from India he said, hinting that the company may be forced to close all operations in Vietnam.
Toyota Vietnam led the market in car sales for 2014, selling 41,200, holding a 31 per cent of the market share. Any legitimate cost benefit analysis won’t support gearing up financial investment and automotive manufacturing in Vietnam at these modest levels of production.
Vinastar, a joint venture assembling Mitsubishi vehicles, has already announced it will switch to the CBU model by 2018 adding that this really isn’t a difficult decision as consumers naturally will migrate to the lower cost model.
Suzuki Vietnam has declined to talk about its future business plans. However, the manufacturer late last year chose Ertiga, a 7-seat car imported from India as its strategic car model to compete with other rivals.
Hyundai, a well-known RoK brand for which many Vietnamese hoped would invest in the automotive industry, has recently announced that it will shift its focus on production to Malaysia.
For his part, Dezan Shira & Associate suggested that without government support Vietnam, vehicle manufacturers will be forced to make the clear cut financial decision to import vehicles rather than assemble them in country.
Goods being unloaded at Cat Lai Port in HCM City. The city achieved robust economic growth in the first four months this year. — VNA/VNS Photo Huy Hung
HCM CITY (VNS)— HCM City achieved robust economic growth in the first four months of the year, the city administration's website reported without furnishing the growth figure.
Retail sales and services amounting to nearly VND211.5 trillion (approx. US$9.8 billion), a year-on-year increase of 10.7 per cent, according to figures released at a meeting to review the performance on Thursday.
Exports in the period edged down to $9.29 billion, but exports ex-crude oil rose 8.3 per cent to $8.03 billion.
Exports of industrial products accounted for 69.4 per cent of non-crude exports, according to Thai Van Re, director of city Department of Planning and Investment.
If oil prices had not slumped, there would have been a sharp increase in exports in line with the targets set by the city.
The industrial growth index was up 5.7 per cent (compared with 5.2 per cent last year) as industrial production expanded due to a focus on processing and manufacturing at the cost of mining.
Domestic and foreign direct investment was also on the rise.
As of April 20 licences had been issued for 8,823 new local firms with a combined registered capital of nearly VND47 trillion (nearly $2.2 billion) a year-on-year increase of 15.7 per cent and 10.4 per cent.
In addition, 158 new foreign projects worth $615.3 million were also licensed, a 55.9 per cent increase in number but a 12.3 per cent decrease in capital.
In May the city authorities will focus on some major targets like fully tapping domestic demand, strengthening distribution networks in remote areas and maintaining traditional overseas markets while seeking to expand into new ones.
They will launch new promotion campaigns to enable city businesses to exploit their domestic and overseas markets and help companies in the price stabilisation programme develop their distribution networks for essential goods. — VNS
VietNamNet Bridge - Vietnamese consumers want to purchase local farm produce, but they can only find Chinese products, and farmers cannot sell their products because merchants are selling primarily Chinese products.
Thousands of tons of watermelon in Quang Nam Province have been thrown away as they could not be sold. Dozens of watermelon-laden trucks were stuck at the Tan Thanh border gate because the fruit could not be sold to Chinese businesses.
Local newspapers reported that the onion price in Da Lat and Soc Trang has dropped dramatically because of oversupply. More than 50,000 tons of unsold onions are piled up in Soc Trang province, where the onion price has dropped from VND20,000 per kilo to VND5,000.
Meanwhile, Vietnamese housewives complain they cannot buy local onions at the markets as there are only Chinese products.
A report of the Ministry of Industry and Trade (MOIT) showed that the export turnover of key export items such as rice, coffee and rubber in the first three months of the year dropped sharply by 30 percent.
The public has spearheaded the criticism of MOIT, which is seen as responsible for the farm produce’s lack of sales.
A member of a parents’ forum wrote that MOIT should help farmers boost sales in domestic and world markets instead of “standing by idly” and watching farmers bargain farm produce away.
“MOIT announced some days ago that 80 percent of watermelon has been sold. But the real situation is much more pessimistic,” he wrote.
In fact, MOIT has done what it can to help farmers sell watermelon. The ministry’s trade union collected tons of watermelon stuck at Tan Thanh border gate, transported them to Hanoi and sold them at the ministry’s head office at VND7,000 per kilo.
A vice director of the ministry’s department, on his Facebook page, called on people to buy watermelon to help farmers settle difficulties.
However, this is not a long-term solution to Vietnam’s farm produce distribution problem.
“By selling watermelon on Facebook and at the head office, MOIT can only help save tens of tons of watermelon at maximum,” an economist noted.
“What it should do is apply drastic measures to regulate the domestic market,” he said.
Vu Vinh Phu, former deputy director of the Hanoi Trade Department, and now chair of the Hanoi Supermarket Association, said there are big problems in the distribution system.
In Long An province, dragonfruit is sold at VND5,000 per kilo only, while Hanoians have to pay VND35,000 per kilo.
Deputy Minister of MOIT Tran Tuan Anh, in reply to the criticism, said that MOIT alone cannot settle the problem, and that this issue relates to the reorganization of agricultural production.
Prime Minister Nguyen Tan Dung (second from right) speaks at a national teleconference discussing the Party Central Committee's 2012 Resolution No.13 on building a synchronised infrastructure system in Ha Noi yesterday. — VNA/VNS Photo Duc Tam
HA NOI (VNS) — Investment in infrastructure development is pivotal to Viet Nam's journey towards becoming an industrial nation by 2020, Prime Minister Nguyen Tan Dung said at a national teleconference discussing the Party Central Committee's 2012 Resolution No.13 on building a synchronised infrastructure system.
Dung said building infrastructure must be appreciated as a strategic necessity if the nation wishes to achieve both a rapid and sustainable development.
He placed the Ministry of Natural Resources and Environment at the helm of the development program-me, putting the ministry in charge of planning land clearance for all infrastructure projects throughout the nation.
"Resolution 13 has been strictly implemented by ministries, sectors and localities nation-wide. Public investment, so far, has been effective in key areas.
"Public – private partnerships have been put to good use in infrastructure development projects. These successes have greatly contributed to socio-economic development, improving people's living conditions, as well as improving national security and defence," Dung said.
To further enhance these successes, PM Dung asked all ministries, sectors and localities to work hard to overcome challenges they may face so as to focus efforts on enhancing collaboration between agencies and enterprises in the implementation of infrastructure construction projects.
Dung also assigned the Ministry of Planning and Investment (MPI) with the mission of calculating how big of a chunk of the State budget will be required over the next five years, from government bonds to Official Development Aid.
A report from the MPI said that in the three years following the issue of Resolution 13, several important infrastructure projects moved forward that improved connectivity between regions, such as the Ho Chi Minh-Trung Luong, Cau Gie-Ninh Binh and Noi Bai-Lao Cai expressways.
In addition, many energy projects have received investment money and support to further the modernization of the national power transmission system.
The PM's speech concluded that, in the last three years, considerable development in all domains - education, health care, science and technology – had been well noted.
Dung, however, warned that if Viet Nam fails to build better infrastructure, it won't sustain the six per cent GDP growth Viet Nam enjoys at present.
"Resolution 13 is a manifestation of the direction charted out by the Party. It has enjoyed support from our people and achieved notable successes in the past three years. We should continue to mobilise and use efficiently all the resources available to continue its progress in the years to come," said Dung. — VNS
Governance and public administration: We are at a standstill
On April 14, the 2015 survey "Provincial Governance and Public Administration Performance Index" (PAPI) conducted by the Vietnam Fatherland Front, Center for Community Support and Development Studies (CECODES) and the United Nations Development Programme (UNDP) was released.
Held for the fourth time, PAPI has become a credible tool for policy monitoring, a mechanism for people to “mark” the provincial governments and express their satisfaction with the job of local governments.PAPI 2014 shows a panorama that is not different in comparison with the starting point four years ago, in 2011.
In the six areas measured: the participation of citizens, transparency, accountability, control of corruption, and provision of public services, the national average score declined in the first field and only slightly increased or remained in the remaining fields. Compared to 2013, the decline was clearer, occurring in five fields, except for provision of public service.
Some worrying matters showed by PAPI four years ago seem to have not been resolved.
Nationally, only 16% of the people knew about land-use planning in their locality, although this has been specified in the Ordinance of Grassroots Democracy, and is one of the most fundamental concerns of the people. This number fell by 20% compared to four years ago.
For half the population, environmental quality is the number one concern. With a quarter of the people, corruption is the most burning issue in society. Food safety and hygiene, drug addiction and traffic accidents are the other issues.
Compared with previous years, petty corruption increased slightly. At least 49% of people said that they had to give a bribe for a job in the public sector and 43% had to give have to bribe at the hospital. At least 33% had to pay black money to get the certificates for land-use rights and 30% had to give money to teachers.
In particular, the majority of people (and almost all in Ha Giang, Dien Bien, Khanh Hoa, Soc Trang) said that the relations with someone in the local government was very important if they wanted to work in government agencies, for example, commune policemen, administrative personnel, or primary teachers.
This is eloquent evidence for the prevalence of the phenomenon of "bribe for positions" from the lowest level of government. Consequently, the administrative apparatus rejects potential candidates who don’t have relations with officials to recruit those of poor qualifications.
Another concern is the inequalities between different groups in society. In the same locality, the poor, the less educated, and minorities tend to assess the quality of public services and other aspects of governance at a lower level. Clearly there is discrimination, and it seems that the citizens who “have power" (through education or income) received a more favorable treatment from the apparatus of government.
Compared with last year, the provinces of Quang Binh, Quang Tri, Vinh Long, Long An, and Ba Ria-Vung Tau still retain their positions in the top group. Vinh Long and Quang Tri made significant progress in scores. In the middle segment, Quang Ngai and Binh Duong also recorded good improvement. Ninh Binh, Ha Nam and Ca Mau were on the weakest team in 2013, but they made significant progress in 2014.
In contrast, Can Tho, Ha Giang, Khanh Hoa, Cao Bang, and Dien Bien are the provinces with the general level of satisfaction of the people declined compared to 2013. Among the five centrally-governed cities (Hanoi, HCM City, Danang, Can Tho and Hai Phong), Da Nang and Ho Chi Minh City stood steady in the top group. Hanoi, Hai Phong and Can Tho were in the bottom half of the table and they declined in the scores.
What is special about Da Nang and Ho Chi Minh City compared to the three other central cities?
The recent strikes by workers in Ho Chi Minh City to protest the Social Insurance Law, locals protesting the project encroaching Dong Nai River, the project to cut down 6,700 trees in Hanoi, and the Son Doong cable car project have all demonstrated a very basic and important principle of good governance: it is that the government needs to consult the people in the drafting of policies, and provide transparent information in a timely manner to people in the process of policy implementation.
If the principle of "people know, people discuss, people do and people check" is only on paper without actually going into life, people's confidence in the government will be shaken, even the conflict between the two parties will happen, because people will not feel that the local authority is theirs, and we then have to pay for huge economic losses caused by inaccurate decisions, and political losses from the government’s loss of the people’s support.
In this context, the project PAPI, through the voices of 13,500 people across the country on the issues closest to them, is a sustained effort giving the people a supervisory role while giving warnings about the shortcomings to the government for timely adjustments.
More than 30 provinces and cities have disseminated the results of PAPI to the district and even commune level, and set up specific projects to work with the data, in order to improve the quality of government operations and improve the satisfaction of the people. This is an encouraging first step.
However, the result of PAPI in the past four years has not shown clear progress. In a world of increasing competition, we are losing precious years and the people do not want to wait any longer.
Dr. Dang Hoang Giang
CECODES Deputy Director
Vietnam is changing rules to allow foreign investors bigger stakes in local banks in its latest move to rebuild a financial sector battered by bad debt, according to the country's prime minister.
"Foreign investors indeed have helped Vietnamese banks a lot, changing them inside out," Duong said. "They are willing to wait as they know there will be time when they can own more."
Construction steel sold in March hit 651,633 tonnes, increasing 160 per cent over last month and by 14.4 per cent compared with the same period last year. — Photo giasatthep
HA NOI (VNS) — The Viet Nam Steel Association (VSA) member companies' domestic steel consumption rose in the first quarter, reaching 2.5 million tones – a 25 per cent increase on the year.
The domestic steel industry produced 2.7 million tonnes in the first quarter, up 17 per cent over last year.
More than half of the steel consumed – 1.29 million tonnes – was construction steel, which saw a year-on-year increase of 10.5 per cent.
Construction steel sold in March hit 651,633 tonnes, increasing 160 per cent over last month and by 14.4 per cent compared with the same period last year.
Nguyen Van Sua, vice chairman of the VSA, attributed the increase in steel consumption to the market's overall growth in March and the first quarter.
The country's gross domestic product (GDP) edged up 6.03 per cent in the first quarter. The industrial and construction sector posted growth of 8.25 per cent.
The Government has promulgated policies to support the country's economic development, including the property market, warming up the construction materials market and helping boost steel consumption, according to the VSA.
Despite positive domestic consumption, the sector exported 390,162 tonnes in the first quarter, a slight decrease compared with 392,132 tonnes in the same period last year.
The domestic steel market would see more change after free trade agreements were signed, economic experts said. They urged the VSA, ministries and agencies to prepare to manage the quality of steel imported to Viet Nam. Trade defence measures were also needed to protect domestic producers.
Enterprises were also advised to improve technology, administrative efforts and competitiveness so they could integrate more effectively in the future. — VNS
The management board of the Bank for Investment and Development of Viet Nam (BIDV) announced its plan to merge with the Mekong Housing Bank (MHB) at a shareholders meeting on April 17.
BIDV Chair Tran Bac Ha at the shareholders' meeting on April 17.
BIDV would issue 336.9 million shares, with a combined value of VND3.369 trillion (US$160.43 million) to complete the merger, with every share of MHB converted into a share of the development bank.
The deal would be implemented with the principle of "maintaining a status quo" to assure that no changes in the business activities of both parties are required.
BIDV Chairman Tran Bac Ha said the merger was part of a Government-adopted plan to restructure the banking system, and it was expected to be completed in late May. The deal was based on spontaneous intentions, as BIDV was aiming for network expansion and MHB at a targeted financial ability enhancement.
"The merger will help us expand networks and customer bases, and intensify capacity in agricultural and rural fields. It will also allow us to enhance our position as a strong financial institution in Viet Nam... with adequate competitiveness to integrate with other banks in the region and the world," the management board's report said.
MHB was among the top 10 banks having the largest networks nationwide, with 44 branches and 185 transaction offices in 35 provinces and cities. Its total asset value is now 110 times as much as that recorded during its establishment in 1997.
"If we only rely on ourselves, it will take seven years to develop a network similar to that of MHB today," said Ha.
The Mekong (Cuu Long) Delta-based MHB had stated earlier this month that the merger was underway, and had shown sustained and healthy development.
Last year, its total assets grew 17.4 per cent year-on-year to about VND45 trillion (US$2.14 billion), and pre-tax profits reached VND162 billion ($7.71 million), reflecting a year-on-year increase of 14 per cent.
Its deposits jumped 14.4 per cent to more than VND37 trillion ($1.76 billion), and outstanding loans expanded by 13.8 per cent to VND30.60 trillion ($1.46 billion) in 2014, with the bad debt ratio pegged at 2.72 per cent at the end of the year.
Chairman Ha told Viet Nam News that BIDV planned to sell a stake of up to 30 per cent to strategic foreign investors in the longer term, and he had shortlisted eight potential partners for negotiations.
The BIDV shareholders meeting had also approved a project to establish a consumer financial company to improve its retail banking operation.
This year, the bank was targeting growth rates of 16.5 per cent for deposits and 16 per cent for lending, and would control its bad debt ratio at less than 2.5 per cent. It also expects to earn VND7.5 trillion ($357.14 million) in gross profits, and pay dividends at 9 per cent.
Last year, its deposits grew 20 per cent year-on-year to VND502 trillion ($23.90 billion) and outstanding loans expanded 19 per cent year-on-year to VND464 trillion ($22.10 billion). Its gross profit was said to be VND6.30 trillion ($300 million), up 19 per cent from the previous year, and the dividend rate was 9.4 per cent.
VietNamNet Bridge - The anticipated loss of revenue of the state budget in 2015 has put pressure on the Ministry of Finance (MOF), which plans to impose higher fees to offset losses.
The increases of fees and charges have been discussed at many state management agency meetings.
MOF has decided to raise the environmental fee on petroleum products sharply by 300 percent.
Petroleum distributors have threatened that they would have to raise retail prices as the higher environmental fee has led to higher production costs.
As a result, Vietnamese still pay high prices for petrol, despite the sharp fall of crude oil and petrol prices in the world market.
Some days ago, the ministry released a decision on collecting up to VND5 million a month from every 400-foot container transported on the Phap Van – Ninh Binh short section of road (20 kilometers).
Since April 8, the new fee levels of VND15,000-120,000 per vehicle have been applied to those using Dong Nai Bridge.
A local newspaper reported that every vehicle in circulation in Vietnam bears 10 different kinds of fees.
Le Dang Doanh, a renowned economist, said that raising fees and charges was one of the measures taken by MOF in an effort to offset the loss of revenue for the state budget in 2015.
The loss of revenue is anticipated by MOF, which points out that the crude oil price fall alone would lead to the loss of VND13 trillion of revenue.
Besides, the official membership of AEC (ASEAN Economic Community) from 2015 will also lead to a decrease in tax collection, because AEC-sourced imports will not bear import taxes.
“With receipt and expense estimates, one can see that no dong from the state budget will be spent on investments. We will have to borrow money for investments. This explains why state agencies are thinking of raising fees,” Doanh said.
Pham Chi Lan, also a renowned economist, has expressed her worries about the possible consequences to be caused by the decisions on raising fees and charges.
“The increases in fees and charges will lead to higher production costs,” Lan said. “If so, Vietnam can no longer maintain its advantage as a country with low production costs as thought by foreign investors.”
Lan said that 80 percent of cities and provinces have budget revenue lower than their expenditures. The investment for development in these localities have been heavily dependent on money from the state budget.
Lan said she fears that the 80 percent of localities may set new kinds of fees and raise existing fees to offset the local budget’s loss of revenue. If so, this would create a burden on local businesses and residents.
Although, the State Bank of Viet Nam at the end of last month had committed to keeping the exchange rate stable, the institute's Deputy Director Nguyen, Duc Do, said at the conference that the market was awaiting an adjustment from the central bank, given the rising dollar rates against many other major currencies. — Photo vietstock.vn
HA NOI (VNS) — Experts have urged the central bank to apply the crawling peg - an exchange rate regime that allows depreciation or appreciation to happen gradually - to help firms develop appropriate business plans.
At a conference organized by the Academy of Finance's Institute of Economics and Finance yesterday, the stronger dollar in the world's financial market and the recent rise in the VND-USD exchange rate in the unofficial market was discussed.
Although, the State Bank of Viet Nam at the end of last month had committed to keeping the exchange rate stable, the institute's Deputy Director Nguyen, Duc Do, said at the conference that the market was awaiting an adjustment from the central bank, given the rising dollar rates against many other major currencies.
Do said the crawling peg regime would be helpful for the economy, where the export potential remained large, adding that this would help firms, especially export firms in foreseeing forex adjustment and develop appropriate business plans.
He added that if a crawling peg was applied, a cap on exchange rate adjustments for a year would become necessary.
According to Le Quoc Phuong, deputy director of the Viet Nam Trade and Industry Information Centre under the Ministry of Industry and Trade, a crawling peg could save the market from possible shocks arising from a huge exchange rate adjustment at one time. In addition, if the exchange rate was kept stable longer term, this might result in speculation.
Phuong stressed that the exchange rate should be adjusted more regularly with mild adjustments that prevent market shocks.
The Vietnamese dong was devalued by 1 per cent from VND21,246 to VND21,458 against the U.S. dollar in January, the first exchange rate adjustment since 2013.
The central bank had pledged that the forex rate would be adjusted by no more than 2 per cent this year. — VNS