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BUSINESS IN BRIEF 28/5   2009-05-28 - VNA

Vietnam borrows EUR100 mil for climate program

The European Investment Bank (EIB) on Tuesday clinched a loan agreement to provide 100 million euro to Vietnam with the main purpose of part-financing projects to mitigate the impacts of climate change in the country.

The Ministry of Finance will make available the proceeds of the EIB’s framework loan to four state-owned banks, who will re-lend the funds to final beneficiaries carrying out investments.

Up to 70% of the loan amount will be used to finance projects in climate change mitigation, through projects in the renewable energy and energy efficiency sectors. Meanwhile, the remaining 30% will be injected into projects to support European presence in Vietnam, through direct investment or transfers of technology and know-how from Europe.

The European bank’s representative said interested promoters should address their requests to one of the four intermediary banks, which cover different areas of the economy. These are Vietnam Development Bank, Vietnam Bank for Agriculture and Rural Development, Bank for Investment and Development of Vietnam and Vietnam Bank for Industry and Trade.

Francisco de Paula Coelho, director of EIB, noted that “the framework loan will make long-term loans at attractive interest rates available to support renewable energy and energy efficiency projects, a priority for the bank’s lending.”

This is the European bank’s fifth credit agreement for Vietnam since it started operations in 1996, and the second lending operation signed with the Ministry of Finance, who received 30 million euro in 2005 for financing small and medium scale projects.


Tea exports gain in five month period

Farmers could still gain a profit of $100-200 per tonne from export tea products because production and processing had saved costs.

Viet Nam’s tea industry showed an increase in export volume and value in the first five months of this year, one of few economic sectors to show a gain.

The General Statistic Office reported that the nation exported 40,000 tonnes of tea in the period, earning US$50 million, showing a year-on-year increase of 17.5 per cent in volume and 13.4 per cent in value compared with the same period last year.

In May alone, the country exported 9,000 tonnes of tea, earning $11 million.

Viet Nam Tea Association chairman Nguyen Kim Phong said the industry achieved its results by improving quality and ensuring hygiene and food safety.

During the economic crisis, the industry had a strategy to increase export volume and cut the price to attract more customers, Phong said.

The strategy included modernising processing, increasing capacity and quality and running training courses for farmers.

At present, the export price of tea has been cut $10 per tonne to $1,248 compared to the same period last year.

But farmers could still gain a profit of $100-200 per tonne from export tea products because production and processing had saved costs, he said.

Viet Nam plans to export 117,000 tonnes of tea this year, earning $167 million, according to Phong.

The export value of tea for this year was expected to show a year-on-year increase of 13.6 per cent, he said, adding that the industry was one of few which had targeted increased exports.

The association planned to build a tea trading floor and the Viet Nam Tea Museum in the Viet Nam Agricultural Product Fair and Exhibition. It also expected to host an international tea conference this year to advertise CheViet, the national tea trademark.

However, Phong said, this year, the tea industry still had an obstacle in that its customers had difficulty paying.

Viet Nam exports tea products to 110 countries and territories under the trademark of CheViet, which is registered and protected in 70 countries and territories.

Foreign businesses poised to swoop in, domestics expand

Domestic retailers plan to expand operations to compete with international retailers, who are poised to enter the local market due to Viet Nam’s commitment under the World Trade Organisation’s rules.

Nguyen Thi Tranh, deputy general director of the HCM City Union of Trading Co-operatives (Saigon Co-op), said Saigon Co-op would open two more department stores in Binh Phuoc and Ba Ria-Vung Tau in southern region this month.

On May 19, Dong Xoai Co-op Mart opened with an investment of more than VND61 billion (US$3.5 million), while Ba Ria Co-op Mart will open on May 22 at a cost of over VND73 billion ($4.2 million).

Since the beginning of the year, Saigon Co-op has built four new department stores and expects to open another 12 in cities and provinces across the country the by the end of the year, valued at a total of VND500 billion ($29.4 million).

Other distributors such as Maximark and Citimart are rushing to upgrade distribution networks in anticipation of an onslaught of foreign competition.

According to Nguyen Anh Hong, director of Maximark supermarket chain, Maximark plans to build a new store in the central resort city of Nha Trang and upgrade and expand its store in HCM City with total investment of VND150 billion ($8.8 million).

The executive director of the Citimart chain, Nguyen Anh Hoa, said the company was negotiating with partners to seek 10 locations for expansion.

Finding land and a suitable location is the most time-consuming and costly tasks, according to retailers.

Maximark, which often chooses central districts or new urban areas for its department stores, spent four years negotiating with partners to reach agreement on a 6,000sq.m location.

Foreign-owned corporations such as Lotte Mart, Big C and Parkson also plan to increase their market share in the Vietnamese market.

The Republic of Korea-based group, Lotto Mart, is preparing to open its second department store in HCM City, which follows the first one built in District 7 last year with a total investment of $75 million.

In July, Big C will open its ninth store in central Thua Thien-Hue Province at a cost of about $17 million.

Nguyen Thi Hong Huong, director of Vinatex Mart chain, said it would co-operate with Saigon Co-op to compete with foreign rivals.

Economic crisis takes its toll on insurance market

The life and general insurance market has been hit by the global recession as companies have had to scale down their production and reduce staff.

Phung Dac Loc, general secretary of the Association of Viet Nam Insurers (AVI), said sales to domestic and overseas markets by production and business companies had fallen.

"The situation has affected the financial capacity to pay for insurance products covering assets and employees, among others," Loc said.

Many potential customers are in industries faced with difficulties, including shipbuilding, shipping, aviation, coal, petroleum, steel and cement.

Individuals are also tightening their budgets, leaving challenges for the life insurance companies.

The general insurance sector gained a premium turnover of VND2.99 trillion (US$166 million) during this year’s first quarter.

The figure is 9.5 per cent higher than the amount of the same period in 2008.

This was 40 per cent lower than the rate of year-on-year growth of last year’s first quarter.

Motor vehicle insurance topped the non-life insurance turnover with VND964 billion, up more than 10 per cent on 2008’s first quarter, perhaps due to the compulsory regulation on buying the insurance.

Compensation reached VND381 billion, almost 40 per cent of the collected premium amount.

Construction and installation insurance posted a turnover of VND363 billion, up 50 per cent. About VND67 billion was paid in compensation, accounting for more than 18 per cent of turnover.

Insurers collected VND360 billion in medical and personal accident products, up over 21 per cent. Compensation in these insurance products represented the largest stake of 50.3 per cent of the collected fees.

Hull and ship’s owner civil liability insurance brought in VND341 billion, up 20 per cent. However, almost VND91 billion went to compensation.

Oil and gas insurance recorded the highest growth rate of 94 per cent, reaching VND265 billion.

Meanwhile, aviation insurance saw a significant fall of 59 per cent as it achieved a turnover of VND122 billion.

Bao Viet, though, topped the 10 insurers with the highest turnover, at VND822 billion, but this was still a decrease of almost 9 per cent. Other big names but losers were Bao Minh and PJICO.

Life insurance

Life insurance companies achieved a total turnover of VND2.514 trillion ($140 million), up 7 per cent over 2008’s first quarter, an encouraging result in difficult times, according to the AVI general secretary.

The share for Prudential was 39.63 per cent; Bao Viet Life, 34.95 per cent; and Manulife, 10,4 per cent.

In the first three months, new contracts were 10 per cent lower than 2008’s same period.

Of the 114,580 new contracts, Prudential represents more than 44,100, Bao Viet Life, almost 32,100 and AIG Life, 10,100.

During the period, over 151,000 contracts expired, with almost 62,000 under Prudential, 53,000 for Bao Viet Life and 17, 400 for AIG Life.

The total in-effect contracts at the end of March was 3,828,700, a year-on-year fall of 1 per cent.

Prudential led with 1.567 million contracts, Bao Viet Life followed with over 1.535 million and Manulife ranked third with 254,300 contracts.

The maximum liability taken by insurers totalled VND274 trillion, up 14 per cent.

This resulted from the availability of insurance products with higher protection from affordable fees.

Again, Prudential accounted for the largest share in this liability, with VND91 trillion.

Around VND630 billion was paid to clients, with Bao Viet Life taking the lead, spending VND410 billion.


WB plans 1.3-1.5 billion USD loan to Vietnam

The World Bank in Vietnam intends to submit a loan for approval worth 1.3-1.5 billion USD to the country in late June for the fiscal year 2009, said an official.

The WB’s newly-appointed Country Director in Vietnam, Victoria Kwakwa, announced the plan while meeting with Prime Minister Nguyen Tan Dung in Hanoi on May 27.

Kwakwa said that the WB is considering additional commercial loans to Vietnam worth up to 3-3.5 billion USD within the next three years after it received positive assessments of the efficiency of WB-funded projects in the country.

The official asked the Vietnamese Government to work closely with the WB to come up with appropriate projects to utilise this capital. She also urged Vietnam to speed up the disbursement as well as improve the efficiency of the WB’s capital.

PM Dung said that the WB’s support had contributed greatly to the socio-economic achievements Vietnam has recorded over the past few years. The Vietnamese Government is always held responsible for capital sources provided by the WB. This is important, not only for good relations with the WB but also for a responsibility to the Vietnamese people and future generations in the country, he said.

The government leader applauded the WB’s good-will to Vietnam and acknowledged Kwakwa’s suggestions regarding the use of WB capital.

Together with a new, flexible mechanism, Vietnamese agencies will spare no effort to accelerate disbursement and enhance the efficiency of the WB’s capital sources to serve the country’s national construction and socio-economic development, he stressed.

The Government of Vietnam will also step up coordination with the WB to draw up projects to use the WB’s funding, focusing on transport infrastructure, energy, human resources development and healthcare services, PM Dung added.

Half of ODA capital disbursed in 5 months

International donors have so far this year provided 1.467 billion USD in official development assistance (ODA) capital to Vietnam, of which 720 million USD has already been disbursed, according to the Ministry of Planning and Investment (MPI).

The MPI said that the total ODA volume agreed with donors in the past five months was 9 percent higher than the figure of the first six months last year.

However, it stated that this had only reached 38 percent of the yearly target of 2.5 billion USD.

According to the MPI, more than 98 percent of the committed ODA, or 1.448 billion USD, was focused on transport, drainage and water supplies, and urban development. This proves that ODA for the country’s infrastructure development still has potential, even during the global economic recession.

The World Bank, one of Vietnam’s four biggest donors, assessed that the country’s power industry had seen the highest five-month disbursement, with a rate of 50 percent, followed by transport, urban development and education.

The MPI reported that only 121 out of 556 ODA projects had disbursed 60 percent or more of their yearly targets.

Ho Chi Minh City led the way with an ODA disbursement rate of 78.3 percent, northern Hai Phong City with around 40 percent and Hanoi with 36 percent.

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