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BUSINESS IN BRIEF 22/9   2009-09-22 - VietNamNet/TN, VNA

Vietnam’s economy shows signs of recovery

Several sectors have been able to find their own way out of difficult financial downturn, which can be seen as clear signs of an economic recovery in Vietnam, the Cong Thuong (Trade and Industry) newspaper said in its September 22 issue.

The paper cited forecast by economic consultant Tran Vinh Du from the ERS Group in the US that inflation is unlikely to be a problem for Vietnam in the short and medium term.

Inflation was a main concern for both policy makers and the business circle in Vietnam at the end of the second quarter of 2009. However, to date, all the macro-economic signals from the economy have put an end to this fear, for now.

Credit growth, one of the major causes for inflation, has been limited at 30 percent for 2009 with the rate already reaching 22 percent by July, the growth in loans can only reach a maximum rate of 8 percent in the remaining five months of the year, which will not lead to inflation.

In addition, the prices of raw materials around the world market are expected to see only small rises.

The Energy Information Administration (EIA) has predicted that the price of crude oil will fluctuate at around 70 USD per barrel from now until the year end, while the UN Food and Agriculture Organisation (FAO) said it is unlikely that food prices will surge during the rest of the year unless harsh weather or serious disasters hit the world’s major food producing areas. At the moment Vietnam has even seen a drop in rice prices.

The aviation sector has also seen some bright spots.

The Cong Thuong highlighted the latest report from low cost carrier Jetstar Pacific, which said the number of passengers it carried in the first half of the year grew by 30 percent, along with a rise in the frequency of flights on all routes. The figures are all the more impressive against the overall gloomy picture of the world aviation industry.

HCM City bakers to tap provincial mooncake market

Shrinking revenues and market saturation in HCM City have seen many mooncake makers shift their attention to neighbouring provinces.

The mooncake, a mid-Autumn festival specialty, sells like hot cakes several weeks before the festival day that falls on Saturday, October 3, this year. The festival is also known as the Children’s Tet.

Many mooncake producers said that sales in provinces have increased sharply this year.

Phan Van Thien, deputy general director of Bibica, a popular backery, said only 300 out of 1,000 retail outlets of the company have been set up in HCM City this year, as the focus has been on nearby provinces.

“The mooncake market in the city is saturated with many popular brandnames while those usually made by small enterprises in provinces and rural areas are not of high quality,” Thien said.

With better economic conditions, provincial people are now willing to spend much money for quality products, he said, adding that this year, the company plans to produce 400 tonnes of mooncakes, 85 percent of which will be sold in other provinces.

Nguyen Thi Ngoc Lien, brand manager of the Kinh Do Corporation, said only 22-25 percent of the company’s 1,200 retail outlets have been set up in HCM City this year. The markets in provinces have been developing every year, she said.

The reduced number of mookcake stores in HCM City is partly due to regular traffic congestion, higher prices and costs of leasing space.

Nguyen Thanh Thuan, a mooncake seller on Cach Mang Thang Tam Street , said sales this year was much lower than previous years. Every year, at the time, customers would flock his shop to buy mooncake.

According to the staff of an auditing company, mooncake prices have increased 15-20 percent over last year.

Poor logistics industry retards economy

Demand for logistics services has risen rapidly, but the plan to develop a professional logistics centre in HCM City is still on the drawing board, experts say.

In recent years, the country poured money into infrastructure projects, but the lack of a professional logistics industry was retarding the competitiveness of the economy, according to experts.

With 600 to 700 logistics companies out of a total of 800 to 900 in the country, HCM City has many advantages to develop a logistics industry, especially in marine, interior waterways, air, rail, road and pipeline transport services.

In an effort to develop a seaport and interior waterway systems, the city government last year ordered the HCM City Export Processing Zone Authority (Hepza) to map out a scheme to build a professional logistics hub for the 2010-20 period. But to date, the plan has not been carried out because of dis agreements among agencies, according to Nguyen Van Minh, director of the Industrial and Information Service Centre under Hepza.

Currently, most logistics services, including transportation, warehousing and yard storage of goods and cargo were done by foreign companies, Minh said.

According to the Vietnam Freight Forwarders Association, domestic logistics companies can meet only 25 percent of local demand.

With the small size and limited ability of local companies, including out-of-date technology, the companies can offer only limited services.

Marine transportation services-a key logistics services-transport 90 percent of import-export cargo, but local companies can meet only 18 percent of that demand, according to the Vietnam Maritime Administration.

Demand for logistics services is expected to soar, and the industry will become a key economic sector, contributing up to 15 percent of the country’s total GDP, experts have said.

More international companies are eager to join the Vietnam market.

Under Vietnam ’s WTO commitments in the logistics sector, restrictions on the percentage of foreign capital contributions, as well as other restrictive conditions, will be gradually removed. By 2012-14, capital contributions can be wholly invested from foreign sources.

Experts said the city should consider hastening development of a professional, local logistics industry before it was too late.

Real estate shares lift indices

Impressive gains by real estate shares helped lifted the VN-Index up 6.96 points on Sept. 21 to close at 577.97, a rise of 1.22 percent, marking the eight straight day of increases on the HCM Stock Exchange.

Trading volume improved to 65.8 million shares, while turnover remained at last week’s heady average of 3.3 trillion VND (185.4 million USD). Market leader Sacombank (STB) generated orders for 7.2 million shares, representing 11 percent of the volume.

On the Hanoi Stock Exchange, the HNX-Index increased 0.77 percent to close at 177.82, with construction shares – including Vinaconex (VCG) and shares in the Song Da family (from SD2 to SD9) – also hitting the ceiling.

The value of the day’s trades reached 1.2 trillion VND (67.4 million USD) on a volume of 33.8 million shares. Kim Long Securities (KLS) showed the heaviest activity on the northern market, with 3.4 million shares changing hands, followed closely by Asia Commercial bank (ACB) with 1.8 million.

In HCM City on Sept. 21, foreign investors continued as net sellers of 1.2 million shares, with a net value of 113.7 billion VND (6.4 million USD).

In Hanoi , foreign investors were responsible for net sales of 16,600 shares, worth 3.3 billion VND (185,300 USD), on a total volume of 8.9 million shares traded.

Vietnam steel production outstrips demand by a wide margin

Steel sales in Vietnam are set to rise 20 percent to 4.6 million tons this year but the new plants starting up in the final quarter will boost the country’s 2009 output to 7 million tons, an industry association said.

The newcomers include Hoa Phat’s steel-rolling mill in Hai Duong Province and Thang Loi Vietnam Steel Company in Thai Binh Province, both in the north.

“We can easily anticipate a surplus of more than 2.4 million tons,” said Nguyen Tien Nghi, vice chairman of the Vietnam Steel Association.

Sales of construction steel, known as long products, rose 23 percent in the 12 months to the end of August to 2.7 million metric tons, according to figures supplied by the VSA’s 75 member companies, which account for 85 percent of Vietnam’s steel makers.

Of the 4.6 million tons of steel sold this year, VSA members will supply four million tons, Nghi said.

VSA chairman Pham Chi Cuong said steel producers were trying to boost exports to reduce the surplus but were facing tough competition from Thailand and China.

The main export markets for Vietnamese steel are Cambodia and Laos.

A sales manager who wished to go unnamed said his company’s sales to Cambodia in the first half were barely 50 percent of the year-ago figure.

He said Thai, Chinese and Indonesian steel companies were selling their products to this market for only US$440-460 per ton, or $100 below what his company could offer.

Do Duy Thai, general director of Pomina, said his company would probably ship US$28 million worth of steel products to Cambodia in 2009, the same as last year.

Despite having surplus stocks, Thai said, Vietnam’s steel makers would not be cutting prices much as they had to import their materials from abroad.

He said they would have no choice but to cut production.

VSA chairman Cuong said prospective investors and government agencies had been warned of the rising surplus yet many enterprises still wanted to put money into the steel industry.

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