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BUSINESS IN BRIEF 28/3   2010-03-28 - Viet Nam Net

State forms construction group

The Viet Nam Construction Industry Group was formally launched in a ceremony here on Thursday, as six major State-owned corporations in the sectors of construction and heavy industry were formally merged in a bid to improve their competitiveness during the process of global economic integration.

The new group gathers together such heavy hitters as construction giant Song Da, the Viet Nam Machinery Installation Corp (Lilama), the Infrastructure Development and Construction Corporation (Licogi), the Song Hong Corporation, and the Construction Machinery Corporation (CMO), with Song Da serving as the nucleus or parent company.

The group's members are famous for major civil engineering projects nationwide, including the Hoa Binh and Tri An hydroelectric facilities, the Bim Son Cement Plant and the Dung Quat Oil Refinery.

"An economic group has some advantages that a corporation does not have," the chairman of the new group, Le Van Que, told Thursday's ceremony. "That is big labour and financial resources to expand production, develop technologies, but specialise businesses."

Under a decision issued by the Prime Minister in January, the group would have charter capital in its first phase of VND6.6 trillion (US$347.36 million) and assets totalling VND68 trillion ($3.57 billion).

However, some market watchers and business experts have expressed concerns about the new group's potential effectiveness.

"An economic group can never be formed by simply gathering corporations together like that, or many groups would be formed easily," said a Ha Noi-based economist who asked to remain anonymous. "I am afraid that such cumbersome groups are not really easy to manage but difficult to make profitable."

Viet Nam's State-owned economic groups so far include PetroVietnam, Electricity of Viet Nam (EVN), shipbuilding giant Vinashin, telecoms VNPT and Viettel, mining giant Vinacomin, garment maker Vinatex, Bao Viet Finance Group, the Viet Nam Rubber Group, and the Viet Nam National Chemical Group (Vinachem), in addition to the new Viet Nam Construction Industry Group.

Minister of Construction Nguyen Hong Quan submitted a plan last August calling for the establishment of the Viet Nam Construction Industry Group and the Viet Nam Housing and Urban Area Development Group.

Construction transparency urged
Construction experts gathered in Ha Noi yesterday as part of an initiative to tackle corruption in the industry.

"The implementation of the initiative proves the Government is serious about fighting corruption although the responsibility does not just lie with the Government, but with society as a whole, " said World Bank Country Director Victoria Kwakwa.

In December 2009, the Prime Minister agreed for the Ministry of Construction to implement the initiative, which is funded by the World Bank trust fund with assistance from the UK Department for International Development.

Viet Nam is among seven countries, including Ethiopia, Malawi, Tanzania, Zambia, the Philippines, and the UK, where the two-year initiative is being piloted.

The Construction Sector Transparency Initiative workshop, a multilateral cooperation that aims to enhance the transparency and accountability of procuring bodies and construction companies that work on publicly financed construction projects, was the first of its kind in Viet Nam.

Participants of the workshop discussed the causes of corruption in the industry before the focus shifted onto State-invested construction projects, which have a bad record of corruption and transparency.

The initiative aims to review regulations and law relating to construction activities and make public information on ongoing construction projects.

Construction is considered one of the most important sectors to the country's economic development so increasing efficiency in the industry is vital, said Christiaan Poortman from the International Advisory Group. But to increase efficiency, corruption must first be tackled.

The construction sector remained particularly vulnerable to mismanagement and corruption due to the sheer of contracts, he added. Implementation of the initiative would help the Government to regain public confidence in development programmes and increase the social returns from construction projects.

But playing down the severity of the situation, Deputy Minister of Construction Cao Lai Quang said wastefulness and corruption was not unique to the construction industry in Viet Nam: "Viet Nam is a developing country so infrastruction construction is still a big priority. While problems still exist, especially with projects that draw on State capital, construction continues to be one of the largest contributors to the country's economy."

But it should be remembered that State capital only makes up a small proportion of total construction capital investment, he added.

"The State has issued many regulations to prevent wastefulness and corruption: the construction law, the bidding law and the anti-corruption law, tartgeted at the construction industry," Quang said, adding that a regulation which required information relating to construction projects, from preparation to implementation processes, to be made public in the nation's media.

Another effort to clean up the state of the construction industry was also launched yesterday by the Japan International Co-operation Agency and the Ministry of Construction. At the meeting a memorandum of understanding was signed which expressed the two parties' intentions to launch a project to enhance the capacity and quality of the industry.

Under the memorandum, the agency agreed to send Japanese experts to Viet Nam, provide implementation equipment, and sponsor Vietnamese experts to study in Japan.

The project aims at enhancing construction project quality by improving project management methods and codify the responsibilities of participants involved in construction project: project owners, investors, engineers and contractors.

Project implementation will take place over three years.

Spanish businesses keen on rail projects

Spanish businesses are interested in underground and urban railway construction projects in HCM City, according to director of Spanish Institute for Foreign Trade Fernando Lanzas.

Speaking at the Viet Nam-Spain Business Forum held on Thursday in HCM City, Lanzas said Viet Nam's economic growth had remained stable despite the global downturn.

Because Viet Nam had great potential to strengthen trade and investment, Spanish businesses would like to seek partners to fully tap the potential in the country, he added.

Lanzas said Spanish businesses had expressed interest in building HCM City's metro and other large-scale infrastructure projects in neighbouring provinces.

The forum was attended by representatives of 30 Spanish businesses specialising in traffic infrastructure, mechanics-electricity systems, solid waste treatment and energy, among others.

Nguyen The Hung, deputy director of the HCM City branch of the Viet Nam Chamber of Commerce and Industry, said Spain was an important partner of Viet Nam.

Trade relations between the two countries had intensified in recent years.

Hung said President Nguyen Minh Triet's visit to Spain in December last year created opportunities to enhance ties in business and investment.

During the visit, Viet Nam signed eight memoranda of understanding with Spain to strengthen bilateral co-operation. Two of them were on transport infrastructure development.

Hung said HCM City needed more than $15 billion to develop infrastructure projects by 2020, and municipal authorities would create the most favourable conditions for Spanish enterprises to do business in the city.

Bilateral trade has increased in recent years, with two-way trade turnover rising to US$1.2 billion in 2008.

Viet Nam exports to Spain amounted to $1.1 billion and imports $140 million.

Spain is the seventh largest export market of Viet Nam, mainly for shoes, coffee, tea, rubber, garments and seafood. Viet Nam imports electronic products, chemicals and machines from Spain.

The event was held by the Viet Nam Chamber of Commerce and Industry and the Spanish Embassy.

Industrial parks need facilities thrive, says expert
Industrial parks require social infrastructure like housing, schools, and medical facilities to attract investors, an industry insider told in a preparatory meeting for an exhibition to be held in HCM City next May.

Vo Son Dien, advisory and marketing director of southern Binh Duong Province-based IP developer Becamex IDC Corp, told in the meeting held on Wednesday to prepare for the Viet Nam Industrial Parks – Investment World 2010 exhibition that this would help attract and retain human resources.

"The facilities will ensure employees have stable lives," Dien added.

He cited the example of Binh Duong, which has 28 industrial parks that have been attracting human resources from elsewhere.

But he admitted that many IPs in Viet Nam are developed by private or joint stock companies who usually do not have the financial capacity or are under pressure from shareholders to achieve quick profits and do not plan for such infrastructure.

IPs that provide decent land lots to resettle people and provide job training would have access to quality human resources, he pointed out.

Lee Chang Keun, honorary chairman of the Korean Chamber of Commerce and Industry in HCM City, said besides land costs and incentives, manpower availability is also an important factor that investors consider while leasing land in an IP.

Though many Korean investors see potential in Viet Nam, they lack information about its IPs, he said to emphasise the important of marketing them.

Participants at the discussion agreed that a stable political environment, improved investment climate, and high GDP growth rate are among the country's attraction.

Viet Nam has 228 IPs covering more than 58,000ha, with 145 already in operation with an average occupancy rate of 64 per cent.

The Viet Nam-Singapore IP in Binh Duong and Amata IP in Dong Nai Province are considered the most successful.

The Viet Nam Real Estate Association and Sao Khue Communications JSC will organise the two-day Viet Nam Industrial Parks – Investment World 2010 on May 7-8 at the HCM City International Exhibition and Convention Center in Tan Binh District.

So far 39 stalls have been taken up by IPs from several provinces including Binh Duong, Dong Nai, Ca Mau, and Binh Thuan.

More than 1,000 investors have agreed to visit the exhibition, according to the organisers.

Da Nang market brisk for high-end property

Luxury real estate projects in central Da Nang City have flourished while a focus on low- and mid-end projects continues to characterize the industry, which is still reeling from the global economic crisis, around the country.

Da Nang became a destination for tourism real estate after the city's beaches were selected as among the six most beautiful beaches on earth by US-based Forbes Magazine, said Trevor Morley from real estate consulting firm Savills Viet Nam.

Da Nang's beaches are prized by developers who in reaction to high tourism demand are racing to construct villas and luxury apartments.

The demand is evident after recently constructed projects along the beaches of Son Tra and Ngu Hanh Son districts sold much faster than expected. Another project by VinaCapital Real Estate, the Ocean Villas project, sold 80 per cent of recently constructed luxury beach villas before the end of the project's first phase. Mario Lotti, director of the Hyatt Recency Da Nang Residences project, comprising 174 luxury apartments and 27 beach villas, said 75 per cent of properties of his project had been sold even though the project had yet to be completed.

Development activity is not showing signs of slowing after VinaCapital Group signed an exclusive contract with the Southern Cros Development Company in March to construct the luxury Norman Estates beach villa complex worth US$40 million.

According to the Savills, 13 projects to construct a total of 670 villas and 19 projects for 8,600 apartments, were planned over the next five years.

Luxury apartments in Da Nang continue to be priced high, with average prices ranging from $485,000 – 2.5 million per apartment.

Nguyen Quang Tam from Cuong Hung Thinh Real Estate Transaction Exchange said domestic property investors, especially from HCM City and Ha Noi, were increasingly seeking holiday houses for the purpose of relaxation.

Da Nang airport welcomed nearly 1.4 million visitors in 2009. Of that figure 1 million were Vietnamese, representing a 15 per cent increase over the previous year.

Apartment projects face obstacles to investment

High interest rates, land prices and construction costs were weighing against investment in apartment projects, prompting a warning of caution from property investment analysts.

The apartment market had undergone complicated changes as it recovering from the economic crisis, with higher material prices creating upward pressure on prices, the analysts said.

But the number of buyers willing to raise loans and take the risk of buying an apartment had reduced, plus there was competition in the market for sales, with demand being soaked up by hundreds of new housing and urban area projects, including low-income schemes.

It was now more difficult to sell apartments at higher prices to cover the increasing construction costs, the analysts said.

Colliers International Ha Noi's Price Study and Valuation Department head Nathan Cumberlidge said apartment prices needed to increase as costs increased for the projects to remain viable.

Viet Nam Steel Association statistics showed building steel prices rose 10 per cent last month.

Association chairman Pham Chi Cuong said the rise was the result of increasing prices in steel embryo, electricity and petrol. It was also influenced by exchange rates.

Prices of brick and cement were also expected to rise.

Song Da Joint Stock Company, which is an investor in Van Khe Urban Area in Ha Dong District, had increased their apartment prices by 12 per cent. Apartments in the Mo Lao Urban Area would also be higher priced than previously announced. However, apartment prices in some new urban areas including Trung Hoa Nhan Chinh, Nam Trung Yen and Van Quan in Ha Noi remained unchanged because of low demand.

Nam Cuong Group has 116 apartments for sale in the CT3 tenement building in Hoang Quoc Viet Residential Area but the number of buyers was described as "modest".

Thu Duc Housing Development Joint Stock Company general director Le Chi Hieu said it had been unable to increase apartment prices because of the new projects coming on line.

Real estate firms said investors were turning to land lots instead of apartments, but even then there was need for caution.

On Hanhudland Estate Trading Floor, people were buying land lots in the West of the city, including Van Canh, Cau Dien and Nam An Khanh. Prices ranging from VND22-30.5 million ($1,180-1,600) a square metre.

Prices of land lots in Lang-Hoa Lac had also increased after a "quiet" spell with prices of VND38-40 million ($2,054-2,162) a square metre.

However, analysts warned that many land lots had been in a period of land clearance for some time.

Analysts said it was difficult to see high growth in the apartment market in the near future as interest rates of 18-20 per cent were causing project investors to hesitate.

Cumberlidge said the housing market would be subject to "unstable demand" with more caution over borrowing.

Head of the Ministry of Construction's House Management and Real Estate Market Department Nguyen Manh Ha said businesses and individuals should be cautious when investing in projects.

Engine oil audit system launched

GfK Viet Nam on Thursday released the country's first ever motorcycle engine oil retail audit service for the automotive industry.

Tran Khoa Van, GfK Viet Nam General Manager, said they wanted to provide accurate and reliable retail sales figures of the engine oil market to manufacturers, distributors, retailers and customers to help them make proper decisions.

According to a GfK survey carried out in Ha Noi and HCM City, there are a total of around 6,500 shops retailing motorcycle engine oil including motorcycle accessories retailers, motorcycle repair shops, bike wash stations and petrol stations.

Atlas Copco opens regional base

Atlas Copco Group, a Swedish provider of industrial productivity solutions, opened its first branch in southern Viet Nam in Binh Duong Province's Song Than II Industrial Zone on March 24.

It would be the company's new base to support the growing southern market, Chris Lybaert, president of Atlas Copco Compressor Technique – Oil-free Air Division, said.

On the occasion, the company introduced its Z series of oil-free rotary screw air compressors, the first in the world to get the ISO 8573-1 CLASS 0 certification from Germany's TUV (Technical Monitoring Association) Rheinland.

Foreign bank to increase capital

The Governor of the State Bank of Viet Nam has approved a licence amendment to the HCM City-branch of the Commonwealth Bank of Australia in Decision No539/QD-NHNN.

Pursuant to the decision, the bank's investment capital will increase from US$15 million to $21 million. The decision came into effect on Monday.

ABBANK profit up 79 per cent

An Binh Bank (ABBANK) reached a pre-tax profit of VND93.15 billion (US$4.9 million) in the first two months this year, up 79 per cent over the same period last year.

This year, ABBANK targets to reach a total property value of VND35 trillion ($1.84 billion), a charter capital of VND3.83 trillion ($201.58 million) and a pre-tax profit of VND550 billion ($28.9 million), up 32 per cent, 10 per cent and 33 per cent, respectively, against 2009.

ABBANK has 89 branches in 29 provinces and cities across the country and held a shareholders meeting in HCM City on Wednesday.

Construction starts on ethanol factory

Orient Bio-Fuels Company Limited (OBF) late last week started the construction on an ethanol factory in the southern province of Binh Phuoc which, when completed, will have a production capacity of 100 million litres per year.

The factory, which has a total investment capital of US$80 million, will produce methylated spirit, mixed ethanol with petrol, Certified Emission Reductions (CERs) and micro-organism fertiliser.

The factory is expected to be operational in 21 months.

Tourism area to be built in My Khe

Work has begun on a tourism area in My Khe, central Quang Ngai Province, with a total investment capital of VND400 billion (US$20.94 million).

The 24.4-ha area areas include facilities such as a health spa, swimming pools, surfing, various sports and a gymnasium to accommodate between 500 and 700 tourists per day.

The project is slated to be operational by the end of 2012.

HCM City: Industrial production recovers strongly
Ho Chi Minh City’s industrial production has shown signs of bouncing back, announced the city’s Department of Industry and Trade.

In the first quarter of 2010, the total value of industrial production reached VND127,398 billion, up 13.7 percent compared to the same period last year.

The state-run sector represented 16.1 percent of the total value (up 8.8 percent against last year’s figure), the private sector 45.8 percent (up 15 percent), and the foreign-invested sector 38.1 percent (up 15.2 percent).

In the reviewed period, HCM City’s economy also recovered considerably. Total Gross Domestic Product (GDP) rose by 11 percent compared to the same period last year. This is the first time the growth rate in the first quarter of a year has been higher than that in the fourth quarter of the previous year.

In the same period, the city’s import turnover increased by 16.9 percent, basic construction investment capital by 15.1 percent, and the consumer price index (CPI) by 9.6 percent.

Laos strengthens aviation ties with Vietnam
Lao Prime Minister Bouasone Buphavanh has pledged that his government will create favourable conditions for the two national flag air carriers of Laos and Vietnam to cooperate effectively and wished that the two sides would soon reach a cooperation agreement.

The Lao government leader made the commitment during his meeting with Vietnam Airlines General Director Pham Ngoc Minh in Vientiene on March 27.

He had earlier briefed the Lao leader on the signing of a joint-venture contract between the two carriers in an effort to reach a cooperation agreement as soon as possible.

He said the cooperation is aimed at restructuring air routes, modernising the aviation sector and increasing the Lao Airline fleet to help it better integrate into the region and the world.

The cooperation between the three airlines of Vietnam, Laos and Cambodia will also help raise their competitiveness and make the region an attractive destination, he added.

Regional nations seek to boost commercial ties
Trade officials from 10 ASEAN countries and representatives of hundreds of businesses and airlines met in the Thai capital of Bangkok on March 26 to boost commercial relations within the bloc.
The event served as an opportunity for the ASEAN nations to compare notes on their new challenges and roadmaps toward the building of the ASEAN Economic Community (AEC) by 2015.

It also provided useful information regarding trade, tourism and investment for enterprises to expand business activities in the next five years.

Thai Deputy Minister of Commerce Veerasak Jinarat said the ASEAN Free Trade Agreement (AFTA), which removed trade barriers among the regional countries, has made the ASEAN an important export market for Thailand and other regional nations.

The establishment of the AEC will form an united market with 590 million consumers, laying a firm foundation for enhancing economic growth of the ASEAN countries.

On the sidelines of the meeting, Jinarat said Thailand highly evaluates Vietnam’s huge potential and high growth rate, adding that the meeting aimed to provide useful information to help Thai businesses pour more investments into Vietnam and other regional countries.

As major rice exporters in the world, Thailand and Vietnam need to work closely in this field, especially on issues related to prices and markets, he said.

Thailand has strived to increase its trade value with other ASEAN members from US$57 billion in 2009 to US$70 billion this year, including US$10 billion in trade with Vietnam.

Commercial Counsellor at the Vietnamese Embassy in Thailand Nguyen Thanh Hung said Vietnam’s trade relations with other ASEAN countries, particularly Thailand, have grown steadily due to the bloc’s efforts to ease non-tariff barriers.

Hung also highlighted Vietnam’s opportunities and challenges once it fully joined the AEC, such as the reduction of export tariff to 0 percent and the deeper penetration of Vietnamese goods into the regional market.

Int’l seminar on tourism cooperation in ASEAN
On March 27 Danang city hosted a seminar to discuss the development of tourism in ASEAN. Among the participants were those from the ASEAN Secretariat and tourism industries.

The seminar served as a forum for ASEAN members to seek effective solutions to cope with hindrances to the region’s tourism, and build on its strengths to make ASEAN an attractive destination for international tourists.

Tran Chien Thang, Deputy Minister for Culture, Sports and Tourism, said at the seminar that the ASEAN region has many common features for cooperation such as convenient travel, amenities, cultural similarities, and many natural and human heritage sites.

Meanwhile, an official from the Singapore tourism watchdog, Ong Jin Chwen, highlighted ASEAN countries’ favourable conditions such as long coastlines, beautiful beaches, and convenient seaports.

ASEAN countries received nearly 63 million tourists in 2009, 40 percent of which were from inside the community.

Since early 2010, Vietnam has hosted more than 1.34 million international tourists despite the global economic crisis.

Tokyo hosts workshop on investment in Vietnam
Over 200 representatives of Japanese organizations and enterprises attended a workshop on Vietnam's business climate held in Tokyo on March 26.

The Head of Aikawa-Asia business research institute, Seiji Aikawa, said the renewal process has helped Vietnam escape from being a country of war to become an attractive destination for foreign tourists and investors, including those from Japan.

In 2006, Vietnam ranked forth among five countries with the most attractive investment environment for Japanese investors, after China, India and Thailand. The country surpassed Thailand to climb to third place in 2007.

Mr. Aikawa, who promoted Vietnam’s business environment to Japanese investors, said the advance is attributable to the Southeast Asian country’s political stability, its encouragement policies for foreign investors and its low-priced workforce.

The government’s focus on improving the country’s infrastructure and legal system, adjusting the economic structure and strengthening human resources training will help Vietnam become an attractive investment destination for Japanese investors, he said.

Vietnam, Cuba bolster industrial cooperation
Cuban Minister of Basic Industry Yadira Garcia has spoken highly of the socio-economic achievements Vietnam has made over recent years, especially in oil, gas and petrochemical industries.

While meeting with Vietnamese Deputy Minister of Industry and Trade Bui Xuan Khu during his five-day visit to Cuba, starting from March 21, Yadira Garcia expressed her wish to increase the exchange of information and experience with Vietnam in the production of fertilizers, herbicides and paper and mineral production.

Deputy Minister Khu briefed the Cuban official of his country’s plans to develop the petrol and power industries in the future and underlined the importance of bilateral cooperation.

He praised Cuba for its assistance in implementing the exploration and production projects between the Vietnam National Oil and Gas Group (PetroVietnam) and the Cuba State Oil Company (CUPET).

He also said he hopes that Vietnam will work with Cuba in the pharmaceutical sector.

During their stay in the Latin-American country, the Vietnamese delegation met with Cuban Minister of Light Industry Jose Hernandez to discuss the two countries’ cooperative capacity in garment and footwear. They also met with Foreign Trade and Investment Deputy Minister Orlando Hernandez and President of Chamber of Commerce Pedro Alvarez and visited several companies and complexes in the country.

Seminar boosts ASEAN cooperation in trade and investment
A seminar was held in Bangkok, Thailand on March 26 to enhance cooperation in trade, investment and tourism towards the establishment of an ASEAN Economic Community (AEC) in 2015.

The event was attended by trade representatives from ASEAN countries’ embassies and more than 300 businesses keen on the Asian and ASEAN markets.

The seminar aimed to spotlight opportunities and challenges in ASEAN countries as well as preparations for their involvement in the AEC in 2015, and provided information on trade, investment and tourism for businesses to seek investment opportunities in each member country.

In regard to the trend of Vietnam’s trade relations with ASEAN countries from now through 2015, when Vietnam fully participates in the AEC, The Trade Counselor of the Vietnamese Embassy in Thailand, Nguyen Thanh Hung said Vietnam’s trade ties with ASEAN countries, especially with Thailand, are growing and flourishing. Thailand has been increasingly easing non-tariff barriers and implementing ASEAN commitments in reducing tax rates under the roadmap. This will help Vietnamese businesses achieve a greater penetration of the Thai market and other markets in the world as Thailand is an international gateway in the region.

A tax reduction to 0 percent and the removal of non-tariff barriers to boost intra- bloc trade will facilitate the participation of Vietnamese businesses into the regional market, Mr Hung noted.

Concerning Vietnam-Thailand trade relations, assistant to the Thai Minister for Commerce, Veerasak Jinarat said, “Vietnam holds great potential for development and has a high growth rate. The seminar aims to provide information for Thai businesses to intensify their investment in Vietnam. Thailand and Vietnam are the biggest rice exporters in the world so we should boost closer cooperation in this field, particularly on prices and markets.”

This year, Thailand is set to up its trade turnover with ASEAN countries to US$70 billion and with Vietnam to not less than US$10 billion.

ASEAN is currently Thailand’s largest export market. Last year, two-way trade turnover between Thailand and the other 9 ASEAN countries hit US$57 billion in which Thailand exports US$32.5 billion and imports US$24.5 billion.

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