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BUSINESS IN BRIEF 3/9   2010-09-03 - Viet Nam Net

Snapshot of national economy in past eight months
Vietnam has recorded remarkable economic growth over the last eight months. However, the domestic economy is likely to experience some instability due to unprecedented fluctuations in the global market.

According to the General Statistics Office (GSO), the consumer price index (CPI) in August stood at 0.23 percent, lower than the previous two months. It is an importance index when measuring the inflation rate. The CPI in the last eight months increased by 5.08 percent over the end of 2009. It is quite possible that in 2010 Vietnam will successfully reach its target of keeping the inflation rate below the two-digit figure.
The country’s industrial growth rate in the past eight months has grown by nearly 13.7 percent against the same period last year, a considerable recovery for the national economy. This positive outcome will significantly contribute to a growth in GDP.

Vietnam’s total investment capital also saw a remarkable growth, with an increasing number of newly-established businesses in the last eight months after numerous difficulties and challenges in 2009. An additional 59,000 businesses have registered to join the domestic market since the beginning of 2010, with a total investment of more than VND370,000 billion, up almost 30 percent over the previous year. The inflow of foreign direct investment (FDI) reached nearly US$10.8 billion in August, or 1.5 times higher than the same period last year.

However, the domestic economy will also undergo many fluctuations if stable agencies do not intervene in time. During the past few weeks, the price of rice in the Mekong Delta has increased suddenly due to unsubstantiated rumours. Price hikes have also seen in some products after increases in the petrol price and the exchange rate between the Vietnam Dong and the US dollar. The domestic economy will also be strongly affected by price fluctuations on the global market, especially as Vietnam is opening its door wide open to the world.

In addition, the business operations of several State-owned enterprises have not yet proven effective, even though they play a key role in the national economy. The industrial growth of these businesses was lower than their set targets, and they also failed to use the State budget effectively.

Despite great efforts by the State Bank of Vietnam to adjust interest rates, the current interest rates at commercial banks are too high. Credit growth in the past eight months is also low and businesses are finding it difficult to access bank loans to expand their operations due to the high interest rates. By August 1, the proportion of industrial goods in stock had grown by 37 percent, compared to the same period last year.

More especially, the country’s trade deficit is currently at an alarming level, with the import surplus in the last eight months reaching over US$8 billion, nearly double 2009’s figure. This is attributed to a huge volume of imported materials, as domestic industries rely on imported materials.

The national economy has seen some green shoots, but they remain a number of hurdles to overcome on the way to achieving the National Assembly’s goal of ensuring stable macroeconomic growth.

Financial analysts discuss economic restructuring
The importance of restructuring the economy from being primarily agrarian to one centring around industry and services was underscored at a meeting held in HCM City on August 31.

Vietnam’s accession to the World Trade Organisation (WTO) has been positive for the economy but it also poses certain challenges, said Tran Dinh Thien, director of the Vietnam Economics Institute.

After joining the global trade body in 2007, foreign direct investment into the country rose dramatically, as did exports, he said.

But accession to the WTO has also revealed the economy’s weakness, including poor quality growth, inadequate infrastructure, high inflation, poor human resources, and low competitiveness.

The quality of human resources has yet to be improved and co-ordination between businesses to achieve a combined strength remains scattered, confessed Thien.

Nguyen Dinh Cung, Deputy Director of the Central Institute of Economic Management, said: “We need to develop new economic mechanisms”.

Economic growth in recent years has been mainly due to the transformation from agriculture to industry and services, while productivity has barely increased, he explained.

With its weak economic structure, the country will find it very hard to become a modern economy by 2020, added Cung.

Tran Du Lich, deputy head of the delegation from HCM City National Assembly, said that the main problem facing the Vietnamese economy is not a shortage of capital, but how to use it effectively.

“Our economy rests on three weak pillars- weak economic institutions, poor human resources and poor infrastructure. These factors do not ensure stability when absorbing capital in an effective and sustainable manner. The country needs measures to shore up these pillars”, he said.

When restructuring the economy, the city needs to focus on improving the quality of its urban infrastructure, creating level playing fields for every business sector and upgrade the city’s infrastructure and training facilities.

The Government should stabilise the macro economy to retain the public and the market’s trust and improve the effectiveness of public investment and the role played by State-owned groups.

But the country has yet to assess the impact of Vietnam’s accession to the WTO, a task that requires great skills, said Lich.

Government keen to grow electricity industry
The Government will speed up programmes to generate electricity from renewable energies and soon adopt a clear and favourable mechanism for the electricity industry to grow and play a crucial role in national development.

The question of how to spur the development of the electricity industry caught the special interest of cabinet members at their regular monthly meeting chaired by Prime Minister Nguyen Tan Dung in Hanoi on August 30-31.

The government’s plan is to encourage all economic sectors to join efforts with the State to boost the growth of this important industry.
The PM asked the Ministry of Industry and Trade to focus investments on raising power output to prevent shortages in the future.

Discussing the socio-economic development plan for 2011, which is the first year in the next five-year development plan, and the 2011-2020 development strategy, PM Dung said the general goal of 2011 is to strengthen macro-economic stability and step up the economic restructuring to achieve a growth rate higher than this year.

The other goals are to ensure social security and social welfare and further improve people’s living conditions while assuring political security, social order and safety, he said. The PM proposed the Government target a GDP growth rate of 7.5 percent, CPI year-on-year rise of 7 percent, and trade deficit below 18 percent for 2011.

He underscored the need to pay special attention to vocational training and considered it an important index to serve the country’s economic restructuring.
PM Dung also requested formulation of mechanisms and policies to support national target programmes, and listed the rural development programme.

Southern localities need more Japanese capital
Ho Chi Minh City, Dong Nai, and Binh Duong should improve administrative procedures, site clearance, and capital disbursement to make a breakthrough in attracting Japan’s FDI and ODA capital.

The President of the Vietnam-Japan Friendship Parliamentary Group, Ho Duc Viet, made the statement at a working session with the authorities of three localities in HCM City on August 30.

Viet, who is also Politburo member and Secretary of the Party Central Committee, highlighted Japanese businesses’ capital and technology strength which will make considerable contributions to local socio-economic development.

HCM City is the country’s leading locality in attracting Japan’s FDI and ODA capital with 398 projects worth over US$2 billion.

Binh Duong now has 153 Japanese-invested projects totalling more than US$1.2 billion while Dong Nai has 90 projects worth more than US$1.7 billion in total.

The three localities need Japan’s ODA funding for four infrastructure development projects in HCM City, two water environment improvement projects in Binh Duong province and three projects in Dong Nai.

Coffee exports fall in value, volume

The coffee industry in the first eight months of the year saw a decline in both export volume and value, according to the Ministry of Agriculture and Rural Development.
During this period, the industry exported 840,000 tonnes of coffee, earning export revenue of US$1.2 billion, the ministry said.

It added that the figures were a 1.3 per cent decline in volume and 4.7 per cent fall in value.

In August, the country earned $140 million from exporting 90,000 tonnes of coffee.

In the first eight months of the year, average coffee prices stood at about $1,415 per tonne, a year-on-year decline of 4.6 per cent.

Doan Trieu Nhan, from the Viet Nam Coffee and Cocoa Association, affirmed that although Vietnamese robusta coffee was of high quality, there were serious shortcomings in harvesting and processing resulting in lower prices than that of other countries including Indonesia.

"Farmers can’t afford to build cement yards or buy machines to dry coffee so they are failing to ensure consistent quality," Nhan said.

To address this issue, Nhan suggested the Ministry of Agriculture and Rural Development (MARD) establish a quality control standard.

"The standard will help managers prevent low-quality coffee from being exported, and will protect the prestige of the national coffee industry. It will also provide both sellers and buyers a guarantee on place of origin and quality of coffee", Nhan said.

He added that Vietnamese coffee exports would strongly develop in the near future, but only when the industry had good management.

Bui Ba Bong, MARD’s deputy minister demanded that provinces develop policies to help local farmers build cement yards or buy coffee drying equipment.

"Processing coffee in farmer households is very important. It directly affects the quality of the coffee," Bong said.

EVNFinance allocates VND16 trillion for electrical projects
EVNFinance joint stock company has allocated more than VND16 trillion to invest in electrical resources and lines for companies in the Electricity of Vietnam (EVN) since it was established in 2008.

The amount of money was delivered in the form of direct credit, direct investment, and confidential consultancy. The EVNFinance recommended that the (EVN) to issues bonds worth more than VND9 trillion.

In the past 7 months, the company has been approved by the Government and supported by the EVN to take the role of capital management for borrowing money to implement the Vinh Tan II thermal plant.

EVNFinance has transactions with nearly 300 economic organisations, more than 70 credit institutions and has gradually build a network of customers and reliable partners as well as implementing and customer care service in two branches in Da Nang and Ho Chi Minh Cities.

The company joins hands with these organisations and institutions to work out policies to control and promote the government’s socio-economic development through solutions such as efficiently implementing preferred interest rate loans, balancing and regulating input and output interest rates in line with market changes and the direction of the State Bank of Vietnam.

Vietnamese-Chinese trade grow sharply
In the first six months of this year, the turnover of two-way trade between Vietnam and China reached nearly US$13 billion, up 49.5 percent. With its current development, it is expected to reach US$25 billion by the end of this year.

This was confirmed at a forum on Vietnamese-Chinese trade and investment cooperation in Beijing, China on August 30 under the framework of Vietnamese Days in China.

The Vietnamese delegation, led by the Minister of Culture, Sports and Tourism, Hoang Tuan Anh, and nearly 300 Vietnamese and Chinese businesses attended the event.

Both Vietnamese and Chinese representatives appreciated that bilateral trade has grown at an average rate of 32 percent over the past ten years. China currently has 743 projects in 53 Vietnamese provinces with a total registered capital of over US$3 billion, ranking 15th among foreign investors in Vietnam, they said.

Both sides put forward a number of proposals to step up cooperation in the seafood processing, manufacturing, materials for garments and textiles and support industries.

The forum ended with the signing of cooperation agreements between several Vietnamese and Chinese businesses.

Vietnam earns US$44.5 bil in export turnover
The country’s export turnover has reached more than US$44.5 billion over the past eight months, up 19.7 percent against the same period last year, according to the Vietnam General Department of Customs.

Of this figure, foreign-invested businesses earned over US$17.6 billion, up 40 percent.

Many groups of export items posted a high growth such as garments and textiles up over US$1 billion, equipment and spare parts up US$720 million, wood and wooden products up US$559 million, rubber up US$543 million, footwear up US$510 million, steel up US$464 million and seafood up US$307 million.

According to the department, in August, the customs sector discovered 773 cases of trade fraud with the total volume of confiscated goods worth nearly VND40 billion.

Hanoi Expo 2010 opens in Hanoi
The 2010 Hanoi International Expo opened in Hanoi on August 30, with a total of 800 stands put up by 400 Vietnamese and foreign organisations and businesses from industrial, agricultural, cosmetics and electronics sectors.

Present at the opening ceremony were Vice Chairman of the National Assembly, Uong Chu Luu, Deputy Prime Minister Pham Gia Khiem, Secretary of the Hanoi municipal Party Committee Pham Quang Nghi and Chairman of the Hanoi municipal People’s Committee Nguyen The Thao.

Several economic and socio-cultural projects were put on to celebrate the 1000th anniversary of Thang Long-Hanoi as well as a range of diverse cultural activities to promote the image of the 1000-year-old capital city.

The event also aimed to give an overall picture of life in the capital and help to develop Party and State guidelines, policies and strategy for Hanoi’s development.

The fair, hosted by the Hanoi Trade Promotion Centre and the Bac Ha Media and Trade Joint Stock Company, will run from August 30 to September 5.

Vietnamese kitchenware exports pick up
Vietnamese kitchenware suppliers expect their export sales to grow by at least 10 percent this year, as overseas demand has picked up, according to a report by Kearny Alliance, a US-based nonprofit organisation which helps businesses in developing economies.

The report was issued prior to the Global Sources’ Private Sourcing Event, which will be held in HCM City on September 16.

It is expected to attract some of the world’s biggest buyers, including ICA, Arena, Next, Target AU, Metro and the Canadian company Tire HK, to meet quality Vietnamese suppliers.

"The fact that big-name buyers with combined annual sales of more than US$60 billion are reviewing Vietnamese suppliers’ profiles in preparation for the Private Sourcing Event underlines the competitiveness and quality of these exporters," said Vu Ngoc Khiem, the manager of Kearny’s export-assistance programme for developing countries.

97 percent of all surveyed suppliers were optimistic about sales growth and 55 percent expected sales to rise by more than 10 percent this year.

According to the survey, export prices range from less than 15 cents to more than US$32, depending on the product, type of material and design.

The total output of the producers who responded to the survey was 40 million units per month, half of which are for export.

Cooking utensil and kitchen accessories accounted for 86 percent and 10 percent of total output, respectively.

"The suppliers surveyed in the report said they were rolling out new competitive strategies, including enhancing R&D and making items using eco-friendly materials while keeping prices stable to retain current buyers and attract new customers," said Khiem.

One supplier profiled in the report, Nguyen Xuan Phu, general director of Sunhouse JSC, said: "Many buyers are coming back to our company inquiring about nonstick and stainless steel cooking. This makes us optimistic about an increase in export sales this year."

"We are very excited about becoming a verified supplier on Global Sources’ B2B website and meeting buyers face-to-face at the Private Sourcing Event here in Vietnam," he added.

Khiem said the surveyed suppliers also planned to emphasise traditional overseas markets.

"Close to two-thirds of them will focus on the EU, while a fifth will target Asia-Pacific. The rest cater to North America," he said.

The Vietnam Sourcing Report: Kitchenware is one of a series of emerging market sourcing reports by Kearny, featuring the profiles of 33 export manufacturers, plus the descriptions, prices and packaging details of the 103 best-selling export products.

These include fruit baskets, food trays, frying pans and dish racks made from metal, rattan, wood, bamboo, ceramics and plastic.

Cost of borrowing declines

The interest rate on loans at commercial banks from August 20-26 was lowered by 1 per cent to about 13 per cent per year.
This move aims to boost the economy after the State Bank of Viet Nam injected capital into the market to improve liquidity.

State owned banks are charging exporters, farmers and rural developers between 12-13.5 per cent per year for both short and long term loans. Private banks charge between 12-14.5 per cent.

The total trading volume on the inter-bank market was VND101.22 trillion ($5.19 billion) in Vietnamese dong and US$1.96 billion in US dollars, up 3.9 per cent and 1.8 per cent, respectively.

Most tradings in dong were made overnight and during the week. Overnight interest rates for the dong rose 0.08 per cent.

Average short term interest rates ranged from 6.78 per cent to 8.56 per cent per year.

The highest lending interest rate was 12 per cent and the lowest interest rate was 6 per cent.

The exchange rate hovers around VND19,480-19,500 per US dollar after the dong depreciated by 2 per cent last week.

Youth unions form entrepreneurs’ club

Ho Chi Minh Communist Youth Union and Viet Nam Young Entrepreneurs Association have set up an online consulting and support programme for young entrepreneurs.

Nguyen Manh Cuong, deputy chairman of the association, said, created in collaboration with E-learning Bachelor Training Programme and the Viet Nam Youth Union, seeks to reduce unemployment and contribute to the country’s economic growth.

The programme will give priority to young people in remote areas and disabled and poor students.

By 2015, about 10,000 people are expected to be trained following an initial phase when 2,000 students in Ha Noi, Thai Nguyen, Da Nang, HCM City, and Can Tho will be trained.

Nguyen Hoang Hiep, secretary of the Ho Chi Minh Communist Youth Union, said jobs are the main concern for people who graduate. About 1 million young people enter the job market every year.

The unemployment rate in the countryside is around four times higher than in cities.

Yesterday, there was a meeting between 200 businesses people who won the Golden Star prize and 1,000 students from HCM City universities.

It was held by the Viet Nam Young Entrepreneurs Association, Thanh Giong Knowledge Gate, and TOPICA e-learning programme to create a close link between businesses and students and provide the youth with information about setting up and running a business.

Vietnam Airlines add 20 domestic flights

Vietnam Airlines plans to add six additional flights to the Ha Noi - Nha Trang route, four flights to the HCM City - Nha Trang route and ten flights to the HCM City - Phu Quoc link.

This move aims to meet the greater demand on travelling during the National Day holiday.

The carrier will use larger planes for the extended routes, including Airbus 320/321 and AT7, which will provide more capacity during the busy holiday period.

Gas prices rise by VND14,000-15,000

The retail price of cooking gas on the domestic market increased yesterday by VND14,000-15,000 to VND258,000 per 12-kilo canister.

This is the second time domestic cooking gas prices have increased within the last ten days, due to a US$55 per tonne price-rise on the global market last month.

Thai-Viet Company to build $50m factory

Thai-Viet Bio-ethanol Company received a license early this week to build a factory to produce ethanol, fertilisers and animal feeds. The factory, located in the central province of Ninh Thuan, has an investment capital of VND950 billion (US$50 million).

It is slated to start construction in 2011 and come into operation in early 2013. The plant is expected to produce 60 million tonnes of ethanol per year for export and domestic demand.

The company also plans to establish an R&D centre in the province’s Phuoc Nam Industrial Park to support the factory’s construction and operation.

SP-PSA Port reports record productivity

The SP-PSA International Port in Ba Ria-Vung Tau Province has gained record productivity for one container vessel, with an average discharge rate of 106 containers per hour.

The port discharged a record 5,174 TEU from a container ship called the APS Iris, which belongs to APL-NOL, a US marine transport company. The ship has direct weekly service from and to West Coast and Vung Tau.

Managers of APL-NOL and the port expect that the high productivity rate will raise the confidence of both the port’s and ship’s customers.

The province’s Cai Mep Thi Vai estuary has many deep seaport development projects in progress. SP-PSA port, the first deep-sea container terminal operating, has a 600m-berth and a sea depth of 14.5m.

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