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BUSINESS IN BRIEF 3/1   2011-01-03 - Viet Nam Net

Lower lending rate promised


The State Bank of Viet Nam (SBV) had been flexible and cautious in its monetary management to keep credit growth, interest and exchange rates compatible with macro-economic conditions and objectives, according to its Governor Nguyen Van Giau.


He noted that credit growth had increased by almost 30 per cent which was stable, and that lending interest rate took a downward trend in the first ten months of the year thanks to the Government's intime monetary policies.


The SBV also took immediate actions to stabilise both the gold and credit markets in the last two months, including importing gold and increasing the prime interest rate by one per cent.


Banks had already reached an agreement about capping their dong deposit interest rates to under 14 per cent a year, he said.


The SBV would continue to monitor the interest market closely and would lower lending rates once the Consumer Price Index goes down.


Regarding concerns that stricter credit control as a result of rising inflation could affect credit growth in the first quarter of next year, Governor Giau assured credit growth had been kept low for the last four months so the capital market for next year would not be affected.


Timber products earn $3.3b in exports


The wood products industry earned US$3.3 billion from exports this year, $300 million more than the target set for the year, according to the Viet Nam Timber and Forestry Products' Associations.


The association's vice chairman, Nguyen Ton Quyen, attributed the result to the rebound of traditional import markets, such the EU, US and Japan, following slumps over the past two years, as well as rising prices and a Government incentive policy that lifted the 10-per-cent tariff imposed on imported wood materials.


Of the $4 billion in export turnover predicted for the industry next year, $1.3-1.4 billion would be spent on importing between 4-5 million tonnes of raw materials.


HCM City Handicraft and Wood Industry Association (HAWA) vice chairman Tran Quoc Manh, speaking on the sidelines of a meeting celebrating the 20th anniversary of the association's founding in HCM City on Tuesday, said inflation would continue to increase many input costs for the industry next year.


Manh said that with increased demand for higher quality and environmentally friendly goods, local wood products makers should improve their production systems to meet the requirements of foreign customers.


He advised companies to learn about technical barriers set by importing countries and understand foreign laws and regulations to minimise potential risks imposed by those barriers.


"The economic recovery is still underway, but with increased demand from the US in the fourth quarter, I hope that orders will increase significantly next year," Manh said.


Ongoing efforts of domestic enterprises in seeking new export opportunities in India, Eastern Europe and the Middle East also contributed to the increase in exports, Quyen said, adding that penetration into such new markets would bode well for the industry in the future.


Quyen listed stricter provisions for timber products in importing countries, raw material shortages and inadequate capital as major challenges facing the industry in the coming year. Compliance with the Lacey Act, the US law requiring wood exporters to prove the origin of timber and related materials, would increase production costs.


Difficulties in accessing credit were also problematic for wood products exporters, he said.


HAWA chairman Nguyen Chien Thang said reliance on imported raw materials and a labour shortage would likely cause difficulties for manufacturers next year.


Local wood processors needed to develop their own sources of raw materials, create more added-value in their products, and use more advanced technology to reduce the dependence on manual labour, he said.


To mark its 20th anniversary, HAWA was awarded the Certificate of Merit from the Prime Minister for its contribution to the socio-economic development.


"HAWA has greatly contributed to the development of the handicrafts and wood products sector not only in HCM City but elsewhere," said Deputy Minister of Industry and Trade Nguyen Thanh Bien.


The association has conducted professional training courses, trade promotions and seminars to help members strengthen competitiveness and expand markets, and the association and its members have made significant contributions to the sustainable development of the domestic wood products industry, said Thang, noting that the number of members had increased from 27 when it was established in 1990 to 350.


Viet Nam now has over 2,500 wood processing businesses, nearly three times the number in 2000 and eight times that of 1990. Private enterprises represent 90 per cent of the total. Altogether, the firms manufacture 3,000 different timber products sold in 120 foreign markets.


 Work on $600 mln southern theme park to start in Feb


Vietnam’s Khang Thong Group is set to start construction of its US$600 million Happyland Theme Park in southern Vietnam in February 2011 as America’s Hill International became the project manager mid-December, a company source said.


The source told this to the Saigon Times Daily on Thursday on condition of anonymity.


Hill International, a Marlton-based project management firm, announced Dec. 27 that it has signed a 40-month contract with Khang Thong to provide project management services from the group’s Phu An Investment Construction and Infrastructure Development JSC.


The contract has an estimated value to Hill of approximately US$16.9 million, the US firm added.


Meanwhile, Khang Thong said the group signed also on Dec. 16 a memorandum of understanding with Steelman Partners LLP for the American architectural firm to design a five-star 1,000-room hotel in the property project, called Happyland Vietnam.


The Nevada-based corporation is the main designer with Happyland Vietnam, which would require around US$2 billion, including $600 million going to the theme park similar to Disneyland and Universal Studio. It is projected to open in Long An Province in 2014.


The park is planned to be Southeast Asia's greatest tourist attraction, serving the recreational and entertainment needs of both domestic residents and foreign tourists.


The theme park will be developed on a prime riverside location along the Vam Co Dong River in Thanh Duc Commune, Ben Luc District, less than one hour drive from Ho Chi Minh City. It is 16 miles (less than 26 km) on the new freeway from the city.


Happyland Vietnam will have a land area of around 340 hectares for phase one and around 350 hectares for phase two. It will include a commercial section providing some 160,000 square meters of space, a section for residential development with villas and shop houses, Vietnam cultural complex, and museum, among other facilities.


Khang Thong expects that Happyland could receive around 14 million visitors a year and generate jobs for about 10,000 people in the province.


Noteworthy M&A deals spawn in HCMC realty sector 2010


Ho Chi Minh City realty market saw many successful mergers and acquisitions (M&A) deals last year.


Notable amongst projects being transferred is Dat Xanh Real Estate Trading and Investment Joint Stock Co which purchased a 3,700 square-meter land of Ha Thuan Hung Co Ltd to develop the 14-storey Phu Gia Hung Apartment building with 234 apartments covering in Go Vap District.


In another deal, Bitexco Nam Long Manufacturing and Investment Joint Stock Co also spent US$8 million to buy a 10-story building owned by Viet Technology Joint Stock Co (Vitek) in Vo Van Tan Street, District 3.


Indochina Co also made an $11.9 million buyback of land using right on a site of 2,700 sqm in South Saigon area from Hoa Binh Real Estate Construction and Trading Joint Stock Co.


By last September, JSM Indochina Co, which specializes in investing in housing and retail sectors in Vietnam and Cambodia, announced to spend $26 million to take two land plots of the Prince and Princess apartment project in Thao Dien Ward, District 2.


These two plots of land were combined with the Peninsula project worth $19 million that the company bought earlier to establish a complex project including 600 luxury apartments for lease and sales.


A month later, according to the information publicized on the company's website, JSM Indochina signed a memorandum of understanding to spend $65 million to buyback two buildings including 180 apartments in District 2 as well.


However, in September this year, JSM Indochina selected CBRE as an intermediary to seek investors to sell its two projects in District 2.


According to Marc Towsend, CBRE Vietnam's executive director, during past time, there has been a lot of M&A deals for realty projects. But, most of these M&A deals were made by domestic firms or foreign firm transferred to domestic enterprises.


Most recently, Prudential Vietnam Investment Fund Management Co bought back the investment of Korea-based Vina Development Inc Co to invest in Blooming Park apartment project that has just been changed name to Imperia An Phu being built in An Phu Ward, District 2.


The over two-hectare project will include four 24-28 storey buildings with about 700 apartments and retail area capitalized at about $120 million. Of which, Prudential holds 60 percent and the rest held by Kien A Joint Stock Co (30 percent) and HCMC Service and Investment Joint Stock Co (Invesco) (10 percent).


In addition, currently the market also sees that some investors are seeking partners to transfer their projects due to they cannot bear hardships in the market.


Commenting on this trend, Tran Nhu Trung, director of market research and consulting department of Savills Vietnam Co, said that the scale of the realty market has grown considerably since 2007. In the expanding market trend, the playing yard also requires more professional, forcing the players in the yard as investors must think more in their investment activities.


"Therefore, the M&A deals of projects are inevitable in the market" Trung said.


Observers forecasted that the trend of M&A in HCMC realty sector will be very exciting in 2011 since the market have been cooled down for the last 2 years due to both international and domestic economic turbulence.


The decrease in market's purchasing power along with difficulties in raising capital over the period have turned out to be an endurance trial for many investors and project developers, exhausting many of them and making them to find ways to transfer their projects.


Since M&A is a normal operation that is able to bring profits as investors transfer projects, it doesn't mean that the investor is fleeing from the projects.


Vietnam eyes $20 bln in FDI next year


Vietnam has expected to attract US$20 billion in foreign direct investment (FDI) in 2011, an increase of 7.5 percent.


Disbursement of FDI is expected to rise to $11.5 billion next year from this year’s $11 billion, according to the Ministry of Planning and Investment.


Next year the country will prioritize the qualitative rather than the quantitative approach. FDI attraction will be under stricter screen, with priority to be given to infrastructure and hi-tech projects.


The ministry told a conference Thursday the disbursed capital this year increased 10 percent to match this year target’s $11 billion thanks to the global economic recovery.


It reported disbursement of foreign direct investment this year was higher than 2009 as the flows of pledges in previous years were high and the world’s economy recovered.


Foreign direct investment, along with remittances from Vietnamese working overseas, has been an important source of foreign exchange, helping finance Vietnam's growing trade deficit, which rose to an estimated $12.37 this year.


Imports this year would rise 20.1 percent to $80 billion, according to the Industry and Trade Ministry.


It revised up the trade deficit last year to $12.87 billion, from $12.3 billion earlier estimated by the government's statistics office.

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