Business in brief 10/3

Airlines rush to the bottom for slow season

Airlines in Vietnam have been rushing to offer cheap airfare as demand in the travel market falls after Tet.

On the occasion of launching its 22th air route linking HCM City and Dalat, VietjetAir has provided up to 30,000 tickets, some for as little as VND22,000 each.

Before Tet, the airline had another campaign of offering discount tickets for just VND9,000 VND for some domestic routes.

National flag carrier Vietnam Airlines announced that from March 15, it will not apply the surcharge of VND50,000 for economy class and VND90,000 for business class. They opted to allow their agents decide if they want to lower the price to better compete.

International airlines have not missed out on the trend. From March 30, All Nippon Airways will start a promotional programme offering a return ticket of just USD650 from Hanoi to Tokyo, Osak and Fukuoka, excluding taxes and surcharges.

Cathay Pacific will extend a 50% discount on March 31 to about 50 destinations, including the routes from HCM City to Taiwan, China, Australia and Japan.

Some other foreign airlines in Vietnam such as Air Asia and Qatar Airways have had their own promotional campaigns too.

Despite cheap tickets, many complain about difficulties with booking. The numbers of available tickets is usually limited, leaving some customers without adequate time.

VNDirect connected to global network

VnDirect Securities Company has become the first Vietnamese broker joining the global network of the UK’s Fidessa Group, a move aiming at supporting foreign investors in approaching the local stock market.

A representative of Fidessa said in a statement released on Monday that this is the first step of Fidessa in serving foreign investors who are interested in the local market. VNDirect’s participation in the network will help clients place buy and sell orders automatically and prevent risks related to manual transactions.

This move is part of Fidessa’s strategy to serve online transaction demands in Southeast Asia. Earlier, Fidessa has opened three order centers in Singapore, Malaysia and Thailand.

Last year, VNDirect introduced DMA and STP, two solutions allowing online transactions to go directly to Bloomberg EMSX and Fidessa systems.

Fidessa Group is providing market analysis, transaction system and investment infrastructure services for financial institutions worldwide.

Shipments of garment and coal pick up in Feb.

In the first two months, export of garments and textiles and coal increased by 44.9% and 4% against the same period last year.

The Ministry of Industry and Trade reported that garment and textile production were better with contracts secured stably in number and recovering export markets.

Garment and textile shipments valued at US$ 1.3 billion in February, up 44.9% against the same period last year. In the January-February period, the sum went up 30.1% against the same period last year.

Meanwhile, according to the Viet Nam National Coal and Mineral Industries Group (Vinacomin), coal production touched 6.58 million tons in the first two months, accounting for 104% of the same period in 2013.

Up to 1.44 million tons of coalwere shipped abroad, meeting 18% of the year’s plan and representing 68% of the same period last year. Domestic consumption was 4.38 million tons, equal to the same period last year.

Due to the slow granting of coal exploration licenses, a large number of small-scale projects were slowly put into operation, said Vinacomin Deputy Director General Nguyen Van Bien.

He suggested relevant ministries speed up the process to ensure coal production meets the set target.

Canon up-phases Bac Ninh factory

Japanese laser printer manufacturer Canon just inaugurated the second phase of its factory in Tien Son Industrial Park in northern Bac Ninh province.

The expansion has an investment of $27 million and will bring output up to 10.8 million products a year and employ 5,400 local workers by 2016.

The investment in Vietnam will further strengthen Canon, as the world’s leading printer manufacturer.

The company entered Vietnam in 2001 with its first investment in Thang Long Industrial Park in Hanoi. To date it has built three factories, with the other two in Que Vo and Tien Son industrial parks.

The factory in Tien Son was built in 2007. Over the past seven years Canon has already increased its production capacity at this factory from two million to eight million products annually.

Promises of cheap credit prove hard to cash in on

Firms are still struggling to access low-cost lending despite falling interest rates.

General director of state-owned Vietnam National Coffee Corporation (Vinacafe) Nguyen Nam Hai said up to 65 per cent of their coffee areas were planted with old trees that needed replacing, but member firms were short of capital but couldn’t take additional loans due to outstanding debts.

Therefore for Vinacafe and other coffee firms, lower interest rates were not of top importance, instead it was the ability to access capital.

Despite agriculture being a priority sector for lending, many agricultural export businesses claimed they could not access credit in the past year.

In response the Ministry of Agriculture and Rural Development’s Agro-Forestry Processing and Salt Industry Department recently proposed that banks reschedule loans for export processing firms, providing them a chance to get new loans at more reasonable interest rates of about 9 per cent per year.

The department also asked the government to cut the interest rate of investment development credit to 5-6 per cent per year from a current 11.5 per cent to benefit firms in the agricultural sector.

Vehicle and part manufacturers are also in a critical state.

In a recent letter to the prime minister, Bui Ngoc Huyen, chairman of leading Vietnamese car-maker Xuan Kien Auto Joint Stock Company (Vinaxuki) said capital shortages were the biggest problem firms were facing.

Kien said this was in part because banks had undervalued collateral.

Despite the State Bank’s (SBV) commitment to offer priority lending to firms in five set areas, its reports showed that the property sector had gained the most from bank loans, growing nearly 37 per cent last year.

That was because banks could hold property as collateral while they faced a surging threat of bad debt when lending to production firms.

According to Vietnam Association of Small and Medium Size Enterprises chairman Cao Si Kiem, current interest rates, although in a downward trend, have still nearly double the profitability rate of most firms.

SBV figures showed that bank credit in January had contracted 0.5 per cent. Some banks were in an even worse position. For instance, the Ho Chi Minh City-based Orient Commercial Bank (OCB) saw their credit contract 0.8 per cent in January. “Our bank only lent to good firms despite having substantial capital,” said OCB’s deputy general director Pham Linh.

Economists have indicated bank credit had been largely misdirected because of the concentration on consumer lending backed by collateral and into government bonds, rather than channelling money into production which was a real cause of concern.

The majority of government bonds were bought by banks, with the State Treasury raising over VND31.542 trillion ($150 million) from four auctions since early this year.

Affordable housing developer Nam Long gets six more investors

Vietnamese property developer Nam Long, which leads in affordable housing development, has just announced six new corporate investors including the World Bank’s private sector lending arm IFC.

The new investors are both local and foreign. Among them are Bridger Capital and Probus Asia from overseas, and Vietnam’s Ho Chi Minh City Securities Corp., a leading broker and investment firm. The two other local companies are Huong Viet and Tan Hiep, both based in the city.

Nam Long CEO Nguyen Vinh Tran announced that IFC will finance his Ho Chi Minh City-based firm to build 8,000 apartments for mid-income homebuyers in the city by 2017. The $7.5 million equity investment will support Nam Long’s plan to build more housing units under its EHome brand. IFC will also aid the company in improving its environmental and social practices

Nam Long had separately issued 25.5 million shares to the six investors for VND18,000 (85 cents) each, adding VND255 billion (12.14 million) to its VND955 billion ($45.47 million) chartered capital, bringing the new capital to VND1,210 billion ($57.61 million). The actual proceeds of VND459 billion ($21.85 million) will go to the company’s forthcoming EHome projects.

The company Nam Long has so far sold more than 3,000 affordable housing units, costing between $25,000 and $50,000 each. Meanwhile, Ho Chi Minh City’s demand in the segment is estimated at about 70,000 units a year. The company plans to provide 2,000 EHome units this year, doubling last year’s number of units sold.

Nam Long’s other strategic investors include Nam Viet, which is fully owned by Goldman Sachs, Malaysian investment fund ASPL, Mekong Capital-managed VAF Fund, and Indochina Land. The foreign investors in Nam Long hold almost 44 per cent of its capital.

Prefab factories trending now in IPs

Industrial park developers are turning from long-term land leases to added-value pre-fabricated factory construction for lease with areas of about 2-3,000 square metres, according to experts.

Industrial park developers are now including prefab facilities in their rentals to attract fast paced investors

Jonathan Tizzard, national head of research and valuation at Cushman & Wakefield, said a recent trend indicated developers were turning from long-term leases to dividing the total land area into plots and constructing factories, warehouses or storage for lease.

According to Ho Chi Minh City Export Processing and Industrial Zone Authority (HEPZA), in 2013, the total leased area of warehousing in the city’s industrial parks reached 55,680 square metres, representing a sharp increase of 37 per cent year-on-year.

“This proved the demand for this type of industrial property is following an upward trend,” Tizzard claimed.

“Demand mainly comes from small and medium foreign invested enterprises (SMEs) support industries which reflected the local authorities’ success in attracting support industries,” he pointed out.

Kelvin Teo, co-chairman of VSIP Group and CEO of Sembcorp Development told VIR that manufacturers often weigh up different rental options.

“Short-term leases give manufacturers flexibility to first understand the country’s operating environment and customer demand before making more long-term investment decisions,” he said.

For VSIP, the company is offering ready-built factories (RBF) in VSIP Binh Duong and Haiphong.

“From our experience, the RBF are popular with some foreign companies who are new to investing in Vietnam,” Teo said.

The reason for this move, according to Tizzard, was that those newly established companies investing in the Vietnam market firstly need to understand the country before settling down for the long term, and therefore leased warehouses inside IPs over 2-3 years allow them to pilot manufacturing instead of leasing industrial land for 50-year periods.

Another reason was to meet foreign investor demands for convenience.

“In the difficult economic context, leasing built factories is preferable for new businesses that want to begin exploiting opportunities in the shortest time,” added Tizzard.

It is estimated that factories take at least four to five months to complete with construction costs ranging from $170 to $400 per square metre depending on their specialism.

In contrast industrial warehousing can help enterprises save time and money otherwise wasted on building infrastructure.

Moreover, most IPs require upfront full payment for the whole leasing period (averaging 30 to 50 years). Leased factories by contrast can help small foreign companies with limited initial equity to save money and minimise risks.

Another advantage of this change is the rent achievable for leasing land with built factories is still being kept relatively high and stable over quarters despite the decreasing rent in other segments in the market.

The asking rent averages from $2 to $6 per square metre per month. Given the increasingly high demand of SMEs entering Vietnam, especially those moving from China, this move will help developers to attract tenants by providing them with more flexibility in leasing choices, Tizzard said.

To support this change, the government has allowed investors who have been issued investment certificates by December 31, 2012 to amend their business purposes in those certificates to include warehouse leasing activities.

At the same time, industrial park managers have been applying policies to support investment from foreign invested SMEs that will be the main demand driver for built factory leasing by working with infrastructure development companies to build qualified warehouses and filtering out enterprises with poor performance to have more space for building factories/warehouses for new investors.

IP management bodies are also providing more services to support new enterprises in leasing factories such as labour recruitment, investment consultancy, training, accounting and management consultancy.

There are currently 18 operating IPs in Ho Chi Minh City providing more than 3,600 hectares. The leasable area is estimated to be about 62 per cent of the total industrial land scale, or more than 2,200 hectares.

It is predicted that the total increase in industrial land in Ho Chi Minh City up to 2020 will be approximately 3,000 hectares, a roughly 85 per cent increase from the fourth quarter of 2013. In terms of the number of IPs, it is forecast that the 18 current parks will expand and there will be 12 new IPs in operation by 2020.

Meanwhile in Hanoi, nine IPs with a total leasable area of approximately 1,400 hectares are currently in operation. Available land for lease in the fourth quarter of 2013 accounts for roughly 34 per cent of the 1,400 hectares, the same as the previous quarter.

Industrial inventory index remains high in early 2014

The inventory index of the manufacturing and processing industry increased by 1.8% month on month in the first month of the year, and 12.7% against the same period last year.

The figures were reported by the Ministry of Industry and Trade (MoIT) during a video conference held on March 3.

Several industries recorded a high inventory index, including sugar production (up 50.7%), milk production (up 24.9%), animal and poultry feed production (up 34.8%,) footwear production (up 36.8%), and pulp production (up 45%).

According to Deputy Minister of Industry and Trade Do Hai Thang, the high inventories were due to high accumulated inventories from the previous month and low consumption in many industries.

Notably, the consumption of iron, steel and cast iron in January decreased sharply, by 20.8% compared to the same period in 2013. The purchasing power of milk products, animal and poultry feed and cement products also saw year-on-year decreases of 2.7%, 1.5% and 9.4% respectively.

To resolve issues related to inventory, the MoIT directed relevant agencies to continue deploying effective measures to remove difficulties facing businesses and offer support in distributing and selling products to reduce inventory. Domestic enterprises need to seek out new markets and improve competitiveness to cut down inventories and ensure sustainable development.

GAS shares running dry on strong foreign demand

The number of tradable shares, or the free float ratio, of PetroVietnam Gas Corporation (GAS) is contracting quickly as foreigners are rushing to snap up GAS shares.

Though GAS has jumped over 100% in price since its debut date, foreigners have picked up 47.8 million GAS shares, or a 2.52% stake. If they continue to acquire more GAS shares, the firm will become a venture between the State and foreign investors pretty soon.

According to latest statistics of the Hochiminh Stock Exchange (HOSE), there had been only 13.3 million tradable GAS shares left, including those held by employees and internal shareholders, by February 20.

The firm earlier launched nearly 1.9 billion shares on HOSE, of which the State holds 96.72%. Therefore, only 61.1 million shares, or 3.28% of the total, have been tradable on the stock market.

A representative of a large investment fund said GAS is among the best blue-chips with strong business results. Taking the lead in terms of market capitalization, GAS always makes significant impacts on developments of the VN-Index and most investment funds have put GAS into their portfolios.

Even domestic organizations have picked GAS for their long-term portfolios. So room for both foreign and domestic investors may be full soon, the expert said.

During a recent conference on State enterprise equitization in Hanoi, leaders of PetroVietnam Gas suggested reducing the State ownership to pave the way for attracting more capital from foreign strategic investors.

Last year, GAS took the lead among listed enterprises in terms of after-tax profit with nearly VND12.4 trillion. The figure is expected to grow further this year.

When GAS launched its initial public offering (IPO) in 2010, a major banking sector investor and associate individuals acquired a huge volume of GAS shares. At the time, GAS sold only 64% of the shares offered, of which foreigners bought only 7%.

Foreign investors were not interested in GAS as they could not predict an exact listing time. In addition, the stock market was suffering a steep decline and GAS’s net profit was estimated at around VND4.5 trillion in 2010.

When GAS rose to VND40,000-50,000 per share, the above holders sold out their GAS shares. Since then, foreigners have jumped in to buy GAS shares.

Foreign investors snap up half of Viglacera shares at IPO

Foreign investors acquired 52% of the shares which State-owned firm Viglacera successfully sold in an initial public offering (IPO) on the Hanoi stock exchange last week.

The company sold a total of 19.47 million shares worth VND200.58 billion in this IPO auction, which however accounted for 25.3% of the total offered volume. The average price per share is VND10,301.

According to the Hanoi exchange, a couple of investors offered bids totaling VND14,000 per share, over VND3,700 higher than the reserve price.

The Hanoi bourse last week also organized an IPO for Bach Dang Construction Corporation in which a mere 12.56% of 896,200 shares offered found buyers with total sales turnover of VND9.14 billion.

The winning bid was VND10,200 per share, the same as the reserve price.

After the IPO auction, the State might sell more preferred shares to staff and eventually hold an 85.46% stake in Bach Dang.

Brokers: FOL spike to spur market

Although the market corrected in the two final sessions last week, securities firms said the correction phase would finish soon due to a forthcoming foreign limit ownership (FOL) increase.

Last Friday, selling remained strong in early trade but then dropped as updates on the possible FOL increase emerged from a meeting of State Securities Commission (SSC). SSC said a proposed draft for a new decision regulating FOL in listed enterprises has been done and was waiting for approval.

In addition, SSC has been working on an accompanying circular, which will follow the new decision on FOL.

According to Viet Capital Securities Company, tickers with foreign room already full like FPT, REE, TCM and JVC were among the gainers. Meanwhile, the real estate sector declined the most.

The VN-Index fell 0.08% against the previous day to 570.57. The HNX-Index, meanwhile, bounced back 0.83% at 80.17.

Both exchanges reported a total trading value of around VND2.7 trillion, down 49% from the previous session with a record high in matched trade volume, as investors turned cautious.

Outstanding put-through transactions included HAG, KBC and LSS. Foreigners remained net buyers with a combined value of around VND44 billion.

During the week, the VN-Index lost 0.29% while the HNX-Index gained 1.79%.

Viet Dragon Securities Company said the FOL issue is supporting investor sentiment. However, even if the new FOL rule is announced, it could still be a big question for the market.

“Right now, we think there could be two scenarios. First, foreign cash flow would be strengthened, helping the VN-Index beat the 580-point level successfully. Otherwise, foreign cash flow would fail to improve and the market could see more corrections,” the brokerage said in its last Friday’s report.

“Given the FOL factor, we do not have reasonable grounds for confirming that the correction phase is over. However, the economic restructuring process, especially State-owned enterprises reform and supportive solutions for the real estate sector, has been sped up. Thus, we think that the bullish run of the stock market will not stop in the coming time,” VDSC added.

Aside from fundamental sectors, investors can look into foreign cash flow to make investment decisions. In recent times, foreigners have been focusing on real estate stocks such as KBC, IJC, DIG, OGC, ITA and DXG.

Experts: Flappy Bird game exit is huge blow

Flappy Bird heated up the 25th anniversary ceremony of the Vietnam Association for Information Processing on Saturday with most participants feeling regret as developer Nguyen Ha Dong has removed the hit game from Google Play and the iOS App Store.

Mai Liem Truc, former deputy minister of posts and telecommunications, said Vietnam should have policy to support talents such as Dong because if he had been discovered sooner and the Government had had timely solutions to maintain the product, Dong needed not have taken the game down due to huge pressure.

Nguyen Long, general secretary of the association, said the information technology (IT) industry started 2014 with a special event as the mobile game Flappy Bird had stayed on top of both the iOS App Store and the Google Play Store. However, authorities have yet to create a favorable environment for IT products.

Bui Manh Hai, chairman of the association, said Vietnam should have policy to encourage and nurture IT talents. Early warnings of a tax levy on Dong’s earnings were inappropriate, he noted. Meanwhile, proper policy should help bring about greater incomes to the State from these types of businesses.

Nguyen Ngoc Binh, president of the University of Engineering and Technology under Vietnam National University in Hanoi, said that the nation should already have in place incentives for individuals so that special cases like Dong can be classified in a priority group. The State should give incentives to encourage talents, instead of threatening to levy tax.

Mike MacDonald, chief technology officer of Huawei Group, said that Vietnam still lacks policy to develop a generation of young talents in a program to build the country into a strong IT nation. Vietnam needs to take policy measures to encourage young people to develop new business models such as the Flappy Bird developer.

Nguyen Trung Chinh, general director of CMC Technology Group, said Flappy Bird has strengthened the confidence of Vietnamese people and enterprises at development opportunities in the global IT sector.

Dong has proved that he as an individual could create a popular product at a low cost for 50 million users worldwide due to his creativity, Chinh said.

Poor Internet traffic on March 2-9

Internet traffic in Vietnam is forecast to be slow from March 2 to 9 as a submarine optical fiber cable system will be repaired and maintained.

A source from the Vietnam Post and Telecommunications Group, the operator of the Vietnam landing point of Asia America Gateway (AAG) cable line, it will switch off the landing point to serve cable line repair and maintenance.

The AAG system accounts for a large volume of international Internet traffic of Internet service providers in the country such as VDC, FPT and Viettel. As a result, around 80% of Internet users in Vietnam could be affected by a slowdown in Internet traffic.

Sources from FPT, Viettel and VDC said these companies would strive to cushion the impact by using inland backup cable systems.

Speaking to the Daily, Nguyen Van Khoa, director of FPT Telecom, said that despite high fees for international traffic volume to be hired from other cable systems when the AAG system is down, FPT is still hiring other systems to ensure the impact on its customers will be minimal.

VND1.2 bil. for HCMC administrative center redesign contest

HCMC will organize a contest to redesign its administrative center with an estimated cost of nearly VND1.2 billion.

The administrative center will be developed in an area surrounded by Le Thanh Ton, Pasteur, Ly Tu Trong and Dong Khoi streets in District 1.

Those taking part in the contest need to be capable, known and knowledgeable about conservation. A list of contestants will be screened by the Architectural Research Center under the HCMC Department of Zoning and Architecture.

The contest will consist of a preliminary round for design ideas in which a panel of judges will pick 7 to 9 contestants with excellent ideas to go to the next round.

The plan with the highest score will be reviewed by the judging panel for improvement, if any. Then it will go before the HCMC government for approval.

The first prize winner will get VND300 million with copyright to be protected. Second and third prize getters will receive VND150 million and VND100 million respectively while VND50 million will go to consolation prize earner.

Each entry will be funded with VND20 million no matter whether it wins the contest or not.

SeABank provides VND4 trillion to support production

The Southeast Asia Commercial Joint Stock Bank (SeABank) has offered credit packages totaling VND4 trillion (US$188 million), with preferential annual interest rates from 8.5 percent, to small and medium enterprises (SMEs).

The packages—intended to assist the businesses in maximising growth opportunities in 2014 and to supplement capital for production, trade and export—are available until the end of this year.

SeABank plans to grant VND3 trillion with annual interest from 8.5 percent to SMEs that need further working capital or medium-term loans in VND to purchase new assets for production and trade.

They can also access short-term loans in USD to supplement working capital and to invest in sectors where credit development is encouraged under the bank’s 2014 business plan.

The other package, of VND1 trillion, is for short-term loans in VND to family enterprises, with interest rates from 8.8 percent annually.

Hanoi urged to up investment in concentrated IT park

The establishment of a concentrated information technology park in Cau Giay district, Hanoi – one of the first three zones of its kind in the country – is on the right path, marking a remarkable turning-point for IT development in the city.

Minister of Information and Communications Nguyen Bac Son made the remark during a working session with the municipal authorities on February 24, praising the Hanoi People’s Committee for swiftly getting the zone operative.

He also urged the city to create preferential policies that will draw more investment to the zone, saying that it is necessary to solve difficulties facing investors to help them promote their business and production.

The minister noted that the municipal authorities should pay attention to calling on domestic and foreign investors to pour money into the field.

According to Vice Chairwoman of the Hanoi People’s Committee Nguyen Thi Bich Ngoc, the city has invested VND30 billion to the infrastructure in the park.

She said the city also asks related departments and sectors to build appropriate policies and models for its first concentrated IT park. Three more of its kind will be built in other districts in the coming time; the city aims for the IT sector to spearhead the city’s economy by 2015, Ngoc stressed.

On August 28, 2013, the Cau Giay handicraft and small-scale industrial cluster was recognised as a concentrated (IT) park in Hanoi.

Covering an area of 8.5 ha, the park houses 306 enterprises, with 11,336 workers. IT firms account for 28.8 % of the enterprises, such as the Financing and Promoting Technology Corporation (FPT) and the Military Telecom Corporation (Viettel).

Transfer pricing out of control in Vietnam

The Government Inspectorate said management agencies are failing to define databases and information about transfer pricing of foreign-invested enterprises in Vietnam.

Although the Ministry of Finance issued several circulars aimed at preventing transfer pricing, the Government Inspectorate has said they have brought limited results due to the failure to define transfer pricing information of foreign-invested companies through their parent companies in foreign countries.

In addition, the government admitted that the cooperation between tax and customs agencies remains lax, which is among causes for current difficulties on the issue.

In 2013, the Government Inspectorate inspected 399 enterprises at export processing zones in Hanoi, HCM City, Binh Duong Province and Dong Nai Province. According to the inspection, over the last three years, the Hanoi Customs Department did not inspect any enterprises at local export processing zones. Also, in 2009, Dong Nai Province’s Taxation Agency did not inspect any companies.

It is suspected that up to USD4.15 million of arrears are owed by 399 enterprises in export processing zones in the four localities, however, until now, just VND5.47 billion (USD261,900) have been collected.

Many Japanese firms have reported losses for three consecutive years, including Sumitomo Bakelite Vietnam, Meiko  Electronics Vietnam Ltd. Co. and Toshiba Asia Pacific Pte. Ltd.

The Government Inspectorate has proposed that the government instruct the Ministry of Finance to cooperate with management agencies to revise policies for detecting and dealing with transfer pricing among foreign-invested companies.

Fishery products remain key export

Export revenue of agricultural, forestry and fishery products in February reached an estimated US$2.08 billion, a 9.4% year-on-year rise as the export of rice, coffee, tea, cassava and rubber falls in both price and quality, according to the Ministry of Agriculture and Rural Development.

Fishery and forestry export has brought about US$919 million and US$837 million respectively, increasing 23.5% and 30.2% over the same period last year.

The US market remains the largest for Vietnam’s fishery products, accounting for 26.67% of the total export revenue. Exports to Japan, the Republic of Korea and Australia have increased by 31.45%, 29.27% and 17.85% respectively.

Meanwhile, 38,000 tonnes of rubber export in February brought US$80 million. In total for the first two months exports reached 104,000 tonnes, approximately US$215 million, decreasing 25.4% in volume and 43.3% in value compared to the same period last year.

Export volumes of tea, cassava and cassava products in the first two months also fell by 18.9% and 32.7% respectively while the value dropped by 15.5% and 30.6% compared to the same period last year.

Rice export also saw 12.3% and 8.4% drops in volume and value in the first two months compared to the same period last year while coffee export dropped by 13.7% in volume and 23.4% in value.

HCMC leader pledges support for businesses

Chairman of the HCMC People’s Committee Le Hoang Quan has reaffirmed the city’s commitment to lending a helping hand to businesses, particularly foreign-invested enterprises, to ensure the efficiency and profitability of their operations.

This was one of the top priorities Quan mentioned at a meeting with representatives of foreign and domestic enterprises organized by the European Chamber of Commerce in Vietnam (EuroCham) in HCMC last Friday.

“HCMC will make every effort to help enterprises of all economic sectors operate efficiently so that they will contribute to the city’s development and state budget,” Quan said at the meeting with more than 70 representatives of domestic and foreign companies.

By December last year, the number of active foreign-invested projects in the city had reached over 4,920 with total registered capital of US$35.5 billion.

At the meeting held by EuroCham, Quan stressed a win-win situation for HCMC and investors. “We have responsibilities for creating favorable conditions for each other,” Quan said.

He reiterated that regulations, policies and procedures regarding investment would be implemented transparently and responsibly.

Preben Hjortlund, chairman of EuroCham, told the Daily after the meeting that a level-playing field was one of the concerns for European companies currently operating in Vietnam in addition to the issue on work permits.  

EuroCham’s Business Climate Index for the fourth quarter of 2013 showed that business confidence and outlook among European businesses in Vietnam stagnated at 50 of the 100 point scale, the same as in the second and third quarters of last year.

European members that participated in the survey remained worried about the impact of future legal changes. However, investment plans and business orders were expected to increase, which in turn positively impacted recruitment plans.

Another positive development was an expectation of less impact of inflation on business, according to the survey.

HCMC leader pledges support for businesses

Chairman of the HCMC People’s Committee Le Hoang Quan has reaffirmed the city’s commitment to lending a helping hand to businesses, particularly foreign-invested enterprises, to ensure the efficiency and profitability of their operations.

This was one of the top priorities Quan mentioned at a meeting with representatives of foreign and domestic enterprises organized by the European Chamber of Commerce in Vietnam (EuroCham) in HCMC last Friday.

“HCMC will make every effort to help enterprises of all economic sectors operate efficiently so that they will contribute to the city’s development and state budget,” Quan said at the meeting with more than 70 representatives of domestic and foreign companies.

By December last year, the number of active foreign-invested projects in the city had reached over 4,920 with total registered capital of US$35.5 billion.

At the meeting held by EuroCham, Quan stressed a win-win situation for HCMC and investors. “We have responsibilities for creating favorable conditions for each other,” Quan said.

He reiterated that regulations, policies and procedures regarding investment would be implemented transparently and responsibly.

Preben Hjortlund, chairman of EuroCham, told the Daily after the meeting that a level-playing field was one of the concerns for European companies currently operating in Vietnam in addition to the issue on work permits.  

EuroCham’s Business Climate Index for the fourth quarter of 2013 showed that business confidence and outlook among European businesses in Vietnam stagnated at 50 of the 100 point scale, the same as in the second and third quarters of last year.

European members that participated in the survey remained worried about the impact of future legal changes. However, investment plans and business orders were expected to increase, which in turn positively impacted recruitment plans.

Another positive development was an expectation of less impact of inflation on business, according to the survey.

European enterprises develop investment plans and recruitment in Vietnam

There is increasing confidence for European companies investing in Vietnam, according to the EuroCham Business Climate Index (BCI) survey released on February 25.

The BDI reached 59 points for the first time since 2012 confirming an optimistic attitude for European commerce.

Investment plans and recruitment in the country have increased due to raised orders.

It is a good recovery sign for the economy, said Csaba Bundik, executive director of EuroCham Vietnam. He is confident that this is due to the Free Trade Agreement between Vietnam and the European Union would be signed soon.

Traffic corporations to launch IPO next month

Many large corporations in the traffic sector will together launch initial public offering (IPO) next month with most setting the starting price at VND10,000 each share.

Civil Engineering Construction Corporation No. 6, or Cienco 6, will offer over 28.7 million shares, or a 47.87% stake, on March 21 on the Hochiminh Stock Exchange. The starting price is set at VND10,000 each share.

On the same day, Civil Engineering Construction Corporation No. 1, or Cienco 1, will also launch over 16 million shares on the Hanoi market at VND10,000 each.

Cienco 5 will also launch IPO for over 14.2 million shares, or a 32.38% stake, on March 24 at the same starting price. On the following day, Cienco 4 will launch its IPO, offering over 16.1 million shares at VND10,000 each.

On March 26, Transport Engineering Design Inc. (TEDI) will also offer 2.6 million shares, or a 20.8% stake, at VND10,000 each. The IPO will take place at 10:00 a.m. at the Hanoi Stock Exchange.

A source told the Daily that two to three investors have registered to become strategic shareholders at some firms such as Cienco 1, 4, 5 and TEDI.

In a related development, the Ministry of Transport is also speeding up equitization of units under Vinalines.

According to reports of the ministry and Vinalines, the enterprise has approved equitization plans of seven out 16 enterprises that need to go public in the 2012-2015 period.

Vinalines has completed equitization of two enterprises, Quy Nhon Port and Khuyen Luong Port while Nha Trang Port has announced evaluation for equitization. Vinalines is considering documents to establish the corporate values of Quang Ninh Port, Vinalines Nha Trang Company, Haiphong Port and Danang Port.

For the equitization plan in 2014, Vinalines will finish equitization of five enterprises. The group will approve schemes and equitize eight more firms this year.

The ministry also has plans to pilot equitization of a hospital within this year.

Brokers merge to erase bad assets

Vietnam International Securities Company (VISE) and Dai Tay Duong Securities Company (OSC) are merging to eliminate bad assets.

The State Securities Commission (SSC) has given approval in principle to the merger and both sides are carrying out necessary procedures to realize the scheme. The deal, once completed, will be the second broker merger after the first between MB Securities Company and VIT Securities Company in 2013.

Before the merger, VISE had a chartered capital of over VND200 billion while OSC had VND135 billion. However, the merged broker will have a chartered capital of only VND60 billion.

Both OSC and VISE have reported low financial adequacy ratios and faced the danger of being put under special scrutiny. The merger is considered the best way for them to eliminate bad assets and retain a healthy financial status.

Before 2010, many brokers provided margin trading to lend money to investors. When the stock market plunged into crisis, the enterprises suffered huge losses.

Many firms now still report assets in the ‘accounts receivable’ column or share-mortgaged assets in their financial reports. But in fact, the assets have turned into bad debts and could not be recovered.

VISE during its extraordinary shareholder meeting in January approved the merger. Shares held by VISE’s shareholders will be swapped for new shares at the 4:1 ratio while the ratio for OSC shareholders is 13.5:1.

Over 10 staff members of OSC will work for VISE and OSC’s investors will receive support to open accounts at VISE or other brokers.

As of the end of 2013, VISE reported a loss of around VND80 billion while OSC also incurred a loss.

SSC yet to approve FOL increase this month

The State Securities Commission (SSC) will not issue an official decision on foreign ownership limit (FOL) increase this month as the Government has just finished fielding suggestions from related agencies.

An SSC leader told the Daily the Government has just updated information on the issue and has yet to decide on the FOL draft submitted by SSC. Therefore, the rumor that the draft would be signed at the end of this month is incorrect.

In the latest draft, FOL in listed enterprises will be lifted to 60% against the current level of 49%. In addition, the regulation on industry classification has been removed.

There will be special rules for enterprises the State needs to hold a majority stake such as banks, the official said. For all others, the common cap for foreign ownership in a listed enterprise is 60%.

After the draft is passed, listed enterprises will decide their foreign room ratios and register with SSC without the need to ask for approval from the Ministry of Finance and the Government. Therefore, foreign room expansion actually will take place quickly, he said.

According to a draft circular guiding the decision on the FOL increase, enterprises can decide their FOL ratios during shareholder meetings or field suggestions of shareholders in writing. As not all enterprises can organize shareholder meetings immediately, the latter way will be the better choice.

Foreigners have paid much attention to the FOL issue as foreign room in promising firms has been full.

Among 302 stocks listed on the Hochiminh Stock Exchange, 21 stocks have seen foreign room filled up, including VNM, DHG, HCM and FPT. The enterprises have reported strong business results but foreigners could not acquire more shares of those tickers.

Meanwhile, large investment funds always eye large-caps with high liquidity. They find it hard in trading small stocks due to poor liquidity.

According to the director of an investment fund, the FOL increase, despite at any level, will help foreigners buy more shares of Vietnamese firms.

Recently, Saigon Securities Inc. in giving suggestions to SSC over development of the stock market in 2014 proposed that FOL could be lifted to the maximum rate of 100%.

This move will allow foreign investors to make maximum investment in shares with voting rights in public enterprises that the State has no need to hold the majority control.

If the proposal is not passed, SSI suggested HOSE to deploy non-voting depository receipt (NVDR), allowing foreigners to freely acquire shares without the voting rights in listed enterprises.

Pleiku Airport to handle big aircraft

The runway at Pleiku Airport in Gia Lai Province will be extended with an additional 583 meters to 2,400 meters so that the airport can handle A321 aircraft and equivalent.

According to Le Manh Hung, general director of Airports Corporation of Vietnam, the project was expected to be kicked off in May and implemented in 18 months, helping the airport to accommodate A320/321, ATR72 and F70 aircraft.

The airport will be expanded to the east so that the runway will be 2,400 meters long and 45 meters wide.

Hong Cong Lu, permanent vice chairman of Gia Lai Province, said that problems concerning site clearance and compensation would be solved in the coming time. The project helps promote the socioeconomic development of not only Gia Lai Province but also the northern area of the Central Highlands region, he added.

The Ministry of Transport has planned to upgrade Pleiku Airport since 2011 with an investment of over VND2.2 trillion. The upgrade will focus on renovating the airfield, extending the existing runway, building new taxiways and parking space.

Cement consumption forecast to rise to 63 million tons

The Ministry of Construction forecasts this year’s total cement consumption volume to rise by 1.5-3% year-on-year to 62-63 million tons, with the exports of cement and clinker accounting for 13.5-14 million tons.

According to a report of the ministry on cement consumption, enterprises sold 61.2 million tons of cement last year, with the domestic consumption taking up 47.5 million tons, equivalent to 96.5% of the target. However, last year’s cement export increased strongly by 62% to nearly 14 million tons.

The lower-than-targeted consumption last year, according to the ministry, resulted from a series of stagnant construction and real estate projects.

The total capacity of local cement plants is around 70 million tons. The ministry said it had checked cement projects implemented in the 2012-2015 period, eliminated nine projects and delayed seven projects to after 2015.

According to reports of some big cement producers, their profits earned last year were not high.

Ha Tien 1 Cement Co. earned up to VND6.624 trillion in revenue last year but its profit was a trivial sum of VND2.5 billion. The company made a profit of nearly VND73 billion in the fourth quarter thanks to the increasing selling volume, better prices and the falling production costs, and thus was able to cover losses incurred in the third quarter.


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