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BUSINESS IN BRIEF 10/5   2010-05-10 - Viet Nam Net

Ministry orders halt to rapid expansion of cassava farming
Cultivation of cassava will be limited to 450,000ha in an aim to stop deforestation and land erosion, according to the Ministry of Agriculture and Rural Development.

The ministry has also told localities to ease growing cassava on hilly land, a practice that has led to serious erosion.

Instead, farmers should focus on intensive farming and plant high-quality cassava strains to raise productivity and increase yields to 20 tonnes per hectare next year from the current 17 tonnes.

Under the plan, cassava yield by 2015 would increase to 23-24 tonnes per hectare, and reach 30 tonnes per hectare in areas specialising in the cultivation of the roots.

The ministry has ordered its Cultivation Department to issue Vietnamese Good Agriculture Practices (VietGap) standards for cassava cultivation and to develop sustainable cultivation processes.

The area under cassava cultivation jumped to 560,000ha at the end of last year, from 270,000ha in 2006, as the crop helped farmers in disadvantaged areas escape from poverty, according to the ministry.

But in several localities, especially in mountainous provinces, cassava cultivation on steep slopes has severe environmental impact.

City aims to curb inflation, improve road safety

The city’s two major tasks from now to the year end will be controlling inflation and improving traffic infrastructure with an aim to reduce accidents, according to HCM City authorities.

Although the numbers of road accidents and serious traffic jams had declined compared to last year, the problem still remained, Tran Quang Phuong, director of the city’s Department of Transport, said.

As of April 2010, there have been 80 traffic accidents, killing 58 and injuring 40 people, a drop of 17 accidents, 19 deaths and 11 injuries compared to 2009.

But the figures reflect an increase of 29 accidents, 15 deaths and 23 injuries compared to March.

Le Hoang Quan, chairman of the city People’s Committee, said that improving the traffic infrastructure was the main task from May to the year end, especially after the opening of Can Tho Bridge in Can Tho City and Ham Luong Bridge in Ben Tre Province, as the traffic load between the Cuu Long (Mekong) Delta and the city is expected to soar.

The city committee has been looking for solutions to further develop traffic infrastructure.

Nguyen Trong Hoa, director of the city’s Institute of Research and Development, said the city would seek solutions based on experiences of other cities in the region and around the world.

He said the project to build Sai Gon Bridge 2 should seek capital from the State rather than from sources via the proposed use of a BOT (Build-Operate-Transfer) model.

Nguyen Thanh Tai, permanent deputy-chairman of the HCM City People’s Committee, said attracting more sources of capital would require that the city reform or cut the number of administrative procedures.

In addition to investing in developing infrastructure, the city needs to pay attention to stabilising the macro-economy, preventing inflation and ensuring sustainable economic growth at about 11 per cent this year.

Mobilised capital for the banks has so far this year reached nearly VND621 trillion (US$32.7 billion), an increase of 25.8 per cent compared to the same period last year.

Meanwhile, total bank loans have reached VND565.3 trillion ($29.7 billion), a year-on-year surge of 32.8 per cent.

However, the amount of capital for doing business and manufacturing is still insufficient as both deposit and lending interest rates remain very high.

The director of the State Bank’s HCM City branch, Ho Huu Hanh, said that it would be difficult to lower the lending interest rate to below 12 per cent per year in accordance with Government proposals.

Hanh explained that it takes quite a long time to lower the lending interest rate since many banks had mobilised capital with high deposit interest rates.

The Consumer Price Index in April increased by 4.02 per cent compared to the end of last year, caused by an increase in prices of electricity, water, gasoline, materials and transportation.

In order to curb inflation, the city plans to stabilise prices for essential goods as soon as possible, according to city authorities.

VN, Cambodia aim to boost trade co-operation

Trade officials from Viet Nam and Cambodia agreed to further enhance co-operation between the two countries to strive to reach two-way trade turnover of US$2 billion this year and increase the figure to $7 billion by 2015.

The agreement was made at the third conference on trade development co-operation between Viet Nam and Cambodia held by Viet Nam’s Ministry of Industry and Trade and Cambodia’s Ministry of Commerce in the southern Long An Province on Thursday.

Participants at the annual event, from businesses and related ministries and departments of Viet Nam and Cambodia, exchanged ideas on future commitments and agreements and proposed co-operation measures as well as reviewing trade results since the second conference in March 2009, held in Phnom Penh.

Addressing the event, Minister of Industry and Trade Vu Huy Hoang emphasised that border trade co-operation had contributed to reinforcing friendly relations, boosting economic, cultural and social exchanges, creating jobs, and strengthening security in border areas.

Hoang said that despite the global economic crisis, last year’s trade turnover between the two countries exceeded $1.4 billion, maintaining a growth rate of more than 30 per cent.

In the first quarter of this year, trade turnover reached nearly $432.5 million, up 127 per cent from the same period last year, Hoang said.

Similar consumption habits and demands have helped the two countries boost trade. Viet Nam mainly exports steel, chemicals, fuel, plastic products, fertiliser, cereal products and instant noodles to Cambodia while mainly importing raw materials.

Participants said that Cambodia is a potential market for Vietnamese exporters, however, it is still difficult for them to enter the market due to high import tax and cumbersome customs procedures.

Besides an import tax of 7 per cent and VAT at 35 per cent, exporting from Cambodia also incurs a fee of $320 for each container in customs fees.

Foreign affairs director of Nutifood Tran Duc Huu said that due to the high tax, Vietnamese exporters often ship goods to Cambodia in small volumes to enjoy a lower VAT rate of 10 per cent compared with the 35 per cent rate imposed on large volumes by the Cambodian government.

Despite being neighbouring countries, costly freight charge also hinders trade between Viet Nam and Cambodia. Pham Le Huynh Mai from Colusa-Miliket, an instant noodle company, said that freight by road for a container from Viet Nam to Cambodia costs up to $95 compared with $85 from Viet Nam to France by rail.

To make it easier for Vietnamese exporters, participants recommended the two governments sign agreements related to investment protection, cross-border transportation and payment.

Development of infrastructure, warehouses and information exchange were also discussed at the conference to help boost trade between the two countries.

At the close of the conference, a memorandum of understanding on border trade development co-operation between Viet Nam’s Ministry of Industry and Trade and Cambodia’s Ministry of Commerce was signed.

Exporters told European Union has strict quality needs

Vietnamese enterprises should concentrate on improving the quality of their products to meet the strict requirements of the European Union, experts said yesterday at a conference in HCM City.

At the meeting on export and market opportunities with the EU in HCM City, economists, the EU representatives and Viet Nam Chamber of Commerce and Industry (VCCI) officials discussed solutions and challenges concerning the country’s exports to the EU.

Dang Hoang Hai, the director general of the Ministry of Industry and Trade’s European Market Department said: "this year is expected to open more business opportunities in the EU market for Vietnamese exporters than last year."

The enterprises should not do business that allow for only short-term benefits. They should know how to consolidate commercial relationships and work to help their country, as well. Hai also pointed out that the Vietnamese handicrafts exports to the EU have decreased in recent years, after dropping from US$238.9 million in 2007 to $229.9 million in 2008 and then to $153.9 million last year.

The main reason for the backsliding is because domestic enterprises have not been successful in accessing major distribution chains in this market.

Hai said that domestic enterprises have been advised to have staff members who are in charge of following new EU regulations.

Antonio Berenguer, trade counselor of EU delegation to Viet Nam, said the website can help exporters access up-to-date information about laws, tariffs and import regulations.

"Viet Nam should also take advantage of opportunities that exist in the diplomatic channels and with business offices.", he said.

He noted that the EU is a highly sophisticated market that has strict import requirements including regulations concerning illegal, unregulated and unreported (IUU) seafood and an upcoming regulation concerning Due Diligence.

The Due Diligence regulation will require that businesses selling timber to the EU market for the first time must conduct a ‘due diligence’ test in order to minimize the risk that the timber came from an illegal source.

During the talks, four representatives from the German Industry of Commerce in Viet Nam, the French Chamber of Commerce and Industry in Viet Nam, the UK trade and Investment in Viet Nam and the Embassy of Spain discussed export and market opportunities in these countries with Vietnamese exporters.

Hai said taste, consumption patterns, language and business cultures are different in all of the 27 EU countries. Making goods that are commercially viable in all of these countries is no easy task.

"The EU market has strict regulations concerning health and environmental protection and sustainable development. Thus, some enterprises are unable to follow the criteria and technical requirements mandated by the EU," he added.

Furthermore, the EU is being targeted by other export economies outside of Viet Nam. Last year, with respect to the global economic crisis, many countries have pushed exports in order to overcome the crisis, which has increased competition in several markets.

Dinh Thi My Loan from the Viet Nam Chamber of Commerce and Industry’s listed the trade remedies that the EU has already put in place including antidumping, anti-subsidy and safeguards, which Vietnamese exporters need to be aware of.

"The EU is a major attractive market with nearly 500 million consumers, opening business opportunities not only for large enterprises, but also for small and medium d enterprises," said Nguyen Thanh Bien, deputy minister of Industry and Trade.

"Vietnamese enterprises need to understand import regulations and technical barriers in order to take full advantage of this market.", he added.

Doan Duy Khuong, deputy chairman of VCCI said despite the global economic crisis, the total two-way turnover of Viet Nam-EU reached $14.8 billion. Viet Nam exported rubber, handicrafts, seafood, coffee, leather shoes, pepper, and tea to the EU and imported machinery, steel, fertilisers and medicine from the EU.

So far last year, total FDI from the EU countries in Viet Nam reached $12.5 billion.

Insurance industry to ‘develop strongly’

The Vietnamese insurance industry hopes to grow at 15 per cent annually in the period through 2020, a Government official told an international conference in HCM City yesterday.

Trinh Thanh Hoan, head of the Ministry of Finance’s Insurance Management and Supervision Agency, said the insurance market has developed strongly in recent years.

Despite the global economic crisis, last year the sector enjoyed 20 per cent growth, achieving a premium income of VND25.2 trillion (US$1.3 billion), underlining its great potential, he said.

Vu Tien Loc, chairman of the Viet Nam Chamber of Commerce and Industry, said since the world economy is recovering, insurance and financial firms should restructure themselves to capitalise on post-crisis opportunities.

The insurance market would continue to grow strongly thanks to rapid economic growth and rising living standards, he added.

Hoan agreed saying the life insurance sector would continue to see strong growth since it is a large market of more than 86 million consumers where only around six million have insurance.

Import-export, property, and other non-life insurance coverage too remains modest, offering insurers plenty of opportunities, he said.

Insurance companies in Viet Nam have started to work with banks to introduce bancassurance services, hoping to increase revenues and expand market share, said Yoko Ogimoto of Japan’s Nomura Research Institute.

"The first bancassurance service in the country was launched last year. It is rather new in Viet Nam, but its development potential is high because the co-operation between insurers and banks has significantly benefited both sides as well as their customers."

Insurers can expand their market share by offering insurance services to clients from partner banks, she explained.

The advantages notwithstanding, there are also many challenges the sector faces, including a shortage of quality human resources at all levels, Hoan said.

To achieve the growth target, the sector should focus on developing human resources, especially at the managerial level, a shortage of which plagues most Vietnamese insurance companies, he said.

They should co-operate with universities, insurance research agencies, and foreign partners to organise training courses for their staff.

The Viet Nam Insurance Association needs to research into the sector’s human-resource needs to help create training plans, he added.

Also at the conference, experts from large insurance and financial institutions, including France’s Prevoir Group, CMC group, CAP Gemini, and the European Financial Management and Marketing Association, spoke about how to train human resources, motivate salespeople, and take advantage of new technologies.

Viet Nam has 50 insurance companies – 11 are in the life insurance sector, 28 in non-life insurance, and one in re-insurance while 10 act as insurance brokers.

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