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BUSINESS IN BRIEF 28/3   2011-03-28 - Viet Nam Net

Work starts on modernising northern railway signals

Work on a VND3.5 trillion-plus project to modernize information and signals along northern railway routes has started at Hanoi’s Yen Vien station.

Addressing the ceremony on March 24, Deputy Minister of Transport and Communications Le Manh Hung said that the project will help the railway sector to increase train speeds and improve safety, through its access to the latest technology and railway management solutions.

More than VND2.4 trillion of the VND3.5 trillion project is sourced from the Chinese Government’s preferential credits. The project includes upgrading Hanoi-Lao Cai, Hanoi-Dong Dang, Hanoi-Thai Nguyen and other railway lines as well as building a cable transmission system, a signal control system and train monitoring staff.

The first phase of the project, worth VND2.2 trillion, is expected to be completed in 2013.

Vietnam Expo 2011 to take place in Hanoi

The 21st Vietnam International Trade Fair - Vietnam Expo 2011 will open at the Vietnam Exhibition and Fair Centre in Hanoi on April 6.

The information was released at a press conference held by the Vietnam Trade Promotion Agency under the Ministry of Industry and Trade on March 24 in Hanoi.

The fair, themed "Vietnam: Integration and Development", is organized by the Ministry of Industry & Trade (MOIT) in Hanoi capital as part of important trade promotion activities in the country's economic development plan.

Domestic businesses from 22 provinces and cities will showcase their key export items ranging from agricultural, forestry, aquatic, food and foodstuffs, wood work, handicraft, textiles and garments, and leather products.

It will also attract the participation of businesses from 20 countries and territories including the US, China, Japan, India, Thailand, the Republic of Korea, Taiwan, Hong Kong, Cuba, Slovakia, Indonesia, Laos, and Cambodia.

MOIT believes that Vietnam Expo 2011 will offer Vietnamese enterprises an opportunity to explore export market and increase trade exchanges, investment, technology transfer and economic cooperation.

During the four-day event, there will also be seminars and trade exchange activities between domestic and foreign businesses.

Increasing supply dents rental property market

A strong new supply in the leasing sector this year will force landlords to fight for tenants in the rental market in HCMC and Hanoi.

Jeremy King, managing director of Knight Frank Vietnam, a property services provider, projected that rents will decrease this year given an increasing supply entering the market and demand remaining flat.

King said there was supply coming onto the rental market from various sources. This includes apartments which were purchased by investors or speculators in hopes of a quick re-sale, but have now turned to leasing the property while awaiting more favorable conditions for selling. And of course the vibrant serviced apartment sector.

“High interest payments are also putting pressure on some owners to generate a yield from their properties,” King commented.

The two cities saw a peak in demand for rental property in the last quarter of 2007, in line with the economic and property boom in the country but since the height of the bull market, demand has eased off and this has in turn led to some softening of rental levels in the mid to high end.

However, he cited the ECA International’s survey 2010 saying that rental levels were generally high in Vietnam compared to other South East Asian cities.

The number of expatriates coming to HCMC and Hanoi to live and work is seen as a major source of income for the serviced apartment market, which offers reception, security, laundry services and international management services.

This has been a growing segment with high occupancy levels, especially in prime central business district locations.

According to Knight Frank Vietnam, there are now 3,300 units in HCMC and 2,250 units in the capital city of Hanoi, with demand traditionally from foreign workers.

However, it has seen a recent trend where wealthy Vietnamese are entering the serviced apartment market.

The serviced apartment market in HCMC has recorded an average rent from US$30 to US$32 per square meter and from US$22 to US$25 per square meter for Grade B facilities.

The market observer projected that demand this year would depend largely on the economic prosperity of the country as a whole, with the demand from foreigners continuing to depend on macroeconomic stability and the levels of direct foreign investment into the country.

Landlords in the serviced apartment market will continue to fight for tenants within the segment, as well as competing with a significant supply in the buy-to-let apartment segment.

It is expected that up to 15,000 apartment units will join the HCMC market and 17,000 units onto the Hanoi market this year.

“This increase in supply could put downward pressure on rents in secondary locations, although prime rents are likely to be maintained,” King said.

He added that the rental market performance would be closely related to the state of the owner occupier market. Given weak apartment sales, some developers with unsold units may consider letting some of their apartments to generate cash flow to help meet costs.

Vietnam's trade gap declines $700 mln in March

Vietnam's trade deficit scaled down to $700 million in March after surging to $880 million and $1.1 billion in the first two months of this year, according to the latest statistics from the General Department of Vietnam Customs.

Both export and import revenues kept declining with export turnover reaching only $3.2 billion while import turnover stood at $3.9 billion, down 36.4 percent and 34 percent against last month respectively.

The tendency started last month with export turnover hitting only $4.85 billion, down 31.6 percent against the previous month, while the country's import spending was at $5.96 billion, falling 25.2 percent over January.

Totally in the first three months this year, the country's total export turnover fetched over $15.395 billion and the country's import value was nearly $18 billion. Thus, Vietnam's trade gap in Jan-March was about $2.6 billion.

The country spend most import revenue on equipment-machinery (over $550 million), fuel and petroleum (over $400 million), personal computer and electronic components (over $200 million), steel ($230 million), completely built unit (CBU) cars ($50 million) and precious stone and metal (over $12 million).

Exporters expect minor impact from Japan’s disaster

Exporters have foreseen difficulties or even decreases in exports to Japan as the impact of the recent devastating earthquake and tsunami unfolds, but said the impact might be minor.

Seafood exporters, for example, said Japanese provinces which were affected by the twin disaster are not major destinations of Vietnam’s seafood. Furthermore, seafood is an essential daily product, so demand is expected to remain strong.

The President of the Vietnam Seafood Corporation Management Board, Vo Phuoc Hoa, said his company was working on export contracts to Japan as usual.

However, Truong Dinh Hoe, General Secretary of the Vietnam Association of Seafood Exporters and Processors (VASEP), said as Japan is the second largest market of Vietnamese seafood after the European Union, VASEP is closely following developments.

Exports of wood and wooden furniture have also signalled minimal impact, since these products mostly go to major cities.

The Ministry of Industry and Trade reported that Japan is Vietnam’s fourth largest trade partner and the third largest importer.

In the first two months of 2011, exports to Japan kept growing considerably, especially apparel, seafood, footwear, wood and wooden furniture.

The garment and textile industry, for example, earned 200 million USD, enjoying a year-on-year increase of 39.6 percent.

Export revenues of seafood, the second-largest hard currency earner, increased almost 21 percent year on year to 106 million USD in the same period. Meanwhile, footwear and wood and wooden products achieved respective growth rates of 78.6 and 20.6 percent.

In general, exports to Japan brought over 1.2 billion USD for Vietnam, accounting for 10 percent of the country’s gross export revenue.

People scurry to buy rings on possible bullion ban

With the government considering a ban on trading of gold bars, ornaments, especially rings, are now the safe haven of choice.

Around 30 people are packed into a second-floor room of a major jewelry shop in Hanoi trying to buy 999 gold gold rings. The harried employees are unable to cope with the clamor. In the staircase, dozens more are trying to get into 20-meter room.

Tien, one of the customers that Monday afternoon at the shop on Tran Nhan Tong Street, said people were buying gold rings because of a possible ban on bullion trading.

Vu Minh Chau, director of the Hanoi-based Bao Tin Minh Chau Jewelry Company, said sales of gold ornaments, especially plain rings, have shot up by 200-250 percent while gold bullion trading has fallen by 30-40 percent.

The most in demand are rings weighing 3.75-18.75 grams, he said, and his company is unable to meet demand, especially for ones of 3.75 grams, despite increasing the number of designers and importing more machinery.

Do Minh Phu, chairman of Doji Gold & Gems Group, said sales of plain gold rings are rising.

A spokesperson for a gold bullion production and trading company said his company is preparing to stop transactions once the ban comes, and will shift to producing and trading ornaments.

But he said people possessing gold bars do not need to worry since the government will protect their benefits.

The State Bank of Vietnam has recommended to the government to ban trading of bullion under a two-step roadmap.

Insurers urged to prioritise services

Insurance companies saw high profits last year, with insurance premiums totalling VND30.8 trillion (US$1.5 billion) in 2010 – far surpassing 2009's total of VND25.5 trillion ($1.2 billion), said the president of the Association of Vietnamese Insurers, Trinh Quang Tuyen.

The life insurance market this year welcomed a new competitor, Fubon, bringing the total number of life insurers nationwide to 12. This suggested that competition and the hunt for profits was becoming more heated.

However, by prioritising earnings, many of the nation's insurance companies have neglected to invest adequately in developing their operations, cautioned the director of the Insurance Supervisory Authority (ISA), Trinh Thanh Hoan.

Firms needed to improve their capacity to meet financial solvency requirements, foster research and development of new products, restructure to retain investors, and enhance their ability to transfer technology, Tuyen said.

Current regulations also needed to be adjusted to meet international insurance standards, prevent fraud and limit risks, he added.

Many non-life insurers had violated existing regulations on risk provision requiring risks not exceed 10 per cent of total equity, he said, while life insurance companies had, in some instances, shifted idle capital to operating costs, without keeping enough in reserve for regular indemnity.

Some insurers had also been found having paid for non-covered claims, or accepting late premiums from customers after losses had occurred, practices considered fraudulent and a form of profiteering, Tuyen said.

He expressed his hope that the amended Law on Insurance Business, to take effect on July 1, would create a unified legal framework for the sustainable development of the Vietnamese insurance market.

The ISA would standardise training ground for insurance brokers and agents, and would urge companies to review and evaluate existing staff. 

 

Banks plan to increase capital

 

Many commercial banks including Agribank, Vietinbank, Asia Commercial Bank (ACB) and Sacombank plan to increase charter capital this year, Dau tu (Viet Nam Investment Review) newspaper reported.

Agribank expects to add VND10 trillion (US$480 million) to make its charter capital VND31 trillion ($1.48 million).

Tran Phuong Binh, general director of DongA bank said: "DongA Bank will increase charter capital from VND4.5 trillion ($215 million) to VND6 trillion ($290 million) this year to raise its competitiveness."

Great Trust Commercial Bank (TrustBank) aimed to increase its charter capital to VND5 trillion ($240 million) from the current VND3 trillion ($145 million), Hoang Van Toan, chairman of the bank said, adding the move was essential to enhance financial capacity and competitiveness.

According to Trinh Van Tuan, general manager of Orient Commercial JS Bank, OCB had applied for their foreign partner BNP Paribas Bank to hold 20 per cent of its charter capital when the bank raises it to VND3 trillion from the existing VND2.6 trillion ($125 million).

Ha Van Tham, chairman of OceanBank, said the bank would raise charter capital to VND5 trillion from the current VND3.5 trillion ($168 million).

"OceanBank has also set the target to gain pre-tax profit of VND800 billion ($38.3 million) against VND690 billion ($29 million) of last year. And it expects to pay a 12-per-cent dividend on 2011 profits," Tham said.

Though the deadline to implement Decree No 141/2006/ ND-CP, which stipulates minimum legal charter capital of commercial banks must be VND3 trillion by late 2010, has been extended by one year to the end of 2011, most small banks have fixed their minimum compulsory authorised capital at VND3 trillion.

Only about four banks including GiaDinh Bank and Ficombank have not finished the process of increasing capital, the paper reported.

It is harder for small commercial banks to raise charter capital than big banks, because the VN-Index and bank share prices are down given the government's currency tightening policy.

The small banks' highly competitive deposit interest rates are also causing them problems to extend their outstanding credit, so they need to exercise caution when announcing profit targets for this year.

Growing Ha Noi trend towards property leasing

Investor interest in Ha Noi's residential and retail property for lease has increased, a representative from the Ministry of Construction said.

A property company in Ha Noi said the growing trend in leasing out properties was a solution to inflationary problems and helped investors recoup capital quickly.

Low cost apartments for lease have mushroomed in areas of Western Ha Noi such as Phu My, Nhan My, Phung Khoang, Dich Vong, Co Nhue, Dong Xa and Me Tri, catering for students and low-income earners.

Hiep, owner of a seven-storey apartment for lease in Dich Vong, Ha Noi, said he has 55 rooms each priced from VND1.4-1.7 million (US$20-85) per month not including water and electricity cost.

Hiep said he had just spent about VND3 billion ($150,000) to buy an apartment building, adding that within two or three years he would retreive his capital.

Another investor said trading property was risky because of the large sums of money involved, so he has shifted to building lodging houses to rent out.

The trend was also fuelled by the growing supply of affordable housing that a lot of low income earners can only afford to rent not buy.

Demand for retail and office space for lease was also growing again in Ha Noi. Colliers International Viet Nam said Cho Mo trade centre will soon have about 22,000 square metres of retail space and 46,657 square metres of office space for lease.

Tai Tam Co will launch an eight-storey office building of 2,600 square metres for lease with the price of $25 per square metre.

Other coming projects include Golden Palace in My Dinh, Golden Palace in Ha Dong, and AZ Thang Long.

 

EuroCham to hold trade conference

The European Chamber of Commerce (EuroCham) will organise a conference on export and marketing skills promotion for businesses and the Viet Nam Enterprises Association today in the northern port city of Hai Phong.

The conference will introduce services and skills to enterprise members, provide information to help Viet Nam's products access the European market and learn more about free trade agreements in relation to Viet Nam.

The conference is under the EU-Viet Nam Multilateral Trade Assistance Project MUTRAP III.

Viet Nam-Russia bank meeting opens

The Centre for Financial Technologies (CFT) will co-operate with the Chamber of Commerce and Industry of the Russian Federation, Viet Nam-Russia Business Council, and Viet Nam-Russia Bank in holding a Viet Nam-Russia bank conference tomorrow in Ha Noi.

The conference will focus on CFT technology solutions to automate banking performances and internal, external financial flow management.

CFT offers superior technology solutions in financial and many other economic sectors.

Vietcombank offers loans to buy rice

The Bank for Foreign Trade of Viet Nam (Vietcombank) has pledged with the Viet Nam Food Association and the Viet Nam Southern Food Corporation (Vinafood II) to offer preferential loans at 14 per cent per annum to help firms purchase 1 million tonnes of rice for reserve.

The current lending rate is similar to the 2-12-month interest rate on savings, with no additional percentage margins.

Van Phong zone receives approval

Deputy Prime Minister Hoang Trung Hai approved investment in Van Phong Oil and Gas Service Park in Khanh Hoa Province on Monday.

The 590-ha site will be constructed during the 2011-17 period.

Van Phong Economic Zone has attracted more than 100 projects.

 

Real estate market hits the wall

Following a turbulent couple of years, the real estate market is now facing a significant shortage of capital that might bring new development and construction to a standstill.

According to statistics from the HCM City Real Estate Association, roughly 60-70 of on-going real estate projects in the city have seen delays due to capital shortages and lower market demand, with property consultants estimating that the city had a glut of roughly 40,000 apartment units.

Tighter credit, the rising costs of fuel and construction materials, and the devaluation of the dong are combining to halt the rapid development of apartments, offices and hotels that has prevailed in recent years.

Real estate loans currently make up 23 per cent of total outstanding commercial bank loans, a figure that will be cut to 22 per cent by June and 16 per cent by December of this year in order to meet Government targets for tighter credit, said deputy director of the Research Institute on Market and Pricing Science Vu Dinh Anh.

"This means that real estate lending will decline by roughly US$5 billion in 2011," Anh said.

"Developers, contractors and investors in housing projects largely depend on loans from commercial banks," said former Deputy Minister of Natural Resources and Environment Dang Hung Vo. "These projects will be the first to be affected by the Government's monetary policies."

Meanwhile, soaring inflation and the recent dong devaluation of nearly 10 per cent have driven up the prices of construction inputs, including materials, labour, fuel and electricity. Dat Lanh Real Estate Co deputy director Nguyen Van Duc said developers would have to renegotiate new rates with contractors and suppliers based on these surges.

"The real estate market is going through a transitional period in which the order is being rearranged," said head of the Hanhud-Land Real Estate Co's management board, Nguyen Van Dinh.

The speculative phenomenon whereby investors borrow money from a bank to buy property and then resell it at higher prices would be risky with lending interest rates now at 20-21 per cent a year, said Dinh.

Vo concurred, saying a "temporary" withdrawal of capital from the real estate market would happen soon which would squeeze out many investors without financial capability.

"But this is a necessary change to close the gap between the bubble price and real price of properties," Vo said.

Nguyen Manh Ha, director of the Ministry of Construction's Department of Housing and Real Estate Market Management, said that real estate developers would have to sell units at more reasonable prices in order to recoup their investments, giving consumers greater choices.

Ha suggested that the market would continue to thrive if companies put their capital into social housing and low-cost apartments that the majority of residents could afford.

"Credit will still be granted to more feasible projects. including low- and middle-income housing, for which demand is very high," said Ha.

According to the HCM City Real Estate Association, nearly 4,500 apartments were sold in the third quarter of last year, 80 per cent of which were for middle-income earners, with prices of less than VND20 million per square metre.

Vo suggested the real estate market could be stabilised if investors relied less on commercial bank loans and found other sources of financing. He suggested forwards contracts (allowing buyers to make sizeable deposits on unfinished units); allowing investors to pledge land use rights as security for loans (a practice currently forbidden by law); and increased foreign investment.

"Foreign investment hasn't been used effectively for a number of reasons, but foreign partners are necessary to raise funds for real estate development," Vo said.

"We should adjust the law to allow investors to access the abundant sources of foreign capital that are out there," he added. "Foreign commercial banks are ready to offer loans [in US dollars] at an annual interest rate of 4-5 per cent."



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