BUSINESS IN BRIEF 29/6 All condo sectors face challenge Owners of many housing projects want to switch to the low-cost segment, and several large-scale budget condo projects have kicked off since the VND30-trillion credit package was launched, promising abundant housing supply for low-income earners. It seems the mid- and high-end commercial projects are at a disadvantage as they do not enjoy preferential loans. Yet, businesses said each segment has its own challenges and opportunities, and all that matters is how project owners lure buyers. Homebuyers are really concerned about the quality of low-cost condos. Their concern is not groundless apparently because a number of project owners have slashed investment costs by 12-15% to lower apartment prices to around VND12 million per square meter so that they can be eligible for the VND30-trillion credit program. Tan Binh Investment & Construction Corp., the owner of a 500-flat project in HCMC’s Binh Tan District, has made calculations to bring down the price of its budget homes by some VND2.5 million per square meter. The company unveils four factors that enable such a price cut, namely land use fees, financing costs, operating and marketing costs and returns on investment, all of which sharply fall when developing low-cost homes. The project owner reveals the costs of investment in infrastructure and construction are the same between low-cost and commercial housing projects. The difference lies in the costs of land, financing and operating. In other words, these two types of housing projects should provide apartments of the same quality. Without support, owners of commercial projects are seeking customers via their own policies, hoping the preferential home loan package will help warm up the property market. Tran Le Khanh, chairman of Kien A Investment & Services Co., said that if the low- and mid-end segments received support, there would be more or less a positive effect on the high-end segment. To attract homebuyers, commercial project owners are making commitments to construction progress and offering payment extensions. For the project Imperia An Phu in District 2, Kien A adopts a flexible payment policy. Buyers can move into the homes after paying 10% of the total home value, versus 30% previously. Hoang Anh Tuan, director of Tac Dat Tac Vang Co., said even those projects unqualified for the credit package were following the market movements to launch their products. For the townhouses at the project Prince Town in Binh Duong New City, the company extends the payment schedule to meet the affordability of homebuyers. Buying a house worth some VND4.5 billion, customers can pay in 41 installments over seven years at no interest. Luong Tri Thin, general director of Dat Xanh Group, said troubled investors could not blame the market, but they should review their business policies. Price is the key issue, yet many projects quote unreasonable prices, making homebuyers frustrated. What must be done now is to restore the confidence among homebuyers, and on that basis the property market can recover, he said. Support sector firms need access points Off colour supporting industry firms claim they cannot benefit from government business incentives. The Ministry of Planning and Investment recently released a survey of 650 Vietnamese and foreign supporting industry enterprises in Ho Chi Minh City, Dong Nai and Binh Duong provinces, which revealed that incentives such as credit support, reductions in tax, land rental and training and educational support were out of reach. In general, up to 55 per cent of total surveyed enterprises said they could not benefit from such incentives. The rates are 47.6 and 67.2 per cent for foreign and local private enterprises, respectively. For credit support, the respective rates were 72.4 and 85.7 per cent for local and foreign enterprises. As for support in workforce training, the general rate is up to 94.9 per cent. Doan Hai Yen, chairwoman of the survey-making project, ascribed enterprises’ such woes to many reasons. “Survey results show that enterprises’ biggest hurdle is policies have been changing too quickly and many policies are inconsistent,” she said. Up to 45.2 per cent of surveyed enterprises underscored three obstructions including the lack of information and consultancy services and policy-related big changes. With four different levels of importance numbered from one to four, with one being “very important”, two being “important”, three being “less important” and four being “unimportant”, the surveyed enterprises said the most important thing for them now was the transparent implementation of land tax and rental incentives (1.41), then the further simplification of administrative reforms (1.63) and the support in capital access plus preferential lending rates (1.78). Meanwhile, the government’s support in technology and workforce training is considered to be less important, with 2.2 and 2.29 respectively. This message was backed up by at the recent mid-term Vietnam Business Forum in Hanoi, where EuroCham chairman Preben Hjortlund said most European enterprises in Vietnam were “unfairly harassed by authorities for tax payments,” and faced with far more audits than in the past and authorities were reinterpreting rules in their favour. “When asked what aspects of the official scrutiny are of biggest concern to our members, the most cited concern is the new interpretations of tax laws and auditing visits, with fully 85 per cent of respondents citing these tax related areas,” he said. “EuroCham will continue to advocate the need for removing any unwarranted scrutiny and for applying all the rules fairly across all companies operating in Vietnam,” he said. Yen said: “The improvement of policy-making and quality is greatly needed to help enterprises out of difficulties. All policy-related impediments have led to enterprises’ low confidence to their performance outlook.” According to the survey, a humble rate of 41.4 per cent of surveyed enterprises said they “will continue their investment.” More than half of the respondents stated they “will not invest any more” or “have yet to decide on further investment” because they “fail to see a clear business prospect” in the coming time in Vietnam. Opportunities for export to Russia abound Due to cold weather Russia does not have farm produce that is abundant in Vietnam, giving domestic producers the opportunity to export their goods to the Russian market. At a seminar on new export opportunities in Russia and Ukraine held in Hanoi last week, La Van Chau, former Vietnamese commercial attaché in Russia, said that to meet its demand, Russia had to import fresh and processed vegetables, fruits and drinks in bulk, mainly from Europe, the Middle East, South America and Asia. With a population of some 145 million people, Russia is regarded as a large market for Vietnamese producers of foods and beverages. Chau said Russians like drinking coffee and that Russia imported 123,000 tons of coffee worth half a million U.S. dollars last year, accounting for 94.75% of the Russia coffee market. Of the 123,000 tons imported, 88.68% was non-roasted coffee that is subject to a 0% tax, compared to the 10% tariff on the roasted type. This is an opportunity for Vietnamese firms to export non-roasted coffee beans to Russia, according to Chau. Other farm goods such as tea, fresh and frozen vegetables, meat, items made from meat and seafood are in high demand there in Russia. Duong Hoang Minh, deputy head of the European Markets Department under the Ministry of Industry and Trade said that in addition to big demand for a wide variety of products, Russia could serve as a gateway to sell goods to Belarus and Kazakhstan as these three countries are members of a customs union. Vietnam is in free trade agreement (FTA) negotiations with this union. The export of agro-forestry-fishery products to Russia accounted for 50% of the turnover before 2009. However, the proportion dropped to 20% last year. This, according to the Russia Trade Representative Agency in Vietnam, resulted from the low competitiveness of Vietnamese enterprises. Product quality, delivery time and product designs have not met the requirements of Russian consumers. Hanoi Trade Corporation (Hapro) is a successful enterprise in the Russian market with annual export sales averaging out at US$4 million. Its main export products are farm produce. Russia imposes tariffs based on product weights, so Vietnamese enterprises should improve their packaging to make their products cost-competitive. According to Chau, there is an international expo on foods and drinks at Expocentre in Moscow every September, with hundreds of Russian and international enterprises gathering there to display their products. “This is an ideal way for Vietnamese enterprises to get access to this market,” Chau said. Japan’s CM Plus enters Vietnam Japanese corporation CM Plus has launched its subsidiary CM Plus Vietnam Co., Ltd. where customers can get management and consultation services, especially in construction and pharmaceutical fields. Tsunehiro Togashi, president of CM Plus Corporation, told the grand opening in HCMC last week that the company would assist partners in this market with project, engineering, construction and validation management in various sectors. Explaining the reasons behind establishment of CM Plus Vietnam, Togashi said the corporation considered setting up a presence in Vietnam last year. He said some 40 employees, including engineers and experts, would be hired for CM Plus Vietnam to develop the Vietnamese market as a core part in the corporation’s strategic expansion in Southeast Asia. Shigehiro Tahara, executive director of CM Plus Corporation, said Vietnamese students, including those studying in Japan, would be trained for working for CM Plus Vietnam, which is located in District 7, HCMC. As CM Plus has strong advantages in GMP (good manufacturing practice) platform, the one-stop provider of GMP consultation and training as well as related services can help pharmaceutical producers deal with issues at their production sites, enhance their product quality and productivity in compliance with global GMP and inspection criteria. According to the Foreign Investment Agency, fresh Japanese investment pledges last year amounted to US$5.13 billion, accounting for nearly 40% of the total in the country. The respective figures in the first five months of this year were almost US$3.7 billion and 43.4%. Vicofa gets nod for coffee stockpiling The Ministry of Agriculture and Rural Development has given approval in principle for the Vietnam Coffee and Cocoa Association (Vicofa) to stockpile 200,000-300,000 tons of coffee in the 2013-2014 crop in anticipation of price hikes at the year’s end. The ministry’s approval was given as global coffee prices are now hovering around US$1,721 a ton, showing a high possibility that the price would rise to about US$1,900 from now to the end of the year. Whenever global coffee prices tumble, Vicofa will ask relevant authorities for permission from for a temporary storage of beans to back exporters. Nguyen Viet Vinh, general secretary of Vicofa, said the association failed in the past when seeking approval for coffee stockpiling as the then price was above US$2,000 a ton. Brazil, the world’s biggest coffee supplier, has entered its harvest season, thereby dragging down global coffee prices. Experts, therefore, forecast coffee prices would not exceed the US$1,900 mark in the final months of the year, Vinh said. To prevent further price falls of Vietnamese coffee in the 2013-2014 crop, local authorities may approve the temporary coffee stockpiling plan, he told the Daily. “Brazil’s government has agreed to set aside US$1.5 billion to support the local coffee industry. This has helped us receive the local Government’s approval of our stockpiling plan,” Vinh noted. Coffee prices last Friday declined by VND1,000 to VND37,900-38,100 a kilo in the Central Highlands, the nation’s key coffee growing area. Meanwhile, the price of robusta coffee to be delivered on July 13 and on September 13 was US$1,721.58 and US$1,721.59 a ton respectively in the Liffe trading floor. Global coffee prices have fallen US$300 a ton in the last one month. However, according to Vicofa, coffee farmers are little affected by the sharp price decreases as now is the end of the harvest season when farmers have already sold out their beans. Coffee exporters have suffered most as they buy at high prices but sell at low prices, the association said. Expert Nguyen Quang Binh has predicted Morgan Stanley would withdraw from the farm produce market in the near future while many big banks are seeking ways to divest capital from agricultural goods investment to shift to the stock market. The nation exported US$1.49 billion worth of 697,000 tons of coffee in the first five months of the year, dipping over 23% in volume and nearly 22% in value year-on-year, the agriculture ministry reports. The export coffee price averaged out at US$2,172 a ton in the first four months, up 4.3% over the year-ago period, according to the ministry. Car firm needs time Truong Hai Auto Corporation, the largest local automobile maker in Vietnam, has asked the government to extend their deadline for an outstanding import tax debt of $57.7 million. The Vietnamese government is now working on the proposed tax extension for Vietnam’s domestic auto-maker for a sum worth VND1.2 trillion ($57.7 million) from July 1, 2013 to June 30, 2014. Previously, in early June the Ministry of Finance (MoF) sent a document to the government to report the corporation’s proposal. Truong Hai Corporation, which is the first and the only company in Vietnam producing, assembling and distributing all kinds of commercial vehicles and passenger cars, is being supported by Quang Nam province’s authorities where four companies owned by Truong Hai reside, including Chu Lai Truong Hai Auto, Truong Hai Bus, Truong Hai-Kia Coach and Vina-Mazda. A MoF source said that pursuant to current regulations, the corporation’s proposal was feasible, even for $75 million. According to the MoF’s document, Quang Nam authorities and Truong Hai Corporation explained that the national economic situation had led to sales dropping strongly for automobile manufacturers across the globe.It has been reported that the corporation has an inventory worth more than VND3.3 trillion ($158.6 million), while it owes about VND5.6 trillion ($269.2 million) to credit institutions. Quang Nam province also called for the government to support Truong Hai as it is a young domestic manufacturer trying its hardest to become competitive, especially before 2018 when the country is planning to fully join the ASEAN Trade Freedom Agreement that will lead to import tax cuts, encouraging regional manufacturers to enter the Vietnamese market. Without investment, the company may collapse, resulting in the loss of thousands of jobs, they warned. According to the Law on Tax Administration and Decree106/2010/ND-CP, taxpayers will be allowed to extend tax payments in case of facing special difficulties. The tax extension must be approved by the government, under the MoF’s proposal. Therefore, the MoF proposed that the government consider the tax extension for Truong Hai Auto if the corporation can provide a guarantee of support from commercial banks and promises that it would continue investing in automobile manufacturing in the future. Quang Nam Provincial People’s Committee would be responsible for managing and ensuring the money is used for the right purpose. Last year, Truong Hai corporation produced 24,500 vehicles with a total revenue of VND12 trillion ($571.4 million), contributing VND2.8 trillion ($133.3 million) to the state budget. The corporation expects to provide 29,500 vehicles this year with a revenue of VND13 trillion ($619 million). Central Highlands - economic engine by 2020 The Central Highlands will become the country’s economic engine by 2020, with an average annual economic growth rate of 7.9 percent. According to the region’s master plan on socio-economic development, which was ratified by the Government on July 18, 2012, per capita income is expected to hit VND24 million per year until 2020. The export growth rate during the 2011-2015 period will reach 7 percent while 14,000-15,000 jobs will be generated. Under the master plan, priorities will be given to sectors including industry, the farm and forestry product processing industry, mining and machinery. The region has identified investment attraction as a decisive factor to fulfil the set targets. Since 2006, regional provinces have lured 1,569 projects with registered capital amounting to VND263 trillion. The whole region has attracted 149 foreign direct investment projects worth over US$800 million. However, performance does not yet match the potential, strength and socio-economic development requirements of each locality and the whole region at large. Poor infrastructure, especially in transport, an asynchronous and short-term master plan, unclear trade promotion strategies, complicated procedures and limited banking loans are blamed for the problem. The Government has worked with ministries, branches and localities to devise active solutions in a bid to ease difficulties for businesses. Accordingly, a project to upgrade National Highway No. 14 during the 2013-2015 period has been approved with construction work scheduled to begin in mid-June. Preferential policies, especially tax and land incentives, have been offered to investors in order to give the region a competitive edge over other regions nationwide as well as the neighbouring countries of Cambodia and Laos. The State Bank of Viet Nam has also instructed commercial banks to give priorities to the region to boost its modern agriculture and competitive edge. At the same time, the Ministry of Education and Training has supported the region in improving the quality of human resources by upgrading its universities, colleges and vocational training schools. Regional provinces have enhanced their links while promoting investment in key economic areas and building border markets in the Viet Nam-Laos-Cambodia development triangle. Covering an area of 54,700 square kilometres, the Central Highlands encompasses Gia Lai, Kon Tum, Dak Lak, Dak Nong and Lam Dong provinces. Apart from land and mineral resources, the region has an uninterrupted transport system connecting it with central coastal and southeastern regions. The region is home to national and international border gates along the East-West Economic Corridor and is close to deep-water seaports such as Dung Quat, Chan May and Nhon Hoi Can Tho to prove it’s a true jewel of Mekong Can Tho city is ready to champion its position as the Mekong Delta region’s economic hub by attracting investments in industrial parks and export processing zones. According to Can Tho Provincial Export Processing and Industrial Zones Management Authority (CEPIZA), during the first half of 2013, export processing zones (EPZs) and industrial parks (IPs) in the city attracted four new projects with the combined registered investment capital of $9.8 million and 12 projects were expanded worth $3.7 million. The local EPZs and IPs are now home to 204 valid projects, covering 564.9 hectares, with the total registered investment capital of $1.8 billion, of which $807.4 million has been disbursed. These projects include 23 foreign-invested ones with the total registered investment capital of $181.3 million. During the first half of this year, businesses in the local EPZs and IPs reported the total revenue of $589.8 million, including the industrial production value of $437.6 million, commercial services of $152.2 million and export earnings of $196.5 million. According to CEPIZA, the above figures have dropped between 13 and 35 per cent as compared with the corresponding period last year. In the long-term, Can Tho believes it would see a bright outlook in attracting investment to its EPZs and IPs as the city’s investment environment has been improved steadily. Recently, the Vietnamese government has focused on upgrading and developing technical infrastructure in the Mekong Delta region, particularly transport network. Many key national-level utilities have been built in Can Tho, such as Can Tho international airport, Can Tho bridge, Cai Cui seaport, the road in the south of Hau River and O Mon power generation complex. The results of these giant construction works are big opportunities for the city to catch the eyes of investors. Can Tho is also ready to bend over backwards to help investors as in addition to efforts in administrative reform and applying investment support mechanisms, Can Tho is working hard to quicken the construction pace of the local IPs and considers it as a focus in investment attraction, creating a boost to the local socio-economic development, contributing to turn Can Tho into an industrialised city before 2020. In addition to Tra Noc I and II IPs, Can Tho is building additional six IPs including 270 hectare Hung Phu 1 IP, 134ha Hung Phu 2A IP and Hung Phu 2B IP. The three IPs would welcome projects in the fields of engineering, electronics assembling, electronics, processing agricultural products, seafood, frozen cattle and poultry, building materials, pharmaceuticals, cosmetics, traffic and export-import services. The 600ha Thot Not IP would focus on drawing investment in farm produces, aquatic products, engineering serving the agricultural sector, and urban development. Meanwhile, 600ha O Mon IP and 400-ha Bac O Mon IP are being planned. Quality condominium projects still a hot property Despite the real estate market slump, some outstanding projects have found a way to beat the gloom and boost sales. Indochina Land has revealed that its condominium and second-home projects have continued outperforming the dormant market. Michael Piro, director of sales and marketing of Indochina Land, said in the two recent months, Indochina Plaza Hanoi closed 12 sales with a total transaction value of $3.3 million without any promotional incentives or new finance programs. “In 2012 most of our buyers were end users who were primarily concerned with construction quality, interior finishing, and the overall amenity/convenience offering. Indochina Plaza Hanoi covers all these key areas better than any other development for sale in Hanoi and this led to tremendous results with over 80 sales last year,” said Piro. “In the later part of 2012 and into 2013 we have witnessed increased demand and transactions from investors looking to capitalize on excellent rental yields from a quality project like Indochina Plaza Hanoi. Overall investors can earn between 8 per cent and 10 per cent from these condominiums and as interest rates have settled this year with retail rates between 10 per cent and 12 per cent, this presents an excellent opportunity for investors,” he added. Imperia An Phu in Ho Chi Minh City is another example in which investors have found a way to survive in a stormy seas. Tran Le Khanh, chairman of Kien A Service and Investment Company, an investor of Imperia An Phu, said that so far 90 per cent of its units had been sold. Among those, 60 per cent had been occupied or leased. Khanh said that when the real estate market fell into crisis, many projects slowed down construction or stopped construction. Kien A, on the other hand, continued to push up construction to deliver units to users on schedule. Apart from maintaining a steady schedule, strong investors like Kien A and Indochina Land are also increasing incentives to woo customers. Khanh from Kien A said he has mapped out flexible financial strategies for customers. “Our sales are based on a “win-win” strategy, in which end-users can own their units for reasonable prices, while investors can sell their products and continue on to other projects.” Khanh said that Imperia An Phu is one of the first projects in Ho Chi Minh City to provide a “pink book” (housing ownership certificate) for every unit in a record time of just six months from the hand-over. “The quick process has made a very good impact on the sales of our project, especially in the context that many other projects have been delayed,” Khanh said. Kien A also provides many flexible financial options to customers. Among them is a scheme whereby users can take over the apartments while having paid only 30 per cent of the total value. In May this year, Kien A even permitted some customers to pay only 10 per cent and got the apartments. According to Khanh, these promotions have been particularly successful encouraging the company to expand them to June of this year . A similarly good offer is on the table in the Happy Valley project, an investment of Phu My Hung company. A whopping 15 banks are providing loans of up to 70 per cent of the total value of the unit for a maximum of 25 years. This project launched 163 units in the first phase in March and 86 per cent of which were sold. Similarly, in the second phase in May, an equally impressive 80 per cent of the 165 launched units were sold. Meanwhile, the Indochina Plaza Hanoi last week offered a charming financial support to buyers. With the backing of Vietcombank, valid till August 8, 2013, buyers of Indochina Plaza Hanoi will have access to loans of up to 60 per cent of the condominium value, and better still, customers will enjoy zero per cent interest rate for up to 18 months from the date of first disbursement under the credit agreement. Management fees to put cat amongst pigeons Newly approved management fees are expected to cool down hot disputes between project developers and residents in Hanoi. Hanoi People’s Committee has recently decided to quadruple the management fees of apartment buildings, which in the past have been flashpoints of conflict with many apartment building residents claiming developers were ripping them off. Decision 3431/QD-UBND, signed by committee vice chairman Nguyen Huy Tuong, means the maximum fee is VND16,500 ($0.78) per square metre per month, compared to only VND4,000 ($0.2) per square metre per month as previously. Nguyen Quoc Tuan, deputy director of the Hanoi Construction Department, said the management fees were based on the true calculation of services in any building and its collection would be used to operate the buildings. The fees, Tuan added, would be collected under the principle of “self collection, self payment”. Savills Vietnam associate director and head of property management Nguyen Thu Hoai said the new fees were more reasonable. “This new fees are more closer to reality and flexibility to apply for different apartment buildings,” Hoai said. The new fees, Hoai said, would not include extra services such as swimming pools as they would be negotiated between developers and tenants. According to Hoai, the fees also depended on many other issues such as the use of common area and the differentials in service charges between the commercial and residential area. Disputes has been occurred in majority of projects, especially luxury projects such as Keangnam Palace, Golden Westlake and Sky City, where tenants did not agree with the management and parking fees applied by developers, claiming that fees were higher than those regulated by the Hanoi People’s Committee. Keangnam Vina – the developer of Vietnam’s highest building Keangnam Landmark 72, even last year had to stop operation of 10 out of 20 lifts in the two 48-storey buildings and provided less security and cleaning services after it had lowered management fees from VND18,843 ($0.89) per square metre per month to only VND4,000 ($0.19) as requested by the residents. Keangnam Vina chairman Ha Jong Suk said that he was forced to stop some of the services because he did not enough money to operate them with the minimum prices. “The operator’s principle is “what you give is what you get”, so it is impossible for the residents to get the high-class services without having to pay more,” Suk said. The case underlined disputes over apartment management fees in Vietnam have not abated as foreign developers and management companies are scratching their heads over how to operate high-class residential buildings. Nguyen Hong Minh, director of PMC - a management services supplier, said apart from different thought in service charges, differences between culture, living habits and people’s thinking were mostly behind the disputes. Minh said disputes were also caused by the lack of a synchronous legal system relating to high-rise apartment buildings. Investors shift as bond yield drops The continuous drop in government bond yields during recent months have caused investors to seek new investment channels. Last week, government bond yields decreased still further, even stooping below the ceiling deposit rate of 7.5 per cent per annum. The bond yields on three-year terms stayed around a paltry 6.8 per cent per annum. “The current level of winning rates is already approaching acceptable mid-term levels and the probability of a sharp plunge is insignificant,” said a Vietcombank Securities report last week. The rebound was sparked by recent positive feedback from the financial markets such as signs of credit growth and the establishment of the Vietnam Asset Management Company (VAMC) which inspired bond investors to forecast an early rebound for government bond yields. Long-term bonds would see the quickest recovery according to many bond traders. “Our bank has stopped investing in government bonds at this time,” said a deputy head of investment at a state-run bank. According to the source, finding alternatives to government bonds was no easy task, as most cite risk avoidance at their top priority. Despite the fact that banks gradually reduced disbursement on government bonds, it does not mean that banks found a way out for credit. Head of treasury at a state-run bank claimed that despite recent signs of credit growth, the rate was still very low, lacked stability and that large amounts of capital were now stuck in banks instead of circulating in the economy. “Meanwhile, other channels such as equity, foreign exchange and lending on inter-bank markets with higher risks and lower liquidity are not as attractive as government bonds,” he said. This source said the short-term solution for banks was to reduce deposits from customers and other markets in order to reduce the pressure to boost capital in a high risk situation. For bond investment funds which are not under pressure to clarify the balance sheet, it is also not easy to find another channel to replace government bonds. “The discovery of new investment channels is urgent but difficult,” said a fund manager. Dragon Capital’s Vietnam Debt Fund (VDeF) said the fund would change from holding short-term bonds to long-term ones. Specifically, it would hold 7-10 year bonds because these bonds’ yields were still more attractive than short-term ones, despite low liquidity. Regarding to prospect for government bond auction results in the coming weeks, Vietcombank Securities’ report expected the gap between bidding rate and expectation (cut off rate) by the State Treasury would be narrowed resulting in significant improvements. Jaks takes step to kick mega project into life Malaysia’s Jaks Resources Berhad is taking a bold step to develop its long delayed, giant $2.25 billion coal-fired power plant in Vietnam. In a document sent to Hai Duong Provincial People’s Committee on June 14, Jaks Hai Duong Power Company Limited – a wholly-owned subsidiary of Jaks Resources Berhad and also the investor of the project – said it was coordinating with its engineering, procurement and construction (EPC) contractor to organise a ground-breaking ceremony for EPC works “anticipated on June 28, 2013”. The 1,200 megawatt project’s EPC contractor is China’s Wuhan Kaidi Electric Power Engineering Company, which also won EPC contracts for the construction of two other power plants in Vietnam. The event will mark an important milestone for two-year-delayed project and help the investor to put the first 600MW turbine in the first half of 2018. This will also significantly contribute to Vietnam’s electricity supply in the future. In a document of Jaks Resources Berhad sent to Malaysia stock exchange, Wuhan Kaidi Electric Power Engineering Company shall complete the first turbine 42 months from the date of the handover of the site to EPC contractor, and 48 months for the second turbine. At present, site clearance has not been completely finished, but the Malaysian firm has urged the local authorities to timely complete site clearance and hand over it the land use rights certificate at the planned ground-breaking event. Jaks Resources obtained the investment certificate in August 2011 to build Hai Duong thermal power plant under a build-operate-transfer (BOT) contract with Vietnam’s Ministry of Industry and Trade. The project’s cost will be 80 per cent financed by debts and 20 per cent by equity. As of March 31, 2013, the firm said it had invested $31 million in this project. Apart from signing EPC contract with Jaks Resources, Wuhan Kaidi Electric Power Engineering Company, is negotiating to acquire a 40 per cent stake in this project. With the Kaidi’s involvement, Jaks Resources believed it would be able to leverage on Kaidi’s experience and track record in securing financing for the project. Hai Duong thermal power plant is the second BOT power projects being built by foreign investors in Vietnam at present. The other one is 1,200MW Mong Duong 2 thermal power plant, invested by a consortium between the US’ AES Corporation, South Korea’s Posco Power and China Investment Corporation. Ports unaffected by truck load inspections Ports in HCMC say their operations had not been affected by the city government’s efforts to cope with truck overloads that are suspected of damaging the city’s roads. Ngo Minh Thuan, deputy general director of Saigon Newport Corp., said that as goods owners properly complied with the regulations on vehicle loads, truckers took more time than before. Statistics reveal throughput at Cat Lai Port in the past few days has risen by about 8%, and thus goods owners have sent in more trucks to the port to take goods. However, operations of the port are as usual. Asked why trucks were not checked at ports. Thuan told the Daily that if load inspections were done at ports, congestion would easily occur. He proposed truck load scrutiny be done frequently rather than occasionally, so that enterprises would strictly observe the regulations. Huynh Van Cuong, deputy general director of Saigon Port Co., said the port mainly handled bulk cargo, so no congestion had been reported. Saigon Port has asked its goods handling divisions to observe the regulations on truck loads. However, for sealed containers, even if overload is detected, it would be hard to reduce the load. Concerning such sealed containers, many businesses said truck drivers could not know how heavy they were. The HCMC Goods Transport Association has written to the municipal government seeking an exemption from load inspection for vehicles carrying sealed containers already licensed for circulation. The reason given is these vehicles are loaded according to world standards and are beyond transport firms’ control. In addition, because container trailers are multi-axle vehicles, cargo weight is even distributed over the axles. Therefore, Circular 03 of the Ministry of Transport released in 2011 should be referred to when handling such vehicles. Under Circular 03, semi-trailers with a total of three axles can carry a maximum load of 26 tons, while four-axle trailers can carry 34 tons at most. If the provisions of Circular 03 apply, there will be fewer vehicles fined for load rule violations. Trucking firms bemoan road toll hikes Vexed by the Ministry of Finance’s draft circular designed to hike road tolls by 2-3.5 times, transport companies have said that the ministry should think of other solutions than toll spikes. Do Xuan Phu, director of Minh Lien Transportation Company, said trucking firms were shouldering a heavy burden of more than 10 different taxes and fees, with the road maintenance fee as the most recent one. Currently, a majority of vital roads have toll stations, which have caused transport costs to balloon. Transport costs would treble by 2015 when 21 new build-operate-transfer (BOT) toll stations on National Highway 1A are operational, plus a rise of 3.5 times in road fees. Transporters said a fresh road use fee increase would be unacceptable as the quality of roads is not improved. High road fees are eventually factored into transport costs and goods prices. In the end, consumers are responsible for all sorts of cost, so Phu proposed the Government should not increase the road fees. Similarly, Trinh Chau Khanh, director of Kim Loi Minh Transportation Co., told the Daily that transport firms now faced too many difficulties and were on the verge of bankruptcy due to taxes and fees. The transport sector is marred by a lot of pressing issues, Khanh said. Regarding the sanctions against truck overload, a 20-foot container can hold 25 tons of cargo in other countries but the permissible volume in Vietnam is only 20 tons. If a container truck is found to exceed the load limit, its driver would be fined and would have his driving license detained for as long as two months, according to Khanh. Khanh said that under the current tough market conditions, the Government should find ways to ease the burden instead of making it more unbearable. Thai Van Chung, general secretary of the HCMC Goods Transport Association, said that while an economic recovery was not in sight, road fees should remain unchanged until 2015, when a spike of 1.5 times could be acceptable. “The Government should not apply the high road fees which are beyond the tolerance of firms, not just for the sake of BOT investors,” he said. Hellmann’s health kick Germany’s Hellmann Worldwide Logistics, one of the world’s leading logistics providers, is about to start a hospital logistics project with an innovative investment model. In the meeting with the Ministry of Health (MoH) last week, Hellmann affiliate Tima International Achim president Georg Deja said Deputy Prime Minister Hoang Trung Hai, head of the Public-Private Partnership (PPP) Steering Committee, had given the greenlight to the firm to conduct a pre-feasibility study for the hospital logistics project. “A survey would be executed during three months in five hospitals in Vietnam including the Hanoi-based Vietnam-Germany Hospital,” said Deja, adding Hellmann and the MoH would set up a working group to implement the pre-feasibility study for the project. A PPP company could be established between the two sides, which would cover the costs of the survey. “The healthcare sector is growing rapidly in Vietnam so we would like to cooperate with Vietnam in this field. During the past 16 months, we have flown to Vietnam many times to negotiate this project,” said Deja. MOH Deputy Mnister Pham Le Tuan said: “Healthcare is a potential sector for PPP projects so the MoH supports the project and will cooperate closely with Hellmann in this plan.” Tuan, however, said the PPP model was still new in the country, so legal normative documents are not yet adequate. Hospital logistics have just been developing in Europe for some 10 years. In a previous meeting with the Ministry of Planning and Investment, Deja, expressed the company’s long term ambitions in Vietnam and his belief that the country could become a logistical South East Asian hub within the next two decades. Established in Vietnam in 1993, Hellmann is particularly positioned within specific industry verticals such as fashion, oil and gas, perishables and cruise ship logistic. Soft loans for Indochina Plaza homebuyers Indochina Land has signed an agreement with Bank for Foreign Trade of Vietnam (Vietcombank) to offer an interest-free loan program for homebuyers of the Indochina Plaza Hanoi apartment project. Under the program, homebuyers can take out soft loans accounting for up to 60% of the apartment’s value at a zero interest rate and enjoy a grace period of 18 months from the date of the first disbursement being made. Indochina Land introduced a similar program last year, with no interest for one year. After seven weeks of launching the program, the realty developer sold 36 apartments. Many customers need a suitable financing solution that can help them extend loan payments, usually for one year, Michael Piro, director of Indochina Land, said. Homebuyers in the program will have enough cash to cover an upfront payment equivalent to 40% of the contract’s value to own a home. The Indochina Plaza Hanoi comprises two buildings with 386 high-end units, a grade-A office tower covering 18,000 square meters and four floors for retail space measuring up to 14,000 square meters. Binh tips dollar rate to drop Foreign currency mobilisation rates are tippled to fall. State Bank Governor Nguyen Van Binh told a State Bank six month review meeting in Ho Chi Minh City last week that lowering foreign currency deposit rates aimed to improve the dong’s position, encourage people to keep the local currency and reduce pressures on foreign exchange rates. This message came after the recent signals that the dong-US dollar exchange rate was tenser. While trade deficit has just seen a mild increase, banks are behind this problem as many have shifted to keeping foreign currencies given difficulties in giving dong loans, stated a State Bank report. Banks have bought in foreign currencies to improve their short dollar positions or to gain some profits given a predictable higher exchange rate in the future. However, Binh said banks should be cautious because increasing foreign currency reserves would cause impacts to other policies. According to the report, the demand for foreign currency was not high during the past two months, and the State Bank had a timely action to support the market. As of June 21, the inter-bank average VND/USD exchange rate stayed at VND20.828. The buying average exchange rate of banks increased about 9 per cent against the early year. The dollarisation situation continued to be cooler. By the end of May, foreign currency deposits made up 11.82 per cent of total means of payment, down from 12.3 per cent in the end of 2012. Binh also affirmed that the forex rates would be kept stable this year and the highest increase would not exceed 2 per cent. Brett Krause, Citibank Vietnam country officer, suggested lowering greenback deposit rates to widen the gap with dong mobilisation rates, ensuring stabilisation of the forex rate. He said that Vietnam dong interest rates had dropped steadily, while dollar rates stayed unchanged, causing forex market fluctuations. Therefore, dollar deposit rates should decline even to zero per cent from 2 per cent to prevent people from keeping dollars, Krause added. Tran Phuong Binh, general director of DongA Bank, agreed with lowering dollar deposit rates which may hurt mobilisation capital, forcing banks to borrow from foreign banks to compensate for credits. Governor Binh said that dollar deposit rate revision would certainly happen but the State Bank still needed more calculation time. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR