BUSINESS IN BRIEF 28/9 Sales promotion helps clear inventories HCM City businesses have sold a large number of inventories and have increased sales thanks to active participation in Sales Promotion Month (August 28-September 30). Businesses and retailers have doubled or tripled revenue compared to last month, Tin Tuc (News) newspaper reported yesterday. According to the HCM City Department of Industry and Trade's figures, sales have increased by 40-50 per cent in the past month. Fresh foodstuff, household appliances, electronics, and clothing have been the most popular. Nguyen Thanh Nhan, director of Co.opmart supermarket chain, said the chain had seen good growth in the number of shoppers and sales turnover. Fresh foodstuff saw the highest increase, 80 per cent, compared to non-sale days. Tran Tan Hoang Hau, marketing director of Thien Hoa electronics centre, said the Sales Promotion Month is an opportunity for businesses to stimulate demands and increase sales, as well as help them to clear inventories to prepare for new products for the Lunar New Year 2014. After discounts of 49 per cent, sales turnover increased 200 per cent compared to the previous month. Customer traffic also went up, with more than 50,000 shoppers coming to the centre in the weekend. Sales are expected to continue to be strong during Sales Promotion Month, Hau said. According to experts, the Sales Promotion Month has helped both consumers and stores considerably. Le Van Khoa, deputy director of the HCM City Department of Industry and Trade, said that positive signs from Sales Promotion Month had given retail businesses more motivation to work closely with manufacturers and suppliers to prepare sources of goods for the peak shopping time in the year-end. Many promotions will be launched in the near future to stimulate market demand, he added. Textile material supply hangs by a thread Viet Nam's textile and garment industry is teetering on the threshold of recovery but is now falling short of material supply due to a temporary lack of imports and the incompetence of local material manufacturers. On 15 September, total textile and garment exports reached US$12.237 billion, up 16.9 per cent year on year. This figure is estimated to grow in the coming months with Viet Nam set to join the Trans-Pacific Partnership Agreement (TPP). However, that move is also expected to create a bigger deficiency in materials available for domestic producers. The Vietnamese industry imported 99 per cent of the material demanded by manufacturers last year, according to the Viet Nam Textile and Apparel Association (VITAS) statistics, but the process is getting slower, with damaging effects. Le Quang Hung, chairman of the board of Sai Gon Garment Manufacturing Trade JSC (Gamex Sai Gon) told VnEconomy that garment companies were worried about their input, as cloth and apparel processing countries were struggling to source raw materials. Material orders previously took one week to be delivered but are now taking up to one month, Hung said, adding that foreign material producers had taken advantage of the current shortage to raise prices by 10-15 per cent. Major material suppliers for Viet Nam are mainland China, Taiwan and South Korea. In the first eight months, cloth imports from China were valued at $3.44 billion, cotton for $301 million, and other materials for $786.6 million. Deputy General Secretary of VITAS Nguyen Van Tuan, for example, said the entire garment industry last year used 6.8 billion metres of cloth, of which 88 per cent was imported. Domestic cloth production only supplied 0.8 billion metres. Viet Nam already has some in-house material manufacturing producers, however, they are not competent enough to supply materials for export-oriented products, with the dying and finishing stages particularly short of quality. Tuan said the government should call for more direct investment from foreign textile manufacturers, while creating favourable conditions for the production of raw materials and core products. Independent economist Pham Chi Lan also warned that building a self-supply capacity was getting more important with the TPP talks advancing and certificates of origin for fibre and cloth becoming more important. Gold measures balance market The State Bank of Viet Nam (SBV) announced yesterday that its intervention in the gold market has helped curb inflation and stabilise the economy. According to the Forex Management Department, the central bank's gold auctions helped reduce speculative activity in the market, with around 60 tonnes of gold being auctioned since March. The department said 18 credit institutions were able to close their gold positions with the first 30 tonnes auctioned by the bank. The remaining supply of gold (around 29 tonnes) was sold to the market by winning bidders, far below the range of 50-100 tonnes imported each year. The measure has helped minimise gold imports and increase foreign reserves, said a department official. The department has also conducted regular inspections of the 2,500 licensed retail points in Viet Nam, to ensure prices are transparent and in compliance with regulations. The inspections aim to enforce a 2 per cent equity rule for local banks, who are required to keep gold reserves at the set level. The SBV also said banks must keep a record of ID for clients who carry out gold transactions worth more than VND300 million (US$14,285) under the Government Decision 20/2013/QD-TTg, to prevent money laundering. The SBV has said it will continue to manage the gold market and raise public awareness of its policies. Yesterday, the Saigon Jewellery Company (SJC) posted a rate of VND37.38-37.58 million ($1,781-1,790) on its website at 3pm, while the kitco.com trading floor listed the price at $1337.30 per ounce, or $1,611 per tael, leaving prices in Viet Nam $179 per tael higher than global rates. Interbank interest rates fall 1.17% The interest rate that Vietnamese banks charge each other for under-12 month term loans in dong and US dollars dropped last week by up to 1.17 percentage points. The change came amid a redundancy of cash in the banking system and at a time where finding a sound borrower is still challenging. The State Bank of Viet Nam's report, released yesterday, showed that loan terms for both dong and the greenback were mostly overnight and one week, totalling VND64.98 trillion (US$3.26 billion) and VND30.1 trillion ($1.4 billion), respectively. The overnight rate for the dong was 2.42 per cent, one-to-three week loans for 2.84-3.82 per cent, one-to-six month loans for 4.17-6.34 per cent and 8.72 per cent for 12 months. Loans in US dollars were charged 0.19 per cent for an overnight term, 0.37-0.27 per cent for one to three weeks, 0.44-1.59 per cent for one to six months, and 2.8 per cent for 12 months. Interest rates that banks can charge their customers have also been slashed to 7-11.5 per cent, 3-5 percentage points against last month, to stimulate businesses and achieve low and stable inflation. However, outstanding loans of the system are not expected to grow because of the current economic turmoil. While large companies can access credit easily despite the sluggish consumer market, many small- and medium-sized enterprises don't have assets as a mortgage to borrow money. Index rise ignites industrial hope The country's index of industrial production (IIP) saw a year-on-year increase of 5.4 per cent in the first nine months of the year, signalling a promising sign in the economic slowdown. This month alone the IIP is estimated to have increased 5.6 per cent over last September, said the Ministry of Planning and Investment (MPI). The Index is calculated using four groups: the mineral exploitation, processing and manufacturing industry, electricity production and distribution, water supply, and waste management and disposal. The IIP in mineral exploitation this month is estimated to decrease 5.1 per cent from the previous year, while the processing and manufacturing sector shows a 8.5 per cent increase. The two sectors have a large impact on the overall IIP. Electricity production and distribution, as well as water supply industries, saw surges of 9.4 per cent and 11.2 per cent respectively. The Ministry of Industry and Trade said both heavy and light industries faced difficulties. For example, the garment and textile sector has had to cope with fierce competition from neighbouring countries in its domestic market, though they had export contracts for the whole year. The paper sector has also been struggling with competition from imported products. The ministry said paper production last month rose 10.4 per cent while its inventory increased 25 per cent against the same period last year. It said its would closely supervise the implementation of set targets and measures, especially giving attention to exploiting the domestic market and strengthening the distribution system, while developing a new export market. The Finance Ministry said it will carry out inspections to detect smuggled goods in purchasing activities. In addition, it will adjust the management policies on imported items and create favourable conditions for investment. The MPI also revealed that more than 42,000 businesses closed down or suspended their operation in the January-September period. The ministry said in the nine-month period, of that figure, 6,700 enterprises dissolved completely, a 2 per cent decrease over the same period last year. However, the number of firms suspending operations rose 13 per cent against the same period last year, reaching 35,700. It said the figures show that the economic situation is difficult. The country saw 11,300 businesses resume operation between January and September, an encouraging result for the economy. As many as 4,000 of these enterprises were involved in wholesale, retail, and auto and motorbike repair, 1,900 were in construction and 1,600 in manufacturing. The MPI indicated that the country established 19,300 new companies in the third quarter of this year with total registered capital of VND87.8 trillion (US$4.18 billion), a decrease of 17 per cent in the number and 23 per cent in capital over the previous quarter. The total number of newly established firms for the first nine months of the year was 58,200 with capital of VND281.3 trillion ($13.3 billion), an 11 per cent increase in term of quantity but a 22 per cent decrease in capital from last year. Vermont welcomes VN investors to seize opportunities Many investment chances are waiting for Vietnamese investors in the US in general and Vermont State in particular, according to participants at conference held yesterday in HCM City by the Viet Nam Chamber of Commerce and Industry (VCCI). At the conference, which included representatives of US law companies and Vermont authorities, delegates said the relationship between Viet Nam and Vermont was expected to develop strongly in the future. Lawrence Miller, Secretary of Commerce for the State of Vermont, said that the main industries of his state were tourism and agriculture. Education and healthcare are also important to the state's economy. He said that student exchanges and tourism would continue to strengthen relations between Viet Nam and Vermont. They were always ready to support for Vietnamese investors to come to Vermont and vice versa, he affirmed. Speaking to Viet Nam News, Hoang Kim Son, head of the Viet Nam Trade Representative Office in West Coast, said that "the main Vietnamese exports to Vermont were farm produce, garments and footwear." "Vietnamese investors must pay attention to developing tourism products here because we are a tourism destination. Every year, there are many EU tourists who come to our state to go skiing," he added. Vermont is a small state in northeastern region of the United States. With a population of 600,000 and a size of 25,000sq.km, the state has many investment opportunities and potential in tourism, agriculture and the paper industry. Bilateral trade turnover between Viet Nam and the US stands at US$25 billion. Son said that the growth rate of trade turnover between Viet Nam and the US since the beginning of this year is expected to reach 18-20 per cent. Furniture design contest launched Registration is now open for a contest to choose the best furniture designers in the country. Organised by the Handicraft and Wood Industry Association of HCM City (HAWA), the Apricot Blossom furniture design competition 2013-14 is open to all Vietnamese and foreigners living in Viet Nam, especially university students, young designers and designers working at woodworking companies. Contestants are required to send their drawings to the organiser by December 25. The organising board will select 20 best works for the second phase. In the second phase, contestants will be provided with design training course as well as wood and equipment so they can make real products for submission by March 6. Awards will be presented on March 10 and wining works will be displayed at the Viet Nam International Furniture and Home Accessories Fair 2014, which is held in HCM City from March 11-14. Supply Chain Congress slated for October The Viet Nam Supply Chain Congress 2013 "Source. Make. Deliver" will be organised by the Viet Nam Supply Chain Community from October 2-4 in HCM City. This year, the annual event is expected to attract the participation of more than 600 professionals and enterprises in the industry. The conference will include discussions on purchasing, manufacturing, retail and distribution, including Viet Nam retail in 2015. Viet Nam Supply Chain has been the leading dynamic independent platform for over 9,000 supply chain professionals in the country since 2008. SBV regulates debt grouping State Bank of Viet Nam Governor Nguyen Van Binh this week issued a directive on classification of restructured debts to ensure that credit institutions perform safely and more effectively. Under the directive, the Governor requires credit institutions to restructure loan repayment periods and keep loan groups on the basis of assessing the conditions for production, business and service supply, as well as the ability to repay debts; and to inspect and strictly control restructured debts to ensure that borrowers can repay the debts in accordance with restructured repayment period. Credit institutions will not restructure the repayment period and maintain loan groups for customers that use funds for improper purposes or violate provisions of the credit agreements and related regulations. The lenders can actively decide to restructure the repayment period on the basis of monitoring and assessing customers' business conditions and financial strength. Additionally, they can simultaneously reconsider interest rates in line with the financial conditions of borrowers, of credit institutions and the actual monetary market to support customers in overcoming difficulties in production and business. They can also only restructure the repayment period and keep loan groups for clients unable to repay the principal or interest within the terms of the loan or when due, if they have new feasible business plans, and is determined that they have a better ability to repay the debts once the debt repayment period is adjusted. At the same time, the institutions will have to promulgate internal regulations for restructuring debts to ensure unity in implementation; have internal control mechanisms to ensure control strictly and safely to prevent violations. Besides reporting internal regulations and internal control mechanisms to the central bank, the institutions must also build and report their deployment plans and implementation commitments. Under the directive, the Governor also requires the supervising agencies of the central bank and its branches nationwide to better monitor credit institutions to ensure they obey regulations and provide timely solutions to remove the barriers faced by lenders and borrowers. Labour exporters rate performance An additional 30 agencies sending workers abroad have committed to self-regulate to promote protection of migrant workers. The agencies will comply with the Code of Conduct (COC-Viet Nam), introduced by the Viet Nam Association of Manpower Supply (VAMAS) in 2010 and supported by the International Labour Organisation (ILO). The voluntary instrument covers advertising, recruitment, training, contracts for Vietnamese workers abroad, dispute resolution and helping workers return to Viet Nam, said VAMAS Chairman Nguyen Luong Trao. Although the mechanism does not replace the government's own ability to monitor, inspect and sanction agencies, it encourages companies to review and improve existing procedures. "Businesses are ranked based on a criteria of business performance," he said. Last year, a total of twenty companies – responsible for sending almost 30 per cent of Vietnamese workers abroad – volunteered to be part of the pilot phase that rated agencies according to their compliance with the COC-VN. VAMAS ranked the firms into four groups: excellent, good, satisfactory and not satisfactory, Trao said. Eight of the firms were graded as "excellent". With the additional registration of 30 more recruitment agencies, the evaluation will expand to a total of 50 agencies among 170 that operate in the country. Trao said businesses implementing COC-VN could seek feedback from local departments of labours, invalids and social affairs on their progress. Speaking at a workshop this year to review the implementation of the COC-VN, Deputy Minister of Labour, Invalids and Social Affairs Nguyen Thanh Hoa said the COC-VN would encourage recruitment businesses to comply with national laws and international standards. Companies can build a reputation in the eyes of workers and foreign partners while complying with best practice on labour export management and legal protection, he said. Hoa urged relevant agencies to work closely with VAMAS to encourage licensed labour export companies to sign onto the COC-VN. Co-ordinator of the ILO's GMS TRIANGLE project Max Tunon said "self-regulation tools could play an important role in enabling best practice in the recruitment industry, as they supplement and support Government regulations". "This is particularly important for countries like Viet Nam, that are sending an increasing number of workers abroad," he said. The benefits of the COC have also been recognised by recruitment agencies and workers. Director of Ha Noi-based Labour Exporting and Training Co Ltd Bui Kim Son said the company had attracted more clients and partners since being ranked second among the 20 recruitment agencies. "Our negotiations with international partners have also become easier now that they know we fully comply with the COC-VN," he said. Pham Minh Toan, who used to work in the Republic of Korea, said he used to rely on personal sources to find information about working abroad, including friends, relatives and consultants from recruitment companies. "However, it often made me confused because I was overwhelmed with information and risks were unavoidable," he said. "But now, it is easier for workers who want to work abroad like me to choose qualified recruitment enterprises thanks to the COC-VN rating," he said. Viet Nam is one of the few nations that have successfully introduced a Code of Conduct for recruitment agencies and could even be a good model for the region, said Max Tunon from the ILO. "Looking ahead, it is important to increase the number of agencies in the ranking," he said, "and include an independent body to evaluate the companies objectively." Around 80,000 Vietnamese workers are sent abroad each year, according to figures from the Ministry of Labour, Invalids and Social Affairs. Approximately 500,000 workers are working abroad under contract in more than 40 countries. US remains leading importer of Vietnamese seafood Vietnam’s seafood exports in September are estimated at US$558 million, raising the nine-month figure to US$4.61 billion, up 3% against the same period last year. The US topped the list of seafood importers, accounting for 21.6% of the total volume with shipments to this market in the first eight months increasing by 10.6% to more than US$873.7 million. Exports to China, Canada and Thailand in the reviewed period also grew significantly by 53%, 13.8% and 13%, respectively compared to the same period last year. According to the Vietnam Association of Seafood Exporters and Processors (VASEP), shrimp exports are back on track at a growth rate of 38%. They hit a record high of US$335 million in August alone, up 65.5% compared to the same month of last year. Due to inadequate supplies of prawn, the export of white-legged shrimp will pick up in the coming months. It is expected that Vietnam will earn US$2.5-2.6 billion from total shrimp exports this year, up 12-16% against last year. Meanwhile, exports of tra fish, tuna and other seafood products tend to decline sharply by 14%, 25% and 10.7%, respectively. VASEP forecast that it is difficult for these products to increase this year due to unstable supplies of input materials and shrinking demands in the world. Teleconference helps Vietnam, India businesses seek partners A teleconference to facilitate Vietnamese businesses’ trade promotion in India was held on September 26 both in Hanoi and New Dehli. Head of the African-West and South Asian Market Department under the Ministry of Industry and Trade Tran Quang Huy said the event helped businesses of both countries seek partners as well as providing information related to trade policies and the ASEAN-India Agreement on Trade in Goods. According to the ministry’s statistics, India has become one of Vietnam’s top ten trade partners with two-way trade increasing by 12.2% a year on average in the 2008-2012 period. The figure in the first seven months of this year hit US$3.02 billion. More high added-value Vietnamese products are entering the India market, including mobile phones, computers, electronic products and components, material plastic and steel embryo apart from traditional commodities like pepper, rubber and footwear, Huy said, adding that this will help narrow the trade balance in the coming time. General Head and General Director of the Federation of Indian Export Organisations Ajay Sahai said the ASEAN-India Free Trade Agreement, which was effective in 2010, has created a favourable legal foundation for Vietnamese exports to India. India’s recognition of Vietnam as a full market economy has also contributed to facilitating Vietnam’s exports to the South Asian market, the one with many protection barriers and regular use of trade safeguarding tools, he added. He said he believes that the future signing of the Trade And Service Agreement and the Investment Agreement between ASEAN and India will further boost the two countries’ economic ties. HCM City prioritises solving difficulties for businesses Ho Chi Minh City will give top priority to removing difficulties for production, supporting the market and solving bad debts in the remaining months of this year, a municipal leader has said. Addressing a September 26 meeting of the HCM City People’s Committee on socio-economic development in the fourth quarter, Chairman of the committee Le Hoang Quan noted that the local economy has showed signs of recovery with more than 4,700 businesses resuming their operations and nearly 1,800 new ones established. This shows that businesses have initially overcome their difficulties so the city should create more favourable conditions for them, he said. The chairman instructed agencies and local administrations to keep a close watch on production and business activities in order to provide timely assistance, particularly in improving credit access for businesses ahead of the peak consuming season of the year before the New Year festival. The Department of Planning and Investment reported that in the first ninth months of this year, HCM City maintained a quarter-to-quarter GDP growth, with the Q3 figure reaching 10.3%, 0.7% higher than that of the same period last year. The city’s index of industrial production (IIP) was estimated to increase by 6% year-on-year. However, the southern h ub still faces high inventories and bad debts. To deal with these problems, the municipal People’s Committee has set out measures such as providing credit support and increasing trade promotion, investment and service. Vietnamese firms ready to spread to other Asian markets Many small Vietnamese businesses have developed into companies that are ready to spread their wings to the rest of Asia, said Thng Tien Tat, Executive Director of Singapore’s United Overseas Bank (UOB) in Vietnam. Singapore’s leading daily, The Business Times, quoted Thgn as saying that companies from the manufacturing, trading and oil and gas industries are taking the lead in Vietnam's expansion into the region. To help Vietnamese businesses expand their operations in Asia, UOB in Vietnam has launched an FDI advisory unit, which will give UOB customers expanding in and out of Vietnam access to the bank's full suite of corporate and personal banking products, he said. According to him, from the first half of 2012 to the first half of 2013, UOB's business flows between Vietnam and Asia increased 20%. From 2010 to 2012, trade between Vietnam and Asia grew by 46.7% to US$150.4 billion. Edlyn Khoo, IE Singapore's centre director for Ho Chi Minh City, said that the setting up of the UOB advisory unit is an additional tool that helps facilitate trade and investment between companies from both countries. “Partnerships in the financial sector were a key area highlighted at the recent bilateral strategic partnership agreement,” he added. Earlier this month, Singapore and Vietnam signed a strategic partnership agreement to deepen their ties on the political, economic, defence, security and international fronts during Prime Minister Lee Hsien Loong's visit to Vietnam. Khoo stressed that Singaporean companies can bring relevant global experience and connections to Vietnamese firms planning their next stage of growth. UOB has opened seven FDI advisory centres since 2011 in Singapore, Malaysia, Thailand, China, Indonesia, Hong Kong and Vietnam. It plans to opens two others in Myanmar in December this year and India in the first half of 2014. Central bank no longer concerned about exchange rates For the first time in several decades, the State Bank of Vietnam’s exchange rate management has successfully prevented what it terms the ‘dollarisation’ of the national economy. SBV introduced a range of measures that helped cool down a currency market risking overheating earlier in the year. It laid out plans to keep exchange rates within the 2­–3% margin during 2013, stabilising the currency market and reinforcing trust in the local Vietnam Dong. Domestic exchange market fluctuations forced the bank to intervene in February–March and May–July. It asked big commercial banks to sell large amounts of US dollars, and worked with relevant ministries and agencies on stepping up their scrutiny to keep the market in check. On June 28, the SBV raised the inter-bank rate by 1% from 20,828VND/US$ to 21,036VND/US$, while simultaneously lowering the US dollar deposit interest rate in accordance with market laws of supply and demand. Its flexible management proved effective in prompting credit organisations to sell US dollars to the central bank, increasing national currency reserves and bringing the exchange rate back under control. SBV management policy, together with other monetary tools, helped control the quantity of Vietnam Dong in circulation and thereby eased inflationary pressure afflicting the economy. A SBV report reveals the ratio of currency deposits to overall money supply fell sharply from more than 30% in the 1990s to 15.8% in late 2011, 12.3% in late 2012, and 12% as of August 2013. Thanks to the stable exchange rate, the central bank has been able to purchase large amounts of currencies for national reserves, strengthening the nation’s financial power. New era of Thailand-Vietnam economic cooperation The recently established strategic partnership between Vietnam and Thailand offers long-term prospects for stronger bilateral economic cooperation. The view was shared by hundreds of Vietnamese and Thai officials and businesspeople attending a seminar in Bangkok on September 25. Vietnamese Ambassador to Thailand Ngo Duc Thang acknowledged the recent positive trade, investment, and tourism development between the two countries, saying two-way trade turnover reaching US$10 billion in 2012. Thailand is one of Vietnam’s top ten foreign investors, with 315 projects worth US$6.4 billion. Vietnam has also invested in eight projects in Thailand capitalised at nearly US$12 million. Vietnam ranks 9th in terms of foreign arrivals to Thailand, while Thailand supplies the 13th largest number of foreign visitors to Vietnam. Thang stressed the Vietnam-Thailand strategic partnership will help strengthen bilateral economic cooperation and mutually beneficial ASEAN community integration in trade, investment, agriculture, energy, telecommunications, information technology, and transport. Thang expressed hope more Thai investors will explore Vietnamese opportunities in the near future. Thailand-Vietnam Friendship Association President Prachuap Chayasan also acknowledged the role of the strategic partnership in driving bilateral cooperation across all fields. He revealed the two governments are working together to resolve issues related to Vietnamese workers in Thailand. The Thailand Board of Investment’s (TBOI) Foreign Investment Promotion Agency Director Siriporn Nuruksa said both countries expect to see increasing numbers of businesses investing and operating in their territories. Vietnamese Trade Office and TBOI representatives briefed seminar attendees on Vietnam’s economic developments and opportunities for Thai businesses. A number of Thai business leaders already boasting effective Vietnamese operations also shared their experiences with participants. Nok Air plans flights to Vietnam Budget Thai airline Nok Air has announced plans to expand its international flight routes, foreshadowing new destinations including Vietnam. NoK Air began operating Bangkok-Yangon flights this year, and will conduct flights between Bangkok and Hanoi and Ho Chi Minh City in 2014. NoK Air Financial Manager Vitai Ratanakorn confirmed consumer demand makes flights to Vietnam a priority for next year. The two Thai budget airlines Thai AirAsia and VietJet Air are currently running flights between Thai and Vietnamese cities. Larger national airlines, such as Vietnam Airlines, Thai Airways International, Qatar Airways, and Turkish Airlines, also service the route. Nok Air is also considering launching Boeing 737-800 flights to Laos, Cambodia, and select Chinese provinces. Airbus recently reported Vietjet – another Vietnamese budget airline - has signed a US$6.1 billion purchasing contract for 62 Airbus A320s. The airline currently rents nine Airbus A320s. Vietjet started its Vietnamese operations in late 2011. It is the country’s first private airline and services both domestic and international routes. Experts skeptical over socio-economic situation Officials and experts during a conference in Hanoi City on Monday expressed skepticism over socio-economic development strategy of the country, saying that the nation would fail to break through the current situation if shortcomings are not fixed. Speaking at the seminar, Deputy Prime Minister Nguyen Xuan Phuc said that the nation has seen slow recovery while most regional countries have gained back their strength after the crisis. In absolute terms, the gap between Vietnam and regional countries has been widening, Phuc stressed at the conference. The event, jointly held by the Central Party Committee’s Economic Commission, the National Economics University, the World Bank and the National Assembly’s Committee for Economic Affairs, aimed to review the implementation of the 2011-2015 development plan and make strategic adjustments. Phuc said that many targets set for the 2011-2015 period might not be fulfilled as well. In 2013, seven out of 15 socio-economic development targets such as gross domestic product (GDP) growth rate, industrial added value, construction and employment would not be realized. Local people are still facing many problems such as poor living standards, criminals in cities, and social conflicts in the rural area. “Warnings of an economy full of risks and with gloomy growth outlook are nearing the reality,” Phuc said. Adverse impacts of the global economic crisis and weaknesses of the local economy are culprits of high inflation, prolonged macro uncertainties, the slump in the real estate market and other challenges against local enterprises, Phuc added. However, former Deputy Prime Minister Vu Khoan said that the main reason is poor internal capacity of the country rather than external impacts. “Impacts of the global economic turmoil are not the key factor as many countries have also suffered the same impacts. Meanwhile, some spheres exposed to external factors such as exports, foreign direct investment (FDI) capital and tourism have seen strong development. Therefore, we could not blame on external problems,” Khoan said. Internal problems of the economy have existed for a long time, not just in recent period. However, the economy earlier did not face many difficulties like now, he said. “Is it that our subjective management has resulted in macroeconomic uncertainties?” he pondered. The 11th National Congress has adopted two groups of principles related to institutional mechanism and growth model renovation. However, these principles have yet to come into the real life. For instance, principles on sustainable development of the financial market, healthy development of the realty market, and building up strong conglomerates have been below expectation. Policy makers have been either subjective in setting up utopian targets or failed to live up to their commitments. Furthermore, they have focused too much on solving immediate matters rather than setting up the right development course, according to Khoan. Cao Sy Kiem, chairman of the Association of Small- and Medium-Sized Enterprises, said that the Government is still sticking to old thinking, and even issuing administrative orders like during the centrally-commanded economy. These problems have made the business community, the key factor of the nation’s development, shrinking. Former head of the Institute for Development Strategy Luu Bich Ho expressed his skepticism over solutions to the current problems. “We have stayed in the talking shop but failed to work things out, and I think that this time we will also fail,” he said. Only skin deep? Japan seeks deeper improvements Vietnam is a hotspot for Japanese enterprises looking for a low cost investment destination, but the country needs to do more to streamline application and regulatory processes. Engineer Nguyen Minh Son has his eyes glued to a computer screen. He is in the final stages of a new invention that will help save lives. It is a respiratory monitor used in surgery. His product may outperform some of its leading competitors in the market today. “This monitor may become part of our Vietnamese production line,” said Son, who is working at Metran Company Limited – Japan’s top healthcare machinery and equipment firm. Tran Ngoc Phuc, an overseas Vietnamese and president of 30-year-old Metran, said the company held the patents on 20 inventions, many of which they planned to manufacture in Vietnam in the near future. Phuc has plans to “make a major investment” to expand Metran’s production line in Vietnam. $3 million is already slated for a factory in Binh Duong’s My Phuoc urban area. The factory is projected to open in 2014 and, besides domestic distribution, will also export to ASEAN markets, Europe, and the US. The company currently has two production centres in Ho Chi Minh City, one making software used in producing medical equipment and the other making healthcare machines. The products are sold locally and exported to Japan. “Compared to other ASEAN markets, Vietnam’s quality of labour for the cost is very competitive. I have also been approached by several Vietnamese partners,” Phuc said. Hirota Nakanishi, assistant director of the ASEAN-Japan Centre’s Trade and Investment Division, said that many Japanese enterprises are looking to Vietnam as a potential manufacturing base. “Vietnam offers the possibility of much greater growth, something much more difficult to achieve in Japan. Recently, Japanese companies have started entering the banking, insurance, and consumer goods sectors,” he explained. Daisuke Hiratsuka, executive vice president of the Japan External Trade Organisation’s (JETRO), reported that between April 2012 and March this year, 6,800 Japanese enterprises inquired with the office in Hanoi about investing in Vietnam and another 5,700 in Ho Chi Minh City. JETRO’s website shows that access to Vietnam tab has totaled 36,000 page views, ranked third after China and Thailand. “Japanese investors are showing great interest in Vietnam, particularly those making automobiles, machines, and electronics. They are beginning to shift their production from China and Thailand to Vietnam,” Hiratsuka said. According to a recently released JETRO survey on investment cost in major cities around ASEAN, Vietnam is highly competitive. Hiroshi Aimoto, director of the Japanese Ministry of Economy, Trade and Industry’s Trade Policy Bureau, shared the opinion that Japanese companies were strongly considering making Vietnam their manufacturing hub. “Investment costs in neighbouring nations are surging.” According to JETRO, after China joined the World Trade Organization (WTO) in 2001, workers’ wages in the manufacturing sector have gone up nearly 200 per cent in US dollar terms whereas in Vietnam they only rose 9.7 per cent between 2006 and 2011. The Richest, a Canadian website tracking the world’s wealthiest people, recently announced a top ten list of nations with the cheapest labour costs. Vietnam was fifth. According to the list, Vietnam’s hourly labour cost is currently $0.39, which remains lower than that in Egypt ($0.80), Sri Lanka ($0.62), Senegal ($0.52), Kenya ($0.50) and India ($0.48). The website calculated Vietnam’s hourly labour cost at $0.39, lower than Egypt ($0.80), Sri Lanka ($0.62), and Senegal ($0.52), as well as Kenya and India. At the recent Vietnam-Japan Economic Summit in Hanoi, Minister of Planning and Investment (MPI) Bui Quang Vinh said Vietnam was well positioned to host Japanese enterprises looking to it as a production base. “In the near future, Japan’s support for Vietnam in terms of building up supporting industries and the two countries’ ongoing joint initiative will lay a strong foundation for Japanese companies seeking a manufacturing hub,” he said. As of July, Japanese investment capital in Vietnam totalled $32.8 billion, with more than 2,000 ongoing projects. Although Vietnam has many competitive qualities, there are still difficulties with entering the country. The Vietnam Chamber of Commerce and Industry and the Japan Business Association in Vietnam (JBAV) recently agreed to develop a dialogue mechanism that supports improving the investment environment and remove obstacles faced by Japanese investments. “The dialogues will be organised quarterly and cover topics such as infrastructure, human resources, supporting industries, tax, and so on. Comments, ideas, and opinions from the discussions will be submitted to the government and ministries, which can use them to eliminate challenges,” said MPI’s Vinh. Vinh vowed to improve the investment environment for Japanese enterprises. “We need their opinions, we want to solve their problems. We understand that is the only way to access their investment,” Vinh stressed. “Investor are like shoppers, if we don’t have good products and services, they will go to a different shop.” His commitment followed Japanese enterprises and organisations’ demands for support in tackling major obstructions they currently faced in Vietnam. Aimoto, from Japan’s Trade Policy Bureau, said infrastructure such as power, roads, logistics, and communications were insufficient and many enterprises lamented the fact that business and investment procedures continued to be bureaucratically inefficient. Also that supporting industries were damaging Japanese companies’ performance. Eriko Tayama, head of the Japan Business Division at Singaporean investment consultancy Ascendas Vietnam, said one of the company’s Japanese customers had spent a great deal of time exploring Vietnam’s investment environment. “They decided to invest in the Philippines instead as Vietnam did not fulfill its labour, land tax, and component supply requirements,” she explained. Echoing this view, Japanese Ambassador to Vietnam Yasuaki Tanizaki underscored that Vietnam’s investment climate was not satisfying Japanese investors. “One of the biggest concerns is the slow restructuring process of Vietnam’s state-run enterprises. We are also worried about slow institutional reform, which is preventing larger investments into the country,” he said. Aimoto proposed that to solve these issues, Japan and Vietnam needed to boost implementation of the two countries’ joint initiative, now in its fifth phase, and develop an action plan on industrialisation that incorporates Vietnam-Japan Cooperation 2020/2030. The initiative’s fifth phase, launched in July and moving through 2014, includes 13 issue groups that include law and policy, human resources, intellectual property, banking, infrastructure, and macro-economic stability. “All these sectors need improvements,” Vinh said. Kenji Itatani, executive director of Tokyo-based Sonkenzai Centre, which often works with Japanese agencies and delegations going to Vietnam, advised that the government establish a hotline or committed email for Japanese investors to seek advice and support when they run into difficulties doing business in Vietnam. “And Vietnam needs to actively invite Japanese investors, rather than just issuing policies and hoping that they come,” he added. Source: VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VIR