BUSINESS IN BRIEF 31/1 VASEP hoping for rebound in shrimp exports Shrimp exports out of Vietnam plummeted dramatically last year, due largely to increased competition and lower prices, according to the Vietnam Association of Seafood Exporters and Producers (VASEP). However, it is hoping recently signed free trade agreements (FTAs) with the Republic of Korea (RoK), EU, the Eurasian Economic Union (EEU) will alleviate the situation and get shipments flowing again in 2016. During 2015, shrimp were exported to 92 markets, though there were acute declines in trade with many of the nation’s principle markets including the US, EU, Japan and China. VASEP also hopes the reduction of the US Department of Commerce (DOC) anti-dumping duty to 0.93% on frozen shrimp for POR9, which is much lower than the 6.37%. rate applied for the POR8 will positively affect the market. According to VASEP, the US remained the top importer of Vietnam shrimp for 2015. However, shrimp exports to the market dropped 38.3% to US657 million compared to 2014 due to fierce competition and decrease in prices. Dozen tons of Chung cakes shipped abroad Tran Gia Company from Bien Hoa city, in the southern province of Dong Nai has shipped more than 40 tons of Banh Chung (a type of traditional rice cake for New Year celebrations in Vietnam) to nearly 10 countries in the world for the upcoming Lunar New Year festival. Besides the cakes, it also exported Dong (arrowroot) leaves – which are used as the wrapping of the cake –, sticky rice, and green beans. The cakes and materials are mainly for  overseas Vietnamese in the US, Australia, Canada, France and Germany. The European market accounted for 60% of the export volume, said Tran Gia Director Tran Thanh Toan. This year’s export volume dipped one-third compared to last year, Toan added. The company planned to supply a huge volume of Chung cakes for the domestic market during the upcoming Tet. Tariff slashes cause foreign foods surge Vietnam’s husbandry sector has begun to feel the heat from the ASEAN Economic Community establishment, expected to prompt a rise in foreign foodstuff imports and livestock investment. Last week, Danish Farm Concept Company signed the first contracts to supply investors in Vietnam with new turnkey pig production facilities. Representing the cooperative expertise of six Danish companies, Danish Farm Concept is the first business enterprise with the capability to deliver the complete Danish model for pig production. The pig production facilities on the way to Vietnam will be tailored to local needs and conditions. Once in operation, they will both supply safe food to demanding consumers and deliver good returns to investors. In another case, Thailand’s frozen seafood producer PFP Group is reportedly planning to establish a joint venture in Vietnam over the next three to five years. The group’s international marketing director Piyakarn Piyapatana said that PFP was negotiating with several seafood firms in Vietnam about the foundation of this joint venture. It is expected that PFP will hold a major stake. The new investments in the local husbandry sector are attributed to slashed import tariffs under the ASEAN Economic Community (AEC), plus Vietnam’s great husbandry growth potential. Under the AEC, investors may concentrate production lines in a chosen ASEAN country, thus creating economies of scale, and then export the finished product tariff-free to other ASEAN countries as well as to ASEAN’s free-trade partners in the region (China, India, the Republic of Korea, Japan, Australia, and New Zealand). Piyapatana ascribed PFP’s investment in Vietnam to the country’s higher economic growth within ASEAN, improved business climate and notably a good source of seafood. Vietnam also enjoys trade privileges that will help PFP export to the other regional markets, such as the US and Europe. According to the Ministry of Planning and Investment’s Foreign Investment Agency study on challenges and opportunities in attracting foreign direct investment (FDI) following the AEC establishment, Vietnam will have a big advantage in luring foreign investment to the livestock sector thanks to its abundant materials and land, especially big tax incentives. For example, a livestock project will enjoy either reduction or exemption of corporate income tax. It will also be exempt from paying tax for importing materials and equipment. However, Vietnam’s livestock sector, home to about eight million farmers, may lose out following the establishment of liberalized trade blocs like the AEC. A Vietnam Institute for Economic and Policy Research survey on impacts of the AEC and the Trans-Pacific Partnership (TPP) on the sector stated that under the AEC and the TPP, consumers and importers would gain, while exporters and producers would lose due to competition with imported products. Specifically, livestock exports of Vietnam to ASEAN are expected to fall mainly in pork and poultry, by 7% to the Philippines, 82% to Thailand and 3% to Indonesia. The survey revealed that in both AEC and TPP, tariff cuts by Vietnam in the husbandry sector negatively affect the total production value of the sector mainly due to higher competition from imported products. For example, Vietnam has been one of Australia’s fastest growing export markets for live cattle, rocketing from just 1,441 cattle four years ago to almost 310,000 cattle last year. HCM City offers interest subsidy for supporting industries The HCMC government will set aside around VND1 trillion (US$44.4 million) to provide loan interest subsidy for firms involved in projects in supporting industries, especially those relating to technological upgrade, production expansion and construction of multi-storey factory buildings. Under a development plan for supporting industries and small and medium-sized enterprises (SMEs) in the 2015-2020 period, the city government will clear land for investors and back the development of such industries at industrial zones (IZs), export processing zones (EPZs), high-tech parks and industrial clusters. Initially, the city will start a pilot scheme to build 100,000 square meters of factory buildings to meet demand of SMEs committed to the supporting industries. Some 50 hectares at high-tech parks and 369 hectares at IZs and EPZs will be allocated to the projects approved. Besides, experts will be invited to assist the city government in policy making and enterprises in technological renovation, product research and business development. The city will also dispatch officials to Japan, South Korea and Thailand to draw on experiences in developing supporting industries. In the next five years, the city will encourage SMEs to expand investment, improve competitiveness and implement projects in the fields of engineering, electronics-information technology, chemistry-plastic-rubber, food processing, apparel and footwear. The objective is to help the city raise its industrial development index by 7% per annum between 2015 and 2020. According to 2014 data of the HCMC Statistics Office, up to 97% of engineering firms in the city were SMEs while 95% of food processing companies and 88% of footwear firms were small or micro businesses. Vietjet welcomes 19 millionth passenger On the occasion of upgrading and reopening Tho Xuan Airport on January 30, the 19 millionth passenger of Vietjet received a special reception when his flight named VJ360 landed at Tho Xuan Airport from Ho Chi Minh City. The lucky passenger, Mr. Nguyen Chi Duc would earn free flights on all Vietjet’s routes in one year. The reception attracted participation of leaders from Vietnam’s government, Ministry of Transport, Civil Aviation Authority of Vietnam, Thanh Hoa province and authorities of Airports Corporation of Vietnam. “It is my great luck to be the 19 millionth passenger today. Whenever I want to fly somewhere, Vietjet is always my first choice because of the airline’s diversified flying schedule, convenient flying timetable and economic fares”, said Duc. “Flying with Vietjet, I myself can enjoy a full suite of high quality services served by friendly flight attendants on brand – new and modern aircraft as well as other interesting activities. Again, I would like to thank and wish Vietjet more developments in the future.”  Mercedes-Benz Vietnam breaks sales record in premium segment Mercedes-Benz Vietnam (MBV) achieved the best year ever since its establishment in 1995 with 3,600 cars sold last year, breaking the all-time record in the premium auto market. With a sales growth of 50%, Vietnam is one of the three fastest growing markets of Mercedes-Benz in Asia. To celebrate its 20th  anniversary, MBV launched 20 new products in 2015, offering the most diversified premium lineup to Vietnamese customers. These products played an important role in helping the company achieve the new sales records in January, May, June, July and September. The C-Class is the best-seller of MBV as well as the entire premium market. With more than 1,500 cars sold and a growth rate of 256%, the new C-Class is not only the market leader with more than 70% market share but also the one to attract many customers upgrading from mass vehicles. With valuable enhancements from mid-2015, the E-Class remains the most favorite mid-size sedan in the country with more than 60% market share and sales of 710 vehicles. The E-Class has always been the key product of MBV: the first car assembled in Vietnam and the only to have a 20th  anniversary special edition. Last year the S-Class continued to retain its “the best car in the world” reputation with more than 450 cars handed over to buyers, accounting for over 80% of its flagship segment. Compacts of the Star won the hearts of customers with 450 orders in 2015. The GLA was one of the most successful completely built-up (CBU) ever with 290 units. MBV was also successful in the SUV (sport utility vehicle) segment. Just two months after its launch at the Vietnam Motor Show 2015, more than 100 orders for the GLE variants were placed. The large-size GL received up-to-three-digit orders as well. In 2016, the brand is poised to further expand its market presence with a full SUV lineup. Mercedes-AMG remains the sporty icon of speed enthusiasts in Vietnam. Stunning cars like Mercedes-AMG like the GT S/GT S Edition 1 and C 63 S Edition 1 have found their passionate owners ever since their launch. In 2015, MBV attempted to enhance the customer satisfaction with numerous investments and achievements in many fields. In terms of product, besides the diversified lineup, MBV applied state-of-the-art technologies to serve customers at higher lever, in which the COLLISION PREVENTION ASSIST PLUS and the 9G-TRONIC were key highlights. The brand invested nearly US$2 million to upgrade seven outlets and four more to come in 2016. For customer care, the “My choice. My service” program offered enhanced service experiences with lounges, express service stations, mobility solutions and economic offers during special hours. In addition, customers could purchase the extended warranty packages, 12 or 24 months extension with the Bumper-to-Bumper manufacturer component coverage, applied for both new and used cars. Mercedes-Benz is the partner of top five-star hotels and resorts in Vietnam, with 80% market share of this potential business. Besides the ideal shuttle vehicle – the E-Class, many hotels and resorts have invested in the S-Class and the V-Class for their fleet. Especially, Park Hyatt Saigon is the first hotel in Vietnam to own the luxury Mercedes-Maybach S 600 as their VIP chauffeur limousine. In 2015, Vietnam won the Nation Cup of Mercedes Trophy 2015 as the North Asia team together with Hong Kong and Taiwan. Coach fares fall 2-3% after several fuel price cuts Coach operators have revised down fares by only 2-3% for their services to and from HCMC after several rounds of fuel price reductions on the domestic market and the urge of authorities. Thuong Thanh Hai, deputy director of Mien Dong Coach Station, said some 25 out of 217 coach operators active at the station have announced fare cuts by 2-3% depending on routes. Hai told reporters on January 7 that the reduction applies to fares on weekdays while fares for the services departing from the period of 10 days ahead of the Lunar New Year holiday (Tet) will pick up 20-60% as demand soars. Asked about the meager fare cuts but sharp rises ahead of Tet despite lower fuel prices, Hai said transport firms adjust down fares based on the operation costs that they have reported to the city departments of finance and transport. According to statistics of Mien Dong Coach Station, around 35 transport firms at the station have started to sell 34,000 tickets for their Tet services and more will join on January 10. This year, the station will work with Pasato Joint Stock Company to sell fares for coach trips during Vietnam’s biggest holiday on the Internet to help passengers save time and cost. Passengers can access pasoto.com to book tickets and make payments by ATM and credit card or in cash. More Tet flights added as demand surges Domestic airlines will add many more flights to make an extra 700,000 air tickets available during the upcoming Lunar New Year holiday (Tet) compared to the same period last year. Vietjet said it will operate 800 more flights with 150,000 seats from January 20 to February 20 (from the 11th of the final lunar month to the 13th of the first lunar month), the peak air travel period in the country. Every day, the no-frills carrier will have 30 return flights on the HCMC-Hanoi route, 13 HCMC-Danang, seven HCMC-Haiphong and six HCMC-Vinh return flights. Vietnam Airlines will add 800 more flights to its Tet schedule from January 26 to February 24 (from the 25th of the 12th lunar month to the 24th day of the first lunar month). These additional services will provide nearly 2.1 million seats, 7% higher than on normal days and up 18% against the same period last year. The national flag airline will operate extra flights on 15 domestic routes. They include 192 flights on the Hanoi-HCMC route, and 90 flights on each of HCMC-Danang, HCMC-Phu Quoc Island and HCMC- Hue runs. Besides, the airline will offer seven flights on international routes to Taiwan, Hong Kong and Japan. Meanwhile, Jetstar Pacific will add flights to a dozen domestic routes from January 21 to March 8 and sell nearly 800,000 tickets during the Tet holiday, 50% or 270,000 tickets higher than last year. The low-cost carrier told the Daily that it would take delivery of three new Airbus A320 aircraft and at the same time lease three more jetliners to meet surging demand for air travel during Tet, which starts on February 8. A large number of passengers opt to travel home by air to save time, so there will be a sharp decline in the number of passengers traveling by road from HCMC to Hanoi. Thuong Thanh Hai, deputy director of Mien Dong Coach Station, said transport firms were unable to offer services on certain routes during last Tet due to a strong slump in passengers. Therefore, the station will receive registrations for trips to the central provinces this year. Rice acreage seen falling further this year The Department of Cultivation under the Ministry of Agriculture and Rural Development said about 30,000 hectares of low-yield rice will be used for growing other crops this year. A report of the department said that last year around 34,600 hectares of rice nationwide was used to plant corn, vegetable, peanut, watermelon, cassava and other high-yielding crops. The converted area included 16,000 hectares in the north and 15,000 hectares in the central coastal provinces and the Central Highlands. Under a restructuring plan for rice fields in the 2014-2020 period approved by the ministry, 260,000 hectares under rice farming would be converted to develop other crops and farm fish. The Mekong Delta region is expected to make up a majority of land converted from rice cultivation to other crops, with 3,600 hectares already converted last year. The department estimated the country’s paddy (unhusked rice) output at 45.19 million tons this year, down 70,000 tons compared to 2015, as 30,000 hectares under paddy farming will be shifted to other crops. The Vietnam Food Association (VFA) said every year Vietnam can export eight million tons of rice, including via border trade. That means apart from ensuring food security, the nation still has about one-third of the annual rice output for export. The association said the slight decrease in paddy output would place no impact on the country’s food security but help reduce a rice oversupply on the home market. According to VFA, Thailand now has 14 million tons of rice in stock and has to clear this rice volume by 2017. Besides, rice inventories in Cambodia and India are three and 16.3 million tons respectively and they will sell in the coming months before a new crop begins. VIB launches Tet promotion program Vietnam International Bank (VIB) has introduced a promotional program called “Tron ven Tet cung VIB” (Enjoy Tet with VIB), in which individual holders of payment and saving accounts can get interest rate bonuses and join lucky draws. Between now and February 29, customers who deposit VND100 million for a six-month tenor will get a promotional code and an interest rate bonus based on the last two digits of the code. If the two numbers are in the 00-89 range, depositors can enjoy an interest rate bonus of 0.1% per year while numbers from 90 to 95 will allow depositors to get 0.3%. The bonus will be 0.5% for numbers from 96 to 98 and 2% for number 99. The bonuses will be paid in cash. Those customers using the bank’s Internet Banking, website and MyVIB app to deposit money will enjoy an interest rate bonus of 0.15% per year for tenors from one to 12 months. Moreover, with every VND1 million in the payment account, the client will receive a code for a lucky draw, and the winner will be awarded a design consulting and home decoration package worth VND200 million. Customers with six-month deposits of VND100 million each will get 100 codes to participate in the lucky draw. Gov’t okays delaying ice-to-fish ratio rule The Government has approved the postponement of a regulation on ice and moisture contents in tra fish fillets as proposed by the Ministry of Agriculture and Rural Development to make life easy for exporters. Employees of a seafood enterprise in An Giang Province screen semi-processed tra fish fillets. The Government has approved delaying a regulation on ice and moisture contents in tra fish fillets - PHOTO: TL The approval came months after the ministry suggested the Government delay the enforcement date of the regulation from 2016 to January 1, 2019. The Government has agreed not to enforce the rule on ice and moisture ratio in tra fish fillet exports as specified in Article 6 of Decree 36/2014/ND-CP on farming, processing and exporting tra fish this year. The article states the ice-to-fish ratio of exported tra fish fillets must meet the requirements of importing countries and the ice ratio must not exceed 10% while the maximum moisture ratio is 83% of net weight of tra fish fillets in other cases. The Government has also approved extending the deadline for tra fish farms to get VietGAP (Vietnamese Good Agriculture Practice) certification or international equivalents. In addition, enterprises will not have to register their tra fish export contracts with the Vietnam Pangasius Association (VN Pangasius) as a customs clearance condition for their tra fish shipments. A source told the Daily that the ministry has suggested extending the time for applying VietGAP standards and relevant regulations until December 31 next year and raising the maximum ice ratio and moisture ratio to 20% and 86% respectively in the draft amendments to Decree 36. The ministry has asked the Government to allow enterprises to register their tra fish export contracts every month at an agency under the ministry, instead of VN Pangasius. The ministry said it will need more time to complete the draft amendments before submitting them to the Government. Foreign-invested feed makers offer high discounts for agents An inter-disciplinary inspection team found that a number of foreign-invested animal and fish feed companies had offered discounts and commissions of up to 30% to agents. The team consisting of officials of the ministries of agriculture-rural development, public security, planning-investment, industry-trade and finance inspected major animal and fish feed producers with foreign direct investment (FDI) as requested by Deputy Prime Minister Vu Van Ninh. Ninh ordered the inspection after animal feed makers were alleged to commit transfer pricing and market manipulation. Nguyen Huy Dien, deputy director general of the General Directorate of Fisheries under the agriculture ministry, told a press conference in Hanoi on Tuesday that seven FDI animal and aquaculture feed firms with dominant market shares had been inspected. Dien said the team found no sign of transfer pricing at the seven firms but they had offered discounts and commissions of 20-30% to sales agents. “Some agents sell only several dozen tons of feed per year but they can get huge commissions and even a Camry car worth billions of Vietnam dong,” Dien said and suggested the finance ministry look into this matter. Regarding transfer pricing, Dien said earlier the ministries launched multiple inspections into FDI enterprises in the sector but none of them were found to manipulate prices or commit transfer pricing. Over the last 15 years, many large foreign companies have invested in the animal and aquaculture feed industry and dominated the domestic animal feed market. They are CP from Thailand; Grobest, Uni President and Asian Nutrition from Taiwan; Thang Long, Tongwei and Hoa Chen from China; CJ Master from South Korea; Tomboy and Proconco from France; and Cargill from the U.S. In terms of shrimp feed, Grobest, Uni President and CP can turn out combined annual output of over 600,000 tons, or 80% of the market. The owner of a local aquaculture feed factory said FDI firms have many advantages including business and production experience and close relationships with input material suppliers. More importantly, they are financially strong and can access loans with lower interest rates from foreign banks. Vietnam enterprises have not invested enough in their distribution networks and human resources and their finances are limited, so they cannot expand market share and are vulnerable to foreign exchange rate risk and fluctuations of material prices. OceanBank collects VND5 tril. bad debt OceanBank has seen its bad debt declining as the lender has collected over VND5 trillion in overdue loans, according to the Vietnam Bank for Industry and Trade (VietinBank). VietinBank said in a statement released on January 6 that it has supported OceanBank and Global Petroleum Bank (GPBank) to return to stable operations. On May 8, the State Bank of Vietnam announced to take over OceanBank and GPBank, effectively making them State-owned commercial banks, and assigned VietinBank to manage the two ailing banks as part of a restructuring plan for the banking sector. According to the central bank, OceanBank committed serious law infringements before the acquisition. Its shareholders did not approve a plan to raise chartered capital to the minimum level required by the central bank. After OceanBank became a wholly State-owned bank, executives from VietinBank were assigned to take up some key positions on the board of directors at OceanBank. Do Thanh Son, director of VietinBank’s branch No. 11 in HCMC, was picked as chairman of OceanBank for a five-year term while Ngo Anh Tuan, deputy head of the credit and investment department at VietinBank assumed the post of general director. In the statement, VietinBank said it will work with Petrolimex Group Commercial Bank (PGBank) to complete the first preparatory step for their merger deal, which is expected to generate more added value for VietinBank and its shareholders. In late May, PGBank and VietinBank clinched a deal for the merger and a comprehensive cooperation agreement. Total assets of VietinBank were VND779 trillion (US$35 billion) last year, up 17.8% from a year earlier and 4% higher than targeted. Its outstanding loans totaled VND647 trillion, rising by 24.2% year-on-year and 9.9% higher than targeted. The bank’s retail loans grew by 51% last year and made up 22.4% of total outstanding loans last year, up from 18.1% in 2014. The bank reported VND7.36 trillion in pre-tax profit, surpassing the target by 0.8%. Bad debt accounted for 0.85% of the bank’s outstanding loans. Railway sector feels impact of competition from airlines The railway sector is grappling with rising competition from airlines and will lose passengers to the latter if it does not improve product and service quality, according to the general director of Vietnam Railway Corporation (VRC). Vu Ta Tung told a recent conference in Hanoi that low-cost airlines like Jetstar Pacific and Vietjet have placed much pressure on the railway sector. The parent firm of VRC, a 100% State-owned enterprise, has recognized the urgency to make change and has speeded up equitization of subsidiaries to help them improve competitiveness. Previously, the corporation planned to let two enterprises go public in the 2011-2015 period but it had equitized 26 subsidiaries as of last year to have more funds for development and production improvement plans. The corporation now has only Saigon Railway Transport Company and Hanoi Railway Transport Company in charge of passenger and cargo transportation. They plan to launch new products at competitive prices to compete with domestic airlines. Tung said VRC will adjust its business development strategy with an aim at increasing the speed of passenger trains to 80-90 kilometers per hour and freight trains to 50-60 kilometers per hour. Tung said in the coming year VRC will only focus on leasing infrastructure facilities and being in charge of the national railway system. Private companies can invest in trains. Executives of Sun Group, Vingroup and the railway sector have gone abroad to study technology and train models to draw up investment plans for new trains in the country. EVN seeks to hike power tariffs Vietnam Electricity Group (EVN) has proposed adjusting up power tariffs by VND21.2-21.4 per kWh this year. EVN said production costs of electricity went up last year due to the depreciation by 5% of the Vietnam dong against the U.S. dollar, higher prices of coal and gas for power generation, and increases in water resource tax and forest environment fee. These factors affected its revenue and profit in the year. The State-owned group reported that its 2015 revenue increased by 18.5% year-on-year to over VND223.7 trillion (around US$9.96 billion) thanks to the average power price spike of 13% to VND1,629.8 per kWh. This price was higher than the average price of just over VND1,622 approved by the Government in March 2015. Dinh Quang Tri, deputy general director of EVN, told a conference in Hanoi on January 6 that the parent firm of EVN and its nine corporations posted higher-than-targeted profit last year. The chartered capital of the parent firm had increased to VND160 trillion, up 2.08 times compared to 2010. Tri said the electricity loss ratio went down by 0.43% last year over the previous year. However, Deputy Prime Minister Hoang Trung Hai told EVN to further reduce the electricity loss ratio, adopt more measures for energy saving and improve service quality. Despite the good business performance in 2015, EVN still wants to hike the average power price to VND1,651.2 a kWh this year, rising by 1.3% compared to the current price and nearly VND30 over the average price approved by the Government in March last year. Regarding 2016, EVN plans to generate and buy a total of 175.9 billion kWh, up 10.35% from last year. The volume includes 81.9 billion kWh generated by the group. In addition, the group intends to import 1.2 billion kWh from China and 1.54 billion kWh from Laos as a backup source to meet increasing domestic demand. Deputy PM Hai was quoted by VietnamPlus as saying at the conference that EVN ensured stable power supply and contributed to the country’s economic growth last year. He noted although EVN is now responsible for 40% of the nation’s electricity output and more private firms have got involved in power projects, the State-owned group is still playing a vital role in the sector. He urged EVN to take the lead in developing new energy and renewable energy sources including wind and solar energy, and improve corporate governance to increase its investment projects. The group was told to prepare human resources and viable schemes to receive technology and operate nuclear power plants planned to go up in the central region in the coming years. HSBC projects further dong devaluation HSBC Bank has predicted the State Bank of Vietnam (SBV) will pare back intervention and allow the domestic currency to depreciate further in the coming months as the central bank’s foreign exchange reserves are getting increasingly thin. In its macroeconomic report released on January 6, HSBC said the widening trade deficit is piling pressure on the Vietnam dong and foreign exchange reserves. The Vietnam dong-U.S. dollar exchange rate has been at the upper side of the central bank’s band since early 2015. The pressure on the domestic currency has intensified due to the heightened yuan weakness. In the last quarter of 2015, the SBV kept its promise to refrain from devaluing the dong further out of a desire to maintain a stable currency. However, since the central bank’s foreign exchange reserves are increasingly thin as import cover had fallen to 2.1 months as of the third quarter of 2015, the agency is likely to pare back intervention and allow the currency to weaken further in the months ahead. Early this week, the central bank launched a new fixing mechanism that allows for a more market-based setting of the reference rate for the currencies. Besides, with growth having firmly shifted gears to the 6-7% range, HSBC predicted inflation to rebound emphatically in the second half of this year, though the uncertainty around this outlook is quite high, given the difficulty of forecasting the path of oil prices. “What we do know, however, is that some administered prices, such as school fees, will be increased this year. Together with base effects from stabilizing oil prices and a likely pick-up in food inflation, we forecast headline inflation to pick up to 3% year-on-year by the end of the first half and hit 5.1% year-on-year by the end of the second half, breaching the central bank’s target,” the bank said in the report. The central bank has sounded more relaxed about the price outlook. In a recent interview with local media, SBV governor Nguyen Van Binh explained that the central bank intended to keep policy rates stable at current levels if inflation is contained in the 3-5% range. He also said the central bank would target annual credit growth of 18% year-on-year though this could be raised as high as 20%, HSBC commented. Even if credit growth is managed at the lower end of the target and core inflation stays contained due to further commodity price disinflation, it would be prudent to commence gradual tightening in the second half of the year to mitigate the risks of another overheating of the economy. In the past, a tilt towards an overly pro-growth policy has resulted in credit booms and overheating, which ultimately led to currency instability and required sharp policy tightening to reverse. As such, HSBC expected the central bank to switch to a tightening mode this year. However, the aforementioned comments by the central bank governor, as well as the recent shift in the government’s policy stance towards a more pro-growth orientation, raise the risks that tightening will be delayed. “Given that, we are less than half way through financial sector reforms and bank balance sheets remain fragile, we would be worried if credit growth begins to consistently top 20%,” it added. In the report, HSBC maintained its 2016 gross domestic product (GDP) forecast of 6.7% year-on-year for Vietnam, which is in line with the government’s growth target. The bank raised the 2017 forecast by 0.1 percentage point to 6.8% year-on-year. Farm exports to China surge Vietnamese farm exports to China via Tan Thanh and Po Chai border gates soared last year and were 4-6 times higher than agricultural product imports from the northern neighbor via the border gates. The revenue of fruit export alone via Tan Thanh in Lang Son Province, Vietnam’s largest border gate with China, neared US$490 million in 2015, according the Lang Son Department of Customs. Particularly, export of dragon fruit reached US$354.5 million, followed by dried litchi with US$104.9 million, watermelon US$19.5 million and fresh litchi US$10.8 million. Total revenue from export of these fruits to China totaled US$167.6 million in 2014. According to the department, some 95% of agricultural products of the two countries are traded via the Tan Thanh and Po Chai border gates. The department said around 1,000 container trucks transport farm produce to Lang Son Province for export to China a day in peak seasons, piling pressure on infrastructure at the Tan Thanh border gate. Many trucks are parked along National Highway 1 and nearby roads to wait for crossing the border. Last year saw imports and exports via the Tan Thanh border gate increasing to more than US$1 billion from US$846 million in 2014. Almost all Ben Tre coconuts sold to China Ben Tre Province exported more than 16.2 million coconuts last year with 36,000 of them to South Korea and the remainder to China, statistics of the Ben Tre Coconut Association showed. The biggest coconut producing province in the Mekong Delta was able to earn only around US$4.5 million from exporting coconuts in 2015, including US$20,280 from Korea. The association said a coconut was sold to China at 27 U.S. cents, equivalent to VND6,000, while the price paid by Korean importers was 56 U.S. cents. Ben Tre also shipped value-added coconut products, including dried sliced coconut flesh, powdered and canned coconut milk, and coconut oil and jelly to the United States, the European Union (EU), Singapore and other markets. Last year, the province obtained more than US$138 million from export of the fruit.   Coconut prices in the Mekong Delta provinces range from VND30,000 to VND80,000 a dozen. More investments back property market recovery The year 2015 saw a sustained recovery of the property market, supported by more investments by local and foreign enterprises and a strong rise in successful transactions. According to the Business Registration Agency under the Ministry of Planning and Investment, the property market has steadily recovered, thus attracting more investors. The agency said startups last year rose by 26.6% to nearly 95,000 but the number of newly established enterprises in the property sector surged 86.2%. Fewer realty firms were dissolved or suspended than in 2014.   Property investments made up nearly US$2.4 billion out of US$22.76 billion in total foreign direct investment registered for projects in Vietnam for all of 2015. Foreign firms invested in the local property sector by buying stakes at real estate enterprises, contributing capital directly and lending to projects in the sector. HCMC attracted around US$1.3 billion, more than half of FDI capital poured into Vietnam’s property market. The 2015 report of the HCMC Real Estate Association (HoREA) said the HCMC market continued recovering in segments like housing, office for lease, industrial property and commercial property last year. According to HoREA, last year saw over 26,000 housing transactions done, 1.5 times higher than in the previous year. Housing prices picked up 5-6%, with low-end apartments posting the smallest price rise of only 2%, medium-end ones up 5%, upper-medium ones up 5-8% and high-end ones up 5-15%.   HoREA said there were a number of growth drivers for the property market. Many commercial banks joined hands with property developers to provide capital for enterprises and lend to home buyers. In HCMC, last year’s property credit reached some VND140 trillion, accounting for 12.3% of total outstanding loans. In addition, 21.6% of US$5.5 billion remittances in the city went to the property sector. Chairman of HoREA Le Hoang Chau said the property market started to recover in late 2013. HoREA’s review report pointed out the number of secondary investors in HCMC’s property market inched up three times against 2014. This reflected the improving market but also risk of instability. Secondary investors mostly buy and sell high-end homes to earn profit thanks to price differentials and currently make up 15% of home buyers in the city. According to HoREA, secondary investors often take out high-interest loans accounting for up to 70-80% of a home’s value. In the land lot segment, secondary investors account for 30-40% of buyers. Bold policy needed to raise labor productivity Minister of Science and Technology Nguyen Quan has underscored the need to adopt a breakthrough policy to help boost Vietnam’s labor productivity and improve the quality of goods. If there is not such a bold policy, Vietnam’s labor productivity and goods quality would continue to stay far below the levels of other regional countries, Quan said at a press conference held in Hanoi on January 5 to introduce activities for the 20th national quality awards. Responding to information that Vietnam will not be able to catch up with Thailand in terms of labor productivity until 2059, Quan said it is true as production capacity, technology and skills of Vietnamese laborers are lower than Thais’. Vietnam’s labor productivity is actually far below other regional countries and its products are of poorer quality.   Quan said these matters must be considered carefully as the ASEAN Economic Community, in which Vietnam is a member, has come into existence. Negotiations over the Vietnam-the European Union free trade agreement and the Trans-Pacific Partnership (TPP) trade pact have been completed and the deals will become effective in the coming time. Businesses could go bust if their products and prices are not competitive, Quan said. Deputy Minister of Planning and Investment Dang Huy Dong told the press conference that the State cannot support enterprises to compete with rivals as they have to find ways to improve product quality and reduce prices. The national quality awards has been organized over the past 19 years. This year, the Ministry of Science and Technology will honor 20 outstanding businesses for their contribution to improving labor productivity and goods quality in Vietnam. A forum on labor productivity and product quality has been established so that domestic and foreign businesses and organizations can exchange ideas and expertise. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR