BUSINESS IN BRIEF 24/2 ODA attraction, use directions issued for 2016–2020 Directions for the attraction, management and use of foreign sponsors’ official development assistance (ODA) and preferential loans from 2016 to 2020 have been issued. A similar ODA blueprint for 2011 to 2015 helped achieve targets set in the period’s socio-economic development plan. The 2016-2020 plan takes into consideration Vietnam’s status as a middle-income country, which it acquired more than a year ago. The new status is expected to shift relationships with foreign sponsors of ODA and preferential loans from assistance-based to partnership-based. The ODA blueprint for 2016-2020, approved by the Prime Minister, outlines policies to ensure the effective mobilisation and use of ODA and concessional loans, helping complete socio-economic development objectives. While the Party and State recognise the importance of foreign aid and loans, they say internal resources are the best way to attain development goals. ODA and preferential loans from 2011-2015 programmes that haven’t been disbursed total about 22 billion USD. The new blueprint focuses on finishing these as scheduled. According to preliminary reports from ministries, sectors and localities, demand for ODA and preferential loans for 2016-2020 is very high, about 39.5 billion USD. Most of the sum will be earmarked for transport, urban development, agriculture, rural development, environment, education, training, health care, science and technology. The disbursed ODA and preferential loans between now and 2020 is expected to be 25-30 billion USD, up 14 percent over the past five years. The disbursement of foreign aid and loans by 2020 is considered highly feasible, since a majority of the programmes and projects have already been launched and Vietnam has ensured conditions for the provision of its corresponding funds. Work starts on Vigrlacera’s industrial park in Thai Binh The State-owned glass and construction ceramic corporation Viglacera on February 19 began construction on the first phase of its Tien Hai-Viglacera Industrial Park in the northern province of Thai Binh. Covering 446 ha, the project has a total investment of more than 174 billion VND (7.78 million USD). Its first phase will be built on about 32 ha. Once completed in September this year, the park is expected to generate jobs for nearly 30,000 labourers. Speaking at the groundbreaking ceremony, Deputy Minister of Construction Pham Hong Ha praised new investment plans made by Viglacera to develop urban and industrial zones. He asked local authorities to facilitate the implementation of the project. The same day, Vigracera inaugurated the expansion of its Granite tile factory in Thai Binh province, which uses natural fuel instead of coal gasification technology . The factory has a combined capacity of 2 million square metres of products a year, creating 150 jobs. Its tile products will be sold on the domestic market and exported to Europe, Indonesia and others. Viglacera is also implementing the second phase of the expansion of its clinker tiles plant in the northern coastal province of Quang Ninh, helping increase the combined capacity of the facility to 4 million square metres of products a year and creating nearly 100 more jobs. The expansion aims to create a more professional production process and improve employees’ skills, thus creating high-quality products that can meet consumers’ demands. VN must find funding for farmers Viet Nam needs to create policies to promote investment in agriculture to build a farming sector to compete internationally, as the country integrates into the global economy. Investments in agriculture remain modest, although the sector involved nearly 70 per cent of the country's population, while contributing some 18-22 per cent of gross domestic product and 23-35 per cent of the value of all exports. Yet, investments in agriculture were estimated to account for only 6 per cent of the economy's total investments. Experts at a meeting held by the Ministry of Agriculture and Rural Development on Friday pointed out that firms were hesitant to invest in the agricultural and rural sector due to bottlenecks in policies and mechanisms, including land-related issues and credit policies. According to Nguyen Do Anh Tuan, deputy director of the Institute of Policy and Strategy for Agriculture and Rural Development, complicated administrative procedures controlling agro-fishery and forestry companies were discouraging investments. A survey by the think tank in 2014 found that nearly 80 per cent of surveyed companies operating in the agricultural, fishery and forestry sectors wanted greater efforts in administrative reforms to create favourable conditions for businesses. Tuan said that slow tax reforms must be hastened, together with incentives to be created to encourage firms to invest. Tran Dinh Thien, director of the Viet Nam Economics Institute, stressed that it is time to change the view about the role of businesses in agriculture. Businesses should be viewed as the "leader" to drive the farming sector ahead, amid rapid international integration. Nguyen Manh Hung, chairman of Nafood Group, said that open policies were important to encouraging firms to invest in agriculture to develop a modern sector with high quality output and greater productivity. Further, the farming sector should raise planning and strategy in line with the development of firms, Hung said. Additionally, Minister of Agriculture and Rural Development Cao Duc Phat, at the meeting, said the ministry would create measures to tackle problems faced by firms. Phat noted that it was important for the agriculture sector to renew its production methods, in which firms played a role in the restructuring process. Supporting firms would mean supporting farmers, Phat said, adding that, without the participation of firms, it would be difficult for farmers. "The ministry will create favourable conditions for businesses to invest and operate efficiently in the agriculture sector. This is a key in promoting the development of the farming sector," Phat said. Investors urged to choose Nghe An Domestic and foreign investors were urged to invest more in the central province of Nghe An for its geographic advantages, improved infrastructure and open investment policies during an investors' meeting held yesterday in the province. In his speech at the annual event, National Assembly Chairman Nguyen Sinh Hung spoke highly of Nghe An's investment attraction results in recent years. He said the province has met investors' expectations in term of policies, infrastructure facilities and services and many of them have been operating effectively in the locality. Meanwhile, Deputy Prime Minister Nguyen Xuan Phuc suggested the province take full advantage of its potential while perfecting its investment climate to attract more investors. Local authorities said the investment attraction would be a driving force for the province's socio-economic development. They committed to bettering the province's investment environment, with a focus on speeding up the administrative reforms, improving infrastructure and services, and solving investor difficulties. During the meeting, the Nghe An People's Committee granted investment licences to 10 projects worth a combined VND3.56 trillion (US$158.5 million). The event also saw five other Memorandums of Understanding worth more than VND61.53 trillion (over $2.73 billion) signed between the committee and investors. The central province attracted investment of VND150 trillion (more than $6.6 billion) from 2010 to 2015, according to Provincial Department of Planning and Investment Director Nguyen Van Do. From 2010 to 2015, levels of investment capital registered in the province more than doubled figures seen in the previous two years, Do said. He attributed this encouraging performance to greater efforts by local authorities and other sectors to accelerate administrative reforms. They reduced the time and expenses required to complete investment procedures, which has helped investors. The province will focus on attracting projects that can use advanced technology and create more local jobs. It will seek investors with sufficient financial capacities and a commitment to corporate social responsibility, he added. The central province has set a target of attracting some VND100 trillion (more than $4.44 billion) in investment from now until 2020, including VND50 trillion in foreign direct investment. Technology production needs boost Viet Nam must act quickly to improving production technologies in all industries to ensure the competitiveness of its goods and services in the international market, a seminar heard in HCM City on Friday. Speaking at the seminar on Viet Nam's opportunities and challenges when the Trans-Pacific Partnership agreement (TPP) comes into force held by the International Business and Law Academy, Prof Dr Don Nang, former head of the Ministry of Science and Technology's Department of Legal Affairs, said several studies have found that the TPP would create huge economic opportunities for Viet Nam, especially in trade and investment. But it would also face massive challenges since it is the least developed among TPP members, he said, adding that the "productivity, quality and competitiveness of Vietnamese goods and services are far behind that of other TPP member countries." Technological skills and competence of Vietnamese firms are also inferior to their counterparts in other countries, he said. "According to the ministry's statistics, the country has nearly 600,000 enterprises, with more than 90 per cent of them being small and medium-sized and most of them used outdated technologies." Little research is done in the country to innovate technologies and make modern machinery and equipment, he said. Imports of these products have increased significantly but, according to a survey by UNDP, account for less than 10 per cent of the country's total imports compared to 30-40 per cent for other countries, he said. Besides, most of the imports are from China, he said, noting that "Chinese machinery and equipment are rather old and obsolete and cause low productivity and pollution during industrial production." He called on relevant agencies to act quickly to help businesses and sectors upgrade technologies to yield quality products and services and enable Vietnamese firms to take part in the global value chain. "Importation of outdated technologies must stop, and speeding up training and developing skilled human resources and technological workers is an imperative," he said. Truong Dinh Tuyen, a former trade minister, said the TPP would bring opportunities, but opportunities cannot by themselves turn into benefits or market strength. It would depend much on how Viet Nam takes advantage of the pact and copes with related problems, and only with appropriate efforts would the country be able to achieve its potential and overcome challenges, he said. State agencies and businesses must thoroughly understand the country's commitments to other TPP member countries to avoid lawsuits, he warned. Le Dong Trieu, general director of the Gia Dinh Textile and Garment Corporation, said the country earned US$27.5 billion from garment and textile exports last year, a year-on-year increase of 9.4 per cent. Exports to TPP member countries were worth more than $14.7 billion, he said. Once the TPP comes into force, import tariffs would fall to zero, opening up more opportunities for Vietnamese firms to export to these countries, he said. But there would be challenges in the form of stipulations related to origin, quality, chemical use and others under the TPP, he said. To enjoy the benefits, Viet Nam must quickly develop the garment and textile supporting industry, encouraging investors to invest in sectors that have remained weak, and develop a complete supply chain for the domestic garment and textile industry, he said. Companies should invest more in upgrading production technologies, designs and quality to achieve a firm foothold in the global market, he said. FTAs to encourage innovation Existing and future free trade agreements are expected to promote innovations in the business community to enable firms to compete not only at home, but also on international markets. According to Tran Du Lich, member of the National Assembly's Economic Committee, success in the market will be determined by restructuring and creativity, rather than scale. Lich said that businesses need to operate in a climate in which innovations were encouraged and the State played a role in ensuring the market remains operating on the right track. Viet Nam, having great opportunities to increase its economic growth in the coming decades, will help Southeast Asia expand the industrialisation process and avoid risks of lower middle income traps, Lich said. Competition is anticipated to become more fierce, not only at home but on international markets, and firms improving their competitiveness was called critical to being able to take advantage of opportunities. However, Lich pointed out that the competitiveness of Vietnamese businesses remained low, especially in high-tech industries, capital-intensive sectors and high-end services. There are some 550,000 existing firms in Viet Nam, but only one-fourth of them were capable of exporting, he said, adding that there was also a lack of stability in the quality of their products. Other problems included high input costs, infrastructure inadequacies, and loose links in the production chain. It is now time for Vietnamese businesses to restructure and to mature, according to Lich. He noted that bad debt, public debt and institutional reforms, in addition to strengthening local markets, must be thoroughly tackled. Viet Nam is integrating more rapidly than any other ASEAN country, except Singapore, according to Vo Tri Thanh, deputy director of the Centre Institute of Economic Management. He also believes that the Vietnamese economy will enter a new thriving period, marked by participation in the Trans-Pacific Partnership. He urged Vietnamese to study new-generation FTAs carefully to understand rules of origin and meet technical norms to allow for participation in these markets. Thanh further predicted that there would be a boom in the consumption and service industries to benefit end-users. Thanh also said, at a conference held by the Viet Nam Association of Consumer Goods on Friday, that creation of a 400-page economic strategy report, entitled 2035, would be officially announced this week. Thai Nguyen seeks $27 billion in exports by 2020 Thai Nguyen Province has set a target of US$27 billion in exports by 2020 to become the leading exporter in the northern mountainous region. Under the province's economic development plan, from now until 2020, exports are expected to grow by 9 per cent per year, with export turnover per capita averaging $20,000 per year by 2020. In order to reach the goal, the province has developed a strategy to produce key items for export, including, amongst others, electronic and hi-tech products at Samsung facilities based in the Yen Binh Industrial Zone, along with varieties of dried tea. As the nation's second largest tea grower, Thai Nguyen aims to ship 10,000 tonnes of tea abroad in the next four years, based upon it maintaining growth of 13 percent annually. Thai Nguyen will also encourage local garment producers to invest in machinery and technological innovations to improve not only their production capacities, but also sharpen competition for their products in an attempt to penetrate US and EU markets. By 2020, the province seeks to generate $360 million from apparel exports, accounting for more than 70 per cent of its total export turnover. Meanwhile, the locality is also expanding its marketing of mechanical products to Europe and Latin America, hoping to increase its exports by 14 per cent per year. Nguyen Ngo Quyet, Director of the provincial Department of Industry and Trade, said the local export revenue per capita neared $14,000 in 2015, a five-fold increase from the country's average. The General Department of Customs' statistics reported that Thai Nguyen was among six localities that recorded exports of at least $10 billion in 2015. The province's export turnover saw a strong increase of more than $8 billion, from approximately $7.93 billion in 2014 to greater than $15.97 billion last year. With this increase, the province became the nation's fourth largest exporter, just behind HCM City, Bac Ninh and Binh Duong. The province's major export markets include the US, the EU, Taiwan, Japan and Russia, Quyet said, adding that the province will continue shipping goods to new markets, such as Latin America, Africa, the Middle East and Western Asia, as a move to increase the value of its exports. Developers flock to untapped provinces Many property developers are moving into provinces rather than try their luck in the fiercely competitive metro markets like Hanoi and Ho Chi Minh City. Tecco, which built the Greenest and Tecco Tower in HCM City, is one of them. "Tecco has moved to the central province of Thanh Hoa, an emerging market with many incentives to boost the real estate market," Nguyen The Manh, chairman of Tecco, told Thoi Bao Kinh Te Sai Gon (Sai Gon Times) newspaper. Earlier, HUD Corporation, which developed many projects in Hanoi like Greenlife Tower and Newskyline, has also moved into Thanh Hoa. But it is FLC, another major Hanoi developer, which is the biggest investor in the province with its VND5.5 trillion (over US$244 million) FLC Sam Son project. Vingroup, the country's biggest developer, has also invested in the province. For many developers, Thanh Hoa's attraction is partly due to its Party Committee Secretary Trinh Van Chien's determination to develop the local property market. Nghi Son Economic Zone with its under-construction Nghi Son Oil Refinery is another magnet for developers. The southern province of Dong Nai is also attracting real estate investors again, with many buying lands in attractive locations. Soon after the HCM City – Long Thanh – Dau Giay highway opened to traffic, Dat Xanh Corporation, which has developed a slew of projects in HCM City, unveiled its Gold Hill project on an area of 27 ha at a price of VND300 million (US$13,300) for each land plot. It also has other projects in Dong Nai like Viva City and Sakura Valley. Besides, it is preparing to launch projects on Phu Quoc Island in Kien Giang southern province and Quang Nam central province. In the Mekong Delta province of Long An, major developers like Phuc Khang, Nam Long, Tan Tao and Dong Tam corporations have begun to pour money and competition is likely to become fierce soon. "Provincial real estate markets have their own potential if investors know what the strong points of the market are," Nguyen Tran Nam, chairman of the Vietnam Real Estate Market Association, said referring to the trend. "This is also time for strong investors with financial and management capabilities to enter the market," he added. Vingroup pips rivals with paradise villas Blessed with a long coastline and numerous islands, Vietnam’s beach tourism investment has been growing remarkably over recent years. Many investment projects in infrastructure, transportation, and properties have been carried out in order to meet the rising demand of both domestic and international tourists and investors. According to market analysts, Vietnam’s beach properties have many advantages over other countries within the region and indeed globally, in terms of lower pricing, and a higher turnover rate, as well as the unspoilt surrounding landscape. Some years ago, when the real estate market in major cities such as Hanoi and Ho Chi Minh City showed signs of cooling down, a number of financially strong local property developers picked up the upcoming trend of beach resorts and villas, and took the initiative to invest in the country’s most beautiful beaches in Danang, Nha Trang, and Phu Quoc Island. Vingroup is one of Vietnam’s leading property developers, with a stellar track record in this market segment. Its major projects include the Vinpearl Resort & Villas, which offers investors not only luxurious beach villas, but also more affordable varieties, with prices ranging from VND15-VND20 billion (US$850,000-US$1 million). In early December 2015, Vingroup put the Vinpearl Paradise Villas – the fourth phase of the Vinpearl Phu Quoc Resort & Villas complex – up for sale. All of the 332 modern villas, once completed, will have sea views and be equipped with various facilities nearby, such as Vinpearl Land, Vinpearl Golf Club, Vinpearl Safari, and Vinmec International Hospital. These villas, ranging from two to four bedrooms and 220 to 330 square metres, will be a solid investment and will generate stable profits for many years to come. More information can be seen at http://vinpearlvillas.com. As one of the most reputable property developers in Vietnam, Vingroup has promised its customers 85% of the rental profit, which is equivalent to at least 10% of the villa price (excluding VAT) per year over 10 consecutive years. Tran Dang Ninh from Hoang Anh Commercial Production Co. Ltd noted that at first he was doubtful of this rental income commitment, but ultimately he decided to buy four villas from Vingroup. “I learnt that the group actually owns many stakes at various international tourist companies, which in turn will secure a steady number of visitors to their villas on the island,” said Ninh. The group commits to high-standard management and maintenance services to make sure the quality of the beach properties is sustained. Given its creditability and strengths in the local real estate market, Vingroup has also partnered with Techcombank to provide its customers with home mortgages equal to 65% of the property’s value. This financial support will help ensure a stable income and good property value for investors over the long term. Foreign shipping lines accused of ripping off Vietnamese exporters The Vietnam Textile and Apparel Association (Vinatex) and non-member Hanoi Industrial Textile JSC have filed a complaint claiming that shipping lines from China, the Republic of Korea and Taiwan were ripping them off with an unfair surcharge. Fully known as container imbalance charge, the CIC is meant to offset shipping lines' costs of transferring empty containers from one place to another. It is only applicable during certain seasons when there is a large gap between import and export activities. But foreign shipping companies have asked Vietnamese traders to pay the surcharge all year round, a representative of the textile association said at a meeting on Friday. The Vietnam Maritime Administration convened the meeting after receiving the complaint. Dang Cong Hoang, representative of Hanoi Industrial Textile, said many shipping lines charged businesses up to US$160 per 20-feet container, much higher than the average of $30 found by inspectors in 2014. CIC payments make up a considerable portion of transport costs, which in turn account for up to 60 percent of all business costs in Vietnam, according to the textile association. A representative of China's SITC Line Vietnam argued that shipping lines collect the surcharge in accordance with contracts signed by Vietnamese businesses and their partners. So, in order to avoid paying the charge, Vietnamese companies need to negotiate the term with their partners, he said. Bui Viet Anh from Chinese shipping company COSCO agreed, saying that Vietnamese businesses should have paid more attention to the terms of their contracts. The meeting ended with Nguyen Dinh Viet, deputy chief of Vietnam Maritime Administration, promising to handle the case soon, with assistance from the Ministry of Transport. Foreign shipping lines have for years been accused of ripping off local businesses. An inspection by the Ministry of Finance in 2014 found 20 foreign companies that dominated the logistics market collecting nearly 70 kinds of surcharges, many of which were either debatable or unreasonably high. The findings later prompted the Ministry of Transport to draft a decree that required shipping companies to publish their freight rates, including surcharges and commissions paid to brokers. Some 40 foreign shipping lines are operating in Vietnam, handling around 88 percent of all cargo, according to official figures. They account for nearly all shipments from and to Europe and the US. HCM City cow raisers suffer as milk products cannot sell Lots of cow farmers in Ho Chi Minh City are struggling after their only partner has put a halt to buying their dairy products, with their predicament worsened by imported milk selling at cheaper prices. Those in Cu Chi District, 80 percent of whose products are sold to a sole trading partner, Vinamilk, which is the biggest dairy firm in Vietnam, are now suffering many hardships since the state-owned company has decided to stop sourcing their milk.   Nearly 40,000 cows are raised in the district, and about ten thousand have been sold due to milk products having no buyers. Such issues prompted Dinh La Thang, Secretary of the Ho Chi Minh City Party Committee, to press for solutions on February 18. In a meeting with Cu Chi officials, Thang urged the district’s chairman to discuss with Vinamilk the reasons for such a decision and to take appropriate measures to support local farmers. After the event, attempts have been made to dig deep into the cause for the firm’s refusal to purchase milk from Cu Chi raisers, Nguyen Huu Hoai Phu, chairman of the Cu Chi People’s Committee, said on Friday. A report on the total amount of such milk must be submitted by competent agencies for consideration, Phu underlined. It appears that most of the products which could not be sold were from those who did not sign trading contracts with the firm, he added. But the cheap prices of imported milk are also to blame, according to a cattle raising expert. Prices of milk shipped from Australia, New Zealand, and European countries have dropped consecutively in recent times, which are now about VND8,000-10,000 (US$0.4-0.45) per kilo, equal to 60-80 percent of the current milk quote in Vietnam, the expert elaborated. It is expected that dairy companies will be invited by local authorities to find ways for supporting and guiding these farmers to grow qualified cows and help them sell their products. Upturn in rice exports early this year Rice exports made a breakthrough in February with an estimated volume of 495,000 tons worth US$218 million, up 56.7% in volume and 46% in value against last year’s same period. The Vietnam Food Association (VFA) attributed the strong growth to high demands from the Philippines and Indonesia- the major outlets of rice for reserves due to serious impacts of drought caused by El Nino. Some rice exporters said an increase of 40% in selling price facilitated rice exports as a result of remarkably reduced volumes in stock and greater purchasing power after the winter-spring crops. Vietnam property prices set to increase Property prices are expected to increase by five to 10 percent in the year of 2016, especially hot projects that have good infrastructure and ensure construction progress. The Vietnam Real Estate Association (VNREA) forecast the estate market would continue to develop, with the middle-income housing segment to be the majority segment. The villa segment is expected to see positive changes in the market as most Vietnamese homebuyers prefer independent houses rather than apartments. The prices of offices for lease will also be four to nine percent higher than that of 2015. However, VNREA said the property market this year would face the challenge of bad debts as most investors have to borrow loans with interest rates of more than 10 percent a year, while the market has not been provided support from the VND30-trillion (US$1.34 billion) stimulus package. The number of transactions in the market in 2015 were double that of 2014. The estate inventory value fell to VND50 trillion (US$2.22 billion), while property credit rose by 20% to touch more than VND373 trillion (US$16.58 billion). Investors urged to choose Nghe An Domestic and foreign investors were urged to invest more in the central province of Nghe An for its geographic advantages, improved infrastructure and open investment policies during an investors' meeting held on February 21 in the province. In his speech at the annual event, National Assembly Chairman Nguyen Sinh Hung spoke highly of Nghe An's investment attraction results in recent years. He said the province has met investors' expectations in term of policies, infrastructure facilities and services and many of them have been operating effectively in the locality. Meanwhile, Deputy Prime Minister Nguyen Xuan Phuc suggested the province take full advantage of its potential while perfecting its investment climate to attract more investors. Local authorities said the investment attraction would be a driving force for the province's socio-economic development. They committed to bettering the province's investment environment, with a focus on speeding up the administrative reforms, improving infrastructure and services, and solving investor difficulties. During the meeting, the Nghe An People's Committee granted investment licences to 10 projects worth a combined 3.56 trillion VND (158.5 million USD). The event also saw five other Memorandums of Understanding worth more than 61.53 trillion VND (over 2.73 billion USD) signed between the committee and investors. The central province attracted investment of 150 trillion VND (more than 6.6 billion USD) from 2010 to 2015, according to Provincial Department of Planning and Investment Director Nguyen Van Do. From 2010 to 2015, levels of investment capital registered in the province more than doubled figures seen in the previous two years, Do said. He attributed this encouraging performance to greater efforts by local authorities and other sectors to accelerate administrative reforms. They reduced the time and expenses required to complete investment procedures, which has helped investors. The province will focus on attracting projects that can use advanced technology and create more local jobs. It will seek investors with sufficient financial capacities and a commitment to corporate social responsibility, he added. The central province has set a target of attracting some 100 trillion VND (more than 4.44 billion USD) in investment from now until 2020, including 50 trillion VND in foreign direct investment. Insurer Bao Viet targets $1 billion in revenue in 2016 Vietnam’s first and biggest insurer Bao Viet Holdings targets to become the first insurer in Vietnam to ever earn annual revenue of $1 billion in 2016. In 2015 Bao Viet Holdings’s consolidated revenue was VND20.8 trillion ($93 million), up 9.2 per cent on year. Net profit was VND1.17 trillion ($524 million), down 2.5 per cent on year. Total consolidated assets at December 31 was VND58.6 trillion ($2.62 billion), up 23.2 per cent, shareholders’ equity was VND13.2 trillion ($59 million), up 2.9 per cent compared to that at December 31, 2014. The parent company, meanwhile, earned net profit of VND1 trillion ($47 million), down 9 per cent. According to its leadership, Bao Viet is ready to take advantage of the Trans-Pacific Partnership and the ASEAN Economic Community. The company is continuing to improve its operations in order to guarantee the benefits of customers, investors and the community. Established in 1965, Bao Viet Holdings currently focuses on three main pillars: insurance, investment and financial services. The company has a distribution network throughout 63 provinces in Viet Nam and more than 160 branches across the country and currently employs 6,000 office workers and 70,000 sales people. According to data by the Insurance Supervisory Agency under the Ministry of Finance, Bao Viet ranked second in terms of new premium in life insurance in 2015 with market share of 19.61 per cent, behind Prudential with share of 20.81 per cent. Last November, PwC Vietnam and Bao Viet Holdings inked a contract wherein the former will provide sustainability assurance services for the financial-insurance giant. This marks the first time that a Vietnamese firm has sought external, independent reviews of its annual sustainability report, in line with regional and international trends. Japanese company yet to reach agreement with workers over wage Around 3,000 workers of Nissey Vietnam took part in the fifth day of the strike protesting what they called an unliveable wage, according to newswire dantri.com.vn Similarly to the previous days, the workers gathered in front of and around the factory, holding strong despite an earlier letter from the management threatening to fire everyone failing to resume work by Friday February 19. Since then the company has not yet issued any new notices. The income of a worker at Nissey consists of a base wage of about VND4 million ($180) a month and allowances, such as housing and health hazard allowances, that total a little above VND1 million ($45) per person—minus health insurance, social insurance, and unemployment insurance. At the beginning of 2016 the government raised the minimum wage in each region. Nissey raised its base wage by VND200,000 ($9) then deducted the same amount from the allowance. Due to the changes in how the insurances are calculated since the beginning of 2016, workers ultimately saw a decrease in their incomes. The general dissatisfaction at having their real wages reduced prompted workers to start the strike on February 15, the first work day after the Tet holiday. The management of Nissey then agreed to an allowance of VND20,000 (90 US cent) for each year in employment to workers who have been working at the factory for more than one year. However, this type of allowance cannot exceed VND200,000 ($9) per month per worker. On February 18, the management announced that they would raise the total allowance by VND100,000 ($4.5) starting April 2016. Effectively, workers with five or more years at the company earn as much as before the cut, while newer workers continue to lose out. On the same day, the management issued a letter saying, “If any worker refuses to resume work by February 19, the company will understand it as a will to terminate his/her contract of employment.” Deputy president of the Vietnam Lawyers Association’s Ho Chi Minh City chapter Nguyen Van Hau said that Nissey violated the Labour Code and  Governmental Decree 122 on the regional minimum wage when they unilaterally cut the allowances they undertook to provide in the employment contracts signed before the cut. This violation would result in an administrative fine of VND40-150 million ($180-670). The chargé d’affaires of the industrial park have yet to offer a public answer. Nissey workers also reported that the company refused to improve the quality of the food in the cafeteria, despite numerous complaints. Other complaints arose over timed bathroom breaks and sexual harassment of female workers by security guards. The 100 per cent Japanese owned Nissey Vietnam operates in Tan Thuan Export Processing Zone in District 7 of Ho Chi Minh City. The company, which employs 3,000 workers, produces titanium eyewear, and parts for wrist watches, camcorders, fishing tools, as well as other precision mechanics products. In September 2010, dozens of Nissey workers were hospitalised due to food poisoning after eating lunch at the factory cafeteria. Section 5 of Decree 122/2015/ND-CP on the regional minimum wage in 2016, dated November 15 last year stipulates that when companies comply to the new minimum wage requirements, they are not allowed to decrease allowances for overtime, working at night, and in hazardous working environments, etc., while other allowances and bonuses are paid according to the contract between employers and employees. High Vietnam CDS may drive up bond yields In the second half of the year, sovereign credit default swap spreads for Vietnam and three emerging Southeast Asian nations bounced back after dropping significantly in 2014 and remaining low during the first quarters of 2015. The credit default swap (CDS) of these countries increased mainly due to the interest rate hike by the US Federal Reserve (Fed), China’s economic slowdown, and the tumble of global crude oil prices. Higher CDS spreads mean that investing in the country is rated as riskier. For the first two quarters of 2015, the CDS of emerging markets seemed to move sideways, fluctuating little. These countries’ CDS spreads started to rise in August and reached a peak at the end of September before falling steadily. Compared with 2014, Vietnam’s CDS spreads rose by 89.96 bps, closing the year at 285, after reaching a two-year high at 302.5 in September. Similarly, the CDS of three other emerging Southeast Asian (SEA) nations also increased quite strongly. Thailand’s CDS reached 134.7 by the end of the year, up 29.79 bps y-o-y, while the CDS of Indonesia and the Philippines grew by 69.91 bps and 16.66 bps respectively, to 229.9 and 107.6. In 2015, the CDS of emerging markets rose mainly due to China’s economic slowdown, which resulted in a Chinese stock market crash, the deterioration of China’s real estate sector, and unexpected CNY devaluations. A gloomy outlook from China and the weakening of CNY negatively affected export and import activities between emerging markets and China. The Asian Development Bank (ADB) and the World Bank reduced the 2015 growth forecast of SEA nations because of the Chinese economic slowdown. In August, immediately after the Chinese yuan devaluation, several other emerging market currencies were devalued to maintain their competitive advantages in international trade, which raised concerns from global investors about a currency war. The CDS of SEA emerging markets surged strongly in August. An interest rate hike in the US was a second factor driving foreign investors to sell off emerging market fixed income assets. The higher interest rate attracted investors to the US market, which is viewed as a safer and more investable destination than emerging markets. Global investors had diverted funds from emerging markets as there was a strong expectation that the Fed would raise interest rates sometime in 2015 – a net of around $500 billion was withdrawn from emerging markets in 2015, the first annual outflow in decades, the main reason for CDS spreads rising until the end of September. Even before the Fed meeting in September, the CDS spreads of emerging markets had soared. In the September meeting, after the Fed announced its decision to keep interest rates unchanged, CDS spreads started to fall back, but not as deeply because of investors’ concerns about the likelihood of a December interest rate hike. As expected, the Fed officially decided to raise interest rates in December, which once again drove the CDS of emerging markets upwards after moving sideways during October and November. Beyond the Fed’s interest rate decisions and the Chinese economic slowdown, a slump in global crude oil prices also negatively impacted CDS spreads of oil-exporting countries, including Vietnam, as it directly reduced the state budgets of these countries. By the end of the year, oil prices had fallen by 30.5 per cent, and by over 70 per cent since their five-year peak in 2011, to almost $30 per barrel. Vietnam’s revenue from crude oil in 2015 was VND61 trillion ($2.74 billion), completing only 65.6 per cent of the target, and down significantly by 43 per cent from the previous year. With a deep tumble in crude oil prices in December, and the Fed’s interest rate hike, Vietnam’s CDS rose quite sharply after remaining stable in October and November. In 2016, we expect Vietnam’s CDS to remain high, because the above-mentioned factors are expected to endure. A gloomy outlook for the Chinese economy in 2016, together with its real estate, credit, and investment bubbles, are increasing the risk of a global slowdown. Although the Fed did not increase the US’ borrowing cost in its first meeting in 2016, it still plans to raise rates this year. Global crude oil prices are also expected to remain low this year, with a recently published forecast from Goldman Sachs predicting crude oil prices may fall to $26 per barrel. During the first two months of 2016, Vietnam’s CDS has continued to rise, reaching a new peak of 312.27 on February 9. Again, this is mainly due to the negative outlook of China’s economy, global financial turmoil, and the slump in crude oil prices. Vietnam plans to issue $3 billion of international government bonds in 2016 to make debt payments that are coming due this year, and to support the state budget. Vietnam previously issued $1 billion of ten-year international bonds in 2014 at a cost of only 4.8 per cent per annum, at a time when the prevailing CDS was 191.5. At that time, Vietnam’s bonds attracted 450 investors worldwide with a total registered amount of $10.6 billion. However, the international bond issuance plan in 2016 might be hindered by a recent rise in CDS spreads compared with 2014, which makes Vietnam’s bonds less attractive to global investors. KIDO's pre-tax profit down sharply The consolidated financial report of the KIDO Corporation (KDC) for the fourth quarter of 2015 reveals total revenue of more than VND442 billion ($19.89 million), down 66 per cent against the fourth quarter of 2014. Gross profit was almost VND138 billion ($6.21 million) in the quarter, a sharp decline of 74 per cent quarter-on-quarter and down from 40 per cent of revenue to 31 per cent.   Profit before tax reached only VND68 billion ($3.06 million), down 45 per cent compared to the fourth quarter of 2014. However, consolidated net profit reached over VND111 billion ($4.9 million), up 19 per cent compared to the same period of 2014 due to corporate income tax refunds. According to a representative from KDC, it selling its confectionery business and investing in new segments lay behind pre-tax profits falling 45 per cent over the same period in 2014. For 2015 as a whole, however, KIDO recorded impressive profits as the first two quarters saw revenues from the sale of shares in its confectionary business to a foreign partner. Net profit was therefore over VND5.2 trillion ($234 million), up sharply compared with the VND547 billion ($24.6 million) recorded in 2014. Short-term financial investments by the group were also up significantly, from VND700 billion ($31.5 million) to over VND1.9 trillion ($85.5 million). At the same time, investments in associated companies and joint ventures recorded higher profits compared with 2014, at VND86.3 billion ($3.88 million). In July last year, KDC sold 80 per cent of shares in its subsidiary the Kinh Do Binh Duong JSC (BKD) to Mondelēz International. In 2014, despite the economic difficulties, KDC still recorded stable growth, with revenue of over VND4 trillion ($184 million), up 8.6 per cent compared with 2013, and profit before tax of VND663 billion ($30.8 million), or 10 per cent higher than planned. VEF/VNA/VNS/VOV/SGT/SGGP/Dantri/VET/VIR