BUSINESS IN BRIEF 19/5 New leader for General Motors Vietnam General Motors (GM) has announced that Mr. Sumito Ishii, the current General Director of GM Japan, will take up the position of General Director of GM Vietnam from August 1. The announcement came unexpectedly, as Mr. Wail A. Farghaly has been General Director of GM Vietnam for only one year. Mr. Farghaly will become General Director of GM Thailand and Chevrolet Sales Thailand, replacing Mr. Marcos Purty, who will return to the US. During his stint in Vietnam Mr. Farghaly helped GM Vietnam develop strongly, with total sales in the first four months of this year reaching 2,821 units, an increase of 39 per cent over the same period last year and accounting for 3.6 per cent of the market. Mr. Ishii worked at Toyota Motor in Japan before moving to GM where, from 1998 to 2003, he was in charge of new product development programs. VIB assists textile companies Vietnam International Bank (VIB) has introduced a preferential loan package for textile companies. Textile company customers can enjoy preferential lending interest rates discounted by 20 per cent and also be in the running for a VND70 million cash gift. The program ends on December 31. Its introduction follows calls by the Prime Minister and the State Bank of Vietnam for banks to cut lending rates to organizations. Ms. Vuong Thi Huyen, Director of Wholesale Banking at VIB, said it has sent documents to the SBV to register the VND3 trillion ($134.49 million) preferential financial package for importers, exporters and producers of textiles. Int’l food ingredient exhibition underway in Vietnam Food Ingredients (Fi) Vietnam 2016 exhibition is underway in Ho Chi Minh City, bringing together more than 150 leading producers and distributors of food ingredients from 26 countries and territories worldwide. Speaking at the opening ceremony on May 18, Vice Chairman of the municipal People’s Committee Tran Vinh Tuyen said he hopes that Fi Vietnam 2016 will help develop the food and beverage industry in Vietnam, especially Ho Chi Minh City. The three-day event is an opportunity for domestic food and beverage firms to promote their products and boost overseas orders. It is also a platform for them to get access to high-quality ingredient suppliers, Tuyen noted. According to the Ministry of Industry and Trade, the food industry in Vietnam has seen an annual growth of around 11-12 percent between 2009 and 2015. The rate is forecast to be maintained from now to 2018. A representative from the US’ National Potato Council said as a member of the Trans-Pacific Partnership (TPP), Vietnam-EU free trade agreement (FTA) and other FTAs, Vietnam would become an appealing destination for foreign investment, particularly in the food processing sector. Vietnam pledges equal treatment to overseas investors: Deputy PM Vietnam offers equal treatment and a favourable business climate for all overseas investors in the country, Deputy Prime Minister Trinh Dinh Dung said. He made the remark during a meeting with a group of foreign investors led by Prince Abdul Qawi of Brunei in Hanoi on May 18. Welcoming the guests who are visiting Vietnam to seek investment opportunities, Deputy PM Dung said Vietnam highly values the contribution of foreign investors in the country’s socio-economic development. Its investment law and policies have been improved to open the door wider to foreign investment in all fields, he noted. For his part, Prince Qawi said he hopes that the visit will not only boost investment in Vietnam but also strengthen Vietnam-Brunei relations. The visiting group learned about local investment attraction and economic management policies during the meeting. They expressed their interest in getting access to investment opportunities in infrastructure development and clean energy in Vietnam and pledged to bring high-quality human resources and advanced technology to the country. Information exchange for civil aviation safety identified The Ministry of Transport, the Ministry of Public Security and the Ministry of Defense have issued joint Circular No. 07/2016 / TTLT BGTVT-BCA-BQP on the exchange and processing of information to ensure safety and security in civil aviation. Information exchange includes official information, evaluations, conclusions and results of handling violations from specialized agencies on incidents and problems related to safety and security in civil aviation; serious violations that require coordinated treatment; the political, security and social order situation relating to civil aviation; criminal and terrorism activities and those by reactionary organizations relating to civil aviation and political security; regions that have routes to, from and over Vietnam; anti-Vietnam activities by hostile forces conducted through civil aviation; new technology solutions; and development trends in the domestic aviation industry. Four modes of information exchange between agencies and units of the Ministry of Transport, the Ministry of Public Security, and the Ministry of Defense will be conducted: 1. Written exchange of information; 2. Presentations and reports from interdisciplinary conferences and conferences summarizing operations in ensuring aviation security; 3. Via an online information system, for information needed to be processed quickly or updates on the database for aviation security under the guidance of the Civil Aviation Administration of Vietnam; and 4. Direct exchange of information through hotlines or meetings. The circular also specifies the responsibilities of agencies and units under the Ministry of Transport, the Ministry of Public Security, and the Ministry of Defense. The circular takes effect from June 1, 2016. Vietnam, Kazakhstan discuss boosting cargo transport The Vietnam - Eurasian Economic Union Free Trade Agreement (Vietnam EAEU FTA) opens up many partnership opportunities for Vietnam and Kazakhstan, especially in transport, H.E. Beketzhan Zhumakhanov, Ambassador of Kazakhstan to Vietnam, told a forum on transport cooperation among Vietnam, Kazakhstan, and the EAEU held in Hanoi on May 16. The signing of the Vietnam-EAEU FTA will present opportunities, he said, for cooperation in logistics and the import and export of farm produce and seafood between Vietnam and European countries, including Kazakhstan. Cargo transport will develop following the Vietnam-EAEU FTA, said Mr. Phan Quoc Anh, Deputy General Director of Vietnam Railways. “Transport of goods by train from Vietnam through China to Kazakhstan and other EAEU countries is more convenient than by road,” he explained. The Kazakh Ambassador also told the forum that a Kazakhstan team would soon visit northern mountainous Lao Cai province to assess transport infrastructure and potential. Mr. Kanat Alpysbayez, Vice President of logistics of Kazakhstan Railways, told the forum that the country’s railway sector would support goods from Vietnam and other EAEU FTA signatories to circulate smoothly. He recommended Vietnam take the lead in transporting goods via railway to China, Kazakhstan and other European countries. GDT launches transfer pricing probe into Big C Tax authorities are conducting a probe into Big C Vietnam for suspected transfer pricing, while seeking to collect hundreds of millions of US dollars from the sale of its retail system in the country. Last week the General Department of Taxation (GDT) instructed its legal base to collect ownership transfer tax from Big C’s mother company – France’s Casino Group. The GDT will seek payment of an estimated VND3.6 trillion ($165 million), calculations based on the profit gained from the transfer deal. Interestingly, affiliated relationships in the trading activities of Big C Vietnam and its partners have triggered investigations into transfer pricing. The Hong Kong-based Cavi Retail Company was discovered by the GDT to be a subsidiary of Casino Group. Meanwhile, Cavi Retail owns two companies engaged in business with Big C Vietnam (namely the Vietnam Japan Real Estate Jsc – leasing retail space for 32 supermarkets to Big C Vietnam and EB Services Ltd, – distributing goods to the 32 Big C supermarkets). Local authorities are now concerned with how to collect the penalty sum of illegal transfer pricing if the investigation leads to a tax arrears decision. “Many other alleged multinational giants have been sentenced to pay penalties but few of these collections have been successful,” an anonymous senior leader at GDT told VIR. In 2015, tax authorities investigated 4,751 enterprises with signs of transfer pricing and issued orders to collect over VND10 trillion ($458.7 million). However, the collected amount was very modest in comparison, VND16.89 billion ($774,771), representing less than 2 per cent of the total sum of tax arrears. According to the source, the accused multinational companies argued that the legal basis for the decision was not strong enough to impel them to pay the penalties. In a private meeting with the Ministry of Finance (MoF) held recently, FDI firms requested the ministry to announce clearly and transparently the source data used in transfer pricing inspections. These firms protested that tax authorities self-determine the transferred price when declaring returns from related transactions as they occur. This puts tax payers in a passive situation and forces them to pay tax penalties after the adjustment. It is not surprising that the MoF responded negatively, citing prevailing legislations [for example Article 8, Section 4, the Law on Tax Administration] that tax authorities could not publish such a database as they are obligated to keep tax payers information confidential. Strong business force speeds up economic development A rapidly growing economy needs a strong business force, along with a favourable environment for the operation of enterprises, said experts at a conference on Vietnam’s economic development prospects held in Ho Chi Minh City on May 17. Victoria Kwakwa, Regional Vice President for East Asia and Pacific of the World Bank, suggested the Vietnamese Government seek strategic measures to increase the competitiveness of domestic businesses and improve labour productivity. For a long time, Vietnam has relied on its cheap labour and dense population to boost production through attracting foreign direct investment (FDI). However, participating experts noted that in the context that Vietnam is facing an aging population, labour productivity is the factor helping the country reach sustainable growth. Jeff Pirie, Executive Director - Corporate Finance Advisory, Deloitte Southeast Asia, said that Vietnam has benefited a lot from its economic integration. However, to take advantage of the opportunities, Vietnamese policy makers should reform institutions and policies in conformity with national development requirements, he added. According to participating experts, the Vietnamese Government needs to carry out policies to improve the skills of labourers, tighten the relationship between businesses and vocational schools, and intensify the application of advanced technologies in domestic production. Domestic enterprises were asked to cooperate with FDI enterprises to benefit more from global economic integration. HCM City’s first startup investment fund announced The Vietnam Youth Federation in Ho Chi Minh City on May 17 announced the establishment of the HCM City Startup Investment Fund (HSIF). (Source: daidoanket.vn) HCM City (VNA) – The Vietnam Youth Federation in Ho Chi Minh City on May 17 announced the establishment of the HCM City Startup Investment Fund (HSIF) with capital of 30 billion VND (1.34 million USD) in the initial stage. The fund will have its capital revised up to 100 billion VND (4.48 million USD) by 2020. It was co-founded by State-owned Ho Chi Minh City Finance and Investment Company (HFIC) and Saigon – Hanoi Commercial Joint Stock Bank (SHB) to support the youth, in not only the city, but also nationwide starting their own businesses. There is no limit to what a startup company should do, said Truong Ly Hoang Phi, Director of the Business Startup Support Centre – the fund’s operator. However, the fund would prefer those with technology-based business, for examples, those developing mobile and web-based applications or those applying advanced technology in agriculture, she added. Phi noted that preferential policies would be designed for those working in or supporting the city’s key industries and hi-tech startup businesses. According to President of the Vietnam Youth Federation in HCM City Pham Hong Son, it is the city’s first startup fund for youth that promotes the creation of intellectual and innovation-based products. New decree facilitates enterprises The Government has just promulgated Resolution No.35/NQ-CP on supporting and developing enterprises by 2020. According to the document, Vietnam will boost economic restructuring and enhance the quality of economic growth, with a focus on improving private sector competitiveness. Under the resolution, by 2020 there will be at least one million operational enterprises with competitive capacity and sustainable development. The private sector will contribute 48-49 percent of the GDP and 49 percent of the social investment capital. The Total Factor Productivity (TFP) will make up 30-35 percent of the GDP. The social labour capacity will rise 5 percent per year. Every year, around 30-35 percent of Vietnamese enterprises will launch creative renovation activities. The Resolution rolls out principles in order to build and complete an economic institution, creating a favourable business and investment environment for businesses to develop and become a driving force for the economy. It is necessary to ensure that the State protects people and businesses’ legal property and business freedom as regulated. Businesses have the rights to do business in lines that are not prohibited by law. The State guarantees the stability, consistency and easy-forecast of the policy, stabilises the macro-economy, and improves the business environment in a favourable, safe and friendly way. The State ensures the fair treatment for all businesses regardless of their forms and economic sectors in getting access to resources such as capital, resources, land and investment. The State devises specialised policies to support small- and medium-sized enterprises, newly-established and creative ones. To realise the objectives, the Resolution sets forth numerous measures, including enhancing administrative reform, facilitating operation and development of enterprises; making the administrative reform as part of the e-Government development, and creating a favourable condition for newly-established enterprises. The Resolution also proposes reducing 50 percent of personal income tax in some fields, simplifying and reducing procedures on land, facilitating the commercialisation of businesses’ products, renewing the lending process, reviewing sector and product development plans, cutting business costs and not crimnalising economic relations. Bac Giang seeks to boost lychee consumption A conference was held in the northern province of Bac Giang on May 17 to discuss measures to promote consumption of “Thieu” lychee this year. Addressing the event, representatives from ministries and sectors, and enterprises pledged to boost efforts for the target. Reports from the provincial People’s Committee show that Bac Giang has 30,000 ha of Thieu lychee this year, down 1,000 ha compared to 2015. Total output of the project is estimated to reach 130,000 tonnes, a year-on-year decrease of 65,000 tonnes. Despite the decreased growing area and output, the locality saw an expansion of the area of lychee grown in line with the Vietnam Good Agricultural Practice (VietGap) and the Global Good Agricultural Practice (GlobalGap) standards. As many as 158ha in the Luc Yen district was planted with lychee under the GlobalGap standards, with expected output of around 1,000 tonnes. Meanwhile, the combined Thieu lychee area produced under the VietGap standards in the district reached over 12,500, with an estimated combined yield of 53,000 tonnes. The province plans to sell 78,000 tonnnes of Thieu lychee in the domestic market, and ship about 52,000 tonnes to foreign markets, equivalent to 60 percent and 40 percent of the total output, respectively. Its export will target key importers such as the US, Australia and the European Union. According to Director of the provincial Department of Industry and Trade Tran Quang Tan, this year’s quality of lychee is better than last year. Vice Chairman of the provincial People’s Committee Duong Van Thai said along with maintaining traditional export markets, the local authorities continue to seek new and potential markets for the product. Representatives from the Advanced International Joint Stock Company said Bac Giang should pay attention to building a trademark for the product, while supporting local farmers in accessing advanced technologies, in order to expand the area of high-quality lychee, towards meeting the increasing quality demands of choosy markets. State strengthens imported food product safety controls To strengthen safety controls for imported food products, the Ministry of Health (MOH) issued Circular No 52/2015/TT-BYT, dated December 21, 2015, on State inspection protocols to ensure the safety of imported food products, detailing the documents needed for the application dossier and the procedure for granting a certificate for exported food products under the administration of the MOH (Circular 52). Accordingly, all such imported food products are subject to a State inspection for safety, conducted by inspection agencies designated by the MOH. Any request for this State inspection must be directed to the designated inspection agency or to an e-information portal, if applicable, by the trader before the shipment of imported food products arrives at the customs checkpoint. The evaluation of the inspection results shall comprise its announcement of conformity with National Technical Regulations or an announcement of conformity with food safety regulations, the applicable International and National Technical Regulations on food quality and safety and regulations on labeling food products. Circular 52 provides for three State inspection methods: standard inspections, strict inspections and reduced inspections. The standard inspection comprises a documentary inspection and evaluation of the products’ organoleptic aspects, labeling, packaging and special preservation conditions, if any, based on a representative sample of the imported products and a test of certain criteria that have raised the suspicions of the inspection agency. The standard inspection is applied to all imported products from any shipment, except in the specific circumstances of a strict inspection or reduced inspection. The strict inspection comprises two forms as follows: (i) The documentary inspection and the test of full product criteria, declared in accordance with the respective announcements of conformity with the National Technical Regulations or with food-safety regulations for food products that were found to be non-compliant in the last inspection; and (ii) the standard inspection and test of the warned criteria or a request for the provision of relevant testing results for the warned criteria where the food products have been issued a warning by the MOH, an overseas competent authority or the manufacturers. The reduced inspection comprises the documentary inspection phase only, which is applied under the relevant notification of the Việt Nam Food Administration and for a maximum period of 12 months from the date of the application. An imported food product under the strict inspection method will be switched to the standard inspection if it passes two consecutive strict inspections, or in the case of products with warnings from the MOH, an overseas competent authority or its manufacturer, if there is an official notification on the cessation of strict inspections for it. As regulated, it takes two days for the relevant inspection authority to complete the procedures for a reduced inspection. Meanwhile, the time needed to complete a standard inspection and strict inspection is 8 and 10 days, respectively. Some traders have complained that the time needed for the standard and strict inspections is too long and creates unreasonable costs for traders due to the need for storage and preservation of the imported food products during such inspections. Circular 52 took effect on February 23, 2016. Banking technology needed in order to compete Technology holds the key to banks’ development, especially with the country’s increasing global integration, a seminar heard in HCM City yesterday. Nguyễn Văn Thầy, IT head at the State Bank of Việt Nam’s HCM City office, said there is intense competition among banks and the appearance of major foreign banks like Citi Bank, HSBC and ANZ with their prestige, experience and modern technology has forced local banks to improve. Trần Thị Hồng Hạnh, general secretary of the Việt Nam Banks Association, said the strong growth in technology had resulted in advanced tools that enable banks to develop new products and services, expand distribution, and improve their management and competitiveness. Commercial banks and financial institutions have increasingly expanded into retail banking, with retail lending accounting for a large proportion of their revenues and profits, she said. To sustain growth, lenders are looking for cutting-edge technologies to assist them in all aspects of lending, from loan history management and regulatory compliance to servicing and portfolio management, she said. Thầy said the use of technology would help banks process a large number of loan applications quickly, safely and efficiently. The use of IT in the banking sector could also benefit customers by allowing them to transact business quickly and safety on the internet, he said. Modern technologies help banks improve their competitiveness and smoothen administrative procedures, he said. “E-banking is an inevitable development trend now and in the future in the banking sector,” he told the seminar organised by the Việt Nam Banks Association, Fintek and Diasoft. Mobile banking would be a strategic channel while internet banking would retain its important role, he added. Trần Lê Quân, representative of Fintek, a leading investment, consulting and technology transfer firm, said according to the SBV only 20 per cent of Vietnamese people have a bank account, meaning banks could expand their retail banking activities to increase loans and deposits. In the past banks mainly focused on selling products they had, but now banking products and services are customer-oriented, meaning they sell products that customers need. Technology has played an important role in this, he said, adding that technology also enables banks to offer a better customer experience, improve productivity and offer fast and paperless services. An executive from Diasoft, a global provider of financial software solutions, introduced FLEXTERA, a financial solution for front-to-back automation of retail, corporate and universal banking, treasury and capital market operations, and insurance. A new portal providing information about science and technology in the banking sector is now available online at this link: khoahocnganhang.org.vn. The State Bank of Việt Nam (SBV) announced the launch of the website, which is run by its Institute for Banking Strategy, during a press conference in Hà Nội yesterday. This launch formed part of activities organised to celebrate the 65th anniversary of the domestic banking sector, which was established on May 6, 1951. It was also held to celebrate Việt Nam’s Science and Technology Day, May 18. Yesterday, SBV Deputy Governor Nguyễn Kim Anh witnessed framework agreements on scientific research and data use being signed between the institute and several commercial banks, including VPBank, Vietcombank, Vietinbank, HDBank and LienVietPostBank. In a related development, Banking Việt Nam 2016, an annual banking technology conference organised by the SBV and American-based International Data Group (IDG), kickstarts today in Hà Nội. Conferences and exhibitions held during the two-day event will promote the use of information technology to create new banking services, aiming to enhance the competitiveness of the local banking system in the face of global integration. Prime Minister Nguyễn Xuân Phúc told The Asian Banker Summit 2016 in Hà Nội last week that Việt Nam would speed up the reorganisation of credit institutions and enhance the efficiency of banking operations for a more stable and competitive economy. Experts said during the summit that technology would be the key to domestic banking development, while the country was becoming more intergrated into the global economy by entering into a variety of free trade agreements. Dutch shipbuilders drop anchor in Song Cam port Damen, a Netherlands-based global leader in shipbuilding, has not yet completed its acquisition of a 70 per cent stake in Song Cam Shipbuilding JSC – the most profitable shipyard in Vietnam – as the stake sale is still under government consideration. Vietnam’s Shipbuilding Industry Corporation (SBIC), which owned Song Cam, has proposed that the government allow it to separate the Song Cam shipyards into two zones before selling a 70 per cent stake in one of the zones to Damen. In a document recently sent to the prime minister, SBIC suggested that the first zone include Ben Kien shipyard, which is located in An Hai district in the northern port city of Haiphong. The company will then sell a 70 per cent stake in this zone to Damen. Meanwhile, the second zone, which includes a small shipyard yet to be relocated, will be excluded from the deal. Vu Anh Minh, head of the Enterprise Management Department under the Ministry of Transport (MoT), told VIR that “The ministry supports SBIC’s proposal, as the separation is expected to facilitate Damen’s future operations as well as those of Song Cam. Ben Kien is already equipped with good infrastructure for shipbuilding.” “It is the best way to keep Damen from exiting the Vietnamese market and encourage it to expand operations in the country,” he said. “Since over 90 per cent of Song Cam’s orders come from Damen, the shipyard would face many difficulties if Damen left.” In late October 2015, after months of consideration, the Vietnamese government gave the green light to the Dutch firm to buy a 70 per cent stake in Song Cam. Song Cam, which has a chartered capital of VND619.69 billion ($28.43 million), with SBIC making up 90.08 per cent, and Bach Dang shipyard holding 7.54 per cent, was the first SBIC shipyard to be equitised in 2008.” “It’s time to further reduce the state’s holdings to attract more investment in the industry,” Minh explained. Currently, the Song Cam shipyard is the most valuable unit among SBIC’s eight subsidiaries. Song Cam has not incurred any losses over the past five years, bringing in most of the SBIC’s foreign investment thanks to its contracts with Damen. In early 2014, the Damen-Song Cam shipyard was expanded with an investment of $60 million, of which 70 per cent came from Damen. Aside from its interest in Song Cam, the Dutch shipbuilding group earlier proposed acquiring a 49 per cent stake in another SBIC affiliate – the Ha Long Shipbuilding Company – once it is equitised. However, the equitisation has not yet been completed, as no financial settlement for the Vietnamese firm has been reached. Damen is an international company that owns 35 shipyards and other partner yards around the world. It manufactures 150 vessels annually. The group has been a major partner of SBIC for years, negotiating all orders for the Song Cam-Ben Kien shipyard, and has pledged to ensure orders for the Ha Long shipbuilding plant through to the end of this year. Cai Lan steel and power complex teetering on the brink of death Despite having been hailed as the hope of Vietnam’s shipbuilding industry, the Cai Lan complex of a VND2.5 trillion ($112.09 million) hot-rolled steel and a VND900 billion ($40.4 million) power plant has yet to see a bright future, after its operation was delayed for six years, according to newswire Tienphong.vn. The complex’s construction was kicked off in 2003, with the total capital of over VND3 trillion ($134.5 million), an ambitious investment by state-owned shipbuilding giant Vinashin. The 15-hectare steel plant was designed with an annual capacity of 500,000 tonnes of steel and started test operation in June 2010, after seven years of construction. During the test run, it had an output of 5,000 tonnes of steel meeting the quality standards of the US and Norway, 3,000 tonnes of which were exported. However, the steel plant has been left inactive after Vinashin’s corruption scandal. Regarding the power plant, the 40MW plant came into operation in April 2007, but its operation was halted in 2009 due to financial troubles, even after managing to sell some of its output to state-run Electricity of Vietnam. In reality, the power plant was quipped with used, low quality machinery imported from China, leading to a failure to supply enough power to the steel plant. Previously, Shipbuilding Industry Corporation (SBIC), which was born through the reorganisation of the parent company and the inclusion of members from Vinashin, made a futile attempt to resurrect the Cai Lan complex. As the latest development, the Ministry of Transport requested the government to assign suitable businesses under the ministry to take over the Cai Lan complex. Banks baulk at strict rules in SBV’s Circular 36 Various banks have requested a delay in Circular 36 amendments, stating that stricter lending rules will hurt their business. In February, the State Bank of Vietnam (SBV) announced that it would revise Circular 36/2014/NHNN, which aims to increase banks’ liquidity and prevent excessive lending to the real estate sector. In particular, the SBV proposed that banks should only use 40 per cent of their short-term funds for mid- to long-term lending, compared to the current permitted amount of 60 per cent. The revised version will take effect on January 1, 2017. In response, banks complained that this new rule would negatively affect their business. According to Phan Duc Tu, CEO of BIDV, depositors often choose short-term tenors, making it challenging for banks to attract long-term deposits. To attract deposits that are longer than 12 months, various banks have edged up their depository rates by 0.2 to 0.4 per cent for the past two months. However, this has been met with little success as customers still prefer short-term deposits. “Banks mobilise the majority of their deposits for loans, so limiting the amount of short-term funds used for mid- to long-term loans will affect our lending capacity in the long run,” said Tu. Other banks noted that the draft revision of Circular 36 classifies12-month deposits as “short-term”, while this tenor is currently considered “medium term”. The new definition will further restrict banks’ lending ability, especially when it is combined with the proposed reduction on using short-term funds for loans. Economic expert Can Van Luc suggested that the SBV should allocate a longer preparation time for banks, and delay the implementation of Circular 36 until a later date. During this period, banks can use different methods to restructure their deposits. “Firstly, banks can hike depository rates, as they’ve already done. Secondly, they can borrow funds from other financial institutions and thirdly, banks can issue long-term bonds to investors,” said Luc. However, he warned that a surge in interbank and depository rates may make it hard for banks to lower their lending rates. Meanwhile, analysts from Ho Chi Minh Securities Corporation pointed out in their recent report that the SBV may need to delay Circular 36 to make way for its easing policies in 2016. “The SBV aims to reduce lending rates to help struggling firms and set the credit growth target at between 18 and 20 per cent this year. It’s usually difficult for the government to carry out monetary easing and tighten the laws at the same time. As a result, it seems that to achieve credit growth goals in 2016, the SBV may have to put tightening rules such as Circular 36 and Basel II on hold,” noted the analysts. 2016 FMCG growth put at 5-6% The fast-moving consumer goods (FMCG) market would expand 5-6% this year as projected by market research firm Kantar Worldpanel. The firm forecast the FMCG market in HCMC, Hanoi, Danang and Can Tho would grow higher than 2.7% in 2015 while the rural areas would see growth slowing to 5-6%, compared to 8.5% in 2015. In 2010-2013, the rural market enjoyed an annual expansion rate of over 12% and even 30.5% in 2011. The market started to experience a slowdown in 2014 with a rate of 10.4%. Nguyen Huy Hoang, business development director at Kantar Worldpanel in Vietnam, said the firm had made the growth forecast for the FMCG market this year based the the country’s economic growth of 5.46% in quarter one, which was lower than in the same period last year. Hoang said a slight increase in the consumer price index in the first months of 2016 indicated more pressure on inflation this year. Vietnam’s gross domestic product (GDP) growth is projected to cool to 6% this year, lower than the Government’s target of 6.7%, due partly to severe the impact of protracted drought and saltwater intrusion in different parts of the country. Lower economic growth would place an impact on purchasing demand in rural areas, according to Kantar Worldpanel. The firm forecast demands of consumers for convenient and healthcare products would remain high this year. Hoang said more women have gone out for working, so time saving is important to them. They prefer buying convenient food items like milk, rye drinks and canned fish, among others. Nowadays, people opt to buy products at places near their houses or on their way back to their homes as shown in the firm’s recent survey on lifestyle. This explains why traditional retail channels remain dominant in Vietnam, and grocery stores in cities and rural areas have posted sustainable growth over the years. Mini-supermarkets and convenience stores have been attractive to shoppers despite their small market share in the domestic retail market. The firm said more consumers have paid attention to their health due to increasing concern over food safety and environmental pollution. Therefore, sales of healthcare products, including soy milk and yogurt, have grown strongly in recent years. Inter-bank rates drop further The inter-bank rates for overnight, one-week and two-week loans in the Vietnam dong have slid in the past week thanks to improved liquidity at banks, according to commercial banks and securities companies. The overnight rate has fallen by 1.11 percentage point to 3.27% per year in the week. The rates for one-week and two-week loans have dipped by 1.04 percentage points and 0.98 percentage point respectively to 3.51% and 3.79% per year. Such interest rates are higher than the inter-bank range of around 2-2.5% per year for overnight loans on April 27, the lowest on the market this year. The central bank has continued to net withdraw cash for three weeks in a row on open market operations (OMO) though this week’s withdrawals are smaller than in the two previous weeks. Only VND310 billion was injected via OMO last week while VND5.53 trillion worth of loans fell due. As a result, VND5.22 trillion was net withdrawn via OMO. Net withdrawals in the three consecutive weeks on OMO and the sharp decline of the inter-bank rates indicate strong liquidity at banks. The country’s credit growth in the first four months has not been announced, but initial statistics of Ban Viet Securities showed positive credit increases at banks in HCMC. January-April credit growth stood at 3.2% compared to minus 0.8% in last year’s same period. Meanwhile, credit at banks in Hanoi grew 4.8% compared to 6.6% in the same period a year earlier. Last week, the State Treasury easily found buyers of five-year bonds as demand of banks for this debt paper was high. Five-year bonds saw a bidding volume 3.2 times higher than that put up for sale worth VND6 trillion. All bonds were sold with an annual coupon of 6.29%, down 0.07 percentage point against the previous week. In addition, the bidding volume for an additional VND1.8 trillion worth of government bonds of the same term was seven times higher and all were snapped up at the same rate. Around VND2 trillion worth of 20-year bonds were offered with a bidding volume accounting for 88% of the total offered for sale. The winning coupon of the amount was 7.65%, unchanged from last week. That the State Treasury is selling government bonds well is an indication of the market’s strong interest in bonds of less than five years. Therefore, this week it will continue to offer VND8 trillion worth of short-term bonds. According to experts of Bao Viet Securities, the coupon of five-year bonds may be equivalent to or slightly lower while those of other terms are forecast to have insignificant change. The State Treasury announced to issue VND10 trillion worth of G-bonds of three different terms this week, including VND8 trillion for five-year bonds, VND1 trillion for three-year bonds and VND1 trillion for 20-year bonds. Rice price dips in Mekong Delta The rice price in the Mekong Delta has slid after weeks of stability due to weak demand and rising competition from Thailand that announced a plan in late April to sell 11.4 million tons in government stockpiles over two months. Rice traders in the Mekong Delta, the country’s key rice producing area, said fresh IR50404 paddy was sold at VND4,500-4,600 a kilo on May 16, down VND250-300 over 10 days ago. The price of unprocessed rice fell by VND200-250 to VND6,550-6,700. Despite the fall, the price is still VND300 a kilo higher than the same period last year. Nguyen Thanh Hon, a rice trader in Tien Giang Province, said the decline was attributable to a purchase suspension by rice suppliers of exporting firms as they have adopted a wait-and-see attitude since Thailand unveiled the 11.4-million-ton rice sale plan in May and June. However, rice exporters said Thailand’s rice selloff would not affect Vietnam’s rice export activity. Ngo Ngoc Yen, director of Yen Ngoc Company in HCMC, said the quality of Thai rice has deteriorated due to a long period of storage while major importing countries, including the Philippines and Indonesia, need new grains. The Vietnam Food Association (VFA) said its members exported over 146,000 tons of rice worth over US$64 million from May 1 to 12. Rice shipments in the year to May 12 had exceeded two million tons worth over US$853 million. Reciprocal capital constraints hinder ODA-funded projects in agriculture The Ministry of Agriculture and Rural Development expects official development assistance (ODA) disbursements for 23 projects in the agricultural sector this year, but shortages of reciprocal capital in provinces might affect the disbursement process. The ministry said VND5.76 trillion (US$258 million) would be disbursed for the projects as planned, including seven worth VND2.8 trillion in irrigation. Provincial budgets are required to cover at least VND633 billion for the projects, but they have managed to arrange only VND274 billion of the total. The ministry said reciprocal capital shortages in provinces would affect the implementation of projects planned for 2016 and thereafter. So far, 21 provinces and cities have got allocations of ODA loans mainly pledged by the World Bank and Asian Development Bank. A number of them fail to reach the required reciprocal capital disbursements such as Ha Giang Province with a proportion ratio of 0%, Binh Dinh Province with 11%, Ninh Thuan Province with 14% and Hau Giang Province with 21%. Meanwhile, the percentage is 87% for Bac Lieu Province, 92% for Quang Binh Province and 99% for Danang City. The ministry said over VND6.57 trillion was disbursed for projects last year, with almost VND4.26 trillion of it from ODA loans. Nearly half of the total, or VND3 trillion, went to irrigation projects. Japanese housing developer enters Vietnam Japan’s housing developer Sanyo Homes Corporation has entered Vietnam’s real estate market through a partnership with a member company of  Hoa Binh House Joint Stock Company. The Japanese firm inked an investment partnership agreement with Tien Phat Real Estate Investment Corporation in HCMC last week. Accordingly, Tien Phat will partner with Sanyo Homes in housing projects in Vietnam and help the latter penetrate the local market. Ascent Lakeside capitalized at about US$25 million will be the first luxury apartment project in which they are involved. Situated on Nguyen Van Linh Highway in District 7, the project comprises a 22-storey block with 108 apartments and 72 offices. The products will be offered for sale later this year. Spanning over 4,063 square meters, Ascent Lakeside has parking basements, kindergarten, supermarket, gym and spa, and restaurants and coffee shops. The project will be managed under Japanese standards when it is put into use. Tien Phat said its cooperation with Sanyo Homes is part of its plan to better cash in on an upsurge in Japanese investments in the country. Founded in 1969, Sanyo Homes is a major brand in Japan’s property market and has nearly 50 years’ experience in developing houses and apartments and providing services to improve the lives of homeowners. Over the past five years, Tien Phat has invested in a number of apartment projects in HCMC, including The Ascent-Thao Dien Condominiums in District 2, Grand Riverside and Riva Park in District 4, and Soho Riverview and Soho Premier in Binh Thanh District. The company expected its cooperation with Sanyo Homes would help it improve services, particularly in the operation and management fields. A number of Japanese investment funds and firms had invested in the local property market prior to Sanyo Homes’ move. Creed Group ventured with local firms An Gia Investment and Phat Dat Corporation to develop the US$500-million project River City, while Hankyu Realty and Nishi Nippon Railroad acquired half of the Fuji Residence project invested by Nam Long Investment Corporation in District 9. Fuji Residence is the second venture between the two Japanese firms and Nam Long after their Flora Anh Dao project, which has sold 85% of its apartments. VN firms need fair shot: seminar Domestic private companies should get equitable treatment, especially in the context of the country's increasing international integration, a seminar heard in HCM City on Monday. Speaking at the "Integration and globalisation" seminar organised by the Viet Nam Youth Business Association, Le Phuoc Vu, chairman of Hoa Sen Group, said "Domestic and foreign firms should be considered as the two legs of the Vietnamese economy, but we see foreign businesses develop strongly and local ones decline." "The Government has not been transparent or fair [in its treatment of] various economic sectors, and this is considered one of the main reasons for domestic companies' limited development" Poor management skills, lack of experience in production and limited funding are the other factors that have restricted the development of local companies, who account for only 30 per cent of total export turnover with foreign firms accounting for the rest. Delegates at the conference urged policy makers to pay more attention to the private sector, resolve its problems and create favourable conditions for it to integrate with the global economy. Since most domestic companies are small or medium-sized, they always face disadvantages, especially when trying to borrow, they said. "Besides seeking support from the Government, private enterprises must address three problems: poor human resources, management and awareness," Nam Phuong, deputy chairwoman of the Da Nang Youth Business Association, was quoted as saying by Thoi bao Kinh te Viet Nam (Viet Nam Economic Times) newspaper. The Government is trying to create a level playing field for all sectors by creating a transparent, fair and open business environment, she said. "Therefore, the private business community should improve its awareness to catch up with the changes." To increase awareness, their managers should be educated, she said. "Awareness of Government workers must also be improved because they will be one of the most important factors in operating policies." The seminar sought to discuss "how private enterprises can exploit free trade agreements", one of themes that will be discussed at the upcoming Viet Nam Private Sector Forum (VPSF). According to the VPSF, the Vietnamese economy will face three major issues related to its global integration before 2018: ending of WTO transition period, the Trans-pacific Partnership, and the European – Viet Nam Free Trade Agreement. "By 2018 the competitive pressures will increase significantly and only foreign-invested companies can take advantage of the integration because they have better competitive ability than domestic ones," Dao Huy Giam, the VPSF's chief consultant, said. VinaCapital raises US$104 mln from selling stakes in real estate firm Two funds of asset management company VinaCapital have sold all their stakes in a Ho Chi Minh City-based real restate company reportedly for a total of US$104 million. Andy Ho, managing director of the fund manager, confirmed the divestment from 21 Century International Development with news website VnExpress on May 17. VinaCapital has been reducing its engagement in real estate to focus on privately-negotiated deals and OTC investments, he was quoted as saying. Ho did not reveal the value of the deals with Ho Chi Minh City-based developer Khai Hung, but news website Proactive Investors UK said the total proceeds amounted to US$104 million. London-listed Vietnam Opportunity Fund's stake was worth US$28.7 million, and the rest belonged to its sister fund Vinaland Limited Fund, according to the report. Khai Hung now owns 50% of the company, which is currently developing a residential project in Ho Chi Minh City's District 2 with an estimate cost of more than US$378.7 million, according to 21 Century International Development's financial statement. Henry Enterprise Group Ltd and Prosper Big Investments Ltd, both incorporated in the British Virgin Islands, control the respective stakes of 33.16 and 15.84%. 21 Century unlisted all its shares in September last year, about five years of listing on Ho Chi Minh City Stock Exchange, citing failure to raise funding from stocks. The company reported more than VND3.6 billion (US$158,000) in net profit at the end of last year, compared to losses of over VND14.7 billion (US$648,000) in 2014. Southern localities discuss database on regional investment, trade Building an investment and trade database for 21 southern provinces and cities was discussed at a meeting between the Investment and Trade Promotion Centre of Ho Chi Minh City (ITPC) and relevant departments and promotion centres in the south on May 17. The database, which will be used to make updates among the localities, will provide information on the investment and trade situation in the south for both domestic and foreign visitors to the provinces, according to Nguyen Van Ut from the Southwest Region Steering Committee. He said that it will be useful when localities hold trade promotions abroad. At the meeting, representatives from Departments of Industry and Trade, Departments of Agriculture and Rural Development and promotion centres agreed to work together for safe agriculture by connecting suppliers and distributors to set up a safe farm produce chain. From May 25, the ITPC will receive registrations from safe food providers and distributors while promoting trade relations between producers, supermarkets, hotels and company or school canteens. Businesses can order safe food from local farmers who use advanced technology in agricultural production, meeting Vietnamese and international standards, the representatives said. 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