VietNam Business: February 2011

Thursday, February 24, 2011

VN to open up booming express delivery market

HA NOI — As part of its accession plans in the World Trade Organisation, Viet Nam has committed to liberalising the express delivery market to level the playing field for both local and foreign express delivery companies.

Viet Nam plans to open its market in 2012 to allow joint-ventures to be made with 51-per- cent foreign investment capital or to establish wholly-foreign companies in the next five years, according to Paul Needham, chief editor of CEP-Research, the first internet portal specialised on the courier, express and postal market.

The country's revenue in express delivery has grown steadily from US$50 million in 2007 to around $200 million in 2010. In urban areas where the abundance of enterprises means express delivery is in high demand, expenditure is estimated to reach between VND10-100 million per unit (US$512-$5,120).

According to HCM City's Department of Planning and Investment, the increasing number of businesses joining in express delivery service are not yet accounted for.

Big domestic and foreign companies including VNPost Express, Saigon Post, Viettel, and multi-nationals like TNT, DHL, FedEx and UPS are operating in a joint-venture model.

These companies are more powerful in technology and finance than the remaining small-scale companies in the country.

Meanwhile, companies with domestic prestige like Tin Thanh, Netco, Nasco, Hop Nhat, 247 Express and 365 Express account for 20 per cent of the market share.

The domestic companies are experienced with long-term development from three to 10 years; however, they are unable to compete with foreign express delivery companies who have powerful international networks.

The country's exports are expected to reach 8.8 per cent in 2010 and the swift movement of goods both domestically and internationally is key to facilitating and enhancing economic growth that will generate more opportunities for express delivery services.

The four leading express delivery companies, DHL, TNT, FedEx and UPS, have expanded their network in Southeast Asia in order to get a firm foothold in this market.

They have invested in their network, equipment and services as well as expanded their aviation network in Singapore, Indonesia, Malaysia, Thailand and recently Viet Nam – a newly emerging market.

International express delivery companies have entered the logistics services market, which has been growing quickly in Viet Nam.

Onno Boots, regional managing director of TNT Southeast Asia and India, said "Viet Nam has tremendous growth potential and occupies a strategic position in Asian trade being so close to China."

In Southeast Asia and Viet Nam, TNT has been expanding its network and service in a unique way. It has focused its efforts on developing a cost efficient road network service that links seven countries and 127 cities across Southeast Asia and China, including Viet Nam – a total distance of more than 7,650km.

Its unique road network is linked to its air network, thereby enabling customers to choose from a wider variety of transports that suit their needs – by air, road or a combination of both.

Today, TNT has launched an expanded and newly-designed integrated air and road hub located at ICD My Dinh, Ha Noi, to handle soaring freight volumes. — VNS

Vinashin collapse gives State a lesson

HA NOI — The collapse of the Viet Nam Shipbuilding Industry Group (Vinashin) has forced the Government to restructure State-run groups and provided valuable lessons for their extensive development, says an official.

Tran Tien Cuong, director of the Central Institute for Economic Management's enterprise renovation and development department, made the statement at a conference on the State-owned group model during the renewal period in Viet Nam, held in Ha Noi on Tuesday.

The Chairman of the Viet Nam National Oil and Gas Group, Dinh La Thang, pointed out some of the shortcomings in the group model, saying that it was too similar to the former corporation model.

"A legal framework related to group activities has not been completed and there are no separate and specific rules between State administration governance and State capital ownership," Thang said.

With experience from South Korea and China, it was essential to build and develop the groups more intensively, control extensive development, avoid inappropriate mergers and acquisitions as well as avoid multi-sector investment and only focus on investment in core business, Cuong said.

Director of Vinashin's technical department Ngo Tung Lam also agreed that one of the solutions to improve the governance of the groups was to avoid multi-sector investment, especially in risky areas that could cause major losses and stretch unqualified human resources.

It was also necessary to build a system to supervise and investigate the groups' assets and State capital as well as the capacity of their leaders, Lam said.

Nguyen Dinh Phan, former rector of the Ha Noi National Economics University, claimed:"Co-operation between affiliates in each group is still loose and their business effectiveness is low."

Phan advised that more measures were needed to legalise group activities, including increased autonomy in subsidiary management and an independent agency to supervise the groups. Since 2006, a dozen groups have been established in various key economic sectors. — VNS

Ninh Thuan master plan awaits PM's nod

The central province of Ninh Thuan has more than 100km of coastline. Its beautiful beaches and fertile land are the envy of the rest of the country. It is the first province to have its socio-economic master plan drafted by foreign consultancy firms. — VNA/VNS Photo Anh Ton

HA NOI — Viet Nam's first provincial socio-economic development master plan created by two world renowned consultancy firms has been approved by leaders of central Ninh Thuan Province and is awaiting the nod from the Prime Minister.

Ninh Thuan's socio-economic development master plan to 2020 with a vision to 2030, which was developed on the basis of its nuclear industry, was presented to the Ministry of Planning and Investment in Ha Noi on Tuesday.

"This is the first province in Viet Nam to invite international consultants to construct its master plan. In the past, other provinces usually used proposals developed by domestic research institutes," said Minister of Planning and Investment Vo Hong Phuc.

The coastal province, 60km south of Cam Ranh Airport and 350km north of HCM City, would become Viet Nam's leading nuclear power centre, and needed a new orientation and vision fitting of its new status, he said.

The US$3-million master plan adopts the strategy of "accelerating economic growth" in the next 10 years with four targets: enhancing competitiveness, improving infrastructure, branding and capacity building, and boosting the competence of State agencies in the province.

The blueprint, conceived by Monitor Group from the US and Britain's ARUP, was based on a "diamond framework", a new approach in Viet Nam, to analyse what existed in the coastal central province today that would provide opportunities in the province tomorrow, said the provincial People's Committee deputy chairman, Do Huu Nghi.

The framework, developed by Professor Michael Porter from Havard Business School, was built on observations of regulations and the nature of consumer demand in the province, together with identifying the current stage of the province's development, which Monitor director Chris Malone said were "the most important sources of strength in the plan".

"At different stages of development, they need to focus on different things. So provinces like Ninh Thuan which are at an early stage of development need to focus on identifying the factors that already exist in the province and generating income from those factors, such as using the location or climate in order to generate tourism income," he said.

The province with more than half a million people decided to go for the "fast and sustainable growth" option, which consists of a 19 per cent increase in GDP per year, instead of normal growth of 13 per cent or substantial growth of 22 per cent that were also considered at the beginning.

Nghi said the decision was made after its consultants pointed out that targeted programmes and human resources training couldn't produce immediate results in the coming period.

With that model, Ninh Thuan is expected to reach GDP per capita of US$2,800 in 2020, or 85 per cent of the country's average, with industry and services accounting for 80 per cent of GDP.

The poor province, where average annual income is just over $510, would need VND260,000 billion ($13 billion) in the next ten years for such development.

A unique point about the master plan that differentiates it from others is that it outlines a number of investment projects and their implementation road maps designed to raise the capital.

"The consultants contacted potential investors while working on the master plan to ensure its feasibility," said Nghi.

ARUP's senior urban designer Slavis Poczebutas said the biggest challenge for them in the one year-long project was to achieve a balance between economic development and an "almost untouched beautiful countryside" with fertile agricultural land, WWF-preserved forests and a rich maritime ecosystem.

"The type of challenges that Ninh Thuan faces are challenges that we see all around Viet Nam. It's important how the country uses the coastal economy to create jobs and increase prosperity," said Malone.

How the province developed its economy in a way that would genuinely help the poor and cope with climate change was important at this stage of development, he said.

The consultant also said tourism and Viet Nam's first nuclear power plant, construction of which would start in 2014, would definitely be able to co-exist if there was an integrated plan in advance.

"There's more than 100km of coastline in Ninh Thuan. The tourism areas are located in the far north while the industrial zones and nuclear power plant will be located in the south," he said. — VNS

Government hails nation’s 1st oil refinery

Photo: Reuters

Though the country’s first oil refinery was completed nine years behind schedule, its cost was eventually lower than estimated and it remains a breakthrough for the oil industry, a government report to the National Assembly said.

The Dung Quat Refinery only cost VND40 trillion (US$2.05 billion at current value) when it was built this year, VND10 trillion less than estimated, said the report.

But according to a report released by the House Committee of Science, Technology and Environment, the refinery’s cost was estimated at $1.5 billion in 1997, raised more than once, and finally ended at $3.05 billion (VND51.7 trillion) in 2009.

The government attributed the difference of around $1 billion between the two reports to the fact that the committee report included revenue expenses like salaries and taxes.

Regarding the criticism that the plant’s capacity is too low at 6.5 million tons a year compared to 10-12 million tons for other refineries worldwide, the government said the project was executed at a time when there were no strategy or planning for oil refineries making it difficult to make a decision on the capacity.

The report admitted that PetroVietnam, which built the refinery, did not have a long-term vision for refining and therefore had to amend the design two times to add two more workshops. Meanwhile, official agencies had been slow in issuing legal documents on quality.

The government said PetroVietnam is considering importing crude oil of better quality to replace the oil from its offshore Bach Ho field, and expanding the refinery to increase its capacity to 8-10 million tons.

Many legislators questioned the competitiveness of the plant’s products and the economic benefits to the country.

Vietnam’s first refinery - an overview

It took 13 years for the Dung Quat Refinery to be built. Work began in 1997 and the plant was initially expected to go on stream in 2001, but it took until January 2010 for it to be actually completed.

Around 75 percent of the work was carried out by Vietnamese sub-contractors.

Xin Chao upgrades city’s circus theater for new show

Vietnamese performers practice the “Xin Chao” production at the HCMC Circus Theater in downtown area on Tuesday - Photo: Mong Binh

HCMC – Xin Chao Art Performance Co. Ltd. is investing heavily in the upgrade of the HCMC Circus Theater at September 23 Park in District 1 in preparation for the premiere of a major show about Vietnam for international tourists and locals.

Augustus Greaves, operation director and producer of the Vietnamese company Xin Chao, told the Daily on Tuesday that the cultural show entitled “Xin Chao” (hello) had three parts featuring the tale of Lac Long Quan and his wife Au Co, heroines Trung Sisters and the present life of Vietnam. The aim is to show the country’s rich culture to the world.

To make the circus theater an attractive venue for recreation, Greaves said the site would be given a facelift after the upgrade to incorporate areas for audiences to enjoy drinks and buy souvenirs before and after the production.

Greaves did not disclose the exact investment in the facelift but said the company was spending a substantial amount of money on renewing the theater on Pham Ngu Lao Street and adjacent to an area of international backpackers in HCMC.

Again, he did not say how much the company had invested in producing the “Xin Chao” show but noted this kind of show would normally cost US$250,000 based on a research that he had made from art performing shows around the world.

The production is scheduled for a premiere in early December, a time when international visitor arrivals in HCMC pick up. Greaves said foreign visitors to Vietnam had been rebounding strongly and growing nearly 35% year-on-year.

According to the Vietnam National Administration of Tourism (VNAT), the country attracted more than 3.7 million international visitors in the January-September period, an impressive increase of 34.2% over the same period last year.

The majority of international visitors to Vietnam go through HCMC, giving the company confidence in the success of the show of 80 minutes including intermissions.

Greaves said Xin Chao had met with travel agents in Vietnam and other markets including Thailand, the Philippines and Korea to promote the show. “We have received a good response from these travel agents.”

The company plans to stage “Xin Chao” every day in the early evening so that audiences will have time to go out for dinner at restaurants, drinks at bars and shopping in this economic hub of Vietnam.

Greaves said Vietnam was a beautiful country of internationally renowned attractions, and HCMC was the destination of most of inbound tourists to Vietnam. However, most attractions here are daytime activities focused on visitation and photography.

“Xin Chao is a theatrical attraction and experience to fill the gap in HCMC nighttime entertainment markets,” Greaves said.

The all-Vietnamese cast includes more than 50 performers and employs some of the country’s top acrobats, martial artists and traditional/contemporary dancers. Experienced producer and director Laura Burke has applied her film making talents in scripting the stories of Vietnam into an internationally appealing story line.

Burke has also written a music score featuring the traditional sounds of Vietnam. “The Xin Chao experience will be wonderful for Vietnamese guests and will make memories for tourists to take back home,” Greaves said.

Xin Chao described the production as the same genre as Cirque du Soleil, which was originally Canadian and is now a global phenomenon including popular shows in Japan and Macau; Voyage de la Vie in Singapore and Siam Niramit Cultural Show in Thailand’s Bangkok.

Intel to open factory in Vietnam next week

HCMC - Intel Corporation, the world’s largest chipmaker, will open its US$1-billion chip assembly and testing facility at Saigon Hi-Tech Park in HCMC next Friday.

A ceremony to open the facility by Intel Products Vietnam is slated to take place on October 29 at the hi-tech park in District 9.

The facility, in which Intel originally planned to invest US$300 million but later announced to treble its investment to US$1 billion, covers more than 46,000 square meters.

Intel Corp. started construction of the Vietnam facility in 2007 after obtaining a license on February 28, 2006, and about 4,000 people are expected to work for the plant, according to the company’s initial plan.

This will be Intel’s seventh assembly and testing site. Other sites include Penang and Kulim in Malaysia, Cavite in the Philippines, Chengdu and Shanghai in China, and San Jose in Costa Rica.

The Vietnam facility is part of Intel’s worldwide expansion of production capacity, according to the corporation at the groundbreaking ceremony in 2007.

SHTP is now home to 44 local and foreign hi-tech companies, with a total investment commitment of more than US$1.84 billion, creating more than 10,000 skilled jobs, and contributing nearly US$640 million in export revenue to the city.

SHTP expects foreign and domestic investment capital-flow this year to hit US$150 million. The park is focusing on attracting high-technology projects in microelectronics, IT, telecoms, research and development, and the service sector.

Wednesday, February 23, 2011

US$40 million more for SME supporting reforms

HCMC – The Asian Development Bank (ADB) is supplementing a US$40 million loan to an earlier reform program helping to untangle a knot of red tape for doing business simpler and quicker for small and medium-sized enterprises (SMEs).

ADB’s board of directors on Monday approved the loan for the first phase of the Second Small and Medium-Sized Enterprises Development Program, the bank said in a statement.

The supplementation follows an earlier ADB loan for an initial reform program helping to slash the time needed to register a business, and support a sharp rise in new enterprises and private sector jobs. SMEs make up a large majority of all registered enterprises in Vietnam and most new jobs in the last decade were generated by the sector.

“The priority for the Government of Vietnam is to sustain high economic growth to create productive jobs for around 1.7 million new workers each year, and growing SMEs is an essential part of its development strategy,” Edimon Ginting, senior economist in ADB’s Southeast Asia Department, said in the statement.

Despite the strong progress over the past four years, difficulties in businesses’ accessing medium-term capital as well as some ongoing regulatory issues have slowed down the registration of new SMEs and the expansion of existing ones. Meanwhile, economic overheating and the global financial crisis have created further challenges for local enterprises.

The release of funds for the latest program follows the achievement of key reform milestones by the government. These include steps to develop a comprehensive policy to address constraints to trade and competition, as well as measures to simplify and streamline business procedures, the introduction of a pilot e-customs program in 10 provinces, and the introduction of a web-based national business registration system. The Government has introduced a nationwide credit guarantee system to support commercial banks lending to SMEs.

The latest loan from ADB’s concessional Asian Development Fund has a 24-year term including a grace period of 8 years, with an annual interest charge of 1%, rising to 1.5% for the balance of the term.

A second phase of the program will provide support to continue reforms to improve business competitiveness, and access to finance for SMEs.

The Ministry of Planning and Investment is the executing agency for the full program with the target completion date yet to be finalized.

Market plunges for third straight day

Investors watch stock prices at Vincom Securities Co. The VN-Index lost 3.34 points, or 0.73%, from a day earlier to close at 454.25 on Tuesday - Photo: Le Toan

HCMC – The local market declined for the third consecutive session on Tuesday, with the VN-Index shedding 3.34 points, or 0.73%, from the day earlier to close at 454.25 although liquidity improved sharply.

The market opened briefly higher again but subsequently fell back into negative territory and traded lower during the second matching phase to hit a low of 451.82 before rebounding slightly at the close.

On the Hochiminh Stock Exchange, demand surged 27.5% against the previous session to 53.8 million shares while supply rocketed 42.7% to over 64 million shares. Closing the day, the market’s total trading volume was 33.5 million shares worth VND884 billion, up 26% and 28% from a day earlier respectively.

Only 32 stocks advanced on Tuesday while 192 others closed in the red, including one stock hitting its ceiling price and 26 issues dropping to the floor prices.

Ocean Group Co. (OGC) took the lead in terms of liquidity but it lost 3.7% to VND28,200 per share on volume of 1.6 million shares. Vietnam Mechanization Electrification & Construction Co. (MCG) was the second biggest traded stock, adding 2.4% against the previous day to VND20,000 with 1.3 million shares changing hands.

Saigon Machinery Spare Parts Co. (SMA) began to trade over eight million shares on the bourse on Tuesday and it closed at VND15,000 against the reference price of VND16,200 with only 3,200 shares traded.

Foreign participation also recovered as investors acquired 3.8 million shares worth VND148 billion and offloaded 1.8 million shares worth 67 billion, making up 16.7% and 7.6% of the market’s buying and selling value respectively.

The Hanoi market also suffered three losing sessions in a row on higher turnover of VND587 billion. The HNX-Index fell 2.33 points, or 1.96%, against the previous session to close at 116.56.

There were 42 stocks rising while 258 others dropping back, of which one stock touched the ceiling price and 24 stocks plunged to the floor prices. Foreigners were slight net buyers again, accounting for 1.9% and 1.2% of the market’s buying and selling value respectively.

Vietnam International Securities Co. (VIS) in its report said investors once again became impatient and boosted selling towards the end of the session.

“We see that they were too cautious and declined to acquire shares at high prices, mostly because of strong fluctuations of gold and dollar prices. The Hanoi market also failed to improve as most investors still stayed on the sidelines,” VIS said.

HCMC Securities Corp. (HSC) said the buying size was more likely positioning than a major wave of buying. “However, with foreign limits in a host of blue-chips close to being full the smart money is picking up shares now while they can. We keep our positive medium and long-term stance while remaining cautious short term,” HSC said.

TNK-BP to acquire BP's Vietnam, Venezuela assets

TNK-BP to acquire BP's Vietnam, Venezuela assets Russian oil company TNK-BP said on Monday it had agreed a deal with its part-owner BP to acquire the troubled British oil giant's assets in Vietnam and Venezuela for US$1.8 billion.

TNK-BP, Russia's third-biggest oil company, is owned 50 percent by BP and 50 percent by a group of Russian billionaires including banking magnate Mikhail Fridman known collectively as Alfa Access-Renova (AAR).

The divestment is in line with a plan by BP to sell up to $30 billion (€21.2 billion) of assets by the end of 2011 to help meet its financial obligations from the Gulf of Mexico oil spill.

"Today's agreement is further evidence of the rapid progress BP is making towards the divestment target we set out in July," BP's new chief executive, Robert Dudley, said in a statement

Dudley, who replaced Tony Hayward after the oil spill catastrophe, said that the acquisition would give TNK-BP a solid foundation to build its business outside Russia.

TNK-BP almost imploded during a venomous shareholder conflict between the co-owners in 2008 but the dispute was patched up when shareholders agreed to appoint Maxim Barsky chief executive effective from January 1, 2011, with Fridman taking the reins in the interim.

Ironically, Dudley was ousted as TNK-BP chief executive at the height of the conflict. With relations now smooth, Hayward has been nominated as non-executive director at TNK-BP after his departure from BP.

TNK-BP, which operates huge oil fields in Siberia and accounts for 16 percent of Russian production, has long been considered one of BP's crown jewels.

"The acquisitions in Venezuela and Vietnam mark a milestone in TNK-BP's strategic expansion in the global energy market," said Fridman, who is serving as acting chief executive of the company, in a TNK-BP statement.

TNK-BP said a deposit of $1 billion will be made by October 29 with final payment upon completion.

"Subject to government approvals and the fulfilment of other agreed pre-closing conditions, the companies expect the transaction to be completed in the first half of 2011."

According to the terms of the agreements, in Venezuela TNK-BP will acquire from BP a 16.7 percent equity stake in the PetroMonagas SA extra heavy oil producer, a 40 percent stake in Petroperija SA which operates the DZO field, and a 26.7 percent stake in Boqueron SA.

The deal comes after Russian and Venezuela on Friday signed a memorandum of understanding supporting the acquisition, at a ceremony in the Kremlin attended by Venezuelan President Hugo Chavez and Russia's Dmitry Medvedev.

In Vietnam, TNK-BP will acquire from BP a 35-percent stake in an upstream offshore gas production block containing the Lan Tay and Lan Do gas condensate fields, a 32.7-percent stake in the Nam Con Son Pipeline and Terminal, and a 33.3-percent stake in the Phu My 3 power plant.

The acquisitions of the assets in Venezuela and Vietnam will bring TNK-BP net proved and probable reserves of 290 million barrels of oil equivalent, it said.

TNK-BP has also expressed interest in acquiring BP's assets in Algeria and the issue was discussed earlier this month during a visit by Medvedev to the North African country.