Strict lending policies hamper contractors

Housing developers are struggling to cope with banks' tightened lending policies.

The new regulations in tandem with construction materials' rising
prices is making it difficult for developers to survive as the real
estate market continues to chill for the second straight quarter.

A leader of the Vietnam Construction and Export-Import Corporation
(Vinaconex) said an increase in construction materials' prices, along
with banks' restricted lending policies, had made construction companies
broke, forcing them to liquidate.

Construction materials'
prices increased by 30 to 40 percent during the past few months while a
new chill in the property market caused bidders to abandon their
projects after their proposals concerning the adjustment of construction
materials' prices were refused by house owners.

The
procedures for State funded construction projects, concerning price
adjustments, takes a long time, making the supply of housing projects
lag behind schedule which in turn adversely impacts the real estate
market.

The prices of construction materials including steel, cement and housing equipment continue to soar.

Construction materials account for 40 to 70 percent of the total
estimated capital for building projects, according to the Institute
of Construction Economics .

Property markets primarily
depend on monetary and credit policies, according to a Ministry of
Construction report that was submitted to the Government Office.

Banks began increasing lending interest rates and applying greater
restrictions on mortgage loans starting in July, following a warning
from the State Bank of Vietnam (SBV) that urged financial institutions
to be prudent with issuing loans for real estate projects.

The warning was issued in response to findings that real estate loans
accounted for more than 5 percent of the bad debts that had incurred at
several commercial banks in the country.

The SBV reduced
the short-term deposit proportion reserved for long-term loans from 40
percent to 30 percent and specified real estate loans as high risk.

Vinaconex deputy director Nguyen Dinh Thiet said commercial banks only
lent loans for up to 10 years, and total outstanding real estate loans
were restrained to 10 percent.

Commercial loans provide
the primary impetus for the property market, reports the Collier
International Company. Buyers are hesitating to borrow money from banks
to purchase homes, while banks increased their interest rates that range
from 17.5 to 18 percent per year.

Investors have begun to
secure capital from other sources including mobilising cash from
secondary investors and issuing bonds. Secondary investors are not so
interested in investing in housing projects, as the chill in the real
estate market continues./.

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HCM City hosts furniture-handicrafts expo

Over 300 woodwork and handicraft businesses from both in and outside of
the country are displaying their products at the International Furniture
and Handicrafts Fair (EXPO 2010) which opened in Ho Chi Minh City
on October 6.

The event, jointly held by HCM
City’s Department of Industry and Trade and the Trade Promotion
Department under the Ministry of Industry and Trade, is to boost exports
of domestic wooden and handicraft products.

With
700 stands, the five-day fair will bring domestic woodwork and
handicraft businesses together, especially small and medium-sized
enterprises, who have little opportunity to take part in overseas
exhibitions, with their international partners.

As
part of the event, an online expo will be set up to help businesses
promote their trademarks by posting their information and products,
saving transaction times and costs.

So far, over
800 companies have registered 7,000 products on the online expo, an
increase of 21 percent in the number of businesses and 40 percent in
products compared with 2009.

In addition, there will be seminars for Vietnamese businesses and importers held by Turkey and Japan .

Over the past year, the International Furniture and Handicrafts Fair
has attracted a large number of participants, helping to raise the
industry’s export turnover from 590 million USD in 2001 to 2 billion USD
in 2005 and 3 billion USD in 2009. This year’s figure is expected to
reach almost 4.5 billion USD./.

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AIA warns failed Pru deal could impact business

Photo: Reuters

HONG KONG - AIA Group Ltd, which aims to raise about US$15 billion through a Hong Kong listing, flagged a series of business risks including the collapsed bid from Prudential Plc as it launched the share offering on Tuesday.

AIA, the Asian life insurance business of American International Group Inc, also said in the preliminary prospectus filed to the Hong Kong Stock exchange that it would not pay a dividend before 2011.

AIG is planning to sell 48.6 percent stake in AIA to raise up to $14.86 billion, a document obtained by Reuters showed late on Monday. The net proceeds will be used to repay financial aid AIG received from the US government.

AIG revived AIA's IPO after Prudential cut its takeover offer for AIA to $30.4 billion from $35.5 billion. In contrast, the IPO would value AIA at as much as $30.5 billion, sources told Reuters on Monday.

"The terminated Prudential transaction also adversely impacted and may continue to adversely impact agency recruitment and new business production by our agents," AIA said in its prospectus. "We cannot assure you that our business and prospects will not be materially and adversely affected by the terminated Prudential transaction."

AIA, an Asia-focused insurer, is selling 5.86 billion secondary shares at an indicative price range of HK$18.38 to HK$19.68 per share.

Priced to perfection?

At the offering price range, AIA is valued at 1.2 to 1.3 times 2010 basis embedded value estimated by bookrunners, according to a term sheet obtained by Reuters on Tuesday.

By comparison, China Life Insurance Co Ltd, China's No.1 life insurer, traded at 2.4 times forecast 2010 embedded value, while No.2 life insurer Ping An Insurance Co of China Ltd traded at 2.6 times forecast 2010 embedded value, according to a BofA Merrill Lynch research report.

"Most retail investors are short-term oriented and they prefer to invest in small to mid-cap IPOs," said William Lo, an analyst at Ample Finance. "AIA is not a pure Chinese insurer, and China accounts for only a small proportion of its business, so investors are not treating AIA as a high growth stock."

Others Asian insurers, including Japan's Dai-ichi Life Insurance Co Ltd and Korea's Samsung Life Insurance Co Ltd trade at 0.37 times and 1.11 times 2010 forecast 2010 embedded value, respectively.

Embedded value is a measure commonly used to gauge the value of insurance companies and includes the present value of future profit from long-term insurance contracts.

Growth

AIA was already operating in mature markets in Asia with high market shares, so room for growth was less than that of peers, Bank of America Merrill Lynch said in a research report.

Also, AIA is a little slow in tapping alternative distribution channels and is unable to team up with key banks in most key markets, which may affect long-term growth prospects. China expansion would remain one of the biggest challenges for AIA as the branch approval procedure is slow there.

Although AIA is the only foreign life insurer to operate a 100 percent-owned unit in China, its market share there fell from 1.51 percent in 2004 to about 0.69 percent in the first eight months of 2010, according to China Insurance Regulatory Commission data.

AIA operates in China's Guangdong and Jiangsu provinces and the cities of Beijing, Shanghai and Shenzhen.

In a separate statement, AIA said it had formed a new board of directors ahead of the IPO.

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EU, Malaysia kick off free trade talks

European Commission President Jose Manuel Barroso (R) greets Malaysia's Prime Minister Mohd Najib Abdul Razak prior to a meeting at the Royal Palace in Brussels during the Asia-Europe Meeting (ASEM).

Photo: AFP

BRUSSELS - Malaysia and the European Union kicked off free trade talks Tuesday in a move aimed at increasing a two-way trade that currently accounts for around 10 percent of Malaysian imports and exports.

The launch of negotiations was announced on the sidelines of the Asia-Europe Meeting (ASEM) attended by 46 nations representing 60 percent of world trade and almost 60 percent of the world's populations.

Malaysian Prime Minister Mohd Najib Abdul Razak and European Commission president Jose Manuel Barroso jointly announced the formal commencement of the talks, with Malaysia proposing a first round be held this year.

The free trade agreement will focus on market access for goods and services, investment, trade facilitation and economic cooperation.

The European Union on Wednesday signs a free trade deal with South Korea, described as its most ambitious yet, and Japan called for increased momentum in its bid for a similar deal during the two-day ASEM summit.

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Ministry mulls curbs on cement production

Photo: Reuters

The Ministry of Construction plans to propose to the Prime Minister a suspension in the licensing of new cement production projects to limit the sector's overheating development, and unnecessary waste of energy.

Vu Quang Diem, Deputy Director of the Ministry's Building Materials Department, said in terms of the building materials production sector, the cement sector was the most energy-inefficient.

For each million tons of cement produced, the power sector had to supply 90-95 million kWh, Diem said.

The rapid growth of the building materials production industry, including the cement sector, had put pressure on infrastructure, especially the power sector, Diem said.

The most worrying problem was the number of new cement projects, many of which were inefficient and used out-of-date technology, would continue to rapidly increase if management was not tightened, he said.

The boom would lead to a waste of energy and harm the environment, he added.

The Department was developing a plan for cement sector development until 2015, with an orientation to 2025 to submit to the Government.

The ministry proposed a suspension of investment in 13 projects which had been approved in Prime Minister's Decision 108/2005/QD-TTg issued in 2005, but had not been carried out or would be harmful to the environment if continued.

As an alternative, the authority petitioned the Prime Minister to agree to the construction of nine projects which had more favorable local conditions and would have a significantly beneficial affect on the development of the region where they were located.

The ministry also asked for stricter punishment on projects that failed to meet schedules.

The head of the ministry's Department of Science, Technology and Environment, Nguyen Trung Hoa, said that it was difficult to compel enterprises to spend hundreds of millions of US dollars to renew technology.

Therefore it was necessary to offer preferential lending policies, so that companies would find it easier to access loans to upgrade energy-saving technology, he said, adding that a raft of complicated administrative procedures was one of obstacles that made companies hesitate when considering upgrading their technology.

The Government should strictly implement the regulation that forced cement factories to re-use exhaust fume heat discharged to generate power, as the temperature of the exhaust fumes could reach up to 370 degrees Celsius, Hoa said.

If factories could take advantage of this energy source, they could save 30 per cent of the electricity they consumed, he added.

Although the policy had been outlined in Decision 108, many enterprises had not been interested in it, Hoa said.

Diem suggested that the Government only license new projects which included the construction of a power generator using exhaust fumes.

According to the ministry, by the end of 2009, total design capacity of all cement factories nationwide was 57.4 million tons per year, which could fully satisfy domestic consumption demand. However, this year, total capacity had added an additional 11.7 million tons to output.

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Dragon fruit gains access to Chile, Korea markets

Chile and South Korea have officially opened up their markets to Vietnamese dragon fruit.

President of the Binh Thuan Dragon Fruit Association Bui Dang Hung on Thursday said only radiated or heat-treated dragon fruit was acceptable for export to the two markets.

Also, dragon fruit farms had to be checked and granted licenses by the two countries’ plant protection departments under the ministries of agriculture if they wanted to export their products, he said.

Currently, businesses in the southern province of Binh Thuan are engaging in the process of receiving licenses from Chile and the South Korea, Hung added.

Early this month, out-of-season dragon fruits in Binh Thuan Province have been shipped to China at a high price of VND8,000 per kilogram.

A seminar is scheduled to take place in the northern province of Lang Son to help Chinese and Vietnamese businesses deal with difficulties when exporting dragon fruits to China in small volumes.

Binh Thuan has 12,300 hectares of dragon fruit trees, of which 2,100 hectares have been grown under VietGAP standards. The province’s main export market is Asian nations, especially China, with 70 percent of market share, followed by the US and European countries.

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Overseas investment totals $730m in first nine months

Viettel advertises its Metfone service on the outskirts of Sihanuokville in Cambodia. Authorities licensed 90 overseas investment projects worth $637 million in the first nine months of this year. — VNA/VNS Photo Ngoc Ha

HA NOI — In the first nine months of the year, the Foreign Investment Agency (FIA) licensed roughly 90 overseas investment projects totalling more than US$637 million and gave permission for 25 existing projects to raise their capital by $92 million, according to FIA statistics.

The FIA said besides the traditional markets of Laos and Cambodia, Vietnamese businesses this year also poured significant investment into Russia, Malaysia, Algeria, the US and Cuba.

Vietnamese businesses have so far invested more than $8 billion in more than 500 overseas projects.

Mining topped the list of Vietnamese foreign investment to date, totalling $3.58 billion. The service and agro-forestry-fishery industries followed with $1.12 billion and nearly $985 million, respectively.

Apart from big names such as the Hoang Anh Gia Lai Group, the Sai Gon Thuong Tin Joint Stock Commercial Bank (Sacombank), the Bank for Investment and Development of Viet Nam (BIDV) and the Army Telecoms Corporation (Viettel), several more enterprises have begun to invest overseas.

The Truong Thanh Furniture Corporation recently signed a MoU with a South African partner to build a $30 million processing plant in the city of Umshwathi.

It also plans to plant 10,000ha of trees in South Africa's Kwazulu Natal province.

"The important thing is not just quantity but the quality of projects and how effective they are, especially in helping local exporters," said deputy director of the FIA's Overseas Investment Division Vu Van Chung.

To facilitate overseas investment, the FIA is collecting feedback from businesses for the amendment of Decree 78/2006/ND-CP, which provides enterprises with guidelines on how to prepare an application to speed up investment registration procedures, Chung said. — VNS

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