VietNam Business

Monday, September 27, 2010

FDI flow turns to processing, manufacturing

Foreign direct investment (FDI) in the first eight months of this year
has seen changes with about 57 percent of the total registered capital
of 11.5 billion USD focused on processing and manufacturing technology
and production.

The processing and manufacturing technology
sectors are magnets for foreign investors, with total registered capital
of about 3.7 billion USD for 265 newly-licensed projects and 102
expanded others in the first eight months of 2010, after a standstill
during the 2006-2009 period.

Noteworthy are large-scale projects
such as the Hai Duong thermal electricity plant with registered capital
of 1.6 billion USD by Malaysia’s Jacks Resources, the Quang Ninh thermal
electricity plant capitalised at 2.1 billion USD by the AES-TKV Mong
Duong Electricity Co. Ltd, the 1 billion USD Vietnam Kobelco Steel
Company in Nghe An province, and the 360 million USD Posco SS-Vina
Company in Ba Ria-Vung Tau province.

The positive change is the
biggest difference in FDI structure compared with the same period
last year. According to the Ministry of Planning and Investment’s
Foreign Investment Agency (FIA), FDI in accommodation services accounted
for nearly 45 percent of the total registered capital of 13 billion USD
in the first eight months of 2009, and the proportion was reduced to 23
percent in the comparable period of 2010.

The change of FDI flow
in Vietnam is attributed to global and domestic economic recovery and
the government’s macro-economic management policy, experts said.

However, the change has not helped reduce the country’s trade deficit, excluding exports of crude oil.

According
to FIA statistics, although January-August exports from the FDI area
rose, its trade deficit reached 1.7 billion USD, accounting for 19.7
percent of the country’s total trade deficit.

The country’s FDI
attraction policy needs to consider both the target for development of
for-export production and the competitiveness of domestic investment
flow, according to James Riedels, economist of the USAID/STAR-Vietnam
Technical Assistance Project./.

Domestic air market becomes more competitive

The arrival of two new Vietnamese carriers Air Mekong and Blue Sky Air
is expected to stir up competition in the domestic market, which is
currently overloaded.

Air Mekong , Vietnam's third private air carrier, is scheduled to launch its maiden flight on October 10.

The airline has received delivery of four Canadian Bombardier CRJ 900
aircraft, owned by the US company Skywest Leasing. Each aircraft has
90 business and economy-class seats.

Truong Thanh Vu, Air
Mekong’s Commercial Director, said that his airline is currently waiting
for its Air Operator’s Certificate (AOC) from Vietnam’s Civil
Aviation Administration.

Air Mekong is scheduled to provide
passenger and cargo services on routes from Hanoi and Ho Chi Minh
City to Da Nang , Nha Trang, Da Lat, Phu Quoc, Con Dao, Ban Me
Thuot, Hai Phong and Vinh.

Meanwhile, Blue Sky Air, Vietnam’s first joint private airline, will focus on services for industry, the
agricultural and fisheries sector and the construction industry. It has
been allowed to use helicopters, seaplanes and other kinds of
airplanes.

Blue Sky already operates two airplanes and will
gradually increase its fleet to meet the market’s demand. The carrier is
registered to provide services on 20 routes to well-known Vietnamese
commercial and tourist areas such as Vung Tau, Ninh Thuan, Dak Lak, Con
Dao, Can Tho, Ca Mau and Phu Quoc.

Around 26.2 million passengers and 445,800 tonnes of cargo were transported by air in 2009, four times the number in 2000.

In the first seven months of this year, the country saw a 33 percent increase in air travel over the same period last year.

This number indicates that Vietnam’s air market has grown rapidly.

Vietnam has to date granted licences to nine operational
airlines, including Vietnam Airlines, Jetstar Pacific Airlines, Vasco,
Viet Air, Indochina Airlines, Mekong Air, VietJet Air, Blue Sky Air and
Trai Thien Air.

Of these airlines, Vasco and Viet Air are both subsidiaries of Vietnam Airlines and Trai Thien Air only provides cargo services.

The
national flag carrier Vietnam Airlines holds more than 80 percent of
all domestic services, which is attributed to the overloading of the
domestic market, particularly the routes from HCM City to Phu Quoc
and Da Nang./.

Commercial banks now cashed up

Commercial bank liquidity has improved dramatically since the State Bank of Vietnam injected a heavy volume of capital at reasonable interest rates into the open market in July.

The volume of valuable paper trading remained at about VND32-56 trillion (US$1.64-2.87 billion) from July to August.

It even climbed to VND110 trillion ($5.64 billion) in late June.

But the volume had fallen seven fold to VND7.72 trillion ($395.79 million) as of August 20.

"The reduction was very surprising," Thang Long Securities said in a report issued last week.

"It reflects the improvement in bank liquidity."

An Binh Bank's deputy general director Pham Quoc Thanh said: "A flexible monetary policy will help bank liquidity remain healthy until the year-end. Supply and demand will be balanced and interest rates will be stable."

In order to boost lending, banks like ABBank, Lien Viet Bank, HD Bank and Asia Commercial Bank are reducing borrowing costs to 10.7-11.7 percent per year for manufacturers, exporters, small and medium sized enterprises.

Commercial banks now cashed up

Commercial bank liquidity has improved dramatically since the State Bank of Vietnam injected a heavy volume of capital at reasonable interest rates into the open market in July.

The volume of valuable paper trading remained at about VND32-56 trillion (US$1.64-2.87 billion) from July to August.

It even climbed to VND110 trillion ($5.64 billion) in late June.

But the volume had fallen seven fold to VND7.72 trillion ($395.79 million) as of August 20.

"The reduction was very surprising," Thang Long Securities said in a report issued last week.

"It reflects the improvement in bank liquidity."

IFC to buy 10 percent stake in Vietinbank

Photo: Tuoi Tre

Vietinbank would sell a 10-percent stake to International Finance Corp (IFC) in October for US$190 million, Vietinbank chairman Pham Huy Hung said last week.

The price was set by the Government, the Ministry of Finance and the State Bank of Vietnam.

When the deal is finalized, Vietinbank will be the first partly-equitized State-owned bank to have obtained a foreign strategic investor within 20 months of its initial public offering (IPO).

Vietcombank was the first State-owned bank to go public in December 2007, but it has been struggling since to land a foreign strategic investor.

IFC, a financial arm of the World Bank, also agreed to lend $120 million o Vietinbank over 10 years at six-month LIBOR (London Interbank Offered Rate) plus a fixed margin of 1.5 percent.

Vietinbank also expects to sell another 10-20 percent to Canada's Nova Scotia Bank which will meet with Government representatives next month with the aim to finalize the Vietinbank deal in December.

Vietinbank is also planning to issue 392 million additional shares next month, of which 315.1 million will be offered to existing shareholders and the remaining 76.9 million issued to them as a dividend. The deadline for shareholders to register for participation is September 8.

Shares of Vietinbank (coded CTG on the HCM Stock Exchange) closed up 3.3 percent on Monday to VND22,200 per share.

In the first six months of the year, the Hanoi-based bank reported earnings of VND5.3 trillion ($273 million), of which revenues from business activities accounted for VND659 billion, forex services VND24.16 billion ($1.23 million), and other sources of revenue VND168.7 billion ($8.65 million).

After deducting VND813 billion ($41.69 million) risk provision, the bank posted a net profit in the first half of VND1.6 trillion ($83 million).

Vietinbank expects to increase its charter capital to VND23 trillion ($1.18 billion) by the end of the year, and the figure is slated to reach VND35 trillion ($1.8 billion) next year.

IFC to buy 10 percent stake in Vietinbank