VietNam Business

Sunday, January 23, 2011

Infrastructure projects seek investors

Can Tho asked to turn into hub of Mekong Delta

Vietnam is calling for infrastructure investment under the Public-Private-Partnership (PPP) model as funds from the State budget, Government bonds and ODA (Official Development Assistance) capital are insufficient to meet demand.

Dang Huy Dong, deputy minister of Planning and Investment, said Vietnam hoped to cooperate with Italian businesses to attract capital and exchange work experiences in infrastructure improvement.

Dong spoke at a conference on Vietnam's infrastructure development held in Ha Noi this week by the Ministry of Planning and Investment, in collaboration with the Italian Trade Commission and the Transport Ministry.

The Italian ambassador to Vietnam, Andrea Peregini, said his country had used the PPP model for several projects that were expected to be profitable in the future.

"Italian businesses are interested in highway projects in Vietnam because similar projects under the PPP model in Italy had been successful," he added.

Marco Saladini, Italian trade commissioner in Vietnam, said more than 5,000 kilometres of highway in Italy were built mainly under the PPP model by large European companies.

Apart from highway projects, Italy has used the PPP model for underground parks as well as electricity and transport-management projects.

Saladini said the Vietnamese Government had implemented an online auction for projects that was more transparent than in the past, creating a more favourable climate for investors.

He added that Italian businesses were committed to creating jobs for local workers at their projects in Vietnam.

In the 2006-10 period, investment capital for infrastructure development was about VND140 billion (US$28 billion) per year.

However, the need for transport, energy and environmental projects has not yet been met.

Dong said infrastructure improvement was the top priority for Vietnam because of increased development.

Vietnam needs to have 3,000-5,000km of highway, 300-400km of metro, and dozens of seaports in the next 10 years.

To meet the demand, Vietnam needs to attract billions of US dollars to develop infrastructure in the next five to 10 years.

To meet the demand, Vietnam needs to attract billions of dollars to develop infrastructure in the next five to 10 years.

Vietnam has used the PPP model to attract more private and foreign-direct invested capital for its projects, including the Ninh Binh-Thanh Hoa Highway and Dau Giay-Phan Thiet Highway. The two highways are expected to be completed by 2014.

Other projects using the PPP model include Highway No.1 Upgrade Project, Ha Noi-Lao Cai Railway, and Phnom Penh-HCMC Highway, according to the Ministry of Transport.

In the near future, Vietnam will call for more PPP and FDI capital for transport projects, such as Da Nang-Quang Ngai, My Thuan-Can Tho, Noi Bai-Ha Long, Dau Giay-Da Lat, Ben Luc-Long Thanh, the international port in Hai Phong and HCMC-Can Tho Highway.

Seminar seeks ways to better ODA

Vietnam needs to improve legal frameworks and institutions in its efforts to better the use of official development assistance (ODA), said an expert.

Head of an independent evaluation delegation Marcus Cox put forth the suggestion at a seminar which was held in Hanoi Friday to get feedback about a draft report on the performance of the Paris Declaration and Hanoi Core Statement on Aid Effectiveness.

Cox recommended Vietnam build the capacity of sector-level managers and utilise more objective assessment tools.

The draft report pointed out the fact that Vietnam ’s national development programme and its rapid growth have not relied on ODA aid capital, but the nation is still facing a lot of challenges in terms of institutions, making plans and decentralisation of power in ODA management.

A number of delegates said the report should give out specific figures and more detailed analyses of new aid methods, refundable and non-refundable aid.

Meanwhile, a representative from the National Assembly Office emphasised the necessity to enhance technical management rather than administrative measures, saying it is one of the most effective way to manage ODA.

The workshop was co-hosted by the Ministry of Planning and Investment and the Aid Effectiveness Forum (AEF).

Vietnam is one of 24 countries worldwide participating in the 2 nd phase of evaluation on the implementation of the Paris Declaration on Aid Effectiveness.

Savills predicts good future for HCMC property market

Savills predicts good future for HCMC property market Ho Chi Minh City’s property market has bright prospects ahead as demand for apartments and business space will grow alongside the economy, UK-based real estate service provider Savills said on Thursday.

The company both evaluates and trades in the market.

A positive demand trend remains in the city’s apartment segment, “fueled by increasing disposable income and growing migration,” Savills found in its quarterly report. During the 2004 to 2009 period, approximately one million people moved to HCMC.

The company forecast that apartment demand will be strong in the smaller-sized and reasonably priced (US$42,000- 79,000) apartment segment.

Savills said the third quarter witnessed the highest number of apartments absorbed into the primary market, at approximately 4,400 units, equal to total absorption over the first six months of the year. Supply also surged, reaching a record of approximately 16,600 units – nearly triple last year’s figure.

HCMC will see the construction of 10,000 new units in the next two quarters, the company said.

The city’s economy expanded by 11.2 percent in the first nine months with a gross domestic product of around $16 billion, official statistics showed.

Savills said in the mid and long-term, the economy is expected to continue growing rapidly. For this reason, demand for office space will also rise.

“Grade A office buildings are waiting for a new wave of foreign direct investment inflow; while Grade B and Grade C buildings depend much on the health of domestic investment,” according to the report.

By the end of 2010, 14 new office buildings will be completed and will add approximately 100,000 square meters net area to the market.

As for the retail segment, Savills observed that both occupancy and rental rates tended to decrease during the third quarter. Average occupancy fell around 2 percent compared to the previous quarter, to 94 percent. The average rent was $75.2 per square meter per month.

“Along with the rapidly growing economy of HCMC, the demand for daily products has been growing substantially as well as diversifying,” the report said. “This leads to a high demand for retail centres of a big population in HCMC.”

Savills said the retail market has strong potential in the mid-term as Vietnamese consumers are beginning to gravitate towards luxury brands, international franchises and domestic goods of high quality.

Savills predicts good future for HCMC property market

The company both evaluates and trades in the market.

The company forecast that apartment demand will be strong in the smaller-sized and reasonably priced (US$42,000- 79,000) apartment segment.

HCMC will see the construction of 10,000 new units in the next two quarters, the company said.

The city’s economy expanded by 11.2 percent in the first nine months with a gross domestic product of around $16 billion, official statistics showed.

Savills said in the mid and long-term, the economy is expected to continue growing rapidly. For this reason, demand for office space will also rise.

By the end of 2010, 14 new office buildings will be completed and will add approximately 100,000 square meters net area to the market.

Oil products pile up, no storage space

Oil products pile up, no storage space Vietnam’s first oil refinery is facing the problem of having huge stockpiles of products that it has no place to store.

The Dung Quat oil refinery has 750,000 tons of oil and gasoline products in stock and not enough space to store them, said Vu Quang Nam, deputy chief executive of state-owned oil and gas group

PetroVietnam. He told a Monday conference in Hanoi that the plant has been running at full capacity, or 30 percent higher than the plan for this year.

According to Petrolimex, a subsidiary of PetroVietnam that has more than a 50 percent share of the domestic fuel market, the refinery was not able to project its output accurately at the beginning of this year.

Petrolimex therefore had to sign contracts to import 70 percent of the fuel it needed and only planned to buy the remaining 30 percent from Dung Quat. These import contracts could not be canceled, the company said.

Deputy Minister of Industry and Trade Nguyen Cam Tu said fuel traders had placed import orders early this year to ensure sufficient supply for the market. But the refinery’s output was higher than expected, leaving the ministry with a difficult logistical problem on its hands, he added.

The ministry has ordered PetroVietnam and Petrolimex to work together and balance demand with domestic production and imports.

The Dung Quat refinery, which cost US$3 billion to build, is designed to supply about one-third of the country’s fuel demand this year. The government in August approved a plan to increase its annual capacity from 6.5 to 10 million tons.

Vietnam spent $4.9 billion on petroleum product imports in the first nine months, a 4 percent rise, while earning $3.7 billion from the sale of crude oil, down 22 percent year-on-year, according to the General Statistics Office.

Nguyen Hoai Giang, general director of PetroVietnam subsidiary Binh Son Petrochemical Refinery Co., the operator of the 140,000-bpd refinery, said Dung Quat has supplied 5.5 million tons of fuel products to the market since it began commercial production in February last year.

Giang admitted that the plant was having a problem with slow sales right now. However, it will continue purchasing crude oil and maintain its production schedule, he said.

In the long term local fuel traders should build more storage facilities with a total capacity of 800,000 to one million tons, then “there will be no problem,” he said.

Vietnam plans to build two more refineries, aiming at self-sufficiency in oil products by 2015. Previously, the country had to import all of its fuel products.

Be original, add value

Local firms advised to realize economic potential of creative industries

Vietnamese footwear products displayed at a shopping mall in Ho Chi Minh City. Experts say local products need more distinctive designs to make a bigger mark in both export and home markets.

Local enterprises should get involved in and take advantage of creative industries to add value to their business, experts said at a meeting held in Ho Chi Minh City last week.

They said although the industries, which cover a range of activities like advertising, designing, performing arts, architecture, crafts, toys and games, were relatively nascent in Vietnam, they had the potential to make significant contributions to the national economy.

At the meeting organized by the Vietnam Creative Enterprise Network in HCMC, Edward Gomez, a Filipino design consultant, and Vietnamese fashion designer Ngo Thai Uyen shared their ideas about global market trends and creativity with participants from the textile, garments, advertising, plastics, furniture, communication and shoe-making industries.

Gomez said many buyers and consumers were seeking unique products that combine ethnic elements with contemporary designs.

He said competition at the low-end segment was strong and required significant production capacity while the luxury market focused more on distinctive designs, higher quality and smaller quantities with greater flexibility in pricing.

Gomez also said that buyers were now seeking other suppliers than Chinese firms that were now focusing on their home market.

Dang Vo, chairman of the network, told Thanh Nien Weekly that creative industries are becoming an increasingly important component of the national economy. The government should see it having the potential to make significant contributions to the country’s gross domestic product and issue policies to support its development, he said.

The development should start from training, said Tran Ngoc Danh, managing director of Arts and Design School, a member of the Creative Enterprise Network.

Danh said the school, supported by the British Council, would start its first training course next month that focuses on creative skills for designers in key export industries like furniture, garment, plastics, handicrafts and toys.

Tu Minh Thien, director of the Investment and Trade Promotion Center, said HCMC authorities considered the industries essential for growth.

“Authorities want the development of the city attached to the added value provided by creative industries,” he said at a meeting held July to announce the city’s Creative Saigon 2010 Plan to develop four of the creative industries, including communications, interior décor, information technology, and packaging and labeling.

Thien said the plan aimed to promote designing activities through training courses, fairs and contests.

The British Consul General in HCMC, Tim Brownbill, said his government considered assisting Vietnam in creative industries as a strategy to further its trade and investment relationship with Vietnam.

Britain is one of the European states with a strong development of creative industries, earning 5 percent of the nation’s total exports.

No parallel

Globally, creative industries rake in revenues of US$3 trillion and account for a significant part of national economies in Asia, said Thien.

Thien said the industries added 12 percent to Thailand’s GDP, 6.5 percent to Indonesia, 5.8 percent to Korea and 5 percent to the Philippines, but in Vietnam, this was miniscule.

Danh of the Arts and Design School said the furniture, interior décor and advertising industries have grown strongly in the country, luring investment from foreign firms and their supporting agencies.

However local industries were not making full use of the creative potential, he said.

Most export-oriented industries are implementing contracts where the importers supply the designs, and this is negatively impacting their own creativity and competitiveness, he added.

Vo Van Yen, deputy head of the Gia Dinh Textile and Garment Corporation’s Sales Department, conceded the corporation has not invested much in designs for both domestic and export markets.

“The designs that we create are mostly based on consumer trends or that used by other producers.”

The network’s chairman Vo said many local firms were yet to develop their design functions as they were afraid of being copied, while other firms worried about how much they would cost.

They were also not accustomed to outsourcing their design needs, said Danh.

Ong Din Han, country manger of Global Sources, said local firms should change their mindset about creative industries and invest in them. They would otherwise find it difficult to get new customers, he said. Global Sources is a Hong Kong-based service firm that connects buyers and sellers globally.

Vietnamese furniture was unique in the international market but other products like handicrafts did poorly in attracting customers, said Han. His company would hold a fair for Vietnamese export products next year to showcase their creativity, besides quality and prices.

Saturday, January 22, 2011