Exports to Japan surge by 65 pct
Vietnam’s exports to Japan in the first quarter this year showed a sharp increase of 65 percent over the same period last year.
This was put down by Vietnamese ambassador to Japan Doan Xuan Hung to a large turnover from fine art and handicraft products.
Other high export earners included bamboo items (US$4.5 million), porcelain and ceramics (more than US$21.5 million) and wood furniture (US$120 million).
Electricity loss estimated at $310.4 mln in Jan-May
Total electricity loss in the first five months of this year still remained high, estimated at some VND6.5 trillion ($310.4 million) in value, according to a recent report of the Electricity of Vietnam Group (EVN).
With the average electricity price of VND1,242 per kWh, the total value of electricity loss was equal to the total investment for Dong Nai 6 and 6A hydropower projects which are proposed to be invested by Duc Long Gia Lai Group.
The electricity loss in the period was over 5.3 billion kWh, or 11 percent of the total electricity production and purchase, said the report on electricity supply situation in the first five months of 2012.
The ratio is exceeding the target of electricity loss ratio at 9.5 percent set by EVN for 2012.
Particularly, electricity production and purchase was estimated at 46.34 billion kWh, of which, the commercial electricity (electricity sale for households) in January-May reached 40.98 billion kWh, according to EVN’s report.
Vietnam’s electricity loss ratio is at high level compared to that in the Philippines, Singapore, Malaysia, Indonesia or Thailand which have the electricity loss ratio of about 4-5 percent only, according Tran Viet Ngai, chairman of Vietnam Energy Association.
The reasons were attributable to old transmission lines, overloading, locking connectors, distribution wires, and old substations, Ngai said.
These technical losses accounted for up to 50 percent of the total electricity loss volume.
In addition, there are also commercial losses due to electricity theft in rural areas and industrial production firms making up the rest of about 50 percent of the total electricity loss.
EVN is striving to reduce the ratio to 8.9 percent by 2015, he said.
Six years ago, seeing the too high electricity loss, even up to 25 percent in rural areas, the government asked EVN to find solutions to reduce the ratio to one-digit level.
With the Decision No 276/2006/QD-TTg issued in April 2006, the prime minister fixed the electricity loss ratio for the whole system to 8 percent in 2010 for EVN to reduce management costs and electricity loss.
However, according to EVN’s report by the end of 2011, the power loss still remained high at 9.5 percent.
Early this year, EVN retained its electricity loss in 2012 at 9.5 percent, remaining unchanged from 2011, also at 9.5 percent, according to the Ministry of Industry and Trade, citing EVN’s business, production and development investment plans in 2011-2015 period.
In addition, in 2013, the group estimated the electricity loss would increase to over 9.7 percent.
According to a specialist in energy sector of the ministry, when evaluating the aforementioned plan, the evaluation unit planned to require EVN to supplement the analysis for the reason why this group cannot reduce the electricity loss; even it estimated a higher electricity loss by 2013.
In the scheme to reduce power loss in 2009-2012 period approved by the Ministry of Industry and Trade, the electricity loss in 2011 was 9.5 percent and it is expected at 9.1 percent in 2012.
Comparing with EVN’s report in Jan-May 2012, the electricity loss ratio has exceeded the group’s target to control the power loss ratio at less than 9.5 percent for the whole year 2012.
According to minister of industry and trade, Vu Huy Hoang, to ensure the energy security for the country, Vietnam is diversifying power generation sources.
However, local resources such as coal and oil and gas are depleting. Therefore, Vietnam may have to import energy by 2015.
Fuel prices fail to dent taxi fares
Transport enterprises have not adjusted their fares even though retail prices of diesel and petrol have fallen by VND1,400-1,900 (US$.07-.09) per litre since early last month, according to the Tuoi Tre (Youth) newspaper.
Ngo Tri Long, an economic expert, told the newspaper that petrol and diesel accounted for 35-40 per cent of transport costs and that companies must reduce their prices.
According to state law, transport services are part of a list of products and services whose prices should remain stable.
To keep their profits at the highest level, companies are ignoring consumer benefits, according to Long.
Long also said that companies should be strictly supervised by the Ministry of Finance if they do not lower prices.
However, Bui Danh Lien, president of the Ha Noi Transport Association, said that such companies could not reduce prices even though fuel costs had fallen.
Lien explained that the haulage business sector was facing a lot of difficulties due to increasing spending on several items, such as a five-per-cent increase on a coach station fee and higher wages for drivers as well.
In addition, the volume of commuters had fallen significantly compared to the same period last year, according to Lien.
Dinh Van Sau, chairman of the board of directors of the Ha Noi-based Huong Lua Taxi Company, said it might consider reducing taxi prices in the near future.
The HCM City Cargo Transport Association also revealed that it had not received any reports from its members on the reduction of transport prices.
Some enterprises that provide container services from HCM City to neighboring provinces such as Binh Duong, Dong Nai and Tay Ninh said they were figuring out all the costs to see if they could reduce prices.
If possible, they would lower costs by VND50,000 (US$2.4) per trip, they said.
Hoa Binh offers incentives to lure investors to IZs
The industrial zones (IZs) management board in the northern province of Hoa Binh has introduced provincial investment incentives and administration reform.
The IZs management board, which is often responsible for directing companies to strictly follow regulations on environmental protection and fire prevention and fighting, claims that the reforms will speed up new projects.
Since 2007, Hoa Binh has granted 52 investment licenses, including two with capitalisation of more than VND70 billion in the first half of this year.
Currently, the province has 49 projects with a combined registered capital of US$334.8 million. 26 projects have been put into operation with a total revenue of VND3,000 billion, exports of US$47 million, and imports of US$23 million. Collectively, these contributed VND80 billion to the provincial budget and generated nearly 4,000 jobs for local people.
Do Hai Ho, the head of IZs management board said during 2011, despite impact of the economic downturn, the provincial IZs attracted three direct foreign investment projects worth nearly US$100 million.
Ho added that in spite of such achievements, IZs development is still hindered by obstacles, such as slow implementation of projects.
Administration reform will cut preparation time for businesses, and allows projects to become operational quicker, Ho said.
In addition, only a few IZs which have been invested into infrastructure came to fruition.
To help these IZs run effectively in the future, the province will select potential and feasible projects which are of high-added values, make a significant contribution to the provincial budget and ensure social welfare and environmental protection. It will build houses and provide social services for workers.
Ben Tre urged to curb coconut cutting wave
With farmers in the coconut kingdom of Ben Tre Province jostling to chop down their coconut trees due to steep price drops, an official from the Vietnam Cultivation Agency urged that the southern province should enact measures to stop the trend.
“Coconut trees are not like orange, tangerine, or longan – you cannot just cut them down whenever you want,” Phan Van Du, the agency’s deputy head, said in an interview with Tuoi Tre Sunday.
Ben Tre farmers said they could no longer withstand the recent record low price of coconuts, with one costing a mere VND800, or US 38 cents.
But Du said it is just the normal “hold and cold” state of the market, implicating that prices will soon return to higher rates once the global economy recovers.
“Hence, Ben Tre farmers have to stay calm, and try to wait for another time,” he advised.
In the meantime, he suggested that the provincial authorities should provide support to farmers amid this hard time.
“No one can live with the VND800 gained from each coconut.
“The industry and trade authorities should assist local businesses to find outlets for products made from coconuts.
“What’s important is to remind farmers to not grow the fruit en mass, which will lead supply outstripping demand, sending prices down,” he said.
Du added that the cultivation agency has recently encouraged farmers to grow cocoa and other plants in their coconut gardens to improve income.
Some households did follow the advice, and gained considerable money, he said.
Meanwhile, Nguyen Van Hieu, chairman of Ben Tre People’s Committee, insisted that only a minority of local farmers rushed to empty their gardens.
“I believe that they will not chop down the trees, even though they are suffering from the dirt cheap prices,” he told Tuoi Tre.
“What will they live on once the trees are all felled?”
He said provincial authorities and businesses have worked with each other to try to craft a solution several times.
Businesses did try to buy at considerable prices, but soon failed to maintain tem, he said.
“We also encouraged farmers to grow other plants in the coconut plantations, but the coconut market is not only sluggish in Ben Tre or Vietnam alone, but also all around the world.
“Our effort is like building a castle in the air.”
He added that the market fluctuations are unpredictable.
“The market faced a severe supply shortage in the last months of last year, and Chinese traders bought at a high price of VND120,000 a dozen, but the current price is only one tenth of that rate,” he said.
“As far as I know, coconut prices in Indonesia are much higher than in Vietnam, but Chinese traders are now buying there — it’s their strategy, and we cannot intervene.
“But soon they will return to buy from Vietnam,” he stated.
Last May, Ben Tre hosted a coconut festival which cost some dozens of billion of dong, a sum the public has recently criticized for being wasteful, claiming the money would have been of better use if it had been given to assist farmers.
But Hieu denied this, saying the money was mobilized from the private economic sector rather than the provincial state budget.
“The festival was intended to introduce the image of Ben Tre coconuts and boost trade, which of course does not happen overnight,” he asserted.
Exporters face tough months ahead
In the first five months of the year, Viet Nam’s export revenues reached US$42.9 billion, a year-on-year increase of 24.1 per cent. However, things may not go smoothly in the coming months even in sectors considered to be the country’s biggest export earners, experts say.
The textiles and apparel industry, for instance, exported goods worth over US$1.1 billion in May. It was the third consecutive month that the industry saw a decrease in export revenues.
Consequently, the industry’s export value in the first five months of the year was only US$5.3 billion, up by only 7.7 per cent – much lower than in previous years.
The second and third quarters are known to be the apparel and textile industry’s peak season. However, most enterprises are finding it difficult to get export orders. Some enterprises have won orders but their value has decreased significantly.
Meanwhile, the industry is also facing many other obstacles including a shortage of capital and raw materials for production, increasing input costs and environment fees, decreasing purchasing power in both domestic and overseas markets, and increasing inventory volumes.
A similar situation can be seen in the footwear industry. Prolonged economic recession in the industry’s main export markets has resulted in a sharp decrease in the number of orders won by enterprises.
Although the fisheries sector still achieved a positive growth rate in the first months of the year, its profits from domestic and overseas business activities have dropped sharply.
Since the beginning of the year, the number of enterprises involved in seafood export has decreased by 40 per cent. The main reason for this slowdown is that they are not able to buy enough raw materials and maintain production, with farmers refusing to sell on credit. Many seafood companies do not have enough capital to pay the farmers.
It is estimated that about 30 per cent of seafood firms are in danger of stopping operations or closing down.
Senior economist Le Dang Doanh says rising input prices of raw material in combination with decreasing consumption in the world market are major obstacles facing Vietnamese exporters.
He said the Government should come up with effective measures to support export firms at this time.
The Ministry of Industry and Trade has denied allegations that it is at odds with the Ministry of Agriculture and Rural Development over a proposal to shore up the price of sugar by increasing reserves.
In March this year, the agriculture ministry proposed the purchase of 200,000 tonnes of sugar for temporary storage with a zero lending interest rate for companies participating in the scheme.
The trade ministry gave its official reply in May.
The decision issued by Deputy Minister Hoang Trung Hai on May 28 says that there will be no lending rate support for sugar stockpiling. This decision was based on actual market movements and inventories at the time, the trade ministry said.
The ministry said it also suggested against offering the interest subsidy because sugar prices did not drop in February and March and actually picked up in April.
The price is expected to continue to rise further in the coming months given rising demand in the pre-harvest period.
This is because the demand for sugar among households and businesses in summer and the upcoming mid-autumn festival will surge, thus pushing up prices. Hence the trade ministry did not support the proposal to rescue sugar refineries when prices were down.
However, the trade ministry’s response came too late, critics say.
They note that the agricultural ministry’s proposal for temporary storage of sugar was made in March when a large amount of sugar remaining unsold at factories.
As of May, this quantity was estimated at 344,000 tonnes.
The volume of unsold sugar had declined when the trade ministry sent its official reply turning down the agriculture ministry’s proposal.
Due to the slow response from the trade ministry, many sugar refineries sought ways to export about 200,000 tonnes of sugar to China via unofficial channels.
Explaining this move, sugar companies said that in March they lacked funds to buy sugarcane while their inventory was increasing and bank loans were falling due, so they wanted the Government’s support to stockpile sugar.
Project set to connect Ly Son to power grid
The Government has planned to spend around VND300 billion (US$14.4 million) to connect over 20,000 residents of central Quang Ngai Province’s Ly Son Island to electricity.
Under the initial schedule, a 26-km underground cable will start from the province’s Sa Ky Port to Ly Son Island with a capacity of 10MW. The project is scheduled to finish after 27 months and provide 24 hours of daily electricity for local islanders.
The move came after a range of projects aimed to provide electricity to the island failed operate for many years due to the low selling price of electricity not covering the big investment capital.
The Power Engineering Consulting Joint Stock Company 2 has finished surveying activities on the island and is ready to start construction.
Quang Ngai Power Company has provided electricity only six hours a day after 5pm for the past ten years in the two communes of An Hai and An Vinh, said Tran But, chairman of the An Vinh Commune.
Agricultural and fishing activities in the commune have met with difficulties due to lack of electricity, But said.
The islanders had to use oil or charcoal to replace electricity for both daily life and production activities. Some used an electric generator to pump water for crops, he said.
The islanders always hoped to be provided with electricity 24 hours per day, But said.
If the electricity is provided all day, it not only helps boost sectors of agriculture and fishery development but also facilitates tourism development on the island, he said.
The company suffers an average loss of VND10 billion ($480,700) each year, said Le Thanh Tung, director of Ly Son Power Division.
The company pays about VND8,400 to produce 1 kWh of electricity, while the average selling price of electricity costs VND746 per kWh.
The average selling price of electricity now costs VND1,034 per kWh.
The company still makes efforts to provide electricity for local islanders and ensure national security and defence in territorial waters of the country, he said.
Ly Son District, covering 14sq. kilometres, is about 24 kilometres far from the mainland and has a population of over 20,000.
Credit loans still out of reach for small businesses
Even though banks are now offering credit loans and various support packages at low interest rates of only 14 per cent per year, many small and medium businesses are finding it difficult to access bank loans to save themselves from bankruptcy.
Bank loans inaccessible
To help small businesses recover from the economic crunch at the moment, banks were requested by the State Bank to lower loan interest rates from 15 per cent last month to 14 per cent. However, credit is not reaching the needy.
According to Dinh Thi Kim Cuc, director of Phuoc Thinh Nhom private company, due to a 50 per cent decrease in orders in the first six months of 2012, she had to temporarily halt many projects. Moreover, her customers only made small part payments of VND30-50 million at a time (approx US$1,428.6-2,381) while earlier she could invest billions of dong at one time in a project. She now has no choice but to borrow money at sky-high interest rates of 28-29 per cent per annum.
Now, after hearing of the new low interest rate package, she immediately applied for a loan from many banks. But the answer she got was not what she was expecting.
Asia Commercial Bank agreed to a loan at 17.6 per cent annual interest rate, provided she mortgage her company. Kien Long Bank did not ask for a mortgage but offered loan at a high 24 per cent per year. Because of this big difference in interest rates, she finally decided to apply in the first bank.
Tran Quoc Manh, general manager of Saigon Trade and Production Development Corporation and vice president of the Handicraft and Wood Industry Association in Ho Chi Minh City, stated that the loan rate at 15 per cent a year was not accessible to every business. Since banks prefer strong companies rather than struggling ones, it is quite ironic that many healthy businesses can easily obtain this low interest rate loan while those who really need it cannot!
The problem therefore lies in the collateral. Small and medium businesses earlier used their own company as collateral to acquire loans, but now with nothing to hold as security, loan applications are being refused.
With a loan interest rate of only 7-8 per cent per year, businesses can clear the credit fund in 5-6 turnovers. However, with the rate at 15 per cent and insufficient orders, they can barely manage to pay back in about three turnovers at best, let alone show profits. Only when the loan rate is at 10-11 per cent can small companies show profits.
Though it’s not fair to solely blame banks for this problem as they also need to manage credit funds, they do show preferences and are extremely picky when doling out loans.
In the first five months of 2012, the credit growth of many banks showed in minus numbers, even though available credit funds are surplus, especially in banks in the First and Second Groups with an average annual credit growth of 15-17 per cent. Under heavy bad debt, all these banks are hectically seeking customers with feasible projects or any healthy company to offer loans.
According to Tran Phuong Binh, President of Dong A Bank, many banks will face losses in the near future because the current capital raising rate is at 11 per cent a year while treasury bills are sold at a lower rate of only 4 per cent per year, plus a low inter-bank lending rate.
Despite a wish to increase credit growth, banks are very cautious when granting loan applications to avoid bad debts in the future. They are in keen competition for prospective customers, creating a situation where healthy companies are allowed various choices whereas struggling ones still cannot access a loan as wished and have to borrow money at a much higher rate.
An economic guru once said that since banks were also commercial organisations, it is no wonder that they are careful in their actions and sought profits for themselves. The only problem is that banks have already received many privileges and made so much profit while other businesses have had nearly no support at all, hence bankruptcy is affecting many weak companies of late.
According to Truong Thi Thuy Nga, director of Vietcombank in Ho Chi Minh City, the bank has no bad debt at the moment. However, they are very reluctant in granting loans because they want to avoid adverse economic impact on existing healthy companies, keeping them from paying back their debts in time.
Vietnam seen as attractive destination for insurers
The young population and low rate of insurance penetration in Vietnam are among elements making the country an attractive destination for local and foreign insurance and financial services companies, experts told a seminar on Thursday.
“We find the Vietnamese insurance market exciting because it is still a very young, emerging market… that provides wonderful opportunities for life insurance companies,” said Kevin McWhinney, managing director and international partner for Limra and Loma company.
He told the Daily on the sidelines of the 2012 Limra and Loma Strategic Issues Conference opening on Thursday at the hotel InterContinental Asiana Saigon that there was much room for insurance growth in Vietnam as only some 5% of the Vietnamese population own life insurance policies.
“There are some 5% of Vietnamese people owning life insurance on Friday, while in mature markets like Hong Kong or Singapore insurance have been there for many years with 40% – 60% of market penetration,” McWhinney said.
The 20th annual conference themed “Generation Next: What Does the Future Hold?” attracted over 200 chief executive officers and key staff at financial services companies from dozens of countries.
The two-day event offers a platform for participants discussing emerging trends and developments in marketing, distribution and corporate management. Some 20 key speakers talked about strategies and technologies that insurance companies must embrace to capture consumers’ attention.
Jack Howell, chief executive officer of Prudential Vietnam Assurance Private Ltd, echoed McWhinney’s remarks, saying that Vietnam market offers a lot of opportunities to insurance companies.
He, however, said that every market has challenges, and one of the biggest challenges is how to help customers understand the benefits of insurance, educating them to buy right products and to understand what they buy and appreciate the value they buy.
Howell said the local insurance market is witnessing increasing competition, but that is good for the market as it gives customers more options in looking for the products they need.
Home loans more affordable
While property firms are adjusting their sales policies to seek customers, banks are pulling down lending rates to attract individuals seeking home loans.
The interest rates for real estate loans have been reduced since last month. At some banks, the lending rates are now less than 15%.
For example, Vietcombank on Wednesday revised its lending rate down one percentage point to 13%, applicable to the VND2 trillion package for loans taken for house purchase, construction or repair. The lending package is available until September 21.
At a meeting between the central bank’s branch in HCMC and the city’s government on Tuesday, Truong Thi Thuy Nga, director of Vietcombank’s HCMC branch, said her bank is still disbursing this package and wants to offer conditions for enterprises to access bank loans.
Meanwhile, Bank for Investment and Development of Vietnam (BIDV) has launched a lending package worth VND4 trillion for customers of BIDV-funded projects.
A representative of BIDV’s second transaction office in HCMC said the bank has disbursed capital for two projects developed by Hoang Anh Gia Lai Group, namely An Tien and Phu Hoang Anh.
These projects have given homebuyers many discounts, thus the buying demand is picking up. BIDV currently applies a lending rate of 12%, or 13% at most, which started from June 1.
Similarly, Asia Commercial Bank (ACB) is offering a VND7 trillion lending package for consumer loans, including home loans, at an interest rate of around 15.5%. Vietnam International Bank (VIB) has rolled out a property lending program with a lending rate of 14.2% for the first three months.
Le Hoang Chau, chairman of the HCMC Real Estate Association (HoREA), said real estate should be included in the list of prioritized sectors subject to preferential lending rates, to create favorable conditions for property developers and homebuyers so that the market will regain its liquidity. In addition, realty companies should be allowed to join debt restructuring to settle old debts and take out new loans, said Chau at the meeting on Tuesday.
Tran Minh Tuan, deputy governor of the central bank, said commercial lenders should support customers of property firms with projects near-completion or those currently on sale. Tuan said he would suggest classifying real estate as a prioritized sector to enjoy the preferential lending rate cap of 14%.
Huynh Kim Doan, director of Eden Real Co., said many project owners are adjusting their policies to lure customers. Specifically, buyers can make down-payments equivalent to half of the apartment’s value and pay the rest by installment within 1-2 years with lending rate support.
This was given at the second Settlement Week organized by Eden Real and Gia Phuc Media Co., which takes place from June 7 to 10 at the Saigon Exhibition and Convention Center in District 7.
Doan stated people still want to buy properties even in the current tough time. Therefore, enterprises are offering homebuyers flexible payment methods, coupled with competitive prices.
For instance, Tan Binh Construction and Investment JSC is offering the remaining 60 apartments of the Tan Mai project in Binh Tan District at VND700-950 million each. Buyers will pay installments over 36 months after a down-payment of 50%.
Similarly, Quang Thai Co., owner of Quang Thai Apartment in Tan Phu District, is offering the remaining flats at VND13.9 million per square meter, applying the same payment method. Many other projects also join the home sale week.
NA finds SOEs troublesome
Minister of Finance Vuong Dinh Hue took his time as a deputy of the National Assembly (NA) to talk about State-owned enterprises (SOE) that have been blamed by other deputies for inefficient investments, losses and wastefulness.
As of end-2010, the total assets of the State economic sector had reached VND1,799,000 trillion, or US$88 billion, including VND1,088,000 trillion worth of liabilities, Hue said at a NA discussion session on Thursday.
SOE equity made up 40%. “This means with every VND100, VND40 belongs to the State and VND60 is borrowed. Such a ratio is not so high, not so low in comparison with other countries,” he explained.
Also in 2010, SOE earned some VND162.9 trillion in profit, surging 66% year-on-year, while accumulated losses totaled VND26.2 trillion, added the minister.
Inspector General Huynh Phong Tranh of the Government Inspectorate revealed the inspection results at five State conglomerates, namely PVFCCo, Vinachem, PVN, Vinatex and Vinalines, at the end of 2011. The inspectors detected misuse of more than VND30 trillion, waste and poor management.
“We have yet to find any loss,” stated Tranh. He said the violations of Vinashin had been transferred to police to clarify.
The explanations of the deputies who occupy important roles in the Government did not satisfy other deputies.
Deputy Le Nhu Tien of Quang Tri Province said voters are really concerned about the “iron fists” of the economy, which mean State groups and corporations.
He said after the cases of PMU 18, Vinashin and most recently Vinalines, each causing losses, waste and debts worth tens of trillions of dong, voters are anxiously waiting to see what State conglomerate would be next.
State groups and corporations are holding as much as VND700 trillion in equity, even larger than the annual State budget revenue, yet their business performance does not meet the State investment and people’s expectations.
He complained every time SOE ran into trouble, the State would be the savior, and this explains why many enterprises do not want to go public for fear their privileges are gone after equitization.
US$60 million can factory opened in Binh Duong
TBC-Ball Beverage Can Vietnam Limited Company on Thursday commenced the operation of its US$60 million aluminum can manufacturing factory in the southern province of Binh Duong.
The plant will have an initial annual production capacity of 850 million cans, mostly supplying contracted customers in Vietnam as well as some beverage producers in neighboring countries, according to the company. The new facility covers eight hectares in Vietnam Singapore Industrial Park II Expansion (VSIP II Expansion) in the province’s Tan Uyen District.
TBC-Ball Beverage Can Vietnam Limited Company is a 50:50 joint venture between Ball Corporation of the U.S. and Thai Beverage Can Limited (Thailand).
* Fujikura Fiber Optics Vietnam Co., Ltd (FOV) on Wednesday announced the official operation of its second factory at VSIP I. The one-hectare expansion of FOV was kicked off since the success of its first plant in VSIP I from 2001.
This second project will turn out fiber optic components for use in telecommunication and data communication systems with the high technology transferred from Fujikura Group in Japan.
VSIPs in Binh Duong have this year to date attracted an additional US$468 million in total registered investment capital, an increase of 60% compared to the same period last year.
Hanel pitches for big Daeha stake
Hanel has finalized the deal to become the sole owner of the Daeha Business Centre.
Although related bodies in the Daeha Business Centre joint venture declined to comment on the deal, a Hanoi People’s Committee source said that Hanel had not faced any difficulties in taking over 70 per cent stake from the foreign partner Daewoo E&C in the Daeha complex, which include the five-star Daewoo hotel, an apartment building and office tower.
The deal was initiated in 2010, when Hanel, which held 30 per cent stake at that time, and Lotte proposed options to buy into the complex. In July 2010, Daewoo told Hanel about its plan to sell stakes to Lotte.
In January 2011, Daewoo and Lotte signed a memorandum of understanding, with Lotte to pay $111 million to own 70 per cent of Daewoo’s stake in the joint venture.
In March 2011, Hanel proposed to pay Daewoo $90 million, plus some other sweeteners.
Daewoo then proposed Hanel pay a further $6 million, raising the transaction value to $96 million to outbid Lotte.
Hanel also said it offered an easier deal as it is a Vietnamese company and a joint venture partner, which meant a shorter time for finishing purchase procedures and would allow Daewoo to further cooperation between two sides.
The Daeha complex consists of 411 hotel rooms, 193 serviced apartments and more than 21,000 square metres of office for lease and is popular with Korea’s business community.
The complex was built in 1996 under the instructions of former Daewoo chairman Kim Woo-Jung to stand symbol of the group’s global management. The joint venture was named Daeha Joint Venture Limited.
According to Korean newspaper MK Business News, after 18 years of operation under the form of joint venture to 2011, the Daewoo hotel was expected to need a further three years to come to the “investment recovered point”, while the project’s certificate was 49 years long.
The Daeha joint venture is not the sold cooperation between Daewoo and Hanel. In 1994, Daewoo Hanel Electronic Joint Venture was born to manufacture electronic appliances and Daewoo Hanel Joint Venture to operate Sai Dong A Complex. However, in 2006 the Sai Dong A complex lost its certificate when Daewoo could not prove its financial ability to undertake the project.
SMC-SUMMIT to transform market
The joint venture testifies to SMC’s great strides in strengthening its position as the top steel distribution and processing business in Vietnam – Nguyen Ngoc Anh,chairman of SMC
Japan’s leading multi-field group and Vietnam’s top steel distributor and processor have hooked up to boost Vietnam’s steel industry. SMC-SUMMIT, a joint venture between Vietnam’s SMC Trading Investment and Japan’s Sumitomo Corporation, celebrated its debut last week.
The joint venture, located at Phu My I Industrial Park in southern Ba Ria-Vung Tau province, has initial capital of $4 million. SMC holds half of the venture’s stakes, with Sumitomo Corporation (30 per cent), Sumisho Tekko Hanbai (15 per cent) and Sumitomo Corporation Vietnam (5 per cent) holding the rest.
SMC-SUMMIT will operate in mechanical, processing and coated metal, export-import and distribution of steel products including processing and fabricating structural and construction steel. It will have an annual capacity of up to 30,000 metric tonnes in the first phase and an increase to 100,000 metric tonnes in the second phase.
The new joint venture will prioritise developing new products for Vinakyoei steel joint venture such as custom-made construction steel products. SMC-SUMMIT will also export/import and distribute other steel products such as HRC and CRC.
“The joint venture testifies to SMC’s great strides in strengthening its position as the top steel distribution and processing business in Vietnam,” said Nguyen Ngoc Anh, chairman of SMC.
He added that the joint venture’s key products were high-quality custom-made steel, which would be consumed at home and abroad, particularly in Japan and South Korea.
Anh said SMC-SUMMIT benefited from Sumitomo’s expertise and 25 years experience in steel processing and a nationwide distribution network as well as warehousing and transport facilities in Vietnam.
He also revealed that SMC-SUMMIT would increase its capital to at least $10 million in and install advanced production lines and equipment to diversify its products. “The cooperation will benefit not only SMC, but also Sumitomo Corporation and particularly the Vietnamese market will have one more steel processor and distributor with the best products,” Anh said.
SMC and Sumitomo Corporation started negotiations on setting up the joint venture in July 2010. SMC-SUMMIT was licenced in February 10, 2012 and was granted investment certificate by Ba Ria-Vung Tau Industrial Zones Authority.
Meanwhile, deputy minister of Industry and Trade Nguyen Hai Nam said SMC-SUMMIT was established on the basis of cooperation between SMC and Sumitomo Corporation to implement the companies’ long-term strategy. Sumitomo is one of the leading corporations in Japan, thus choosing Sumitomo to be a partner in the joint venture showing SMC’s vision, long-term oriented development and sustainability.
“I believe that SMC-SUMMIT will reap successes, build a strong brand reputation and credibility to become an effective joint venture of Vietnam’s steel industry,” he noted.
Ho Van Nien, vice chairman of Ba Ria-Vung Tau People’s Committee, said in the context that Vietnam and Japan were trying to promote the comprehensive strategic partnership the Vietnamese government encouraged Japanese investors to expand investment in Vietnam.
The event is a good sign to mark the flow of Japanese investment in Ba Ria-Vung Tau and is also a good opportunity to promote the long-term cooperation, to take full advantage of favourable conditions in order to exploit and enhance great potential for cooperation.
The province’s investment strategy would focus on the supporting industry and logistics to attract strategic investors, especially small- and medium-sized Japanese enterprises. Currently, the province was focusing on preparing a favourable investment environment and policy systems for attracting new investment from Japan, Nien noted.
“The birth of SMC-SUMMIT is a demonstration of the joint cooperation between the investors and the local government to support the provincial socio-economic development. With experience and prestige of the parties who participate in the joint venture, accompanying with strong leaders, dynamic and innovative team members, SMC-SUMMIT will quickly implement the project to produce products with high quality, competitiveness and environmental protection,” he said.
Sumitomo is one of leading corporations in Japan which possesses the hot-rolled steel factory Sumitomo Metal and a wide network of “Coil Centres”. The corporation has active in Ba Ria-Vung Tau province for many years.
Meanwhile, SMC is a leading steel distributor and processors in Vietnam with the market-share accounting for some 5 per cent in the country. Last year, despite a slump in the local steel industry, SMC made total revenues of more than VND8.9 trillion (429.8 million) with sales volume of around 555,000 tonnes, a jump by 5 per cent against the previous year.
After 23 years in operation, SMC has built an extensive distribution network with six member companies and a branch, including two steel mills located in Phu My I Industrial Park in Ba Ria-Vung Tau, whose total production in 2011 amounted to 80,000 tonnes of hot-rolled steel and 40,000 tonnes of cold-rolled steel with proven quality and accuracy. In addition, SMC plans to inaugurate in August another mechanical engineering factory in Quang Minh IP in Hanoi’s Me Linh district.
The new facility will enable SMC to rapidly respond to the northern market’s demand as well as cut transport costs. In 2012, SMC targets to consume some 600,000 tonnes of steel, earning revenues of VND8.9 trillion ($427.9 million) and after-tax profits of VND80 billion ($3.8 million).
MBV supports customers throughout UEFA Euro
Mercedes-Benz Vietnam on Thursday announced a 3-in-1 promotion of a 5% discount plus a fan package, service vouchers and opportunities to win accessory coupons for all Mercedes buyers from Friday to 30 June, 2012.
The campaign was launched to coincide with the Mercedes-Benz Driving Experience that attracts more than 300 Mercedes enthusiasts in HCMC from June 7 to 10. It is also meant to support the German football team joining UEFA Euro 2012, the automaker said.
Mercedes-Benz Vietnam divides the campaign into two phases aligning itself with the probable road to success of the German national team throughout the football tournament.
During phase 1 from June 8 to 20 as the group stage in the football tournament, customers buying Mercedes passenger cars will get a 5% discount on their purchases and a fan package of two supporter t-shirts and three service vouchers for regular vehicle maintenance check-ups at Mercedes-Benz authorized dealers.
From 21 – 30 June, Mercedes buyers will get a 5% discount and two service vouchers for vehicle maintenance check-ups.
Beside, if the German team should lift the UEFA Euro Championship trophy, all customers who have bought their Mercedes during the campaign period will be rewarded additional Mercedes-Benz accessory coupons valued at VND39.9 million for phase 1 customers and VND20 million for phase 2.
The discount is not applicable for M-class, SLK350 and CLS350.
The driving experience is held annually in Vietnam and this year Mercedes-Benz once again flies in motorsport instructors to HCMC to offer customers useful lessons on driving techniques when using Mercedes-Benz cars.
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