Marching towards Vietnam-Japan FTA

16:32' 05/07/2007 (GMT+7)

VietNamNet Bridge – Minister of Trade Truong Dinh Tuyen talks about the possible impact of the Vietnam-Japan Free Trade Agreement (FTA). Vietnam is conducting comprehensive economic partnership negotiations in the period of deep integration with Japan. Please tell us, how far have the negotiations gone? Minister of Trade Truong Dinh Tuyen On June 26, I had a meeting with Akira Amari, Japanese Minister of Economy, Trade and Industry. Now Vietnam is negotiating with Japan in order to sign the FTA between Vietnam and Japan. The two sides are trying to wrap up negotiations before November 2008. Personally I think that only as of 2003 did Japan begin advocating the FTA with Vietnam. Japan has signed FTAs with many countries, especially ASEAN nations. If Vietnam cannot reach the agreement with Japan, its exports would face discriminatory treatment in Japan’s market. In trade with Japan, Vietnam’s exports to the market are $300mil higher than imports. If the Vietnam-Japan FTA is signed, the trade balance will be improved. How will the FTA influence Vietnam? There will be breakthroughs in exporting goods to Japan. As for Vietnam’s exports, Japan wants to lower taxes to 2.8% on average by 2018 from the MFN tax rate of 5.05% as currently applied. In return, Vietnam will have to cut taxes to 7% by 2018 from the current MFN tax rate of more than 14%. It is obvious that the tax reductions for Vietnam will be sharper and faster than Japan, though the final tax rates Japan would apply would be lower than Vietnam’s. Japan commits to lower 92% of categories of tax, of which, several thousand categories of tax would be cut to 0% immediately. The tax reductions would create good conditions for Vietnam’s exports to enter Japan’s market. However, if Vietnamese companies are not good in trade promotion, they would not be able to access the market and boost exports to Japan. Meanwhile, Vietnam will also have to open its market to very dynamic Japanese enterprises. Currently, the import tax rates Japan is applying are relatively low already, and the tax rate will be lowered from over 5% to 0%, while Vietnam will have to cut from 14% to 0%. Japanese enterprises prove to be capable of easily accessing Vietnam’s market, while Vietnamese enterprises are still weak in trade promotion, which should be seen as a big problem. What would you recommend to enterprises and state management authorities? We are trying to join the global market. With the agreements on bilateral and multilateral market opening, Vietnam’s partner countries will open their markets for Vietnam’s goods, while Vietnam will also have to open its market for foreign companies. As such, the door to the world’s market would be opened, but whether Vietnam’s goods could penetrate the market would still depend on many factors, especially the quality and price of goods. Even when we have good quality products and competitive prices, we need still push up trade promotion in order to bring Vietnam’s goods to foreign customers. (Source: Viet Nam Net)

PM arrives in India, beginning state visit

10:07' 05/07/2007 (GMT+7)

VietNamNet Bridge – Prime Minister Nguyen Tan Dung arrived at Kolkata airport in India's West Bengal on July 4, beginning his landmark to visit to the country. Prime Minister Nguyen Tan Dung. After his arrival in the world's second most populated country, PM Dung, his wife and the high-level delegation accompanying them symbolically paid a floral tribute to a monument dedicated to Vietnam's President Ho Chi Minh that is located in the city. Later that day, the Vietnamese Government leader met with West Bengal Governor Budhatdev Bhattcharya and a delegation of the India-Viet Nam Friendship Association. Bhattcharya said as a state rife with massive agriculture potential, West Bengal is eager to invest in aquaculture and milk processing projects in Vietnam. He then invited Vietnamese business executives who accompanied PM Dung to link up with the West Bengal Chamber of Commerce in sponsoring an annual trade fair in his state. The Vietnamese leader went on to reiterate Vietnam’s policy to open its market for Indian businesses interested in investing in information technology and steel production. During his meeting with a delegation of the India-Viet Nam Friendship Association led by its chairman Geetesh Sharma, the Prime Minister expressed “A sense of deep gratitude from the Vietnamese Government and people for India’s valuable support during their struggle for national independence.” “Vietnam will do its utmost to bring traditional relations between the two countries to new heights for the vested interest of the two nations as well as for peace and prosperity in the region,” said the PM. Following the meeting, the PM attended a joint business forum that drew the participation of close to 300 Indian businesses in addition to the travelling 100 Vietnamese partners from his accompanying delegation. At the discussion, he extended an invitation to India’s industrial giants to invest in areas that directly relate to their strengths and experiences such as information technology, electricity, petroleum, metallurgy, coal mining, transport, agriculture, fisheries, food processing and medicine. PM Dung later witnessed a signing ceremony for a cooperation agreement between the Viet nam Chamber of Commerce and Industry (VCCI) and the Confederation of Indian Industry (CII). Capping off a busy day, PM Dung then visited the Headquarters of the Tata Steel Group. He told the company's executive board that he was eager to see a home grown entity such as Tata operating in Vietnam after the giant rolls out a steel complex in the central province of Ha Tinh. (Source: Viet Nam Net)

Imported brand new cars to be new favorite choice in Vietnam

12:56' 05/07/2007 (GMT+7)

VietNamNet Bridge – Though distributors now still find it hard to sell imported brand new cars, experts still believe that imports would be the favorite choice for Vietnamese customers in the near future. After Porsche announced its official distributor, the market has become more bustling with the appearance of seven big trademarks in Vietnam, such as Nissan, Hyundai, Kia, Land Rover, Peugeot and BMW. With the presence of imported models, Vietnamese customers would have more choices, including the foreign made and locally assembled products. However, not every manufacturer can succeed in Vietnam. Japanese Nissan, the pioneer on the market, has not made any breakthroughs over the last year, since it set foot in the market. Only 100 units have been sold in the last year by Nissan’s three agents, mostly the X-Trail. Soon after launching, the five-door hatchback Tiida disappeared from the market, and currently, every Nissan’s sales agent could sell only one or two units a month. Analysts said that the problem of Tiida was that it appeared on the market at the time when the segment of five-seat cars began sliding down. Besides, the price of $40,000 proved to be not a good decision, as customers would favour Honda Civics or Toyota Altis, or the imported Toyota Yaris, which has the same price level. Though Tiida remains unmarketable, Motorcare, the distributor of Nissan’s products in Vietnam, still decided to import Sunny to sell domestically. However, the mid-size sedan model had the same miserable fate as Tiida. Meanwhile, the Murano crossover, which has been favoured by Vietnamese customers, cannot be found in any Nissan stores. Motorcare’s representative said that Nissan did not bring Murano to Vietnam for fear that the overly high price (approximately $100,000) would keep customers away. However, the reality showed that the thought was not true. An automobile salon in HCM City said that all Muranos were sold soon after they arrived. Like Nissan, Land Rover has just ‘disposed’ of some units which were imported in last October. In fact, New City, the distributor, could not sell more than it did, as Land Rover is not a well known trademark in Vietnam, while the products are very expensive, ranging between $140,000 to $200,000. Mr Thanh, a staff of New City, said that it is now the experimental period, and whether Land Rover would develop further still depends on the market demand. Peugeot cars are also rarely seen rolling on roads. Its distributor Thuan Lan could sell 15 units only which were imported in the first consignment. Nguyen Chi Can, Director of Thuan Lan, said that the selling price was higher than expected since customs agencies defined high taxable value of the cars. The importer plans to import small-size models in September in an effort to maintain its operation. If it is not lucky, it is very likely that Peugeot will have to go away as it once had to do 30 years ago. While several big names have not succeeded in Vietnam, others seem to be satisfied with their business in Vietnam. Hyundai’s products, distributed by Hyundai Vietnam, for example, are selling well. Making debut in October 2006, some several tens of Santa Fes are being sold every month. Besides Santa Fe, the small-size Getz is also favoured by Vietnamese people, thought it is sold at $20,000. HMV has been wise enough to ignore five-seat models to focus on crossover and small-size ones, which are the tastes of Vietnamese customers. HMV’s representative said that it has stopped importing Santa Fes and Getz to focus on 3.5L Veracruz crossover, a luxury model of Hyundai, which has the design not much different from Lexus RX350. Hyundai has been successful with its sale of imported models as its turnover is always at a high level, while Peugeot is in the danger of having to withdraw from Vietnam as it had to 30 years ago. The coming months will be the time for Porsche and BMW, the two giants that have announced their plans to conquer Vietnam’s market, to show their ability. (Source: Viet Nam Net)

Nation works hard to bolster tourism

17:33' 04/07/2007 (GMT+7)

VietNamNet Bridge - The Vietnam National Administration of Tourism (VNAT) has been working hard to work out plans to achieve ambitious targets of over 4 million foreign and 19-20 million domestic visitors, earning 56 trillion VND (3.5 billion USD) by year-end. In cooperation with ministries, provinces and sectors, VNAT has attached importance to updating laws on tourism, issue new regulations in accordance with WTO commitments and other bilateral and multilateral commitments in the hospitality industry. The sector also focuses efforts to complete several major projects, including plans for developing tourism in the northern mountainous region and a programme on seaside tourism development. It will continue to guide provinces in tackling problems that prevent the industry from development, including those in policies aiming to upgrade infrastructure and increase investment. VNAT plans to accelerate reforms in the international travel licensing as well as hotel ratings and will focus on improving the quality of current tourism products. A programme on developing human resources in the tourism sector will also be sent to the Government for approval. It will seek to boost international coordination and exchange as well as opportunities to enter cooperative agreements with regional neighbours. In order to promote joint tourism development, VNAT has suggested that the Government focus on international bordergates in an effort to draw foreigners traveling to Vietnam by land from China, Laos, Cambodia and Thailand as well as open international airports in such cities as Hai Phong, Nha Trang and Da Lat. It has also petitioned the Government to offer visa exemptions to visitors from major tourist markets, including Russia, France, Germany, Italy, Spain and Australia. In the first half of this year, Vietnam welcomed over 2.1 million foreign visitors or a year-on-year increase of 15 percent. Tourism brought the country 28 trillion VND (1.75 billion USD) in revenue during the reviewed period. (Source: Viet Nam Net)

India ready to expand bilateral ties with Vietnam, says PM Singh

09:54' 04/07/2007 (GMT+7)

VietNamNet Bridge – Indian Prime Minister Mammohan Singh granted an exclusive interview with a New Delhi-based Vietnam News Agency correspondent on Indo-Vietnam relationship on July 3 on the eve of the state visit to India by Vietnamese Prime Minister Nguyen Tan Dung slated for July 4-6. Following is the full text of the interview: Would you please elaborate the significance of the upcoming visit to India by Prime Minister Nguyen Tan Dung? Indian Prime Minister Mammohan Singh. (Photo: press.jrc.it/NewsExplorer) An inspiring legacy of friendship and cooperation has been bequeathed to India and Vietnam by two of the greatest leaders of the 20th century Prime Minister Jawaharlal Nehru and President Ho Chi Minh. Like the leaders who preceded us, I am confident that Prime Minister Nguyen Tan Dung and I will work successfully to nurture this relationship further. There is tremendous work to be done on our bilateral ties. We need to expand the ties beyond traditional areas like trade and cultural cooperation. I met Prime Minister Dung in Cebu this January, and was impressed by his ideas and commitment to broaden the scope of our ties. I keenly look forward to his forthcoming visit from this perspective. I hope to discuss ways in which we can elevate our ties to a higher level. Would you please paraphrase development experiences which India has gone through? A process of comprehensive reform of the Indian economy has been underway for over a decade now. This has resulted in some notable successes such as rapid economic growth, greater foreign investment and technology inflows into the country and the emergence of Indian companies that are multi-national and technology leaders in their fields. We have sustained an annual 8.5 percent rate of growth in our economy for a fifth year in a row. However, much work needs to be done in the social sectors. We still need to tackle problems of poverty and illiteracy that our people face. We need to improve access to health care for a vast majority of our population who live in rural areas. We in India are inspired by what Vietnam has achieved in these areas despite having faced great challenges in the 20th century. I think that India has much to learn from Vietnam ’s experiences and we need to exchange views and share lessons learnt. What should India and Vietnam do to make a break-through in the areas of bilateral trade and investment? I agree that notwithstanding the consistent rise in the volume of trade between the two countries, the level of bilateral trade in value terms is still far below its potential. I understand Prime Minister Dung also conveyed dissatisfaction with the current level of our economic interaction during one of his recent interviews. With both the Indian and Vietnamese economies growing at a record pace in recent years, and the political will that exists on both sides to enhance our economic engagement, there is no reason why we should not be able to significantly scale up trade and investment between the two countries. Vietnam has strengths in inland fisheries, handicrafts, food processing and textiles. India can offer collaboration in pharmaceuticals, animal feed, auto components and plastics. I intend to discuss this matter in greater detail with the Prime Minister. To begin with, I would suggest that we must create a policy environment that will facilitate a much freer movement of goods, services and people between the two countries, both bilaterally, and also under the India-ASEAN framework. India has been exercising the “East-oriented” policy in order to bolster the country’s regional integration. What does India expect from Vietnam in the course of carrying out that policy? An integral part of our “Look East policy” is greater engagement with countries of the ASEAN region, both bilaterally and as a regional grouping. We are giving special emphasis to the CLMV (Cambodia-Laos-Myanmar-Vietnam), which are countries with whom we have the strongest civilisational links and with whom we are cooperating under the Initiative for ASEAN Integration programme. We consider our cooperation with Vietnam to be a key element in this overall engagement with the region. India and Vietnam share similar objectives and often have similar positions on a variety of international issues. We look to Vietnam for its support for enhancing India’s ties and interaction with the ASEAN region. (Source: Viet Nam Net)

FIEs distribute imported electronics, local companies worry

17:09' 04/07/2007 (GMT+7)

VietNamNet Bridge – Local electronics companies will have to face new difficulties once foreign invested enterprises (FIEs) are allowed to import goods directly to sell domestically. As of July 1, 2007, FIEs in Vietnam have the right to import goods directly for domestic distribution. According to Tran Quang Hung, Secretary General of the Vietnam Electronics Businesses Association, direct imports will help FIEs cut expenses for intermediaries (in the past, they had to import through a third party under authorised contracts); therefore, the selling prices of the imports will be lower – thus more competitive. Meanwhile, local electronics companies cannot lower their selling prices any more, as the currently applied prices are the floor prices. In general, locally made products will find it hard to compete with imported ones in terms of price and quality. Nguyen Thinh, Director of the Hanoi Informatics Development Support Company, said that when the tax rate on AFTA-sourced imported electronics was reduced to 5%, many enterprises asked for permission to import products under the form of complete built units (CBU). However, enterprises just imported small quantities so no big impacts on the market have been seen. However, when more FIEs are allowed to import CBU products, there will be many changes in the market. Imported genuine products and good post-sales services directly from the producers, as well as promotional programmes will help create healthy competition in the electronics market. The biggest concern of 100% domestic owned enterprises is that they will have to counter big-scale promotional programmes to be launched by FIEs, which have more experience and money for these. Meanwhile, prices will not be a big problem for local electronics companies. Pham Thanh Tri, Director of VVC Electronics Company, said that CBU products had been imported into Vietnam since the AFTA-applied tax rate was reduced to 5% one year ago, which had led to the considerable price decreases of these products. Non-AFTA products will also not be seen as fearsome rivals for locally made products as they will be expensive after tax (40% import tax and 10% VAT). An LCD 32 inch TV, for example, has the import price of $500, and the selling price of $770 (after calculating tax and expenses), while a similar TV made by VVC is priced at VND9mil ($562). In fact, local electronics companies have been suffering many difficulties recently. Sales have been slow. Enterprises cannot attract more customers as they are not financially capable enough to launch promotional programmes. Many enterprises have to expand their business scopes by jumping into other fields, including real estate, finance to earn their living and cover losses. The Deputy Director of an electronics company said that it was unsurprising to see many domestic owned companies narrow their production or shut down their workshops. The domestic market proves to be quite small, which makes production costs high; imports will bring more profit. Analysts have predicted that at the end of 2007 there will be a new wave of promotional programmes launched by FIEs. These programmes will help boost sales and polish the images of FIEs, while these will, once again, make domestic owned enterprises miserable. Tran Thuy - Viet Nam Net

Is HSBC’s warning trustworthy?

17:04' 04/07/2007 (GMT+7)

VietNamNet Bridge – The stock market has been stirred up by the prediction of HSBC’s securities expert Garry Evans who said that the VN Index would fall to the 900 point level by the end of this year. However, analysts have said that the warning is not reliable. HSBC once had to correct its report The Hong Kong and Shanghai Banking Corporation (HSBC) has relied on the P/E indexes of listing companies as the main basis for the warning. HSBC concluded that the P/E indexes of many share items were too high though they had been adjusted recently. It is not understandable why HSBC just refers to the P/E indexes to give such a conclusion. Both foreign and domestic securities experts think that it is a correct method, but ultimately insufficient. Huy Nam, a securities expert, said: “If only looking at the P/E Index, no one would dare inject money in blue chips like FPT, VNM, STB, ITA, TDH, and VHS. I think it is necessary to consider other indexes as well, including profit, prospects and demand and supply basis.” The director of a securities company said that HSBC was presumptuous to give such a conclusion. Investors should still buy share items which have a high P/E index as long as they have good prospects and profitability. If the profit is big next year, the P/E will decrease, he said. Securities expert Tran Ngoc Nam also questioned if HSBC wasn’t too hasty giving the warning at a very sensitive moment. He recalled that in May 2007, HSBC cited false information about the P/E indexes of SSI, PVD, BVS, BTS and VNR, creating bad impacts on the market. The banking corporation had to correct the information but the share items suffered before the correction. In fact, the warning has not caused havoc because investors are wise enough to question: why are foreign investors still buying shares despite HSBC’s warning? Why are foreign investors buying more than selling? In the six consecutive trading sessions from June 26 to July 3, foreign investors bought more than they sold, while they bought more than at any other time during the trading sessions just before and after HSBC’s warning was released. On July 2, when the VN Index fell down to below 1,000 points and disappointment pervaded the trading floors, foreign investors bought shares in large quantities. The purchasing volume was 2.5-fold higher and the purchasing value was 3-fold higher than the sales (bought: 1.673mil units, VND252bil; sold: 633,000 units, VND71bil). On July 3, 2007, a lot of share items that, according to HSBC report, had high P/E indexes like FPT, SJS, TAC, HRC, and PVD, were hunted by foreign investors, and many of the items have run out of room for foreign investors. Huynh Anh Tuan, Head of the Brokerage Division under ACB Securities Company, said that in most cases, domestic investors should not follow foreign investors, but they should analyse the recent moves by foreign investors. Vu Ngoc Huy, a Viet Kieu investor on SBS trading floor, noted: “If foreign investors believed the warning of HSBC, they would not buy shares in such large quantities. Having 20 years of experience as an investor in the US, I dare say that foreign investors do not pay any attention to the warning.” Director of an investment fund also said that foreign investors all had their own sources of information and analysis, and they knew what to do at a given time. Domestic investors prove to be too hasty when selling shares for fear that the VN Index will fall to below the 1,000 point level. Analysts have reminded the public that the scenario has occurred at least three times so far this year. Domestic investors, believing warnings of foreign experts, tried to sell shares while foreign investors tried to buy. And domestic investors have since had to buy shares from foreign investors at high prices. (Source: Viet Nam Net)