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BUSINESS IN BRIEF 20/6
Local suppliers find blocks to supermarket access
Small local suppliers are being confronted with demands for huge trade discount rates and bribery in order to access supermarket distribution.
At the workshop on the retail market, Pham Ngoc Hung, vice chairman of the HCM City Business Association, said in order to get products on display, firms are being arm-twisted into paying VND10-20m (USD454-909) for each type of product. They also have to bribe sorting and placement staff or their products won’t be displayed properly.
Small sized firms aren’t in a position to pay huge amounts and also have to accept huge trade discount rates to get their products displayed, especially export firms who consider discount rates as marketing costs. As a result, this has encouraged even higher discount rates.
Le Thi Thanh Lam, director of SaigonFood TM Company said foreign-owned supermarkets were asking for huge discount rates while domestic supermarkets were indifferent toward them. "Some supermarket haven't met us for five years," she said.
In addition, local distributors are losing in competition and have not been able to prove their credibility.
Last month, Vietnam Association of Seafood Exporters and Producers asked supermarkets to lower the discount rate as several supermarkets had demanded a higher rate after their mergers and acquisitions. Big C Supermarket recently asked to raise the discount rate to 17%-25%, which was leading to several firms wanting to terminate contracts. Some even speculated that the Thailand's TCC Holdings Co Ltd., the new owner of Big C, were happy to see Vietnamese producers fail as they could source produce from Thailand. VASEP then asked Big C to keep the rate at 15%.
Another pressing problem is that supermarkets are losing customers. A survey by the Vietnam Institute for Trade, under the Ministry of Industry and Trade, showed that even though Vietnam’s retail market is developing with over 700 supermarkets and convenience stores, customer trust is decreasing rapidly.
Pham Nguyen Minh and Hoang Thi Huong Lan from the institute said people went to the supermarket due to guaranteed quality, and then hygiene, food safety, services, prices and convenience. But supermarkets were losing quality in terms of their products, marketing and even services because many products of unknown origin were found displayed. According to Minh, in order to earn consumer trust, supermarkets must reduce service costs and work more closely with distributors and marketing departments to make sure their prices are stable and products are in stock.
Foreign investment in Hanoi increases by three times year-on-year
Hanoi’s socio-economic situation posted positive progress in the first five months of 2016, according to the Hanoi municipal People’s Committee.
The city’s industrial production index was estimated to increase by 7.7% over the same period last year.
Export revenue in the first five months of the year reached US$4.314 billion, a year-on-year increase of 0.3%, while the year-to-date import revenue reached US$9.281 billion, down by 6.2% over the corresponding period last year.
The capital’s consumer price index (CPI) in May posted a slight increase of 0.35% month-on-month due to raised petrol prices, which made the transportation category’s CPI surge.
Nearly 9,400 enterprises were established with a total registered capital of over VND74.6 trillion, up 59% compared to the same period in 2015. Meanwhile, the number of enterprises suspending or terminating operation was only 460.
The city’s State budget collection reached more than VND74.1 trillion (over US$3.3 billion), meeting 43.75% of the estimate for the year and total invested development capital was VND10.34 trillion (over US$447 million).
The city has attracted foreign direct investment projects with a total registered capital of over US$1.6 billion, an annual increase of three times.
The city has also recorded significant achievements in controlling inflation and ensuring social security. The consumer price index this year is expected to be controlled in single digits.
Corporations divest VND 2,000 billion from non-core business
State corporations and companies withdrew VND 2,086 billion in capital from non-core business lines and collected back VND 4,168 billion in the first five months of 2016.
The State Capital Investment Corporation (SCIC) alone withdrew VND 985 billion and gained VND 2,817 billion, according to the Ministry of Finance (MoF).
The total State budget revenues in the five months reviewed was estimated at VND396,200 billion, accounting for 39.1% of the year’s plan and a year-on-year increase of 4.5%.
Meanwhile, the total State budget spending reached VND466,300 billion, making up 36.6% of the year’s estimates, up 4.7% against the same period in 2015.
As a result, the State budget deficit is estimated to reach VND 70,000 billion, equivalent to 27.6%.
By May 20, e-tax payment services were provided in all 63 cities and provinces across the country. More than 535,000 businesses, or 99.59 percent of the total number, have declared tax online while more than 492,000, or 91.58 percent, have registered to pay taxes online.
HN calls for investment into PPP projects
Ha Noi is calling for investment in 52 transport infrastructure projects under public-private partnership (PPP) form in 2016-2020.
This is the first time Ha Noi publicly has called for private sector participation in the construction of transport and infrastructure facilities under PPP form.
Earlier, major projects of this kind have been carried out with State budget and Official Development Assistance (ODA) and the Build–operate–transfer (BOT) modal.
The 52 projects will cost about VND338,725 billion, including 35 in infrastructure with four elevated urban railways lines listed as key projects in the set period which need a total investment of VND150,000 billion (US$7.1 billion).
Urban railway line No.6 (from Hanoi's centre to Noi Bai internationsl airport) is estimated to require VND 14,282 billion. It is expected to promote the urban development and socio-economic development of the Northern part of the Red River Region.
The urban railway line No. 3 (from Ha Noi station to Hoang Mai district) looks to reduce traffic congestion. It will need VND28,175 billion.
The others are urban railway line No.4 phase 1 (Lien Ha-Vinh Tuy) whose total investment nears VND40,885 billion and urban railway line No. 5 which will cost approximately VND65,572 billion.
In addition to infrastructure, Ha Noi has also called for investment into healthcare, clean water, industry, trade, services, parking places, parks, hospitals and social housing projects.
Business bemoans high wages and social insurance
Businesses, especially those in the labor-intensive sectors, have complained about rises in minimum wages and social insurance premiums.
The Government’s Decree No 49/2013/ND-CP stipulates the base wage for the simplest job in normal working conditions must be based on the regional minimum wage, said Truong Van Cam, general secretary of the Vietnam Textile and Apparel Association (VITAS) at a dialogue last week with the Ministry of Labor, Invalids and Social Affairs.
Jobs in the textile-garment sector are heavy, so salaries are normally at least 5% higher than the regional minimum level, and skilled or trained workers are paid even 7% higher. This means a garment and textile employee’s wage is at least 12% higher than the minimum wage.
However, the current minimum wage is equivalent to 70% of the average income of salaried workers, around VND5.08 million (US$226.4) in the first quarter this year. This is putting pressure on employers.
The ministry should simply require employers to ensure that wages are not lower than the minimum levels set by the Government, Cam said, and that is enough.
Nguyen Xuan Duong, chairman of the Hung Yen Business Association, said the ministry should adjust the minimum living standards in a way that the minimum wage can be kept at an acceptable level.
Deputy Minister of Labor, Invalids and Social Affairs Pham Minh Huan told business executives at the dialogue that pending a law on minimum wages, the ministry would propose adding some provisions on minimum wages to the Labor Code.
According to Luan, three factors for calculating minimum wages are needs, social and economic conditions, and average wages on the market but the National Wage Council is now focusing on the “needs” factor.
Minimum wages have been revised up considerably in recent years, so negotiations over the 2017 minimum wages should delve into all factors including the correlation between areas and the endurance of enterprises.
Besides minimum wages, employers are having difficulty with social insurance payments for their staff.
Social insurance accounts for 24% of wages and allowances, compared to ASEAN’s highest rate of 18%, Duong said. Therefore, the percentage should be lowered. Previously social insurance is paid based on the wage stated in the labor contract, which is normally the same as the mandatory minimum wage.
Rice exports forecast to rise in final months
The Vietnam Food Association (VFA) has projected that rice exports would increase in the final months of this year owing to a rise in orders from key importing countries after a fall in the second quarter.
VFA painted a rosy picture for the rice export sector at a conference held by the Ministry of Agriculture and Rural Development in HCMC on June 7 to announce a protocol on rice and rice bran exports to China. The protocol, which was signed in 2004 and amended on May 30 this year, and more contracts from other countries are expected to help buoy Vietnam’s rice exports.
According to the Plant Protection Department under the ministry, the protocol was amended to make life easy for domestic firms to sell rice to the northern neighbor in the coming time. It is set to take effect in three years since the date of signing and will be renewed for another three years.
According to VFA, rice exports in the first quarter this year rose 56% year-on-year to 1.5 million tons, supported by the contracts signed at the end of last year with the Philippines, Indonesia, and China.
However, rice shipments went down in the second quarter. Earlier, VFA predicted outbound sales of rice would be 1.6 million tons in the period but revised down to 1.5 million tons and then 1.3 million tons.
Falls in rice and paddy prices have extended in recent times although paddy output in the Mekong Delta has shrunk as a result of severe drought and saltwater intrusion in the delta, the country’s key rice producing area.
A report of the Cultivation Department under the Ministry of Agriculture and Rural Development showed that paddy output in the 2015-2016 winter-spring crop in the delta slid by 713,000 tons compared to last year’s winter-spring crop.
Nguyen Van Hoa, deputy head of the department, said the farming area in the 2015-2016 winter-spring rice crop in the Mekong Delta exceeded 1.5 million hectares, up around 10,000 hectares compared to the previous winter-spring crop. Meanwhile, paddy output reached only 10.4 million tons, down 713,000 tons.
However, lower paddy output in the the 2015-2016 winter-spring crop cannot support domestic rice and paddy prices to stay as high as expected.
Nguyen Van Hai, a rice trader in Tien Giang Province, said fresh IR 50404 paddy is sold at VND4,000-4,100 per kilogram, dropping VND500-600 per kilogram over two weeks ago and VND1,000-1,200 per kilogram compared to the highest level recorded this year.
Meanwhile, the current price of unprocessed IR 50404 rice stands at VND6,200-6,300 per kilogram, down VND400-500 per kilogram against a half month ago and more than VND1,000 per kilogram compared to the highest price recorded this year.
Lam Anh Tuan, director of Thinh Phat Co Ltd in Ben Tre Province, said a higher level of moisture in paddy and the low quality of rice caused by rain are attributable to falling prices of paddy ad rice.
For example, moisture of fresh paddy was 21-22% before rain but has risen to 30% at present. This is why the price of paddy has declined from VND4,700-4,800 to VND4,000 per kilogram.
Rice traders said more supply projected for the 2016 summer-autumn crop and the suspension of rice exports to China via border trade have weighed on domestic paddy and rice prices.
However, the export price of Vietnamese rice is forecast to go up as other rivals such as Thailand, India, and Pakistan have plans to adjust up their prices since protracted drought has sent supply down, according to Tuan.
Tuan said although Indonesia, the Philippines, and Malaysia need to import rice, they are still keeping a close watch on other rice exporting countries.
With the wait-and-see attitude of major importing countries, domestic rice exporters have to cope with mounting pressure on costs triggered by loan interest payments and storage charges, Tuan said.
Ministry urges higher cashew productivity
The Ministry of Agriculture and Rural Development wants the cashew sector to quickly increase productivity in order to reduce heavy dependence on unprocessed cashew imports.
The ministry has requested the Department of Cultivation and research institutes find viable solutions and develop new seedlings to help achieve the target though the farming area is kept stable.
Deputy Minister Le Quoc Doanh said in Dispatch No. 4509/TBBNN-VP dated June 4 that the policy to promote intensive farming and replant new high-yield seedlings over the past years has borne fruit, and it is expected that each hectare will produce two tons of cashew per season.
According to the Vietnam Cashew Association (Vinacas), last year’s cashew output leapt by three quintals a hectare compared to 2013.
The department said cashew production jumped from 8.5-9.5 quintals per hectare in the 2006-2013 period to 11.71 quintals a hectare in 2014 thanks to intensive farming, up 2.3 quintal a hectare and equivalent to 24.4% versus 2013.
Though Vietnam has the highest cashew productivity worldwide, the current 300,000 hectares of farming cannot produce sufficient unprocessed cashew for domestic processors to turn out nuts for local consumption and export.
Statistics of the ministry showed that the country spent US$1.12 billion importing 853,000 tons of crude cashew last year, up nearly 48% in volume and 73% in value year-on-year.
In the first five months of this year, Vietnam imported 226,000 tons of raw cashew worth US$344 million, down 20.5% and 7.7% year-on-year respectively.
Vinacas said the price of crude cashew has risen in recent months, so processing firms should consider adjusting the selling price of processed products to avoid losses.
In 2006, Vietnam overtook India to become the world’s largest exporter of cashew nuts but the country has since been dependent on crude cashew from other countries.
The ministry said cashew exports totaled 119,000 tons worth US$910 million in the first five months of this year, up nearly 2% in volume and 10% in value year-on-year.
Wood exports expected to hit US$7 billion this year
Vietnam wood and wood product exports increased by 10.7% to US$6.9 billion last year, helping the country become the world’s fourth largest wood exporter after China, Germany and Italy, according to the General Department of Vietnam Customs.
Wood and timber products have penetrated 37 countries in the world. The US topped importers with a value of US$2.6 billion, accounting for 38.2% of total export value.
Latest statistics from the Ministry of Industry and Trade (MoIT) showed that during the first five months of this year, wood and wood-based product exports hit US$2.68 billion, up 2.08% against the corresponding period last year. With the current growth rate, they are expected to increase by 3.5% during the first half of this year.
The MoIT also forecast a positive growth of wood and timber product exports this year.
According to Huynh Van Hanh, Vice Chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), Vietnam has become a wood furniture manufacturers in the world as it has raw materials of legal origin and skilled and low-cost labour force. Exports of the products are expected to surpass US$7 billion this year.
However, to obtain the result, wood processing businesses have to face numerous challenges.
Tran Viet Tien, Director of Lavanto Home Décor Company said the advantage of low-cost labour will be lost to the fierce competition from regional countries like the Philippines, Indonesia and Myanmar. Meanwhile, Vietnam’s wood processing technologies and equipment are outdated comparing to those in European countries and China.
Tien said another challenge for the wood processing sector is that many wood processing factories from non-TPP member countries or countries which do not sign free trade agreements with the EU will be moved to Vietnam to enjoy FTAs benefits.
Vietnamese apartment buyers risk living in unfinished buildings
Buyers of several apartment projects in Hanoi and Ho Chi Minh City have resorted to moving into unfinished buildings, saying it is still better than continuing to live in rented houses while waiting for sluggish constructions to be completed.
As condo projects in Vietnam tend to reach completion behind schedule, some apartment buyers do not have the patience when developers repeatedly ask them to keep waiting.
Consequently, some buyers have started moving in as soon as the unfinished buildings have the most basic utilities available, such as elevators, power and water supply.
Such apartments, however, pose numerous risks as those residential features including things like water drainage or firefighting systems are yet to undergo a construction completion inspection.
A man is pictured at the unfinished Cao Oc Xanh apartment building in Ho Chi Minh City.
“At least we can save on the monthly rental, which could be as much as VND5 million [US$223],” V.T.N., a resident at the Cao Oc Xanh condo project in District 9, Ho Chi Minh City, said.
N. moved in her new apartment more than a year ago, when only one out of three proposed blocks of the project, developed by the No. 8 Investment and Construction JSC, was basically completed.
“We had to wait for nearly four years before moving in,” she said. “We took a risk to live there, so long as it had the power, water and elevator systems.”
However, N. and other residents at Cao Oc Xanh are facing daily difficulties caused by the incomplete infrastructure.
The whole block has only one elevator, which breaks down every three days, while the public yard is inundated whenever it rains, she said.
There are no green trees around the buildings and no space for recreation for the elders or children.
In Hanoi, 120 buyers of the Usilk City apartment complex in Ha Dong District are sharing the same hardship.
The project, developed by Song Da – Thang Long JSC, broke ground in 2008 with an investment of VND10 trillion (US$446.43 million). The project was designed to feature 13 multi-purpose towers, including 2,800 apartment units and a modern trade center.
Many people paid between VND2.5 billion (US$111,607) and VND4 billion (US$178,571), or 50% to 80% of the unit value, to purchase apartments there.
However, eight years on, only 120 people have been able to move in, and the project is yet to undergo any completion inspection.
“The project’s elevator and firefighting systems are uninspected,” said Nguyen Ngoc Thanh, one of the Usilk City residents. “It also lacks a main power supply system, and the drainage system is incomplete.”
In the worst-case scenario, residents will be forced to leave those unfinished apartments, such as what happened to buyers of the Bay Hien Tower in Ho Chi Minh City last week.
Located in Tan Binh District, Bay Hien Tower consists of 170 units and is developed by Long Hung Phat Co. Ltd.
In late May, the developer transferred 14 units to buyers, allowing them to move in even though the construction company had yet to complete its utilities, posing a high risk of fire, explosion and accidents.
On June 3, the city’s construction department issued a document, recommending that residents leave the unfinished building for safety reasons.
The department recommended that buyers move to nearby rental properties, with the Bay Hien Tower developer forced to cover their rental fees.
The city’s administration and construction department have had several meetings with the developer to rectify the situation, but Long Hung Phat executives had never shown up.
The company did send some representatives to work with authorities, and said it agreed with the suggestion to have residents move out until the building is completed.
EU, Vietnam free trade could ‘lift millions’ out of poverty
The EU-Vietnam Free Trade Agreement (FTA) should deliver strong future economic benefits and enhance the competitiveness of the nation’s private sector, says the Ministry of Industry and Trade (MoIT).
The FTA, which was signed late last year, will generate new growth and export opportunities for small, medium and large local companies when it comes into full force in 2018, said Trade Tran Quoc Khanh, deputy minister of the MoIT.
Mr Khanh made the remark in response to queries from guests at a conference in Hanoi discussing the full ramifications of the trade deal.
The Vietnam government has long been an advocate of bilateral and multilateral free trade, said Mr Khanh, and we are confident this new agreement once signed by Prime Minister and approved by the NA will deliver promising new channels of trade for Vietnam and EU economies.
We are particularly pleased to see that the deal provides clear and simple rules of origin, as well as transparent and effective origin procedures to administer the rules without creating unnecessary barriers to trade.
In addition, the FTA includes advance rulings on origin and tariff classifications, promotion of automated border procedures and an impartial and transparent system for addressing complaints about customs issues.
The Vietnam government is committed to growing its trade partners with economies around the globe and is particularly focused on diversifying Vietnamese local companies exports to markets such as the EU, US, ASEAN and Eurasia.
The government looks forward to the EU deal being finalized by all of the respective parties and to seeing precisely what specific international opportunities will be created as a result.
Mr Khanh said he understands the concerns of many citizens regarding free market competition and potential threat to the nation’s local businesses.
But he reminded guests at the conference that in the decade following the nation’s accession to the World Trade Organization exports more than tripled— and stood at US$160 billion last year.
This vividly demonstrates that citizens and local companies have nothing to fear from open market competition, said Mr Khanh.
He said he was confident the new trade agreement means the nation’s exports could see a substantial boost amid broader access to the EU— whose member-countries collectively represent one of the largest economies in the world.
Key exports of Vietnam to the EU include telephones and parts, electronic products, footwear, textiles and clothing, coffee, rice, seafood and furniture, he said, but told the guests that as a result of the FTA the government would concentrate on enlarging the range of exports.
The FTA will allow the nation to move away from the traditional export drivers and into other sectors of the economy, particularly the technology segment, a key to unlocking the full economic potential of Vietnamese, said Mr Khanh.
In 2012, said Mr Khanh, the Vietnam government unveiled a broad, ‘three pillar’ economic reform program, in which it proposed to restructure public investment, state-owned enterprises and the banking sector.
The FTA will help advance the economic reform begun in 2012 and play an instrumental role in setting the stage for economic stability that will reign for decades to come, said Mr Khanh.
Most importantly, said Mr Khanh, the agreement will provide a hefty boost to an already bustling and robust economy that will continue to grow a larger middle class, lifting tens of millions of the nation’s citizens out of poverty.
Vietnam struggles to re-brand its furniture industry
The household furniture industry needs to undergo significant changes in the way manufacturers market their brands if they are to survive the onslaught of foreign competition, says the Vietnam Wood and Forestry Products Association (Viforest).
Traditionally, consumers around the globe made the decision to purchase furniture based on the price, style and reputation of the retailer from whom the purchase was made, said Nguyen Ton Quyen, chairman of Viforest.
This resulted in poor brand awareness by consumers, said Mr Quyen, but even more importantly it gave rise to a lackadaisical attitude among local manufacturers for developing their brands.
Over the past decade, manufacturers in markets such as the US, EU, China, Canada, Taiwan, Mexico, and Italy have rapidly been establishing their own dedicated retail outlets and showrooms worldwide.
In addition, every major manufacturer in the aforementioned markets now has a web site dedicated exclusively to marketing and brand building, said Mr Quyen, — and they have proven quite effective.
Most of these manufacturers have no intention of selling direct to consumers via the Internet but have learned to use the Internet effectively to gain large-scale visibility that is impossible to obtain in traditional brick and mortar stores.
This lack of brand development has severely handicapped local manufacturers when it comes to competing with the foreign rivals in the industry who have established household names the likes of UMA or IKEA.
Vo Van Quyen from the Ministry of Industry and Trade agrees with Mr Quyen.
Local manufacturers have also neglected the domestic market and wasted too much time trying to make inroads into China and other foreign markets, said Mr Quyen, adding that the outward approach has been unsuccessful for the most part because of their low brand recognition.
“The failure to develop strong brand name recognition in the domestic market has created a huge opening for the foreign competition who are swarming onto the market as a result of the ASEAN Economic Community (AEC) formation,” said Mr Quyen.
The AEC is going to bring about an even greater influx of less expensive imports making products such as those from Swedish home furnishing giant IKEA much more competitive and most likely allow for them to corner the domestic market.
The household furniture industry in Vietnam consists primarily of producing wood and wood veneer sofas; dining tables; convertible beds; along with television, radio, phonograph, and sewing machine cabinets.
Furniture manufacturers from China, Canada, Taiwan, Mexico, and Italy have dominated the global furniture market for the past several decades, accounting for in upwards of 75% of the market.
Domestic enterprises' exported products increase 3.9%
Vietnam recorded an export revenue of more than US$67.7 billion in the first five months of 2016, a 6.6% increase compared to the same period last year, according to the Ministry of Industry and Trade.
Domestic enterprises exported US$19.44 billion worth of products - 3.9% more than in the same period last year - while foreign direct investment (FDI) enterprises exported US$48.3 billion in products, 7.7% more than in the same period of last year.
Meanwhile, imports were estimated at over US$66.3 billion, a year-on-year decrease of 0.9%.
Domestic enterprises imported products worth US$27.2 billion, up 0.7% compared to the same period last year, while FDI enterprises imported products worth US$39.1 billion, down 1.9%.
China was the country’s largest import market in the first five months, accounting for US$19.2.4 billion in imports, a 2.9% decline compared to the same period last year.
Other significant import markets include ASEAN with US$9.4 billion, down 4.2%; Japan, US$5.7 billion, down 6.4%; the European Union with US$3.8 billion in imports, down 3.7% from that of last year; the US with US$3.2 billion, a 4.4% rise; and the Republic of Korea with US$12.1 billion, up 6.4%.
Key export products saw an increase in export value in the first five months. These included agro-forestry-fisheries with a growth of 10.1% to US$818 million; telephones and components, up 20.6% to US$14.4 billion; garments and textiles, up by 6.1% to US$8.6 billion; and electronics, computers and components, up by 5,4% to US$6.3 billion.
HCM City leader hears difficulties facing local property developers
Politburo member and Secretary of Ho Chi Minh City Party Committee Dinh La Thang was updated with the current obstacles hindering the development of the local real estate market at a working session with the HCM City Real Estate Association (HoREA) on June 6.
As raised at the meeting, the biggest difficulties were cumbersome administrative procedures and a lack of consistency between functional agencies and local authorities in granting construction licenses, evaluating projects, and land clearance and compensation.
In addition, both enterprises and banks are lacking information on the local real estate market, which has made supply exceed demand and led to the unbalance from locality to locality.
Speaking at the event, Secretary Thang hailed the significant contributions of the real estate sector to HCM City’s economic growth over the past years, affirming the city’s commitment to constantly supporting property businesses and proactively removing difficulties in terms of mechanism to boost the sector’s development.
He urged authorised agencies and local authorities to make administrative procedures simpler, and more public and transparent, and immediately abolish unnecessary procedures in order to best serve enterprises and people.
The city leader asked the Department of Construction to promptly identify the rights of the district-level authorities and local departments in the fields of construction and real estate, as well as review all the planning and projects across the city to make them known to businesses and citizens.
Local producers urged to cooperate to face foreign competition
Domestic producers and suppliers should join forces to build their retail and distribution systems in the wake of rising foreign competition on the home market, according to a seminar.
At the seminar held last week by the HCMC Business Association, retail experts and enterprises threw support behind Vietnam Association of Seafood Exporters and Producers (VASEP) members that have threatened to suspend supplies for a supermarket chain over its demand for more discounts. This is an effective solution to coping with demanding retail store chains with foreign investment, they said.
The move has compelled this foreign retailer to meet suppliers for negotiations. A supplier said the chain had agreed to shelve its demand for higher discounts rates this year.
Pham Ngoc Hung, vice chairman of the HCMC Business Association, underlined the need for closer coordination among local enterprises to deal with demanding foreign retailers.
Le Thi Thanh Lam, deputy general director of Saigon Food, said Vietnamese businesses usually pay a 10% commission to domestic store chains but the percentage might be up to 30% for those with foreign involvement. However, domestic store chains and distribution systems are not as big and extensive as foreign-invested ones.
Foreign-invested store chains are growing well while domestic ones are of small scale and not well connected, thus forcing local suppliers to depend on foreign retailers, Lam said.
She added small suppliers tend to accept all requirements of foreign retailers due to their lack of information and connectivity.
Therefore, Lam requested business associations to join forces to deal with high commissions for and other demands of foreign retailers.
Many participants at the seminar agreed that enterprises should focus on doing the marketing in lieu of paying higher commissions.
In addition to supplying supermarkets, local producers should pay more attention to traditional retail channels that still hold big market share. This way can help domestic suppliers depend less on supermarket chains that demand preventatively high discounts, according to Bibica’s general director Truong Phu Chien.
Nguyen Ngoc Hoa, deputy director of the HCMC Department of Industry and Trade, was also of the opinion that local producers should shift their attention and focus to traditional markets and avoid dependence on a single distributor.
Modern sales channels now make up one-fourth of the retail market and the figure is forecast to climb to around 40% in 2020, which means traditional channels are still dominant, said Hoa, the former chairman of Saigon Co.op., the owner of the Co.opmart supermarket chain.
M&A is common trend in global integration: official
Market opening and mergers & acquisitions are a common trend in global integration, said head of the Ministry of Industry and Trade’s Domestic Market Department Vo Van Quyen in response to concern over intense competition from foreign rivals.
In a teleconference by the ministry in Hanoi on June 6, Quyen said foreign retailers’ revenue account for three fourths of the total, primarily in the supermarket segment.
Vietnam is committed to the World Trade Organisation (WTO) and Free Trade Agreement’s terms and will take measures allowed by the WTO to defend domestic trade, he said, adding that the department will continue providing incentives, support for investment, training and technological advances, expanding the distribution system and responding to the campaigns: “Vietnamese prioritise Vietnamese goods” and “Domestic trade promotion until 2020”,
Minister of Industry and Trade Tran Tuan Anh, for his part, called for building a retail strategy, that considers the characteristics of trade in rural and remote areas to submit to the Politburo, as well as working with associations and localities to find out about any shortcomings.
He said the ministry will do its best to manage the domestic market in terms of price and facilitate macro-economic adjustment, and urged domestic retailers to enhance their competitiveness and keep track of market movements, particularly monitoring law-abidance by foreign rivals and report it to the ministry and government.
VN total retail sales increase
Việt Nam’s total retail sales and services revenue reached VNĐ1,430 trillion (US$63.4 billion) in the first five months of this year, a year-on-year increase of 9.1 per cent, officials said.
If inflation is excluded, the amount marks an increase of 7.8 per cent, according to the General Statistics Office (GSO).
Vũ Mạnh Hà, GSO expert, said the growth of the total retail sales and services revenue in the first five months of 2016, excluding inflation, was lower than the 8.2 per cent growth in the same period last year. This meant purchasing power was on the decline.
The reduction was due to the impact of incidents affecting accommodation, catering and tourism services and of the mass fish deaths along Việt Nam’s central coastal provinces.
The spending power of those offering such services in the coastal provinces fell strongly as they had to cancel their beach tours.
Meanwhile, the purchasing power of goods retailers witnessed high growth of 9.5 per cent in the first five months, amounting to VNĐ1,920 trillion ($48.5 billion), accounting for two-thirds of the total retail sales and services revenue.
Retailers of rice and foodstuff saw growth of 13.6 per cent; garment retailers, 10.9 per cent; and home appliance retailers, 9.6 per cent.
Hà said the total retail sales and services revenue next month would increase further due to high demand for house construction and repairs and recovering demand for beach tours.
GSO director Nguyễn Bích Lâm said purchasing power this year was expected to have a lower growth rate than last year because of the stability in prices, high supply and stable demand for most essential goods.
Spending on some services, including accommodation, catering, tourism and entertainment, will not have a high growth rate as it did previously, Lâm said, because the people were worried about food safety and environmental pollution affecting the quality of the food. They tend to eat mostly home-cooked meals now and control their spending on entertainment and tourism services to save money.
Casumina to raise capital to over VNĐ1 trillion
Southern Rubber Industry JSC, or Casumina (CSM), planned to issue 29.6 million bonus shares to increase its charter capital as of yesterday.
The shares worth VND10,000 (US$0.43) each will be issued to shareholders. After the issuance, HCM City-based Casumina would have another VND296 billion in charter capital, which will rise in value to over VND1 trillion.
The firm's largest shareholder, Viet Nam National Chemical Group (Vinachem), which now owns over 51 per cent of stakes, will have another 15.1 million shares. At the current VND32,700, Vinachem will get nearly VND500 billion.
Established in 1976, CSM is now among the leading producers of rubber tyre products in Viet Nam. It earns 63 per cent of revenue from local trading and 25 per cent from exporting for the regional and international market.
Foreign investors' securities accounts increase
The number of securities trading accounts of foreign investors in Viet Nam increased significantly this year, announced the Viet Nam Securities Depository.
The number totalled nearly 18,400 at the end of May, including some 2,370 organisational accounts and more than 16,000 individual accounts.
The depository reportedly granted transaction codes to nearly 500 individual foreign investors during the first five months of this year, an increase of 125 per cent over the same period last year.
This is also the record high five-month figure recorded since 2010, when the depository began to provide investor statistics.
In May alone, more than 130 foreign investors received the codes for domestic transactions, the highest monthly level since February.
According to local stock exchange reports, foreign investors last week recorded a net buying value of around VND430 billion, or US$19.1 million.
Analysts said the chance for a US interest rate increase in June has declined and bolstered foreign investors' confidence in local assets.
Kido to buyback 26 million shares
Foodstuff producer Kido Joint Stock Company (KDC) plans to buy 26 million shares at no more than VNĐ30,000 each, announced a document of the firm's shareholder meeting.
Kido Group JSC, said it will continue to buyback treasury shares, in accordance with the Resolution of the Extraordinary Shareholders Meeting dated December 1, 2014, which says Kido will buyback 30 per cent of total issued shares, equivalent to nearly 77 million shares.
To date, Kido has bought 51 million shares or 19.87 per cent of issued shares. So it will buyback the last treasury shares to fulfil the target.
The firm targeted net sales of VNĐ1.8 trillion, down 43 per cent from 2015, and a before tax profit of VNĐ1.5 trillion, down 71.5 per cent from 2015. It also expected to pay 14 per cent of the 2015 dividend rate in cash and planned a cash dividend rate in 2016 of 16 per cent.
The company attributed the downturn to its investments in new business segments, like cooking oil, instant noodles, and other foodstuffs.
During the quarter the company did not earn a big contribution from its snack business, either, since it had sold 80 per cent of it to Mondelez earlier last year.
Yesterday KDC shares rose 5 per cent to end at VNĐ27,300 on the HCM Stock Exchange.
New microsoft cloud computing distributor
Microsoft Việt Nam signed an agreement yesterday in HCM City with its new strategic partner CMC Telecom to provide Cloud Computing services in Việt Nam as a Cloud Solution Provider Tier 1.
CMC Telecom will offer counsel, set up and provide IT solutions based on the international standard Microsoft's Cloud Computing foundation, with the aim of providing a solution package with secured services and savings of expenditures for domestic enterprises.
"Demand for internet capacity and digital storage sizes has increased. At the same time, management requirements are also increasing and cloud computing is the answer for development trends," Ngo Trọng Hiếu, CMC Telecom general director, said.
Microsoft's Cloud Computing Service will include Azure Opened Cloud Computing, Office 365, teleconference, OneDrive for data archive, governance solution CRM, Exchange Online, and Yammer.
CMC is now the fourth largest telecommunication service provider in Việt Nam.
Unleashing agriculture’s potential in Vietnam
Vietnam agriculture has unparalleled opportunities for growth, but making the most of them will require more effective regional integration, says the Institute of Policy and Strategy for Agriculture and Rural Development.
At a recent conference in Hanoi, speakers from the Institute, a think-tank for the Ministry of Agriculture and Rural Development (MARD), addressed measures to bolster the competitiveness of agriculture.
“Most importantly,” said Nguyen Trung Kien, “industry participants need to capture some of the economies of scale that their foreign counterparts enjoy from advanced fertilizers and seeds.”
“Additionally, there needs to be more investment in agricultural research and technology development.”
While increasing agricultural yields is essential, said Mr Kien, more attention needs to be placed on the downstream segment of the ag-food system – assembly, storage, processing, wholesaling and retail.
For example, food processing companies located in Vietnam often prefer to import raw materials such as fruit juice concentrate, grains and vegetable oil rather than sourcing them domestically or developing substitutes based on local raw materials because local supply chains are too weak and fragmented to provide them reliably.
Appropriate policies will vary by market segment, but broad efforts to upgrade small and medium sized businesses in the food processing segment of agriculture should be a policy priority.
Strengthening the linkages between market-oriented family farms and their organizations with agribusiness of all sizes to enhance access to markets, inputs and support services should also be a top priority, said Mr Kien.
He emphasized, in particular, that special attention should be placed in supporting both women and young entrepreneurs, who play a key role in the ag-food system from farming through the supply chain to retail.
Lastly, he said the government should shift spending towards public goods such as roads, reliable electricity supply, research and schooling rather than towards subsidizing private goods such as fertilizer and tractors.
Dr Sergio Rene Araujo-Enciso, an economist at the Food and Agriculture Organization of the United Nations in Vietnam in turn shifted the subject to the expansion of overseas markets for Vietnamese fruit.
Dr Rene said actors in the agriculture segment of the economy in Vietnam should pay particular attention to accessing foreign markets for dragon fruit, rambutan, and litchi because more and more people are interested in them.
He said, however, consumers around the globe are highly concerned with the safety of Vietnamese fruit and vegetables— resulting in a reluctance to purchase them and that is a pivotal obstacle that needs to be rectified to unleash their potential.
Strong growth in card payments boosting Vietnam's economy: report
The higher use of electronic payments helped consumption grow 0.22% in Vietnam in 2011-15, which translated to an addition of US$880 million to its gross domestic product (GDP) over the years, according to a global study.
That was equivalent to 0.14% of Vietnam's GDP, the highest rate in Southeast Asia, after Thailand's 0.19%, the US financial services company Visa said in the study co-authored with market research firm Moody's.
Such GDP contribution equaled to the creation of around 75,000 jobs a year in Vietnam, Visa said.
Latest figures released by the State Bank of Vietnam (SBV) showed the number of debit, credit and prepaid cards in the country reached 101.94 million at the end of March, up 18.2% year-on-year.
Card transactions were estimated at around VND70.07 trillion (US$3.09 billion) in the first three months, an increase of 60.4% from a year ago, the central bank reported.
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