Happy New Year Everyone!!

In less than 7 hours, I'll be ringing in the New Year in California. Those of you who are in Vietnam have already celebrated yours and are probably just waking up to the New Year (or maybe not.) As I wait to pop the champagne, let's take a quick look at what Vietnam has accomplished this year and see what needs to be done in 2008.

2007 has been a great year for Vietnam and there is much to celebrate. The year marks many significant achievements including: a successful first year membership in the WTO, a record foreign direct and indirect investments (FDI and FII), the most attractive manufacturing destination (beating out China), and the fastest improvements in living standards in the world.

There is no doubt 2008 will be another successful year. However, Vietnam does have quite a few challenges to undertake but I believe it will do a good job at tackling them. Here is my short list of what Vietnam needs to focus on in 2008 and beyond.

1. Education, Education, Education. I can't stress enough on the importance of education. It is the ticket to economic prosperity and to solving many of Vietnam's problems. The areas to focus on at the moment are technology, science, and business management.

2. Infrastructure -- anyone one who has been in Vietnam will immediately know what I am talking about. Vietnam must reduce congestion, traffic accidents, and road pollution and it must do it fast.

3. Corruption & Regulatory System -- corruption one of the biggest gripes to doing business in Vietnam. Vietnam has devoted a lot of attention to fighting corruption but it needs to do more, a lot more (I know, I know...easier said than done.) Vietnam needs to cut down its bureaucracy and red tape. The rules must be easier, straightforward, and more transparent--complicated, burdensome, and murky rules make it much harder to fight corruption.

4. Viet Kieu -- Vietnam must continue to solicit Viet Kieu to return to Vietnam. It needs to promote an open environment for Viet Kieu to express opinions and share ideas--in business, education, and civil liberties.

5. Small and Medium-sized Businesses -- these businesses are huge contributors to Vietnam's economic growth. Vietnam must create favorable conditions to attract new small and medium start-ups (both domestic and foreign) and to foster their growth.

Vietnam is one of the great untapped emerging markets and I think 2008 will be an amazing year.

Cheers to a happy and prosperous New Year!!!

Vietnam's Exports to US Projected to Increase 28%

Vietnam's exports to the US is expected to reach US$13.1bil in 2008, an increase of 28% over 2007. Vietnam's revenue from exports to the US increased by 39% this year to $10.2bil.

The 2007's growth rate came mostly from items such as clothing, seafood, wood products, coffee, and footwear.

The garment sector currently takes up the lion's share of Vietnam's exports, with a value of $4.4bil. Next year, Vietnam's garment exports to the US are likely to reach $5.4bil, a rise of 25.6%.

The US is now Vietnam's biggest importer of garments, which account for 55% of Vietnam's total exports to US market.

Vietnam's footwear exports to the US hit the $900mil mark, in 2007, a 12% increase over 2006. The footwear industry set the target of $1.1bil in exports for 2008, a 22% increase over 2007. If that goal is reached, Vietnam will account for more than 5% of total footwear imports to the states.

Vietnam is developing the production and export of wood products to the US in the coming year as a result of cheap labor and high skill.

The lumber processing and wood products industries aim to export $1.1bil of their goods in 2008, a 23.6% upswing from this year.

Vietnam's seafood industry hopes to continue tapping the US market next year with a 14.9% increase over 2007, bringing its export total to $850mil.

In 2008, Vietnam's coffee industry anticipates shipping 125,000 tonnes of coffee to the US, with an export value of $200mil, the same as 2007. The US is the world's biggest coffee importer.

New items such as shoulder bags, purses, suitcases, hats and umbrellas also promise another export windfall. Vietnam is predicted to boost exports of these items to $270mil in 2008, up 31% from 2007.

source: vietnamnet

Investors Register to Buy Vietcombank Shares Scheduled for December 26

As many as 9,473 have registered to buy over 122.2 million shares of the Bank for Foreign Trade of Vietnam at its initial public offering scheduled for December 26.

Of these, 45 foreign organizations have registered to buy nearly 39.9 million shares while 207 foreign individuals have ordered to buy nearly 805,000 shares.

In total, foreigners ordered to buy nearly 40.7 million shares, accounting for over 40% of the total 97.5million shares offered by Vietcombank.

153 domestic organizations have ordered to buy 34.8 million shares while 9,068 domestic individuals have registered to buy over 46.7 million shares.

Vietcombank is the first State-owned bank to offer shares to public. The shares offered at its IPO are equivalent to 6.5% of its stake. At this auction, foreign investors are allowed to buy a maximum of 30% of the total shares offered.

source: Nhan Dan Online

Exchange welcomes 130th listed firm

Construction and property firm DESCON (DCC) listed on the Ho Chi Minh City Stock Exchange on December 12, becoming the bourse’s 130 th member.

The price reference on its opening day was 62,000 VND, and the stock closed at 69,000 VND after clocking volumes of over 326,000.

DCC has a charter capital of 103 billion VND with the State holding 5.53 percent and its staff 14.7 percent. A foreign institution, the Asian Worldwide Management, owns another 7.28 percent.

The company’s CEO Nguyen Xuan Bang believes that with major collections due in December, the year’s profit target of 18 billion VND will be achieved.

The targets for the next two years are respectively 26 billion VND and 37 billion VND.

DCC is developing a commercial-residential complex in Ho Chi Minh City ’s District 2 in partnership with Korean company Pumyang. The Preche project, with two blocks of 33 floors each, will have offices for lease and apartments and will be completed in 2010.

The company also plans to begin several other projects soon, including two hydropower plants in Dac Nong in collaboration with partners, a housing villa complex in Da Lat, and an apartment project in Can Tho province.

source: http://www.vnagency.com.vn

Still waiting on foreign investment regulations

When regulations on foreign stock market investors will be put into effect?? Government officials were unable to provide an answer.

The Ministry of Finance announced at the beginning of this year that draft regulations had been completed, but for some reason, the document that should have been enacted mid-year has yet to be ratified.

According to Chairman of the State Securities Commission (SSC), his organization submitted the draft regulations to the Ministry of Finance for approval. However, finalization has been delayed for an indefinite period of time, while the ministry waits for the decision on whether Vietnam will allow the establishment of 100% foreign owned investment fund management companies earlier than the WTO commitment deadline.

Part of the new regulations includes easier administrative procedures which aim to create the best possible conditions for foreign investors to enter Vietnam’s stock market.

Under current law, foreign representative offices only have the function of promoting the business activities of parent companies in Vietnam, while they are not allowed to do any actual investment business. However, according to the new regulations, the functions of representative offices will be expanded: they can place securities trading orders through securities companies or authorize fund management companies in Vietnam to make investments.

Also, Vietnam plans to allow fund management companies to set up 100% foreign owned branches or 100% foreign owned entities.

Foreign investors also expressed their concern over the high number of new securities companies.

The overly high number of securities companies may have a bad impact on the market’s operation, the SSC is going to amend regulations on licensing securities companies setting stricter requirements in order to limit the number of securities companies.

Prior to that, Deputy Chairman of the SSC Nguyen Doan Hung, also revealed the SSC would set higher capital, technology and corporate governance capability standards for securities companies.

Phan Minh Tuan, Director and Chief Representative of Dragon Capital in Hanoi, warned the establishment of too many securities companies would lead to an employee shortage and, particularly, stretch an already limited experienced management pool far too thin.

source: http://english.vietnamnet.vn

Banks raise interest rates on dong deposits

Commercial banks have lifted interest rates on dong deposits yet again to rescue client profit against the backdrop of high inflation.

Banks have said that the rate hike favors depositors as inflation continues to outstrip interest rates and erase any possible gains.

"Those depositing in dong are losing out," said deputy general director of the Western Bank, Nguyen Quoc Sy.

Today, a customer who deposits in dong for a nine-month term with monthly interest of 0.78%, would receive 7% interest on the deposit at the end of the term.

The consumer price index had increased by 9.45% in the first 11 months of the year to November, prompting a negative interest rate on most deposits.

Interest rates on US dollar deposits are also restricted after an increase two months ago. People with savings in dong might consider turning to the greenback, given that the local currency in Vietnam depreciates around 0.5%.

Many people with idle money but no investments still prefer banks however, citing the low risk ratio of the saving measure.

According to the State Bank of Vietnam’s Hanoi branch, total capital by commercial banks and credit institutions has reached VND341.7bil so far this year, up 36 per cent over the end of last year.

Banks are likely to continue to increase interest rates on dong deposits. Experts remain concerned that high interest rates may cause businesses to curtail investments, which will reduce the nation’s GDP and send unemployment to undesirable levels.

source: http://english.vietnamnet.vn

Vietcombank IPO not for little fish

How expensive Vietcombank’s shares will go for is the current hot topic of investor discussions. Many say they will accept the VND130-150,000 range, while analysts argue the IPO will be a game for big players, ready to pay VND200,000/share or higher.

According to Hoang Xuan Quyen, Director of the Investment Analysis Division under Tan Viet Securities Company, he will be able to accurately forecast Vietcombank’s share price in only a few days, after the list of registered investors has been completed. If the number of investors registered to buy shares is high, the price will be as well, and vice versa.

Contradicting predictions have been released since the national leading bank announced the initial share price at VND100,000, several days ago. Analysts say that no previous IPO has attracted such rapt investor attention.

Local newspaper VnExpress conducted a quick survey and found that most individual investors are willing to pay VND130-150,000 per share. Vu Manh Vinh, an investor on ACB trading floor said that thanks to a household name, high chartered capital and robust performance, a reasonable share price is VND140,000.

Mr Binh, an investor on Bao Viet trading floor, said that he knows an investor who has reserved VND3-5bil for the IPO and would accept between VND130-150,000/share.

Xuan Phong, General Director of T&M Finance, says individuals should not purchase shares because the IPO is targeting and will benefit domestic and foreign institutional investors most.

According to Mr Phong, individual investors who buy shares at VND130-150,000/share will pay for Vietcombank’s shares by selling other securities, which will create sharp falls on the market.

If an investor gets the right to buy 5,000 shares at VND150,000/share, that is VND750mil, a significant sum in this market, Mr Phong said.

Vietcombank has decided to sell 6.5% of total shares to the public, 30% of which will be sold to foreign investors. As the demand is high and the supply limited, Mr Phong believes foreign investment funds are willing to pay over VND200,000/share.

Mr Quyen from Tan Viet Securities Company also thinks institutional investors will be superior to individual investors, but does not believe foreign investment funds will pay over VND200,000/share. He thinks institutional investors are wise enough to make accurate and reasonable decisions.

Mr Quyen says most individual investors are speculators or short-term buyers and sellers, who aim to profit from items first listing on the bourse. Whereas, Vietcombank will only list after the time it takes to negotiate with strategic shareholders, which could be awhile.

Ngo Van Minh, Deputy Head of the Brokerage Division under VPBS Securities Company, agreed that Vietcombank shares will not be attractive in the eyes of short term investors, contrary to long term investors to whom this is a strong, seasoned investment choice. Long-termers invest 30% of their money on prospective items and the other 70% on perdurable shares. Mr Minh said that Vietcombank is a good choice for long term investors, because of its reputation, experience and market niche.

Vietcombank’s representative, at the roadshow on December 11, acknowledged that Vietcombank’s IPO might not be as successful as expected. Nguyen Phuoc Thanh, General Director of Vietcombank, said investors are in need of money, and he doesn’t expect they will sell other shares to buy Vietcombank’s at higher prices.


source: http://english.vietnamnet.vn

PIT law has little impact on real estate market

The property volume now offered on HCM City’s real estate trading floors has reduced slightly after the announcement of the Personal Income Tax (PIT) law, but sale prices remain high. Experts think that the newly ratified tax on real estate capital gains will not have a considerable impact on the market.

Under the PIT Law, taxable income will be calculated by subtracting sales price from purchase prices and related expenses.

People will have two PIT real estate options: either paying 25% tax on the profit from a real estate sale after deducting expenses (margin between the sale and purchase prices), or 2% tax on the sale price or real estate value.

Huy Nam, an economist and real estate expert, said tax policy changes will cool the market down for some time as real estate traders speculate on possible consequences and changes, but not for too long.

According to Ho Dac Hung, Chairman of Vietnam Real Estate Consultancy and Brokerage Company, people will accept paying 2% on turnover. “This tax calculation method proves to be simple enough to be implemented and 2% is considered a suitable rate,” Mr Hung said.

Analysts also say the first calculation method is too complicated, especially for property purchased long ago. In many cases, property owners do not keep documents showing purchase prices and other expenses.

Meanwhile, analysts say 25% on net profit proves to be high, thus not encouraging real estate transactions.

Mr Hung does not think speculators will try to offload real estate before PIT law comes into effect to avoid the tax.

In fact, taxation is only eligible on transactions recognized by the state, i.e. land plots and houses that have ‘red book’ (land use right certificates) and ‘pink book’ (certificates on house ownership). Meanwhile, the state is unable to collect on transactions without ownership certificates, and these account for a big proportion of total transactions.


source: http://english.vietnamnet.vn

Less tax, more cars

Foreign-made cars have been imported in large quantities after the Government lowered the import tax rate.

According to the Vietnam Automobile Manufacturers’ Association (VAMA), local auto manufacturers will only be able to deliver the 10,000 cars they have promised by the end of the first quarter of 2008. A lot of sales agents have refused security money from clients because manufacturers cannot provide timely deliveries.

Mr Thanh Hung, who lives in HCM City’s district 10, wants a 3.5L Camry. A Toyota sales agent told him he would have to wait until early 2008. Instead, he decided to buy an imported car.

He has found out that a Camry 2.4L is being offered for $50,000 and if he pays the deposit now, he can expect delivery in four to five weeks.

Analysts say a lot of customers are now buying imported cars. In the past, imported cars were out of many people’s reach, but are now much cheaper thanks to tax cuts.

Wise buyers should purchase imported cars now instead of waiting so long to get locally made products, they said, adding that locally made products will fall further behind due to increasingly high year end demands. In fact, import prices are just a bit higher than locally made products.

Director of a car import company said that the domestic market has been stimulated by tax decreases and the number of car buyers is increasing as many profit from securities investments and want to own cars.

Analysts say the market will remain hot in the near future as importers still can not meet rapidly increasing demand.

They say more imports will intensify the pressure on local automobile manufacturers, forcing them to lower the sale prices.

Car importers have all announced they will lower sale prices.

The tax decreases have resulted in considerable car price decreases: $2-4,000/unit for BMW models, $1,500/unit for the Hyundai Santa Fe (now selling at $43,400), $5,000 for the Veracruz ($63,500) and $2,000 for a 2007 Toyota Camry.

Currently, medium-class cars are hovering at $50,000/unit, down by $1-4,000.


source: VietNamNet Bridge

HCM City’s GDP hits ten-year record

HCM City ’s gross domestic product (GDP) surpassed 228.6 trillion VND (14.3 billion USD) in 2007, a year-on-year rise of 12.6 percent and the ten-year record, reported the city’s People’s Committee.

At the 12 th meeting of the seventh tenure of the HCM City People’s Council on December 4, the municipal People’s Committee said that 14 socio-economic targets for 2007 have been fulfilled, including the economic growth rate surpassing the average target of 12 percent set for the 2006-2010 period.

The city’s export revenues hit 16.59 billion USD this year, a year-on-year rise of 15.5 percent.

However, weak infrastructure facilities, overlapped planning, traffic congestion and cumbersome administration are hindering the city’s socio-economic development, the report said.

Settlement of petitions, land use management and environment protection, and the list of capital construction and land prices will be high on the agenda.

Municipal People’s Council President Pham Phuong Thao said that 104 voters’ petitions and 61 questions on traffic jams, administrative reform, infrastructure construction, environmental pollution, food hygiene and epidemics have been sent to the People’s Council for its hearing on December 5.

source: http://english.vietnamnet.vn

Credit Rating Book for Public Companies in Vietnam

There was an article from VNS a few days ago talking about an upcoming credit worthiness rating book for publicly traded companies in Vietnam (see original article).

The book is published by the Credit Information Center of Vietnam and Dun & Bradstreet (D&B) and will be available in both English and Vietnamese.

There was no mentioning in the article as to when the books will come out or how much it will cost.

I did some quick searches on D&B website and looks like these credit reports are currently available online. However, the price is US$498.99 for each report, which is pretty expensive--click here to view the search results of companies with the word "Vietnam" in the name. You can refine the search further by putting in a specific company name or keyword using the form at the bottom of the page.

The credit worthiness of the public companies is based on the audited financial reports which will be provided by the State Securities Commission. The evaluation process is done entirely by computer software. Each company will receive a rating ranging from "AAA" for the best rated companies to "C" for the worst ones--this is the typical rating scale for D&B.

The ratings can be useful in determining the credit worthiness of listed companies. However, unless you are major investor, I am not sure how many people can really afford the $US498.99 price.

Keep in mind though, the ratings are only as good as the integrity and accuracy of the data source, which is the audited financials provided by the companies. The reliability of the audited financials will depend upon factors such as the automony and competency of the auditing firm, interpretation of accounting rules, conflicts of interest, and the integrity of management.