Bài 58: Tourist turns to sustainable tourism

When Frédéric Tiberghien Frédo first visited Vietnam 20 years ago as a tourist, he wanted to see more of the country.

He was already linked to the country, being born to a French father and Vietnamese mother, but he lost both of them in an accident in France when he was young, and was raised by his maternal grandmother, according to a 2011 report in the Kien Thuc (Knowledge) online newspaper. He worked as a carpenter and a horse keeper in France and England before deciding to visit his mother's native country.

In his fifties now, he is no longer a tourist. Vietnam has become home. And, he is known as Frédo Binh.

Frédo's transformation from a curious tourist to a charmed one and to a tour operator himself has been accompanied by a motivation to preserve the country's beauty, the culture of its ethnic minority residents and improve the living standards of communities in a sustainable manner.

Over the years he has initiated community projects in many localities in the northern highlands.

In Cao Bang Province, he established a small museum introducing local culture to foreign tourists. In Lao Cai Province, he built a bridge that made it easier and safer for children to attend school. In Yen Bai Province, he founded a nursery school and a community "culture house." He has also helped improve sanitary facilities like toilets and septic tanks at various localities.

His most impressive achievement, however, is probably the eco-tourism project he began in 2006 in Yen Bai Province's Ngoi Tu Village, which is home to Dao ethnic families.

Because of the project, locals are able to augment their incomes from farming by participating in the tourism industry. They have also developed a better awareness of environment protection. Many villagers have become professional tour guides able to speak foreign languages.

"It is slow but lastingly effective to promote Vietnam's image through sustainable tourism," Frédo told the An ninh thu do (Capital security) newspaper.

"Green tourism is not only about sustaining the environment where it happens, but also about how local culture is conveyed to visitors," he said.

When he first arrived in Vietnam and visited Hanoi's famous Old Quarter, he felt the "depth of the culture of the peaceful country."

In 1994, he took adventurous trips to the northern highlands on a Minsk a motorbike produced in Belarus. During those trips, he was not only charmed by the beautiful landscape but also the culture of ethnic minority people he met.

"Then I suddenly thought about doing tourism to earn a living," he said.

Frédo said he printed ads about his motorcycle tours and posted them at places frequented by foreign tourists in Hanoi.

"Unexpectedly," it was "effective," as he received many phone calls and bookings, he said.

In 1997, he founded a travel company called Compagine Bourlingue, which was also known as Freewheeling Tours in English. He asked the ethnic minority residents to join him in offering homestay experiences for foreign tourists in their villages.

Years later, he came upon Ngoi Tu Village on the banks of the Thac Ba Lake in Vu Linh Commune. He was totally captivated by the scenery and the way local people preserved their traditions and customs.

So, he bought a stilt house there and developed it into an eco-lodge that can accommodate 60 people.

Once again, he invited local people to join him in the eco-tourism project. He taught them French and English. He also sent them to Hanoi, where they were trained in being tour guides as well as other aspects of the hospitality industry.

He also worked to raise their awareness about protecting environment and their culture, and earning a living in sustainable ways.

Speaking about his project, Luong Xuan Hoi, secretary of Vu Linh Commune's Party Unit, said local people's life has changed a lot since they began participating in tourism.

Previously, it was not easy for them to earn more than VND2 million ($94.65) a month, as they only did farm work, but now, that has changed.

The way Frédo has done tourism, moreover, has contributed to the preservation of local culture, the official said.

Frédo himself has changed a lot over the years.

He can speak both Vietnamese and the Dao people's language fluently. Although he is based in Hanoi, he visits and stays in the village often, and has learnt a lot about the Dao culture, from the meaning of pillars in their traditional houses to the practice of burning incense and offering chicken to the spirits before building houses.

He loves in particular the festival that Dao people celebrate at the beginning of the spring to mark the start of a new rice season.

"It is a beautiful aspect of culture," he said. "People thank the plants, heaven and the earth for giving them a good life and harvest."

He regularly takes his 10-year-old son to Ngoi Tu, where the boy plays with local children. And, like his father, he has learnt to speak Vietnamese and the Dao language very well. Frédo is divorced and has two children.

Trang 59 : Lack of government support blamed as more firms shut

The number of companies shutting up shop rose last year while fewer new ones were incorporated, reflecting the poor business environment and the government's failure to support business.

According to a recent report by the Vietnam Chamber of Commerce and Industry (VCCI), the number of businesses that shut down or suspended operations increased by 6.29 percent last year to over 54,200.

Most of them were in the finance, banking, and real estate.

The number of newly established firms declined by 9.9 percent to 69,900. Their total registered capital was estimated at VND467.3 trillion (US$22.3 billion), also down 9.9 percent from 2011.

Vietnam now has just 300,000 firms, compared to nearly 700,000 during the past decade.

Most of firms operating in Vietnam now are mainly microenterprises, which have less than 10 employees, and small ones with 10-50 workers.

In 2011 some 39 percent of medium-sized companies reduced their staff size and became small firms while 5 percent of small firms became microenterprises.

The average number of staff in a Vietnamese firm decreased to 34 in 2011 from 74 in 2002.

Pham Thi Thu Hang, general secretary of the VCCI, said Vietnam lacks medium-sized and large enterprises that take part in the global supply chains.

Only 2.1 percent of firms are medium-sized, the report said.

Ineffective measures

The VCCI blamed the situation on the poor business environment and the government's ineffective support measures, which benefit only large firms.

According to the Doing Business 2013 report by the World Bank, Vietnam ranks 99th out of 185 economies for ease of doing business.

 The VCCI said the country's business environment has not improved much over the past decade and remains below average.

Administrative procedures, despite being reformed for many years, still remain tortuous, hindering businesses, Vu Quoc Tuan, chairman of the Vietnam Handicraft Village Association, said.

The government has proposed amendments to the tax law to cut corporate income tax and also reduced interest rates to help businesses.

But companies said the measures have not really worked since their biggest difficulty now is to liquidate inventories, not high tax or interest rates. Some 73 percent of firms polled by the VCCI said large inventories were their biggest concern.

The Ministry of Finance last week announced plans to cut corporate income tax to 22 percent on January 1 next year from the current 25 percent. It plans to bring it down further to 20 percent in 2016-20.

However, the 22 percent rate would apply earlier to small and medium-sized enterprises from July as they are most vulnerable in the depressed economy, Deputy Minister of Finance Vu Thi Mai said.

The ministry has also announced a 30-50 percent cut in value added tax for developers of affordable housing from July. Mai said they play an important role in helping low-income buyers and bringing greater liquidity to the property market.

Nguyen Nhan Phuong, chairman of the Association of Small and Medium-Sized Enterprises of Bac Ninh Province, said the tax reduction would not benefit small and medium-sized firms that are already in deep trouble. It benefits only firms with sound operation that are making profits, he said.   

"Most of the weak companies, which should have received support from the government, will not benefit because they have no profits to pay taxes," he explained.

Small and medium-sized firms now find it hard to sell their products, and the government should help them study and update them on foreign markets, he said.

Many companies, whose products can be competitive in foreign markets, have not been able to enter them, he added.

Meanwhile, the State Bank of Vietnam has cut lowered the maximum deposit rate to 7.5 percent from 8 percent, the first cut this year following six in 2012, raising expectations of cuts in lending rates.

But economist Le Tham Duong said interest rate cuts no longer excite expectations for the economy.

"Why will firms borrow when demand is weak and inventories remain high?" he asked.

Tran Thi Hong, director of electrical home appliances maker Phuong Hong, said interest rates, despite being cut, remain too high especially for small firms.

Her company's bank loans carry over 12 percent interest, but all are short-term, since she does not dare make long-term credit decisions now. "We will borrow only when the rates go below 9 percent," she said.

The VCCI suggested that the government should support firms by minimizing the import of unnecessary products, thus boosting demand for domestic products.

Trang 60 : Chinese imports monopolize major vegetable market

Cho Lon in Ho Chi Minh City, famous as Vietnam's Chinatown, a repository of Chinese culture, has a rival.

The Hoa Dinh Market, around 30 kilometers from Hanoi, could well be hailed as another Chinatown.

The market in Bac Ninh Province is one of the biggest agricultural produce suppliers in the country, and most of its products come from across the border.

It used to trade in local products which were famous nationwide, but many farmers since the late 1990s have left their fields and switched to trading Chinese produce which are several times cheaper than local ones and thus earns them bigger profits.

A major problem with this is the lack of official supervision of the whole process. The imports are not taxed or checked for safety. 

The market trades between 200 and 400 tons of all kinds of vegetables every day, providing stock for distributors and vendors to sell to consumers in smaller markets in Hanoi and other provinces, as also down south in Ho Chi Minh City.

"A hundred percent Chinese. You won't find a Vietnamese thing," said a trader named The.

The owns a warehouse of around 300 square meters that stores 60-70 tons of garlic and onions in packages labeled with no other language but Chinese, and it is among many such warehouses in the bustling market.

He told undercover Thanh Nien reporter to feel safe taking stock from his store, as "the Chinese have special preservation methods and their produce can be stored for a long time without getting rotten."

The produce is transported from Tan Thanh border gate in Lang Son Province, around 100 kilometers away, after it is imported from Hunan, Sidong, Jiangxi and Jiangsu provinces in China.

An area more than 60,000 square meters (around 15 acres) near the border, three times larger than Hanoi's major wholesale market Long Bien, is used to gather the imported produce before they are picked up by trucks.

Customs figures compiled over the first five months this year show that Chinese carrots and potatoes are priced between VND3,500-3,700 (around US16 cents), between two to three times cheaper than prices in Hanoi markets.

Chinese raw produce imports to Vietnam are exempt from tariffs and trade in fresh vegetables is free of value-added tax.

Nam, a dealer at the border who owns trucks that deliver the Chinese produce to Bac Ninh, said suppliers like The would resell them at prices many times higher.

"They can pocket VND140-150 million ($6,640-7,110) a trip (of around 30 tons).

"That is not to mention times when prices of Chinese produce drop even lower, and traders with large pockets would store a lot of these, waiting for prices to go up and make even bigger profits."

Vendors buying from The would accept the prices as they can mix the products with local ones and tell buyers that they are Vietnamese produce so that they can charge higher prices. Some vendors do not even bother to mix them, and just sell Chinese imports as locally produced fruits and vegetables. 

They said the Chinese imports are not only cheaper, but also look better because they are big, plump and smooth, though they do not smell as good as locally grown produce.

Nam said dealers like him also have their own way to increase profit by overloading their trucks, usually up to three times its designed capacity.

A 10-ton truck would carry 30-35 tons. "The more we can carry, the more money we make."

The trucks usually leave the border at night and arrive early in the morning, and traders in Bac Ninh are charged VND220,000 ($10) a ton for the delivery.

Trucks coming from around the country to buy the stock also arrive at night.

Nguyen Van Cuong, head of Vo Cuong ward in the province's capital town, also named Bac Ninh, said many local farmers have become rich pretty fast with trade in Chinese produce. Some families have been able to buy their own trucks for transporting the goods, he said.

Cuong said there are around 20 major household businesses that have become prominent in the region.

They earn between VND2-3 billion ($95,000-142,300) a year, locals said. Vietnam's per capita GDP in 2012 was $1,596.

Numerous uncounted small traders also make more than $5,000 a year, they said.

Cuong said that when local crops are out of season, between 80 to 90 percent of the supply at the market is brought from China through Tan Thanh border gate.

Bac Ninh market managers said the traders almost always managed to produce legal import documents and quality certificates for their stock. So far this year, they have imposed fines of VND8 million for the import of eight tons of garlic of unclear origin which they seized.

But Nam said the inspections do not prove a thing as customs officials are already bribed to let the cargo pass without close inspection, and the traders can "buy necessary papers later."

Toxic stuff

Authorities in the Central Highlands town of Da Lat in June dumped 26 tons of potatoes from China after samples tested positive for excessive levels of a toxic insecticide called chlorpyrifos, although the owner had produced adequate safety certificates during earlier inspections. 

Surveillance over two years showed the trader had been importing potatoes from China and local vendors were mixing these with local produce to cheat consumers. 

In May this year, a wholesale market on the outskirts of Ho Chi Minh City banned traders from selling Chinese ginger after tests found high levels of adicarb, a highly poisonous carbamate pesticide, in a sample.

Official figures say that Vietnam imported around 150,000 tons of Chinese produce in the first four months this year, mostly garlic, onions and apples.

A report on the website of the Ministry of Industry and Trade earlier this month cited experts as saying Vietnam has a much smaller cultivation area than China and cannot engage in the same large-scale intensive farming.

Hence local prices cannot compete with Chinese imports, they said.

Trang62: In Vietnam, unsustainable ‘modernization’ too much for sanitation services
Huynh Thanh Long said he and his neighbors close all their doors and windows whenever they are at home but that doesn’t keep the awful stink from the Ba Bo Canal out of the house.

“Pollution often forms a thick layer of foam on the surface of the flowing water,” said the resident of Ho Chi Minh City’s Thu Duc District.

According to the city’s anti-inundation center, pollution in the canal is a combination of wastewater from residential areas and industrial zones upstream.

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Pollution in big cities is common in Vietnam, threatening public health and sustainable growth, experts say.

Vietweek recently reported serious pollution in Hanoi’s rivers, the result of untreated wastewater being discharged from series of new urban areas built without  wastewater treatment facilities.

“Over the last 20 years, the government of Vietnam has made considerable progress on the provision of wastewater services in urban areas, investing nearly US$250 million annually in recent years,” said Le Duy Hung, a senior urban specialist in Hanoi.

“However, keeping pace with rapid urbanization is challenging and it is estimated that $8.3 billion will be required to provide wastewater services to Vietnam’s urban population between now and 2025,” Hung, who is also a leading researcher at the World Bank’s Vietnam Urban Wastewater Review, wrote in a report released on January 20.

The report focuses on the specific challenges that Vietnam faces as a result of increasing environmental pollution associated with rapid urbanization. It also evaluates the performance of the wastewater sector in Vietnam.

It found that although 60 percent of households dispose of wastewater through a public sewerage system, much of this goes to the drainage system with only 10 percent of the wastewater treated.

Hung said estimated economic losses resulting from poor sanitation stood at $780 million per year, or 1.3 percent of the country’s GDP.

“Financing needs are still very high, estimated at $8.3 billion for sewerage services to an estimated urban population of 36 million by 2025,” he said.

Industrialization problem

Apart from untreated wastewater from residential areas, pollution also comes from industrial zones, threatening public health and sustainable growth.

Recently, many farmers in HCMC’s Cu Chi District complained that they do not have water for nearly 400 hectares (988 acres) of rice due to pollution in the Thai Cai and An Ha canals.

They accused the SEPZONE - Linh Trung 3 Industrial Zone of discharging untreated wastewater to pollute the canal.

Vietnam’s first industrial parks opened in 1991 as part of thedoi moi reform movement, and there are currently more than 189 industrial parks and 878 export processing zones nationwide in 57 of the country’s total 63 cities and provinces.

Vo Thanh Thu of the Vietnam Chamber of Commerce and Industry’s international trade policy advisory committee said that rapid industrialization over the past 20 years had led to a boom in industrial parks and export processing zones.

However, it has also led to serious pollution, leading to conflicts with local residents.

“Only half have established waste treatment plants,” Thu said at a recent seminar on the issue, organized by the People and Nature Reconciliation (PanNature) a Vietnamese non-profit organization.

Thu said that toxic waste is discharged without treatment, causing serious pollution to the environment.

The committee urged the government to review industrial park and export processing zone zoning plans and encouraged agencies to cooperate to improve the monitoring of environment regulations.

Action needed

Researchers estimated that investment levels of at least $250 per person are needed annually in the East Asia region over the next 15 years to manage wastewater and septage that is generated by the urban population.

In another World Bank report, entitled East Asia Pacific Region Urban Sanitation Review: Actions Needed, researchers examine what is holding back the sector and recommend ways to expand and improve urban sanitation services in an inclusive and sustainable way in Vietnam, Indonesia and the Philippines.

The region’s rapid urbanization is an engine of economic growth but poor quality sanitation leads to unsustainable development, with economic losses of 1.3, 1.5 and 2.3 percent of GDP in Vietnam, the Philippines and Indonesia, respectively.

“Worldwide, about 2.5 billion people lack adequate sanitation and 660 million of them live in East Asia and the Pacific Region,” said Charles Feinstein, World Bank sector manager for energy and water.

“Inadequate sanitation takes a tremendous toll on the quality of peoples’ lives, the environment, and the economy,” he said. “But the good news is investments in sanitation yield high returns.”

According to the report, poor sanitation has a significant impact on public health in the region including chronic poor health caused by diarrheal disease and an increased risk of disease epidemics such as cholera.

It calls for developing people-centered policies, promoting cost-effective technical solutions, developing sustainable institutions for quality services and developing viable financial schemes.

Returns on sanitation investments are also high.

Worldwide, every US dollar invested in sanitation yields $5.50 in return in terms of economic benefits.

In East Asia, this rate of return is even higher, with every US dollar spent yielding $8 in return, according to the World Health Organization.

Trang 63 : Doing good to feel good

Over the last 12 years, the life of Marc De Muynck, a 64-year-old French veteran, has been ruled by the simple desire to help those less fortunate than him.

When he came to Vietnam in 2001 after retiring from the military, he was a tourist, but also on a mission of delivering gifts from a French veteran association to an orphanage in the Mekong Delta province of Dong Thap.

The Frenchman was stricken by the plight of the abandoned children. After the three-month trip, he returned to his home, Arras in Northern France, and interned with a volunteer organization engaged in humanitarian activities around the world.

He worked with several non-governments until 2007 when he returned to Vietnam and started projects on his own.

"My volunteering experience with some NGOs did not satisfy me. I did not really find my place. Very often, a volunteer is given a specific task and has very little or no involvement in projects or decision-making," said Muynck, whose friends call him Minh.

During his first years in Vietnam, Muynck initiated several different projects, from helping upgrade a nursery in his residential neighborhood in Ho Chi Minh City which was often flooded during torrential rains, to building houses for poor people in the southern province of Dong Nai.

The projects were conducted in cooperation with humanitarian organizations or his friends, acquaintances and even tourists who donated medicines, school stationeries, and toys.

Two years later, he founded the association Les Enfants du Dragon (The Children of the Dragon) with his friend, Bui Huy Lan, a Vietnamese-French dentist based in Northern France, to help poor people and orphans in the Mekong Delta and part of the central region.

With 11 core members, a dozen volunteers, and the support of local governments, other NGOs, and numerous fundraisers, the association tries to meet every need of the needy.

It has built houses, bridges, ensured clean water supply to poor localities,  provided scholarships and bicycles, opened free English and French courses for children, supported teacher training projects, supplied walking sticks for the elderly, entertained sick children and organized camping trips for orphans.

Les Enfants du Dragon also runs farms that culture spirulina a kind of nutritious algae usually recommended as food supplement to combat malnutrition and supplies it to orphanages and centers. About one-third of the farms' output is for sale to generate funds for the association's activities.

What motivates him is, Muynck said, the smiles of children when they are given gifts like bicycles, and the tears of happiness of a poor family when given a roof above their heads.

"Man can only feel happy when helping people who are less lucky than himself, when bringing joy to kids without parents."

After 12 years, what does he feel about his work?

"I have not finished my mission yet."

He said his "foremost" desire now is to carry out the association's "heart project" an orphanage for about 100 children in the southern province of Long An.

When the project is finished, he will see if he wants to take a short rest, he said.

"But, for now I still have enough energy to help other people. ["¦] There is always more to do, to do better."

Sweet lifestyle

While most of the association's core members are French and Swiss nationals living in their own countries, Muynck, despite having his own family in France, is among the few members who are based in HCMC so that they can work directly with local governments, volunteers, and beneficiaries.

"I am retired, and I like the sweetness of the Vietnamese lifestyle, and the southern heat."

He said one of difficulties he faced at the beginning was building a stable network of volunteers.

Initially lots of people volunteered, but many would also retreat quickly, either because they found the work hard and time-consuming, or because they did not get the recognition they expected from the association's leaders, and perhaps even more from beneficiaries, he said.

"But, in the end, we managed to form a small but strong and united team of loyal members."

Currently, there are a dozen of full time volunteers, both Vietnamese and French expats, working with Les Enfants du Dragon.

Occasionally, foreign donors also come to visit their beneficiaries and take part in volunteer work like building houses for the poor, and playing with children they had adopted by providing financial assistance.

These days Muynck is busy checking the progress of construction sites, visiting beneficiary families, attending meetings organized by local authorities, and updating the association's website and his personal blog to keep members and supporters informed.

He also joins other members in finding partners and donors online.

Dr. Lan, who is in charge of the association's work in France, said Muynck has done his job "very well," and thanks to him, Les Enfants du Dragon's activities are always "transparent."

Lan, who has always wanted to contribute to his home country, said he has found a kindred spirit.

"Muynck has a heart for Vietnam and its people."

Trang 64 : Vietnam economists warn against addiction to foreign investment

Belatedly, Vietnamese experts wake up to the danger of being addicted to foreign investment and resultant loss of self-reliance

A worker in an assembly line at a South Korean mobile phone factory in northern Vietnam

Vietnam is opening its doors wider to attract foreign investment hoping that will help its economy recover, but economists warn against undue dependence on overseas investors.

Vietnam is in active negotiations for the Trans-Pacific Strategic Economic Partnership Agreement (TPP) and plans to allow more foreigners to buy housing in the country.

Nguyen Dinh Cung, head of the Central Institute for Economic Management (CIEM), said: “It is now the time to review what negative and positive impacts FDI has on Vietnam.”

According to international norms, FDI should account for only 5 percent of gross capital formation, he said, but in Vietnam, it now makes up 25 percent, which may cause risks to the economy.

Economist Pham Chi Lan concurred, saying: “The development of an economy cannot rely on foreign firms, only local ones. Foreign investors could leave Vietnam for other markets when the country no longer has advantages or offers them the incentives it does now.

“What will happen to our economy if investors leave Vietnam en masse like they did in Thailand in 1997? The reliance on FDI is a big challenge to economic development.”

Current policies only benefit foreign firms and cause difficulties to local private businesses, she said.

Equal treatment

“No country offers incentives to foreign investors like Vietnam. We should review our policies, cutting out too generous incentives for foreign investors and providing equal treatment to local private firms.”

Bui Kien Thanh, another economist, said many provinces, which want to compete with others in attracting FDI, offer them too many incentives but do not know if the projects are useful.

“They are exempt from corporate tax and get thousands of square meters of land free in industrial parks for many years.

“On the other hand, local firms find it hard to get even 100 sq.m for their workshops.

“Authorities should reconsider the issue. Why do we cause difficulties for our local firms? FDI should support development of our products instead of overwhelming Vietnamese firms. Our firms are being crushed by foreign firms.”

Unable to compete with foreign rivals, many local firms have disappeared from the market. Some firms with good brand names have been bought up by foreign rivals in the last two years when they faced financial difficulties.

Thanh urged the government not to let local firms with good products, good markets, and good management be in a position where they cannot compete with foreign firms only because they cannot get bank loans.

“The government should implement a monetary policy which ensures enough money flows for the economy’s development,” he said.

“Private firms should play the leading role in the economy. State-owned enterprises should work to serve the development of private firms, while foreign invested firms should support it.”

Limited contribution

Lan said the country has been too friendly in inviting in foreign investors, and the economy has lost much and gained little with this approach.

Many foreign companies are benefiting from cheap Vietnamese resources, including labor, but abuse transfer pricing and announce losses to avoid paying taxes, she said.

Economist Dinh The Hien said foreign businesses' contribution to the country is not worth the damage caused to the country's resources and environment.

The FDI sector was the best performer in the country with a trade surplus of $14 billion last year compared to a deficit of $13.1 billion made by the state and domestic private sectors.

But its importance to the country's overall growth was not high because its exports had little to no added value, the General Statistic Office said.

Economist Nguyen Minh Phong said the biggest disappointment with FDI projects is that they have done very little technology transfer to benefit Vietnam.

Foreign investors tend to keep their technologies secret while local authorities do not demand them, he said.

The lack of technology transfer might not be a good thing but the situation can actually be worse if Vietnam becomes a dumping ground for outdated technologies.

Many foreign investors focus on exploiting cheap natural resources at low prices, and use outdated technologies, harming the environment.

Fourteen percent of foreign businesses use outdated technologies, more than twice the number that use high-tech methods and equipment.

Thanh said the country needs to tweak its FDI policies, forcing foreign investors to use new technologies and be content with fewer incentives, and offer more incentives to local private firms.

"We need to boost the development of domestic firms to build a strong economy," he said.

Foreign investors brought in $1.12 billion in the first two months of the year, up 6.7 percent from a year ago, according to the General Statistics Office.

Vietnam has forecast total disbursement of $11-12 billion this year compared to $11.5 billion in 2013.

Trang 65 : Vietnam struggles to attract foreign investment in airports

Vietnam has been soliciting foreign investments in airports for the past several years, but it has not succeeded, and critics blame this on the low profitability of airports in the country and vague policies.

The government plans to have 26 airports by 2020, building five and upgrading the 21 existing ones, the latter at a cost of some VND221 trillion ($10.5 billion).

Le Manh Hung, general director of the national airports operator, the Airports Corporation of Vietnam (ACV), said many airports need to be upgraded and expanded.

The government used to provide funds for the construction of airports, usually big-ticket projects, but it has become necessary to attract investment from other sources, both domestic and foreign, he said.

It is difficult to mobilize enough taxpayers' money for the task, and other sources have to be tapped, head of the Civil Aviation Administration of Vietnam (CAAV), Lai Xuan Thanh, concurred.

Public funds can meet just 60 percent of the need, and the rest should be raised from foreign and domestic private investors, according to the CAAV.

It is necessary to find investors with experience in the construction and management of airports, advanced technologies, and deep pockets, Thanh said.

"However, it is difficult to attract foreign investment in airport construction because it requires huge funds and a long time to break even, but fetches little profits."

Nevertheless many investors have expressed interest in developing airports in Vietnam, he said, and have carried out feasibility studies.

Canadian Commercial Corporation is working with Quang Ninh Province authorities to do feasibility studies for Van Don Airport, which will come up 45 kilometers from world heritage site Ha Long Bay.

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The construction of Van Don International Airport in Quang Ninh Province is expected to start this year at an estimated cost of VND5.1 trillion ($242.9 million).

Japanese firms have expressed interest in the $10-billion Long Thanh Airport near Ho Chi Minh City, work on which is expected to start in 2015.

Another barrier to foreign investment is the lack of specific policies, Thanh said.

"We do not have clear regulations about which projects foreign investors can participate in or how much they can invest," he said. In fact, the government announces regulations on a case-by-case basis.

Many airports are used for both military and civilian purposes, and this too causes difficulties in seeking foreign investment, he said.

All airports are managed by the government except in certain cases approved by the government.

Most investors do not want to build airports under build-transfer contracts, but want to manage them, Thanh pointed out, saying this was also a deterrent to attracting investments.

"So, to encourage foreign investment in the field, we need to categorize airports and allow foreign investors to manage them."  

The CAAV has recommended that the Ministry of Transport should categorize airports into two groups, with the first comprising of those playing an important role in international transport and national security - like the ones in Hanoi, HCMC, Da Nang, and Cam Ranh.

The rest would be in the second group and foreign investors should be encouraged to participate in their construction and management, it said.

Barely used

Vietnam's plan to build new airports and upgrade existing facilities is predicated on boosting tourism and vying for more international routes.

Increased domestic air travel, propelled by an increasingly prosperous middle-class, is also spurring this task.

The government plans to have six international airports.

International flights are now mostly routed through Hanoi, HCMC, and Da Nang.

Vietnam is developing a strategy to compete with airports in neighboring Thailand and Singapore, according to the ACV.

Deputy Minister of Transport Pham Quy Tieu said the aviation sector holds promise, with average annual growth of 15 percent in passenger transport and 12 percent in goods transport.

Passenger numbers rose from 6 million in 2000 to 52 million last year.

The country has five carriers that fly to 15 countries, and they are expected to expand their fleets to 150 aircraft by 2015, he said.

However, many of Vietnam's existing airports are struggling to get flights or passengers and suffer losses running into tens of billions of dong (VND1 billion = $47,600).

Dong Hoi Airport in Quang Binh Province is one such. The airport, which cost VND210 billion ($10 million) and has an annual capacity of 500,000 passengers, has only received 140,000 since it opened in 2008, deputy head of the airport, Trinh Hai Duc, said.

It only has a few flights a week to Hanoi and HCMC, and suffers losses of VND55-60 billion a year, he added.

A similar situation exists in Chu Lai Airport in Quang Nam, which was built in 2004 at a cost of VND80 billion.

The airport now handles 60,000 passengers and suffers losses of VND5-6 billion a year.

But despite this, several provinces are planning to build their own airports, hoping it will boost economic and social development.

The central province of Thanh Hoa, for example, plans to sink over VND2.6 trillion into a 213-hectare airport that will become operational in 2030.

The Mekong Delta province of An Giang has announced plans for a $163-million airport, also scheduled for completion in 2030.

Trang 66 : A fruitful expedition

I had been to Cho Lach District a couple of times earlier, but I did not remember much apart from bad roads and weak bridges. There was nothing to write home about. 

However, on a recent trip to the place with a group of friends, I saw the district in a new light.

The district is located about 144 kilometers from Ho Chi Minh City in the Mekong Delta province of Ben Tre. When we requested the Center for Ben Tre Tourism Promotion to help us spend some time with farmers in the district, they recommended that we visit the Dai Loc eco-tourism site belonging to Nguyen Cong Thanh, better known as Tu Thanh, in Son Dinh Commune.

It was late in the evening when we arrived at Thanh's place. Ben Tre's reputation as "the land of coconuts" is well deserved and we were not surprised to see coconut palms with 50-70 fruits each right at the entrance.

Thanh, a middle-aged man, took us to a restaurant on the banks of the Cho Lach canal.

We started our dinner with a sweet-sour, lightly fragrant white smoothie. Called ca cao dằm Ä‘á (cocoa chipped with ice), the drink was made with cocoa flesh. Suitable for almost every kind of soil, cocoa is quite popular in Ben Tre, where, apart from its main use as raw material for chocolate, all its parts are used the flesh is made into a fresh fruit drink or wine, seeds are powdered, and the fruit's outer layer is used as food for cattle.

Since he received 600 cocoa saplings from the HCMC University of Agriculture and Forestry in 2001, Thanh has successfully developed eight strains of cocoa and every year he provides more than 500,000 seedlings to farms nationwide.

After the refreshing drink, we were treated to bánh xèo hến(deep-fried pancake, or sizzling cake, stuffed with mussels) cooked by Thanh's wife.

Having had the pancake at many different places, I can confidently say it was one of the best I've enjoyed. The sweetness of mussels, the fattiness of coconut milk and fresh milk, the fragrance of home-grown mushrooms and mung beans, the dipping sauce - fish sauce mixed with lime, sugar and coconut juice, and fresh herbs picked from Thanh's garden, are tastes that will linger on our tongues and in our minds for a long time.

Other dishes on the menu included freshwater apple snails that were cooked into seven different dishes, sour hot pot with swamp eels, and braised small cyprinids fish with a toothless jaw that do not have stomachs. These dishes were accompanied with sips of cocoa wine. 

The dinner ended with durians, another fruit that Thanh is famous for. Nicknamed "the durian witch," he was the man who brought the famous Mon thong durian variety from Thailand into Vietnam during the 1990s and successfully grew it here.

I would highly recommend a boat ride with Thanh along the canal that runs through his garden. He will provide the best form of "entertainment," introducing you to many facts about the many fruits that are grown in his four-season garden that covers more than two hectares. Guests are free to collect ripe durians that fall on the ground and eat them. Or, at the coconut area, just tell Thanh, and he will pick whichever fruit you like and you can enjoy it on the spot.

We decided to spend the night at Thanh's place. Contrary to our initial belief that it would be a homestay experience, we ended up staying in bungalows built in the garden to serve guests. There were no mosquitoes, but the pleasant breeze was cooling and comforting.

The next morning we visited the Cho Lach Market, which can be reached either by motorboat or bicycle.

The sight of vegetables like sweet potatoes and taro, seafood like prawns, snails, and fish, as also a variety of dried foods, made me want to buy them all. In the end, however, I just bought the ingredients needed to make the tapioca noodle soup (bánh canh) with mussels and coconut milk that Thanh's wife was going to teach us to cook.

Besides Thanh's eco-tourism site, there are many other places to visit in Cho Lach: a sandy beach on the banks of the Co Chien River in Son Dinh Commune; the Ba Ngoi and Tam Loc fruit gardens in Vinh Binh Commune; the Nam Cong ornamental garden with nation famous plants in Vinh Thanh Commune; the Cai Mon tourism area with fruit gardens and one of the oldest churches in southern Vietnam.

On this trip, I felt Cho Lach is a good match for Thailand's Suan Supatra Land, which is considered a paradise for fruit lovers. If local authorities could improve the infrastructure and promote its attractions, this place can be a big draw for tourists.

Trang 67 : No takers for bad debts

Local investors lack capacity, foreign counterparts lack confidence, asset management company finds

Vietnam's new asset management company is finding it hard put to find investors to whom it can resell the bad debts that it buys from the ailing banking industry.

Very few local investors have the financial capacity needed to buy such debts and prospective foreign buyers are concerned about vague policies that could weaken their investment.

The Vietnam Asset Management Company (VAMC) has thus far bought VND6.5 trillion (US$309.5 million) worth of bad debts that have book value of VND7.8 trillion, from eight domestic joint stock banks.

Run by the central bank, the company opened in July as the government aimed to restructure bad debts that have crimped lending and further slowed the economy, which is facing its most severe slump in at least a decade. Lenders with bad debts of three percent or more are required to sell them to VAMC.

Economist Nguyen Tri Hieu said: "In theory, foreign investors are interested in Vietnam's bad debt market, as it has not yet been tapped. However, they will not participate now due to the lack of regulations on bad debt trading procedures, and the settlement of secured assets."

Another barrier to foreign investors is that foreigners are not allowed to own land in Vietnam. The regulation hinders them from getting mortgaged assets, mainly properties, when buying bad debts, Hieu said.

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Economist Bui Kien Thanh agreed with Hieu, adding that shortcomings in bad debt assessment were also a barrier in reselling bad debts. In principle, banks, when offering loans, evaluate mortgaged assets, mainly properties, below the market value. However, it is difficult to price them now since the property market is currently frozen.

Vietnam does not have independent assessment agencies yet.

"Foreign investors will not participate in the market unless they know the assets' real value, the potential to resell the assets, and can understand clearly the bad debt trading procedures in Vietnam," he added.

Nguyen Quoc Hung, VAMC's vice chairman, admitted that Vietnam is yet to have policies on selling bad debts to foreign investors.

"We have to learn how other countries have dealt with the issue. If foreign investors could participate, Vietnam can receive huge funds from them."

Pham Manh Thuong, deputy director of the Ministry of Finance's Debt and Asset Trading Company, said a number of foreign banks and funds have come to study the country's market for bad debts.

"I myself have held talks with some big investors who said they are ready to invest even billions of dollars in buying Vietnamese bad debt," he said.

But it is not an easy market for them, Thuong said. "We cannot expect the participation of foreign investors in the next 1-2 years, because there are too many barriers they cannot overcome, and we cannot remove them in one or two days."

Apart from the complex procedures and lack of certainty about cooperation from Vietnamese banks, their biggest problem is the lack of transparency on bad debts, he said.

Many banks have announced bad debts much lower than the real figures due to worries about having make high risk provisions and loss of prestige. Banks estimated their bad debts at 4.93 percent of loans as of September 2012, but the central bank put the ratio it calculated independently at 8.82 percent.

Many foreign companies want to buy Vietnam's bad debts but they need a clearer policy framework, said Karin Finkelston, vice president Asia Pacific for the International Finance Corporation, a private sector lending arm of the World Bank.

Setting up the VAMC is a good thing to rescue lenders, but the country should also develop a market mechanism to quickly resolve the debts, she said.

Not thoroughly been solved

The Asian Development Bank (ADB) has recently said it is concerned that VAMC's current capitalization may not be sufficient for it to deal with large amounts of non-performing loans (NPLs).

The VAMC has an initial registered capital of VND500 billion, while the NPLs (non-performing loans) in the banking system could total well over VND200 trillion.

Hung of VAMC admitted that the state, due to its thin budget, cannot pour more money to help the company by NPLs, but has to wait for investors to do it.

The VAMC buys bad debts using its own funds or issues five-year, zero-coupon "special" bonds to the banks in exchange. The bonds may be used to obtain refinancing loans from the central bank to boost lending and stimulate an economy that grew at just 5.03 percent last year.

Thus, banks will still play the decisive role in tacking their NPLs, an economist said.

The VAMC is expected to buy VND40-70 trillion worth bad debts this year. However, the biggest issue of finding out customers to resell the bad debts has not yet been resolved.

Hung said the company will sell the debts to both foreign and local investors, but not at any price, only for a profit.

If the debts are not sold by the time the bonds mature, the banks would have to swap those with the bad debts.

Hung said the company is mainly focusing on buying and categorizing bad debts at present, not reselling them.

"After categorizing, VAMC will join hands with banks and firms to deal with the debts."

Some 60-70 percent of NPLs that VAMC bought from banks are from real estate sector.

An economist said many NPLs are not eligible to be sold to VAMC, as it only buys those backed by collateral. Thus, banks can only sell a part of their bad debts to VAMC, and have not found a way to deal with the rest.

Bad debts had accounted for 4.58 percent of the total VND138.98 trillion in loans as of July, official news website Banking Times reported last month, based on reports released by the commercial banks themselves.

Trang 68 : Is Vietnam ready to compete on free-trade playgrounds?

Vietnam professes, especially in the rhetoric of government leaders and so-called experts, seeing many chances to expand its markets with the signing of major pacts like the free trade agreement (FTA) with the EU to be finalized later this year, and the Trans-Pacific Partnership (TPP) that is under negotiation with 11 other countries.

However, in reality, such chances are just theoretical exercises in international economics, as Vietnam lacks strengths to play along and hold its own on free-trade playgrounds.

According to the theory of comparative advantage developed by economist David Ricardo (1772-1823), a nation should concentrate on producing and exporting products where it has comparative advantages, while engaging in international trade to import products where it does not. This way, every nation would maximize its benefits from international trade, the theory goes.

So, in entering a “flat world” that the FTAs are purportedly creating, every country needs to focus on its key industries that can help it withstand the flows of goods from other countries.

At the launch of the book “Swiss Made: The Untold Story Behind Switzerland's Success,” by James Breiding in Hanoi last month, Vu Khoan, former deputy prime minister, conveyed the same message.

He said Swiss people have this simple but very effective concept: they make use of and develop what they have. So, with fields, pastures, and snow, they focus on building agriculture and tourism as their key industries.

Now, speaking of Switzerland, people would think about Nestlé, chocolate and cheese. And its well-protected and maintained snow covered landscapes continue to attract lots of tourists from around the world.

With such well-developed key industries, Switzerland is always eager for FTA playgrounds. This is also true of countries like Australia, which is keen on exporting the products of its animal husbandry industry, to mention just one; the US with banking and ownership of a large amount of intellectual properties; and Japan with its car industry.

What does Vietnam have to enter FTAs and gain from them?

For many years, local experts have argued over whether or not agriculture is Vietnam’s key industry.

The country has been blessed with natural resources like fertile land and suitable climatic conditions to become a major producer and exporter of farm produce like rice, coffee, cashew and pepper. However, the experts have pointed out that the internationally recognized produce is Thai rice, Japanese rice, Indian cashew, or Italian and American coffee. Only when it comes to cheap, crude products do people occasionally speak of Vietnam.

How about tourism?

Vietnam has a long way to go in using its tourism resources well,  given the lack of effective investment in infrastructure, human resources, and cultural preservation, and the failure to effectively tackle problems like robbery, rip offs, and tourist harassment.

The Central Institute for Economic Management recently introduced six industries chosen as spearheads for Vietnam: electronics, agricultural machinery, agriculture and sea produce processing, shipbuilding, environment and energy saving, and auto and auto part manufacturing.

The industries were, in fact, chosen in 2007 along with the government’s pronouncements about issuing policies that would help develop them.

However, the industries are still underdeveloped, as official figures show that their imports have kept increasing over the years.

According to the General Statistics Office, last year Vietnam’s import of machines, devices and spare parts increased by 16 percent year on year. The import of electronics, computers and accessories was also up 34.9 percent.

The country imported US$3 billion worth cattle feed and raw materials, a year-on-year rise of 23.6 percent, while its rice exports earned less than $3 billion.

Generally speaking, what should be Vietnam’s comparative advantage (agriculture) has yet to be made best of, while those which are considered as key industries in national development strategy are still languishing.

Without comparative advantages, Vietnam’s trade balance will be under great pressure soon. 

For instance, if TPP is finalized, Australia-imported beef with the same prices as Vietnamese but with higher quality will obviously dominate the domestic market.

Towards the end of last year, the Hoang Anh Gia Lai Group attracted widespread objections and criticism from local sugar producers when proposing to the government that it imports 30,000-40,000 tons of crude sugar from Laos, refines it in Vietnam, and re-exports it to China.

Nguyen Hai, general secretary of the Vietnam Sugar and Sugarcane Association, warned that the project, if approved, would kill local sugar producers and sugarcane farmers.

The association also submitted a petition asking for help from the government.

However, once Vietnam enters one free-trade playground after another, businesses will no longer be able to turn to the government and seek its help to survive.

The evidence so far is that FTAs are not the level playing fields their votaries claim them to be. Signatories bound by their regulations have found that they favor the stronger players because the stronger players are setting the rules, and the weaker players typically end up getting crumbs at the negotiating table.

Vietnam needs to seriously think about how it is going to become strong enough to survive in such an environment. One has to survive first, thrive later.

Trang 69 : How will ASEAN regional integration affect labor migration in Vietnam?

The occasion of International Migrants Day (December 18) is an opportunity to recognize the contribution of migrant workers to growth and development in Vietnam and the Association of Southeast Asian Nations (ASEAN) region.

The coming together of the ASEAN member states in a single economic community in 2015 is expected to provide a greater wealth of opportunities for growth across the region. But there is still a lot of misunderstanding about what this will mean for migration flows in the region and at the country level. People sometimes refer to a free movement of labor, as in Europe, but that prospect remains distant.

This forum opens the floor to readers, expats and Vietnamese alike, to hold forth in greater detail on any and all issues that concern you. Email your thoughts toeditor@thanhniennews.com. We reserve the right to edit your submissions for reasons of space and clarity.

As this new economic community emerges, there will be opportunity for the greater mobility of workers who move across national boundaries to fill skills shortages, increase their incomes and gain new experiences. However, discussions have primarily focused on labor mobility for skilled workers through Mutual Recognition Arrangements (MRAs) that provide freedom of movement and rights to work across the region for professionals in eight fields - accountancy, engineering, surveying, architecture, nursing, medical services, dental services and tourism.

Because Vietnam's wages are close to the median wages for the region, economic integration could mean movements of workers both in and out of the country. For Vietnam, well-planned integration could lead to increased domestic productivity through skilled migration, but it is important to anticipate the potential impacts of large numbers of skilled workers finding higher-paid work abroad through the MRAs.

A report by the International Labor Organization (ILO) and the Asian Development Bank, which will be published in mid-2014, is expected to shed more light on the labor market impact of the regional economic integration.

But migration among professional categories is and will only represent a very small proportion of the labor migration flows in South-East Asia. It is important to remember that the ASEAN Economic Community (AEC) is not a standalone process; it is very much complemented by the Socio-Cultural Community pillar of ASEAN integration, which supports AEC's goal of equitable economic development across the region.

The contribution of low- and semi-skilled migrant workers should not be forgotten. And taken in isolation, the emerging ASEAN economic community does not sufficiently address social issues including safe migration, protection from exploitation, access to skills training, and welfare provisions for workers. 

Vietnam is well positioned to benefit from AEC integration, and with 15 percent of the ASEAN population, it also has a significant contribution to make to the new regional market. The 500,000 migrant workers already make a substantial contribution to Vietnam's economy, with remittances of approximately US$1.6 billion each year.

The government of Vietnam is active in its support of migration for work as part of its poverty reduction strategy and employment strategy. A suite of policies and services have been introduced to reduce costs and increase opportunities through training subsidies. This includes target-setting for skilled migration.

The ILO perspective is that migration should be a choice rather than a necessity. While migration may provide a route out of poverty, it is important to balance the promotion of migration with appropriate protection measures. 

For a number of years, the ASEAN member states have been cooperating to strengthen migration management and protect the rights of migrants. There are a number of frameworks and forums that provide the possibility of greater policy coordination and dialogue to advance the protections contained within the ASEAN Declaration on the Protection of the Rights of Migrant Workers, including the ASEAN Forum on Migrant Labor, an annual meeting of governments, workers' and employers' organizations and civil society.

In addition, cooperation on migration management is being fostered, including through the Initiative on ASEAN Integration, wherein the Philippines is committed to sharing their experience on administration of overseas employment.

Some of the areas for action include the need for migrants to be better informed on the costs and benefits of migration; how to protect themselves throughout the migration cycle; mutual skills recognition in low- and semi-skilled jobs; portability of social security; and training and support for returning migrants, who can use their savings and knowledge developed abroad to enhance their livelihood options and help to grow the communities they return to in Vietnam.

International Migrants Day is a time to re-commit our efforts to make migration work for all, and the ILO is committed to continuing to work with the government of Vietnam and the workers' and employers' organizations to strengthen migration management and the protection of migrant workers, both at the national level and at the ASEAN level.

Trang 70 : Banks locked in fierce battle to attract borrowers

OceanBank has been offering corporates loans at just 7 percent interest, lower than the top deposit interest rates of 7.5-8 percent.

Others like HDBank, VPBank, TPBank, and Maritime Bank offer loans at zero interest for the first few months.

Clearly, competition is fierce among banks in attracting customers at a time when credit growth is very low.

The head of a bank in Hanoi said there would be no customers if the bank does not cut interest rates sharply, and the losses then would be much bigger.

It is now buyers' market, and banks which want to lend have to fulfill borrowers' demands, he said.

His bank gave a big firm a loan of around VND100 billion (US$4.76 million) for two weeks at the overnight interest rate on the interbank market.

"If we do not agree, they will stop dealing with us and shift to another bank.

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"In the current tough situation, we have to fulfill customers' requirements."

The extended economic slump has hit companies' demand for funds.

Credit growth this year has been just 8.83 percent, much below the 12 percent target, Nguyen Thi Hong, head of the Department of Monetary Policy at the State Bank of Vietnam, said. Last year credit growth was 8.7 percent.

To boost lending, banks have cut interest rates by 2-5 percentage points.

The fierce competition to attract borrowers and the resultant lending at below deposit rates is raising concern about the health of the banking system.

Banks only break even when the interest rate spread is 3-4 percentage points, according to some economists.    

But Le Quang Trung, deputy general director of VIB, dismissed this, saying banks' average cost of funds could be as low as 4-5 percent if they have a lot of money in current accounts.

In that case they would still earn profits by lending at 6-7 percent.

Economist Bui Kien Thanh said the low rates are often offered only for a short time, maybe the first one to six months, and subsequently interest rates are increased to market rates.

"It is a way to attract customers."

Besides, banks also earn fees from many services like ATMs, money transfer, and foreign exchange trading, he pointed out.

Unhealthy practice

Despite the explanations, the central bank, which wants banks to step up lending, said lending at below than deposit interest rates is an unhealthy practice and has ordered banks to stop it.

"Several credit institutions have accepted to lend at below deposit rates, which"¦ causes risks," it said in a recent statement without naming any of them.

It also called on banks to lower both deposit and lending rates, adding "Liquidity at credit institutions has improved significantly in recent months."

Banks are offering 6.5-8.5 percent interest for dong deposits.

Do Minh Toan, general director of Asia Commercial Bank, said banks now have ample deposits and can also borrow at just 5.5 percent in the interbank market, and so can lower lending rates to attract customers. The central bank's instruction to stop lending at low rates would make it difficult to expand credit because of low demand from firms.

But Le Tham Duong of the Banking University of Ho Chi Minh City justified the order saying the central bank is worried about the unhealthy competition among banks.

The credit growth target for next year is 12-14 percent, according to the central bank.

The government was counting on lending growth to be higher than last year's 8.4 percent to spur the economy. This year's GDP growth is likely to be at 5.4 percent compared with 5.25 percent last year.

It hopes the economy will grow at 5.8 percent in 2014.

Trang 71 : Foreign investors shun farm sector, say no support from authorities

The deputy director of a foreign-owned fruit processor in Can Tho has a tale of woe about its experience in the country: His firm had eagerly invested in Vietnam a few years ago in the hope of finding a favorable business environment. But the situation turned out to be quite different. 

Local authorities had spoken about plans to earmark areas for certain crops to support investors, but they remain on paper, Saigon Times quoted him as saying.

Without this support, his company has struggled to remain in business. It has had to support local farmers with technologies for fruit production so that their products are of adequate quality to process for export.

He spoke about other companies who are no longer interested in remaining in the country after having to do a lot of the work that should have been done by the government to support investors.

Not surprisingly, foreign investment in agriculture has plummeted in the past few years.

According to the Ministry of Planning and Investment, FDI in this sector had accounted for 8 percent of total FDI in 2001, but has since fallen to 1 percent.

Bui Tat Thang, head of the ministry's Development Strategy Department, said: "The shortage of a long-term FDI attraction strategy, poor rural infrastructure, low quality of human resources, and high risks are major barriers to foreign investors in the agricultural sector."

In the current tough economic situation, fewer foreign businesses are interested in investing in the sector, he said.

Over $86.7 million worth of FDI came into the agricultural sector in the first 11 months of this year out of more than $20.8 billion overall, according to a recent report from the Foreign Investment Agency.

Economist Pham Chi Lan said even domestic firms are not interested in investing in the sector because profits are often lower than in industry and services.

They also face risks like price fluctuations, animal diseases, and natural disasters, she pointed out.

Indonesian-invested company, Japfa Vietnam, a leading breeding firm, which accounts for 90 percent of the chicken supplied in the country, ended contracts with farmers earlier this year.

Its general director, Nguyen Quoc Trung, said the company is scaling down its business in Vietnam by half since prices have kept falling below cost (of VND30,000 a kilogram) for the past two years.

A member of the Da Lat Flower Association said one reason for the difficulty in attracting FDI is the limited land for agricultural production and high rents. "The increasing land rent will become one of the biggest barriers to foreign investors in the locality in the coming years."

Le Dang Doanh, another economist, said Vietnam still finds it hard to zone large areas for agricultural production, which is a decisive factor in attracting FDI in the sector since regulations on land compensation, taxes, and investment incentives are unclear.

He said foreign businesses have not invested in bio-technology and new plant and animal strains, and have mainly invested in basic commercial projects to quickly recoup their investment and make profits.

The Ministry of Agriculture and Rural Development said foreign investors are switching from agricultural production to importing agricultural products for distribution in Vietnam.

Most foreign-invested projects sent to the ministry for assessment before being licensed are involved in exclusive import-export and distribution of agricultural products.

This is not a good trend for the agricultural sector, Doanh warned.

Change policies

Lan said the government, to attract more FDI in agriculture, should quickly change investment policies, which are not efficient. For instance, farmers' land holdings are too small to ensure a stable supply of raw materials to foreign processors, she said.

There are no big-sized agricultural zones to supply produce of good quality and in stable volumes, an issue that needs to be resolved to attract FDI, she said.

The country should also improve training for workers in the agricultural sector, industry insiders said.

Foreign investment in operational agricultural projects is estimated at $3.35 billion as of November 20 as against $229.23 billion overall, according to figures from the Foreign Investment Agency.

Foreign invested agricultural projects often have small size with FDI of only $6.6 million each, much smaller than the average that of $14.7 million in all projects, $130 million in property ones, and $17.6 million in banking and financial ones.

FDI have been often poured in animal husbandry, animal feed production, afforestation, woodwork production and seafood. Up to 78 percent of FDI in the agricultural sector has been poured into afforestation and woodwork production projects, said the ministry

Trang 72 : Ex-deputy minister sees better times ahead for low-priced property market

Why does the property market not recover despite all the measures taken to revive it?

Dang Hung Vo: Because of the large investments involved, the property market has often a big inertia. It means it takes a long time for the market to recover from a period of sluggishness. If there is a boom, that too lasts a long time.

In 2013 we helped resolve many of the difficulties faced by developers like capital shortage and large inventories. The government has cut some of their taxes and land rent and extended the time for them to pay land use fee. It has helped developers overcome difficulties, but not yet affected the market.

This year the government rolled out a supporting package of VND30 trillion (US$1.43 billion) to spur the low-income housing segment of property market,

70 percent of it to subsidize interest rates for low-income buyers and the rest earmarked for developers of low-priced housing projects. The support for developers of low-priced housing has been effective though it has not really created many choices for consumers. The supply of low-priced commercial housing projects and social ones has increased. Early this year it was difficult to buy an apartment in social housing projects due to the low supply. But we can do it easily now, and have greater choice in terms of prices and locations. 

However, disbursement of the package has been slow. The requirements for home buyers to demonstrate their loan repayment ability and housing situation are too complicated. So far over VND800 billion has been disbursed. It is too small. The disbursement should have been faster. The issue should be resolved in 2014.

If demand is spurred, the low-income housing segment could soon recover. This is a factor that could increase the confidence in the market, creating a foundation for dealing with issues in the medium- and high-priced segments.

Another issue we need to resolve but have not done much about is the inventory of medium- and high-priced housing. We have established the Vietnam Asset Management Company to deal with the housing inventory attached with bad debts. However, it has not been effective since we do not yet know what is form of bad debts structure in the housing inventory. In the beginning of the year, it was officially reported that almost all properties with bad debt were in the form of completed housing, but at the end of the year, statistical data show that 70 percent were in the form of residential land - without housing.

The property inventory has reduced slightly as the government has allowed developers to make changes to housing projects so that they could be used for other purposes or divided into smaller ones with lower value. We have done something to reduce the inventory, but the task at hand is still huge.

The draft revised housing law and revised real estate business law has an important renovation that expands real property market for foreign consumers. It is a good vision on resolving the housing inventory in current time and also for long term development of housing market.   

There is a concern about excessive supply of low-priced housing in future, the same situation that existed with high-priced housing a few years ago. What do you think about it?

The concern is reasonable but comes too early since the supply of low-priced and social housing is still low. Many people have not yet been able to buy a low-priced house. We need to work out a housing planning and its implementation. We have yet several serious problems with urban planning based on population, housing, infrastructure, public services and not calculated the number of high,  medium-, and low-priced houses we need.

The low-priced housing segment has developed only since 2009, so it is too early to worry about excessive supply in the segment.

But we need to make housing plans in a careful and feasible manner. This is a fundamental issue for a sustainable housing market.

Doan Nguyen Duc, chairman of Hoang Anh Gia Lai, has recently announced the company will pull out of the property market. Do you think it is because of the market situation?

I don't think one investor's decision can strongly affect the market. A company could decide to invest in a market and leave the market for another. I don't believe that an investor in Vietnam could affect the market. Vietnam has many property investors, including many big ones - Hoang Anh Gia Lai is just one of them. The property market was not controlled by Doan Nguyen Duc, so his decision will not have any impact on the market.

Have property prices bottomed?

Firstly, we need have a definition what is the bottom of market. I think we can agree that the bottom of housing market is the price calculated on production cost of house. In this meaning, they have fallen nearly to the bottom. Now you can buy a 40-50 sq. m house for just VND500-600 million. If it is reduced further, builders will face losses.

Obviously, we can do more to reduce the price, for instance by using more advanced construction technologies and materials and reducing management cost and also capital using cost.

How do you see the market next year?

The low-priced segment will see better growth next year. It will see a larger number of transactions. But we need to do more to help the market recover soon. The government should consider allowing banks to accept the huge volume of gold owned by people as deposits to develop the property market. The current policy, which does not allow gold transactions or deposits, has prevented the property market from benefiting.

The Housing Law and the Real Estate Business Law are in revising process and to be adopted by the National Assembly late next year. Under those laws, expats will find it easier not only to buy houses and also to have the transaction rights in Vietnam. This is a new decision and will contribute to strengthening belief and demand in the market. 

Trang 73 : Vietnamese firms yet to cash in on fast food boom

McDonald’s said it attracted 20,000 customers and earned around VND1.5 billion (US$71,130) on its first two days in Vietnam in early February.

The US fast food giant said it plans to open more outlets this year, to catch up with chains including Burger King Worldwide which opened its first restaurant in Vietnam in 2011.

Industry insiders say it is time for Vietnamese firms to find ways to enter the fast food market, which according to the Ministry of Industry and Trade earned VND870 billion in 2011 and is growing at 26 percent a year.

Local suppliers have not made their presence felt for nearly two decades that the fast food market has been growing in Vietnam.

Foreign fast food chains still rely on importing materials, blaming Vietnamese products for lack of quality and consistency.

McDonald’s has said it only uses two Vietnamese ingredients – tomato and lettuce from Da Lat. All beef is imported from Australia, pork and potatoes from the US, and paper boxes and cups from China or Malaysia.

Nguyen Huy Thinh, managing director of McDonald’s Vietnam, told Thoi bao Kinh te Saigon (Saigon Times) Online that the chain adopts a quality control procedure that local providers are unable to cope with.

“McDonald’s has many different quality control stages from the farm to the dining table, so it’s very hard for us to find a suitable local provider at this moment,” Thinh said, without elaborating.

South Korea’s Lotteria, which arrived here 15 years ago and accounts for 40 percent of the fast food revenues from local market, sources 80 percent of its materials from Vietnam, but mostly from joint ventures with foreign companies.

KFC, which opened the first fast food restaurant in Vietnam in 1997, uses local ingredients for 30 percent of its production and Dunkin’ Donuts, which entered late last year, 20 percent.

The managing director of a chain who wished to remain unnamed said they had a hard time during the first five years in Vietnam finding enough supplies.

“We had to constantly change the providers as the quality was not consistent as guaranteed in contracts.”

He said one lettuce and tomato provider made a proper delivery in the first month, but the quality dropped significantly the very next month as it could not produce enough and make up the required quantity by buying from other producers.

“That’s why we have to change suppliers and always have to prepare some imports in case the local supply is not enough,” he said.

Kao Sieu Luc, general director of A Chau Bakery Company (ABC) which is the sole local producer of buns for KFC, Lotteria and Burger King, said the foreign chains impose very strict requirements.

Luc said the company has to invest in different production chains for each brand, and is now providing around 50,000 buns every day.

He said it’s not very difficult to become a supplier for the foreign chains, but one needs to understand and stick to their regulations and maintain their quality.

“Like the buns for example, the chains have strict requirements for their crispness and thickness.”

But representatives from local providers said quality is only part of the story, and the chains are also very concerned about prices.

Nguyen Hai Binh, director of Dalat G.A.P Store which provides fruits and vegetables, said: “Domestic firms have met strict regulations of picky markets like Japan and EU, so meeting the requirements of fast food chains is not a problem.

“But the chains want to maximize their profits and thus tend to choose providers with the cheapest prices.”

Binh also urged local providers to popularize their names better at home, as some have been exporting their products properly but are not able to enter the domestic market yet.

Leading animal products provider Vissan used to provide ground beef for several fast food chains in Vietnam, but its partners have come down to only Jollibee.

Other chains are seeking cheaper providers or investing in their own factories to control cost, said Vissan general director Van Duc Muoi.

Muoi said local providers face tough competition in prices, quality, services and supply volume in order to win contracts with the foreign chains.

Muoi said the need for stable and quality supply will force local companies to raise their prices, and they will become less competitive than foreign providers.

Lotteria has built a processing factory in Binh Duong Province outside Ho Chi Minh City to support its 185 outlets across the country.

Nguyen Thanh Tam, a representative of Lotteria Vietnam, said local providers are small and cannot guarantee stable quality and quantity of their supplies.

“The strength of large joint ventures that are providing for Lotteria is they have a professional distribution system with stable supply, which is very important as otherwise, there will be big impact on our brand name,” Tam said.

But he said finding local partners is always the priority if they want to stay long, as import ingredients can be cheaper but they raise transport and storage costs.

“Increasing local resources is a win-win solution.”

Thinh of McDonald’s also said it plans to use mainly Vietnamese resources.

“We are working with local providers. They will be trained for managing product quality according to McDonald’s global standards,” he said.

The chain is looking for suppliers of vegetables, milk and eggs.

It is expected to start using locally-produced buns after a production chain following its standards is completed by the end of March.

Trang 74 :Vietnam to lose FDI due to ailing support industries

Automobile giants like Toyota, Ford and Honda plan to expand production in ASEAN countries like Indonesia and the Philippines, but not Vietnam due to the country’s weak support industries.

An official from the Vietnam Automobile Manufacturers Association (VAMA) said Vietnam would not be a choice for foreign investors interested in the ASEAN unless supporting industries developed more quickly slowly.

“Vietnam’s supporting industries are far less developed than other ASEAN countries like Thailand, Malaysia and Indonesia.”

Locally-made automobile components and spare parts accounts for only 25 percent of the total parts used to manufacture a car, compared to some 60 percent in Indonesia.

The rate is very low, which means investors have to import more components and spare parts from other countries, raising their production costs, he said.

“Products made in Vietnam are less competitive than those made in other countries with higher localization rates.”

Former Ford Vietnam General Director Laurent Charpentier said it is not easy for car producers to purchase enough batteries in Vietnam. Battery producers in the country are mainly small-sized with limited production capacity. Thus, supply has not met local demand, he explained.

He said the local automobile industry would develop only when Vietnam does more to boost its supporting industry, which now has some 210 businesses making auto parts. The number is just a fifth of that in Indonesia, and a fiftieth of that in Thailand.

Weak supporting industries are a barrier to foreign investors not only in the automobile sector, but also in other sectors like motorbikes, electronics and garments.

Executives at chip producer Intel also said the company had been unable to find enough qualified Vietnamese partners. Intel has only 18 Vietnamese partners among hundreds of companies providing materials and components for its production.

"We have worked with many Vietnamese companies in the supporting industry. They showed very good samples, but when it came to actual business, their deliveries were not consistent," he said.

Samsung Electronics Vietnam has only five Vietnamese partners in its 60-strong supply chain, and they do simple jobs like packaging and printing. The others are mainly companies from South Korea or other ASEAN countries, or joint ventures between Vietnamese firms and foreign partners. 

A company source said production had evolved from cheap cell phones five years ago into smart phones and tablets, but the local supporting industry companies have failed to keep pace with the technology.

Nguyen Van Dao, vice general director of Samsung Vina, said almost none of the Vietnamese firms could meet the technical requirements set by Samsung. With low technology, local firms could provide foreign investors simple products only.

“Thus, it is difficult to reach the target that half of 170 providers of Samsung are Vietnamese firms by 2015.”

Hirotaka Yasuzumi, managing director of the Japan External Trade Organization (JETRO), said Japanese firms see the weak supporting industry as their biggest challenge. A recent JETRO study found that for Japanese firms, Vietnam is the second most difficult place to do business behind Myanmar.

The ratio of Japanese firms’ use of local parts in Vietnam is just 28 percent, or half the rates in China and Thailand, the study showed.

This raises concerns about high input costs among firms that have already complained about tax policies and the lack of skilled workers and information, according to the report.

Support for support

Some industry insiders said the government is actually treating foreign electronics investors better than the local supporting industry.

Nguyen Anh Tuan, chairman of the Ho Chi Minh City Semiconductor Industry Association, said by failing to back the local supporting industry while pampering foreign investors with low taxes and land fees, the government is just giving the latter a chance to make use of cheap resources.

Tuan said foreign giants like Sony, JVC, and Panasonic only use Vietnamese companies to assemble components, generating little value addition.

Amid reducing import tariffs under free trade agreements, the primitive state of the supporting industry is a reason for foreign firms to shift their focus away from production to trading imported products. Most other auto firms manufacturing in Vietnam, like Toyota, Ford, and Honda, have increasingly resorted to importing and selling products. Their ratio of imported cars now matches locally made ones.

Even a few years ago 75 percent of their cars had been produced locally. Others like Canon, Sharp, and LG have also started to depend on imports.

Nguyen Mai, former vice minister of the Planning and Investment, said supporting industries, despite being a major concern for foreign investors, have not been improved over the past many years.

He said supporting industries in other countries develop into production mode within five or 10 years, but Vietnam's has been stuck in assembling for more than 30 years.

He said the problem was that the government has not offered specific policies to support the development of supporting industries.

Economist Dinh The Hien said state-owned corporations involved in key sectors of the economy want to participate in all stages of their production chain, instead of ordering spare parts for their products from private small-and medium-sized enterprises components. “It is one of reasons hindering the development of the local supporting industries.”

While local enterprises could not participate in supporting industries due to weak technology and limited capital capacity, and shortage of support from the government, foreign ones are not interested in it because of the small market scale.

A representative of a foreign car assembler in Vietnam said Vietnam has a very high number of assemblers (18) compared to the industry size (less than 200,000 units). “With multiple models assembled in all factories the average production run is less than 3,000 units a year,” he said.

“At this volume it is almost impossible to localize beyond a very basic level. Most component manufacturers require annual production runs of at least 100,000 units a year, and this will require exports if they are to set up in Vietnam,” he said.

According to Mai, the government needs to define which supporting industries we will boost in the coming years, and build specific policies to develop them.

“There is a trend of tax reduction in the world, so Vietnam doesn’t have much time to develop its supporting industry. The most essential thing now is to define a concrete action plan - where, when, and what to do - and implement it well.”

Trang 75 : Hiring the right people key to public sector reform

The planned purge of 100,000 workers is only a temporary solution to improving the government sector. Strict regulations that will ensure only qualified people enter it is the real answer, says Ngo Thanh Can, deputy director of the Department of Organization and Human Resource Management of the National Academy of Public Administration. 

The Ministry of Home Affairs has released a draft resolution seeking to downsize the 2.8-million strong government workforce by 100,000 between 2014 and 2020. It says that people working in areas they are not qualified for, those lacking competence and those appointed government representatives in state-owned enterprises that have since been privatized will be laid off. Do you think this will work?

Ngo Thanh Can: The government’s Resolution No. 132, implemented from 2007 to 2011, had cut 67,000 public servants, mainly by offering voluntary retirement. Now, the government is drafting a new resolution as many people who are not qualified enough have been recruited into the government in recent years.

Leaders of some sectors and National Assembly delegates have said 30 percent of public servants fail to do their work efficiently. Others think that the rate may be even higher.

The current draft resolution envisages 100,000 employees leaving between 2014 and 2020, with 80 percent of them being allowed to retire before reaching retirement age and 20 percent laid off.

The number of government workers which would be cut each year is over 16,000. It is not very large, equaling that effected under Resolution 132. So I think the reduction is feasible.

However, what we are interested in is the resolution’s effectiveness and its impacts on society. We have to implement well the resolution to remove unqualified employees from the government, keep good ones, and recruit new ones with of good quality.

The resolution’s effectiveness will depend on upcoming policies on the recruitment and treatment of talents. Without such policies, the social impact will not be great and citizens’ belief in the government will fall further.

There are concerns that relatives of senior officials and leaders will not be laid off despite failing to work efficiently. Can you comment? 

The issue is that too many unqualified workers have been recruited into the government. Our recruitment regulations are not strictly implemented, so those who are relatives, have connections or those who are able to offer bribes have become government employees.

Local governments should declare detailed recruitment criteria, and build a standard system to assess who meets or fails to meet work requirements.

The downsizing policy will only work well if inefficient workers are weeded out irrespective of their connections or relations.

There is also the possibility that qualified employees who are unpopular with their bosses are laid off, or even that some bosses lose their jobs when they try to dismiss relatives of those who have higher positions. To avoid this, we have to strengthen inspections of the policy’s implementation.

There should be special missions in provinces to monitor the implementation process.

You mean provinces should establish independent inspection teams to monitor implementation of the government’s downsizing policy?

Right. We can do this two ways. Local governments can hire private professional consultant companies to assess and monitor the downsizing process or employ highly qualified experts in human resource management to do this.

You have said that the government should have implemented strict recruitment policies instead of cutting employees. Please explain this further.

The root of the problem will not be solved if a policy only provides a temporary solution. Weeding out disqualified or inefficient employees is a temporary solution. To develop the government sector, we should also replace bad employees with good ones. For this, the filtering process must happen at the time of recruitment. The government sector will also not develop if we do not treat employees well, especially talented ones.

The implementation of the draft resolution is expected to cost around VND8 trillion (US$379.3 million) in pensions and other payments. Is this acceptable or a waste of scarce funds?

Dismissing unqualified workers can improve the quality of the government sector and increase citizens’ confidence and belief, which has much higher value than VND8 trillion. However, if the policy is not implemented well, it would be wasteful and have negative impacts on the society as a whole.

Vietnam’s earlier efforts to downsize the government have not proved effective. What should be done to make sure the upcoming effort does not suffer the same fate?

To have a good government sector, we have to dismiss unqualified public servants, recruit employees with good professional capacity and good morals. To this end, we should raise awareness of these issues for all government workers, review and rearrange work of government employees, and improve the treatment of employees, in particular the talented ones.

Trang 76 : When will Vietnamese farmers escape the sorrow of poverty?

The media has reported about nine families in Long An Province asking to be imprisoned because they are broke after last sugarcane season.

They said being in jail is better than starving after their lands are auctioned to repay their debts.

This forum opens the floor to readers, expats and Vietnamese alike, to hold forth in greater detail on any and all issues that concern you. Email your thoughts toeditor@thanhniennews.com. We reserve the right to edit your submissions for reasons of space and clarity.

In 2011 they had mortgaged their lands to rent 300 hectares (740 acres) of land in Ben Luc District to grow sugarcane. But floods destroyed their crops repeatedly, rendering them completely broke.

It is rare for farmers to ask to be jailed, but much less rare for Vietnamese farmers to be broke.

Many Ho Chi Minh City residents remember well the rumors about a possible dire shortage of rice in 2008. People rushed to buy and rice stock despite the government dismissing the rumors.

A few months later things went from apparent bust to boom as farmers, hoping to capitalize on the panic buying, grew vast quantities of short-term rice.

HCMC then witnessed long lines of trucks with rice from the delta parked randomly on the roadside to sell at low prices.

It was the result of panic sparked by rumors and poor export policies.

When global demand was high, the government allowed limited exports, fearful of food security. A fall in demand coincided with the harvest season in Vietnam. After agents offered very low prices, farmers resorted to hiring trucks to take their rice to HCMC to retail.

I almost cry whenever I remember the story.

In the previous two seasons, after the prices of the IR 50404 rice variety - a short-term, low-quality variety - shot up, middlemen went to the fields and offered farmers prices equal to that of high-quality varieties.

Farmers cultivated 50404 despite the Ministry of Agriculture and Rural Development’s warning not to do so because they saw some reaping nice profits from growing it regularly.

Exporters too profited.

But suddenly the government limited exports saying it was waiting for a further increase in 50404 prices.

Vietnam is not the only country to export rice. So, when it curtailed exports, others stepped in to fill the gap.

Then, one day, there was no more demand for the low-priced rice from Vietnam; buyers only wanted high-quality varieties like jasmine rice.

It hurt to see Mekong Delta farmers riding their motorbikes for hundreds of kilometers to find the new variety and waiting on fields to buy it for cultivating on their lands.

People competed to buy jasmine rice, buying even unripe grains. Some took off their shirts to wrap sheaves of rice, fearful of losing some of them.

I cried.

The story is but one example.

It is not unusual for the media to report about saddened prawn farmers sitting in their farms for days after their animals died, others giving away huge amounts of fruits to feed livestock because they cannot sell them, and vegetable growers selling a tricycle full for a few thousands of dongs.

Why do Vietnamese farmers face this kind of sorrow? Because they are the first link in the production – consumption chain that consists of dozens of other links.

These links promote the trade, but also pocket most of the profits. The farmers have to depend on them because they have no other choice. That is the tragedy of Vietnamese farmers.

Farmers have to put up with a multitude of official agencies, most of whom merely collect taxes and fees and do not help them improve farming technologies or produce or seek to expand the market.

Without being aware of the market, lacking resources, and cultivating without any strategy, they are caught in a cycle of changing crops.

While authorities have taken certain actions like setting up linkages between the government, scientists and farmers, traders and banks, there is a distance between the planner’s office and the field, and farmers have had to struggle on their own.

Unlike in developed countries, Vietnam’s agriculture depends almost completely on the weather. There is truth to the saying that farmers can easily become insolvent after investing all their money in the farm when “Mr. Sky” is not happy.

After dozens of years, a plan to sell farmers insurance remains in trial mode.

So farmers struggle on their own to cope; they survive, but face extreme hardship.

As for the sugarcane farmers in Long An, their children have had to drop out of school or quit their jobs to return home and see if they can do something with their lands.

But with the huge debt, it is easy to foresee a scenario of poverty for these uneducated people who no chance to improve their lives.

A solution can be a total scrapping of the bureaucratic government mechanisms which place a burden on farmers, putting an end to unrealistic theories and leaving farmers to the market.

There should be a playing field with a win-win collaboration between companies and farmers.

Vietnamese farmers can learn from their peers in Japan, Malaysia, Israel, Thailand, the Netherlands, etc. to become millionaires.

Trang 77: Vietnam’s dirty energy habits hard to kick, getting worse

Although Vietnam may shelve construction of its first nuclear power plant to assuage fears about safety and efficiency, the country has still failed to hammer out an environmentally friendly energy blueprint to curb its chronic power shortages.

Vietnam has done little to promote renewable energy despite its abundant wind and solar power generation potential, experts say. Coal is the main source of power generation in the energy-hungry country, a fact that could exact a heavy economic and environmental toll, they say.

Construction of the first nuclear plant in the coastal south-central province of Ninh Thuan, which was originally slated to start this year, may be put on the backburner until 2020 to ensure the highest safety and efficiency standards, Prime Minister Nguyen Tan Dung told officials from the Vietnam National Oil and Gas Group (PetroVietnam) at a recent government conference.

Dung also ordered PetroVietnam to ensure that Vietnam has enough gas to build a 5,000-megawatt power plant complex to make up for the delayed 4,000 MW of nuclear generation capacity.

Dogged by an energy crunch, other than the first four-reactor power plant in Ninh Thuan to be built by Russian utility and energy company Rosatom, Vietnam envisages constructing seven other nuclear plants by 2030.

The country plans to produce 15,000 megawatts of electricity, or 10 percent of total generating capacity, through nuclear power by 2030, a senior official from the Vietnam Atomic Energy Commission told Reuters recently.

Electricity demand has seen double digit growth for all the 2000s, and power consumption is projected to spike over the coming years, fueled by economic growth and a population of 90 million.

The Asian Development Bank has predicted that domestic electricity demand may rise by up to 14 percent per year until 2015 and plateau at 11 percent growth until 2020, according to AP.

Vietnam’s electricity supply relies heavily on cheap hydroelectricity and domestic coal, which are both leveling off. Given that, official plans for the expansion of power generation will rely increasingly on imported coal and gas, and on foreign and private investment in new power plants.

According to the most recent power development blueprint, total collective power plant capacity in the country must reach 75,000 MW in 2020, of which coal will account for 48 percent, hydropower 25.5 percent, gas 16.5 percent, renewable energy 5.6 percent, nuclear power 1.3 percent and imported power 3.1 percent.

Thus, delaying nuclear power development would not make a huge difference for total power supply in 2020, experts say.

But given that power shortages are still affecting many businesses and communities and crude oil output has peaked, “the overall planned capacity by 2020 is a heavy increase when compared to 2011 for all sources and I am not sure that expansion is fully on track,” Koos Neefjes, the policy advisor on climate change for the United Nations Development Program (UNDP) in Vietnam, toldVietweek.

Renewable energy a turnoff?

Although the government has enacted a green growth strategy since 2012, experts say other renewable resources have not been given priority in Vietnam.

Experts say that even though speeding up investment in wind and solar power generation would limit Vietnam’s dependency on imports of fossil fuels and global fuel market price fluctuations, there is no sign that the country is taking this path.

“We do not expect this type of energy resource to play a significant role in the country in the near future, due to low tariff rates and other available attractive energy alternatives,” Business Monitor International, a UK-based firm that provides analysis and forecasts on global emerging markets, said in its Vietnam Power Report for the first quarter of this year.

The government has set a tariff cap of VND1,614 (US$0.078) per kilowatt hour for wind energy, which is significantly lower than comparable tariffs in the region, the report said.

The state utility Electricity of Vietnam (EVN), which has long controlled the generation, transmission and distribution of electricity in the country, is not obliged to purchase the electricity generated from wind farms at the maximum tariff cap, it said.

“EVN has no motivation to purchase the electricity from the farm at a higher price, as the utility is already selling the generated electricity to consumers at a loss,” the report said.

“Given these limits towards the profitability of wind farms, we do not foresee much private investment occurring as long as this cap is enforced.”

Regulations are another barrier to development of and investment in renewable energy here, experts say.

“There is a limited understanding of renewable energy technologies at the local level and the requirements of establishing renewable energy plants, so potential investors are not being attracted,” said Nguy Thi Khanh, director of the Vietnamese NGO Green Innovation and Development Center (GreenID), which recently launched an initiative to promote renewable energy and energy efficiency in the northern province of Thai Binh through introducing sound local energy planning practices.

‘Worst of all’

The Business Monitor International report projected that coal capacity and generation would grow “the fastest” of all energy supplies and that Vietnam would thus have to import large amounts of coal.

From this year, Vietnam is set to become a net importer of coal with Indonesia and possibly Australia as likely suppliers. Behind China, India and Turkey, Vietnam has the largest number of coal plants proposed out of any country in the world, with EVN outlining plans to build a further 17 large coal-fired power stations by 2020.

Such a scenario portends a grim economic and environmental picture for Vietnam.

Importing coal is an incredibly expensive, risky and uncertain way to power an economy, experts say. International coal prices are far higher than domestically produced coal and are subject to the power of just a handful of large producing nations, they say.

To make matters worse, “coal for power production is indeed the worst of all fossil fuels, in terms of greenhouse gas emissions that cause global climate change and other pollutants, including the effects of mining, transport and use in large power plants on local environments,” UNDP’s Neefjes said.

Numerous studies have documented the serious health impacts from coal fired power stations to nearby communities worldwide. Air pollution from coal kills 13,000 people every year in the US, 22,000 in the EU, and 100,000 in India, according to studies released by international environmental groups.

Khanh, the Vietnamese expert, said she was not aware of such a study in Vietnam other than the one her organization is conducting on the impacts of coal-fired plants.

“The impacts of those plants have not been taken into serious account,” she said.

Last year, a leading US government finance agency, the Export-Import Bank, voted to deny financing for the polluting and inefficient 1,200-MW coal power plant being developed by PetroVietnam in Thai Binh.

Experts hope that these moves at the international level will force Vietnam to rethink its energy policy for the future. But it is not clear if a real sea change is in the offing as coal is projected to cover over 56 percent of all electricity production capacities in the country by 2030.

UNDP Vietnam-commissioned studies have confirmed that Vietnam is indirectly subsidizing coal and other fossil fuel consumption, so “it is subsidizing pollution whilst clean energy sources are still comparatively expensive,” Neefjes said.

He said if indirect subsidies on coal and other fossil fuels are removed, alternative renewable energy would be able to compete with coal and hydroelectricity very soon. Removal of indirect subsidies would also make energy efficiency measures more attractive to consumers and businesses, he added.

“Unfortunately, Vietnam is not yet doing as well as it could on developing wind and solar power and improving energy efficiency.” 

Trang 78:

Thailand Challenges Singapore to Hong Kong With Foreign IPO Plan

Thailand will allow initial public offerings of foreign companies for the first time as Asia’s 11th-largest equity market seeks to compete with Hong Kong and Singapore as a regional hub for stock listings.

Several Chinese companies have already expressed interest in selling shares in Thailand, and rules for the offerings will be announced this quarter, Vorapol Socatiyanurak, the secretary general of Thailand’s Securities & Exchange Commission, said in an interview in Bangkok yesterday.

While Thailand’s $341 billion equity market is about a tenth the size of Hong Kong’s, growing interest in stocks from the Southeast Asian nation’s 67 million people led them to pour $2.7 billion into the market last year. The benchmark SET Index trades at a valuation premium over the Hang Seng Index and Singapore’s Straits Times Index, even amid anti-government protests that spurred Prime Minister Yingluck Shinawatra to declare a state of emergency in Bangkok yesterday.

“Thailand wants to compete with Singapore and Hong Kong to become one of Asia’s funding centers,” Vorapol said. “Thai investors are also in desperate need for new stocks and investment alternatives for their savings.”

The regulator will also allow trading of depository receipts linked to large foreign companies such as Apple Inc. and Google Inc., Vorapol said. Thai companies, property funds and infrastructure funds raised about $5.8 billion through IPOs last year, the most since Bloomberg began compiling the data in 1993.

Myanmar, Laos

The SET index has slipped 0.4 percent this year amid violence in Bangkok that injured at least 70 people since Jan. 17. Political tension is increasing as Suthep Thaugsuban, a former opposition party lawmaker, steps up efforts to oust Yingluck before an election scheduled for Feb. 2.

Thailand will require foreign companies seeking Bangkok listings to have at least two Thai citizens on their boards, Vorapol said. Financial statements must be endorsed by auditors who are certified by the local regulator, he said.

Policy makers will promote Thailand as a funding destination for nearby countries with less-developed capital markets such as Laos, Myanmar and Cambodia, Vorapol said. Thailand is in talks with Myanmar’s finance ministry on the sale of baht-denominated bonds to Thai investors, he said.

Relative Value

Hong Kong’s exchange, long a listing destination for Chinese companies, has broadened its reach in recent years to include Moscow-based United Co. Rusal and Milan-based Prada SpA. Singapore has lured companies from China, Malaysia and the Philippines.

Thailand’s SET gauge is valued at 14 times reported earnings, while the Hong Kong index trades at 10 times and Singapore’s measure has a multiple of about 13, according to data compiled by Bloomberg.

While Thailand has made strides in developing its capital markets, the country still has more work to do before catching up with larger regional competitors, according to Viravate Vongkitbuncha, head of the international securities department at SCB Securities Co.

“The regulator has taken a lot of development steps,” Viravate said. “It’s going in a good direction.”

Trang 79

Lack of raw materials puts foreign drug firms off production

Workers at a pharmaceutical factory of Imexpharm Company

Though the pharmaceutical market is expected to see rapid growth, foreign companies are not interested in investing in drug production, leaving Vietnam heavily dependent on imports.

The country's pharmaceutical and healthcare sectors are set to see strong growth, albeit from a low base, given the bullish outlook on the economy and rising affluence.

Besides, the government is committed to universal healthcare coverage, according to Business Monitor International, a UK-based information provider on country risk and industry research.

Spending on drugs is expected to increase from US$2.84 billion last year to $3.31 billion this year, it said.

Two-thirds of Vietnam's 90 million people are covered by health insurance, and the ratio is expected to rise to 70 percent by 2015 and 80 percent by 2020, according to Deputy Minister of Health Nguyen Thi Xuyen.

But despite the promise, the market is not attractive to foreign investors since Vietnam is still heavily reliant on imported raw materials, which could increase production costs, industry insiders said.

Foreign investors said pharmaceutical production in Vietnam is not really profitable because the country has to import 90 percent of the raw materials.

The government has allowed foreign drug firms to establish wholly-owned subsidiaries and branches since 2009 under its WTO commitments.

But setting up a subsidiary can be a long process and entails having a manufacturing facility in the country.

So, instead of establishing wholly-owned subsidiaries in Vietnam, foreign pharmaceutical companies prefer tying up with local partners for manufacturing and distribution.

GlaxoSmithKline, for instance, signed an agreement in 2010 with leading Vietnamese drug company Savipharm. The UK firm is responsible for marketing, technical support, and quality control, while Savipharm takes care of manufacturing and distribution.

Most foreign companies restrict themselves to imports, with only 30 percent being in production in the country. Even they focus on turning out low-cost generics, not sophisticated drugs.

There are 178 drug companies in the country, 80 of them making only traditional medicines. Together they meet only around half the country's demand, according to the Ministry of Health.

Weak local firms

Most local drug companies are small to medium-sized.

Hau Giang, Traphaco, Vinapharm, Domesco, and the Central Pharmaceutical Company account for most of the market share, with Hau Giang being the largest.

Vietnamese drugs are not very popular, with doctors and patients preferring foreign-made ones. Industry insiders blame this on the advertising by foreign pharmaceutical firms.

An executive at the Central Pharmaceutical Company said his firm produces around 300 products which are much cheaper than imports, but still finds it hard to attract customers.

He blamed this on the disparity in regulations that limit the capability of domestic firms to advertise and offer commissions.

The law caps pharmaceutical firms' advertising expenditure at 10 percent of their total spending.

One industry insider estimated that spending by Vietnamese drug manufacturers to win over doctors and hospital procurement officers is only 6-10 percent of that of their foreign counterparts.

But Nguyen Ngoc Hien, deputy director of Bach Mai General Hospital in Hanoi, said: "Many local drugs are not as good as imports. The most important thing for doctors is to prescribe something that is safe and effective.

"Price is not a decisive factor in convincing a patient to buy a certain drug. Moreover, many kinds of drugs are not being produced in Vietnam."

Unable to sell their products, most have stopped production to focus on imports. According to the Vietnam Pharmaceutical Companies Association, only 10 percent of over 2,000 drug firms are still in production with 90 percent now preferring to trade.

The association said only 11.9 percent of central hospitals' spending on drugs is for local products, while the ratio is 33.9 percent for provincial facilities.

Pham Khanh Phong Lan, deputy director of the Ho Chi Minh City Department of Health, said while it is easy for foreign pharmaceutical products to infiltrate into Vietnam even if they could be produced locally, other countries use technical barriers to prevent this.

Ong Van Dung, general director of pharmaceutical firm Stada Vietnam, said the biggest rivals for Vietnamese companies are India, Pakistan, Bangladesh, and South Korea.

Foreign firms are not allowed to directly distribute pharmaceutical products in Vietnam, but some firms are getting around that restriction by investing in local companies.

Chile-based CFR International SPA bought a 44 percent stake in Domesco, a local drug manufacturer.

Vietnam has spent $1.25 billion on importing drugs so far this year, 7.1 percent higher than in the same period last year, according to the General Statistics Office.

Trang 80

Garment industry hit by competition from low-cost rivals

Workers at a garment factory in Ho Chi Minh City

Vietnamese garment exports, plagued by rising labor costs and heavy reliance on imported raw materials, face fierce competition from low-priced products from other countries.

As a result, export growth is expected to be lower this year, with the target being only 12 percent, compared to 18 percent last year, according to the Vietnam Textile and Garment Association.

Pham Xuan Hong, the chairman of the association, said: “Vietnam is facing big competition from some countries, including Bangladesh, which offer lower selling prices due to their lower labor costs.”

He said Bangladesh has among the lowest labor costs in Asia, with workers getting average monthly salaries of US$70-100, or just one third of that in Vietnam.

Bangladesh also produces more raw materials for the garment industry than Vietnam, which also makes its products more competitive, Hong said.

A report on the Vietnamese government website last year said the garment industry imports 70 percent of feedstock.

Industry insiders said they are highly dependent on Chinese raw materials.

Local cotton production, for instance, is only 5,000 tons, enough to meet just 1 percent of the demand, while cloth production is estimated at less than 1 billion meters, or 10 percent of the industry’s needs, according to the association.

The heavy reliance on import of raw materials causes great difficulty for garment producers. “When they receive too many orders, foreign suppliers do not provide materials in time. Sometimes they delay delivery by one or two months, affecting our production,” said the head of a garment company in Hung Yen Province.

“So many garment companies cannot deliver to importers on schedule, affecting their prestige. They even lose customers.”

But it is not easy to reduce imports since the domestic industry is still undeveloped.

“Many textile and dyeing businesses are refused licenses everywhere they go since authorities are afraid of environmental pollution,” Le Quang Hung, chairman of the Saigon Garment Production and Commerce JSC, said.

“So I think some government policies are needed here.”

Cambodia has also become a rival to Vietnam since the US has granted it most favored nation status, meaning Cambodian garments enjoy zero tariff when exported to the US.

“Lower export tax and labor costs in Cambodia are also important factors,” Phung Dinh Ngo, head of garment producer Hoa Binh, said.

Vietnamese garments are subject to an export tax of around 17 percent, he added.

Vietnamese garment producers expect the Trans-Pacific Partnership (TPP) that it is set for signing this year to boost their export prospects. But things may not be so straightforward.

Le Tien Truong, vice chairman of the Vietnam Garment and Textile Group, said to benefit from preferential tariffs in the US market, exporters would also need to meet the TPP’s requirements on the origins of raw materials. Vietnam’s garment industry imports most of its raw material needs from non-TPP members, mainly China, meaning it cannot meet the requirements, he said.

Meanwhile, there are no indications that foreign investors would expand investments in Vietnam to make use of the TPP, he said.

In fact, Vietnam should have beefed up production of materials to benefit from the TPP, of which the "yarn forward" rule requires clothing to be made from yarn and fabric manufactured in one of the free trade partner nations to qualify for duty-free treatment, Truong said.

Foreign investors have not been interested in making needed investments, he added.

He said the most important task now for garment producers is to improve quality to boost their competitiveness.

Trang 81

A roof above their heads and a place in their hearts

Everyone gets more than they bargained for as volunteers from several countries contribute sweat and money to build houses for needy families in the Mekong Delta province of Tien Giang 

At 63, Nguyen Van Kheo has two major concerns: his health and his house.

He says enteritis, muscle pains and other illnesses have forced him to undergo several surgeries, and made ­him dependant on medicines and acupuncture. They make him feel "weak," says the man, who is virtually on his own with no children and his wife living away.

Meanwhile, the  small house that he got from his mother some 20 years ago in Tien Giang Province's Cho Gao District has worn him out with its continuous needs for repairs, he says. Intended as a temporary shelter, the house has seen its wooden poles and beams begin to rot, and it leaks during the rainy season.

With an income of just about US$30 a month, he can only afford cheap and non-durable materials for necessary repairs that he does by himself.

So, over the years, he has been stuck in an endless cycle of housing improvements that just barely keeps a roof above his head.

If he had a new house, he would feel much relieved and would be able to focus on taking better care of his health problems, Kheo tells anyone who cares to listen.

Someone did listen. And they did something about it.

Last week, nearly 250 foreign and Vietnamese volunteers descended on Cho Gao District to build new houses for Kheo and 24 other poor families in Cho Gao District, under the project Mekong Big Builds 2013 initiated by Habitat for Humanity Vietnam, an international NGO.

The volunteers included 190 people from eight countries Australia, Cambodia, China, Germany, Japan, New Zealand, Singapore and the US. Aged 16-81, they came from different backgrounds. They were students, lawyers, teachers, singers, actors, engineers, retirees and even cancer survivors.

They arrived in Tien Giang Province's capital town of My Tho, which is 10 kilometers from Cho Gao District, on Sunday (August 4). And, the very next day, they started working together with local volunteers and families. On Friday noon, they handed over 25 houses to local house owners.

Kelly Koch, country director of Habitat for Humanity Vietnam, said the rush to build and repair houses in four and a half days was because volunteers had to cover all the costs of their stay in Vietnam, and a longer period of time would be very expensive for them.

Not only did they pay for the accommodation, air fares and other costs, the volunteers contributed $1,500-2,000 each to the project's fund as well.

Koch said funds also came from Habitat affiliated offices around the world, bilateral funding agencies, various corporate donors, local government, and home partners who could contribute money, materials or labor. 

In an interview with Tuoi Tre (Youth) newspaper she said although the building was done at high speed, each house with an average area of 40 square meters met Vietnamese technical standards as well as those set by her organization's volunteers who are experts in construction.

The whole process, from identifying building areas, constructing foundations, to applying concrete, was closely watched by members of a technical management team, she added.

Nearly 250 volunteers, including staff members of the organization, were divided into specialized teams. One managed technical standards, another team the logistics, and yet another took care of processing concrete. Then, at each house, a "house leader" was chosen from some ten volunteers, and there was a paper on its wall outlining the plan in detail.

Every day, they started working at 8:30 a.m., spent around 10 minutes assigning jobs, and would not stop until they had completed all the jobs listed for that day.

Koch said all the volunteers believed in and were dedicated to what they were doing.

They had joined the project at their expense, and worked until they were bathed in sweat, and did not let inconvenient weather conditions caused by the rainy season put them off the task at hand.

Paul Foster, a Singaporean singer, actor and model, did not rest for an instant. He transported sand, rocks, water, and cement in a push cart. Whenever he had nothing to transport, he carried scaffolding material or found something else that needed to be done on the construction site.

Another volunteer, despite falling sick, refused to be hospitalized and insisted on staying to complete the job.

The oldest volunteer, Ngatuakana Wichman, an 81-year-old woman from New Zealand, amazed many people, painting a house by herself, arranging and preparing scaffolding, or mixing and applying concrete.

Koch said it was the fourth build for Wichman, and that she was planning to join one in Nepal.

But, even more "amazing" was the relationship among people who joined the project, from foreign volunteers to local families, she said.

Koch said despite differences in culture, profession, social status, and language, "everyone on site bonded" and worked together for a common goal.

In one blog entry, a volunteer wrote that strong connections between volunteers and local families were expressed in simple acts like the sharing of local fruit and the effort made by residents to practice saying "hi" and "goodbye" to their benefactors. 

"It was heart-warming to be accepted into their neighborhood as friends as the week progressed," it read. "The team felt we were leaving a piece of our hearts behind as a cornerstone of the families' new homes."

Giving and getting

Dinh Thuy Loan, whose family benefited from the Habitat project, said after living in a dark and leaky house for many years, her family feels "blessed."

She said they finally had a place safe enough to shelter their six-year-old son from rain and shine, giving him a healthy environment to grow up.

Koch told Tuoi Tre she was touched when Foster told her that although he was tired, he could imagine how a family with parents and children would be able to live and play inside their new house.

Sweat, tears and blood (injuries at the construction site) was shed, but everything was still great, he said.

Foster also said that every volunteer knew that locals would thank them when the houses were completed, but from the bottom of the volunteers' heart, they too felt grateful to house owners for giving them such wonderful experiences.

That is the lot of volunteers they give but also receive a lot, Koch said.

"We are not trying to convey any specific message. This is the work we do. We build houses, and if we can succeed in bringing communities together to do it, we feel we give people more than the walls within which they can live."

Trang 82

TPP: Getting US snout in Vietnam trough

American swine could make their way to the Vietnamese dining table via Chinese slaughterhouses, thanks to the TPP

Super-secret Trans Pacific Partnership talks ended in Singapore last week without a deal. While US trade representatives reported making major progress on the 12-nation trade pact, detractors of the deal hailed the failure to hit Obama's year-end deadline as a victory for normal people.

In the past year, the villagers have grown restless.

The idea of yet another extra-democratic trade deal just isn't sitting well.

Protesters all over the globe have warned that the pact will extend the powers of US pharmaceutical companies, media conglomerates and security agencies to places like Chile and Vietnam.

If all of this sounds vague, that's because it is.

Without even a modicum of transparency, the TPP has come to feel like the proverbial monster under the bed. No one knows what it will look like and perhaps for that reason we can't help but fight a creeping sense that it's going to kill us.

That may sound a little alarmist. Unless you're, say, a Vietnamese pig farmer.

The National Pork Producers Council (AKA the lobbying arm of America's industrial pig machine) released a drooling statement in September pointing out that Vietnam sucks down more pigs per year than Mexico"”America's biggest export market by volume.

Due to a number of strict laws protecting Vietnam's patchwork of small farms and joint-stock slaughterhouses, less than 2 percent of the two million tons of pork Vietnam eats every year is imported.

Naturally, the NPPC wishes to crush those laws and capitalize on our daily cơm sườn.

The NPPC hopes the TPP will do in Vietnam's "burdensome administrative procedures," "zero-tolerance policy for pathogens on raw meat products" and "reference prices established by the Vietnamese government."

If that happens, the organization says it stands to increase pork exports to Vietnam by "hundreds of millions of dollars" a year.

They are working hard for that money.

This summer, the swine lobbyists hosted a delegation of Vietnamese agriculture officials and dazzled them with presentations on antibiotics, veterinary drug approvals, and food safety research.

In September, Vietnam began accepting shiploads of something called "white offal" with some restrictions"”all of which the NPPC wants overturned.

"The NPPC will continue to work with Vietnam to encourage the adoption of science-based food regulations as part of the ongoing Trans Pacific Partnership trade negotiations," the organization stated in a press release.

The NPPC reserved the term "science-based" to belittle food systems (notably those in the EU, Russia, and China) which ban US pork outright because it contains ractopamine. The leanness and growth-promoting drug (it does both!) is about as popular, these days, as the NSA.

In 2007 mobs of Taiwanese pig farmers hurled feces at the Ministry of Agriculture building in Taipei when word got out that their government might lift its zero-tolerance policy on the drug. US trade representatives continue to push for an end to the ban, every year.

However, few are budging on their blockade of US pork; there's more than one reason to resist it.

In addition to concerns about the growth drug, Thai farmers took to the streets this spring to warn that, if permitted, cheap US pork imports would devastate more than 250,000 Thai households that draw their livelihoods from rasing pigs.

Ironically, they have cited Vietnam as an example.

The Thai conglomerate Charoen Pokphand Foods (operating here as the Vietnam CP Joint Stock Company) is one of several global pork conglomerates that operates large-scale slaughterhouses which buy pigs from farmers who can no longer afford to do business on their own.

Some of these farmers have publicly accused CP and its ilk of creating "price spirals" that forced them to go from being farmers to contractors.

The pages of this and other papers have been full of stories in recent years describing how pig farmers have been driven to bankruptcy by falling meat and rising imported feed prices. Many are barely surviving on emergency government loans.

In addition, who knows how much longer those will hold out? In October, the Vietnam Investment Review newspaper described local agricultural officials as quaking in their green socks at the prospect of competing with America's drug-addled, hyper-packed impossibly-cheap pork.

One estimated that American, Canadian, and New Zealand pork is 1.5 times cheaper than local meat. Compound this with the blind faith Vietnamese consumers place in the integrity of American (and generally white-people-made) products and you're looking at a veritable porkpocalypse if the TPP passes.

Perhaps the strangest twist in all of this is the role China plays. The People's Republic, which refuses to import ractopamine-laced pork, recently acquired the largest industrial pork producer in the United States: Smithfield Foods. 

Soon after the sale, Smithfield announced plans to make half its pork products ractopamine-free, prompting an attorney at the Center for Food Safety (which is currently suing the American Food and Drug Administration for 100,000 pages worth of ractopamine research) to predict that it would all go to the Chinese.

In the end, one could probably upend the entire TPP negotiation process by telling every Vietnamese person at the table that they were about to ink a deal that would force their children to eat cheap Chinese pork forever.

But nothing, these days, is so simple. Smithfield's new owner, Shuanghui International, is itself partially owned bysome American pigs at Goldman Sachs.

Trang 83 : Rice Rout Seen Extending as Thai Sales Quicken: Southeast Asia

Global rice prices will extend declines as Thailand is forced to offload grain from record stockpiles accumulated under a state-buying program, according to the Vietnam Food Association, the main shippers’ group.

Exports to China and Africa from the second-largest shipper will drop this year on increased competition from Thailand as well as from India and Pakistan amid a global glut, said Truong Thanh Phong, chairman of the Ho Chi Minh City-based group.

While Thailand’s reserves built up as the government paid farmers above-market prices since 2011, the program is now short of funds and unpaid growers are demanding stockpile sales. The unrest by the growers adds to opposition targeting Yingluck Shinawatra’s caretaker administration, which has faced months of demonstrations. Phong’s comments reflect concern among exporters about the pace of sales from holdings that are large enough to cover 39 percent of annual world import demand.

“The rice market has seen fierce competition for the past two years due to the global surplus,” said Phong, who has been chairman of the group for 13 years. Global prices will decline this year because they’re guided by Thai rates, he said.

The price of new-crop Thai 5-percent broken white rice, a benchmark grade, tumbled 23 percent last year and was at $460 a metric ton on Feb. 12. The Vietnamese 5 percent-broken variety is about $395 a ton, higher than $370 for old-harvest Thai grain, Phong said, without giving price forecasts. Rough rice fell 0.3 percent to $15.81 per 100 pounds in Chicago today, paring losses this year to 0.7 percent.

Rural Incomes

Thailand spent 689 billion baht ($21 billion) in the past two years buying from farmers to boost rural incomes. That spurred the buildup in the inventories to 14.7 million tons this year from 6.1 million tons in 2010, according to the U.S. Department of Agriculture. The program is set to lapse at the end of this month as Prime Minister Yingluck’s caretaker administration doesn’t have the authority to extend it.

“Given the caretaker government’s troubles in securing financing to pay farmers for their paddy pledged during the past wet-season crop, it seems likely that they will try to increase sales,” said David Dawe, Bangkok-based senior economist at the Food & Agriculture Organization. “If they are sold too soon and all at once, the global price will fall, but if they are sold too late then the quality will continue to deteriorate.”

Thai farmers blocked roads in the provinces and protested in Bangkok this month, urging a faster pace of sales from the stockpiles so that the government can make missed payments to growers. It may take about five years for the state stockpiles to be sold off and a further slump in prices is possible as more of the grain is shipped out, Thai Rice Exporters Association President Chareon Laothamatas said on Feb. 5.

Planned Sales

Thailand plans to sell about 1 million tons a month from stockpiles during the first quarter, Deputy Prime Minister and Commerce Minister Niwattumrong Boonsongpaisan said on Feb. 17. The government will clear all remaining payments to farmers within six to eight weeks using short-term borrowings, Finance Minister Kittiratt Na-Ranong said the same day.

Vietnam’s exports are forecast at 6.5 million to 7 million tons this year, with shipments of 1.2 million tons seen this quarter and 3.5 million in the first half, Phong said. The country shipped 6.68 million tons in 2013, the lowest level in four years, according to VFA data.

Official exports to China may drop 9.1 percent to 2 million tons this year, Phong said on Feb. 14, referring to trade tracked by customs. Unofficial shipments, not tracked by customs, may slide to 1 million tons to 1.1 million tons from a range of 1.4 million tons to 1.5 million last year, Phong said.

Biggest Importer

China, the world’s largest buyer, will import 3.4 million tons in 2014, according to the USDA. Heilongjiang province halted a plan to buy 1.2 million tons, Deputy Prime Minister Niwattumrong said on Feb. 4, citing the province’s concerns about an anti-corruption probe into the program.

There’s enough evidence to charge Yingluck with negligence for her role overseeing the policy that generated losses, the National Anti-Corruption Commission said yesterday. Yingluck will have an opportunity to defend herself before the commission determines whether she will be indicted. The prime minister defended the program in a national address yesterday.

Vietnam’s sales to Africa will drop as India and Pakistan offer cheaper prices, Phong said. Shipments were 1.9 million tons last year, accounting for about 28 percent of the total. That’ll decline to 23 percent to 25 percent this year, he said.

Shipments from India, the second-largest producer, will probably expand to a record 11 million tons in the 12 months through March, according to M.P. Jindal, president of the All India Rice Exporters Association. Exports from Pakistan may total 3.4 million tons in 2014 compared with 3.5 million tons last year, a USDA projection shows.

Harvest Forecast

The global rice harvest expanded 0.8 percent to 469.5 million tons in 2013, outstripping demand of 467.1 million tons, according to the USDA. The surplus -- together with record supplies of wheat, corn and soybeans -- helped world food costs tracked by the Rome-based Food & Agriculture Organization to drop 15 percent from a record in February 2011.

Vietnam’s total output of unmilled rice this year will be similar to last year’s 44 million tons, Phong said. In 2015, the harvest may decline 2 percent to 3 percent as the government implements a plan to switch more land to other crops, he said.

The switch away from rice is designed to boost farmers’ incomes, with corn one of the alternatives, Pham Dong Quang, deputy head of the government’s crop-production department, said in an interview in September. Any reduction in planting will be mainly in the north of the country as the Mekong Delta in the south will stick to rice, said the VFA’s Phong.

“We will try to promote trade in China because it’s our biggest buyer,” said Phong, who’s been in the industry for almost four decades. “But China will definitely demand lower prices from us because of Thailand’s selling pressure.”

Trang 84

Three artists of ca tru - a complex form of sung poetry found in the north of Vietnam which was recognized by Unesco as an intangible cultural heritage - in a performance in Hanoi

UNESCO recognition fails to improve heritage conservation: cultural official

UNESCO's recognition of Vietnam's cultural heritage should not be the end but a driving force for efforts to conserve it a task that has been neglected even at UNESCO-recognized sites, Ngo Duc Thinh, a member of the National Cultural Heritage Council tells Vietweek.

Don ca tai tu, or southern folk music, was recently recognized as an intangible cultural heritage of humanity by UNESCO. What do you think about its significance?

Ngo Duc Thinh: Besides don ca tai tu, seven other intangible cultural heritages of Vietnam have been recognized by UNESCO. There will be other heritages to be recognized in future. However, UNESCO's recognition of don ca tai tu is of great significance since it is the first southern heritage to be recognized. The seven others are mostly located in the north. The fact is that heritages can be found across the country, not just in the north. Thus, the Ministry of Culture, Sports and Tourism and scientists had hoped for a southern heritage to be honored by UNESCO.

Don ca tai tu is very popular and enjoyed by a large number of people. The recognition is an important encouragement for Vietnam in its heritage conservation. It is an art that closely combines with traditional and scholarly styles. This is the special characteristic of the music.

There is an opinion that Vietnam seems too anxious to get UNESCO recognition for its heritage sites. What is your opinion?

Obviously, the recognition is an honor for Vietnam. But in my opinion, we have run after the recognition, regarding it as a target. The same situation could also be seen in some other countries.

In fact, UNESCO recognition for our heritage should not be the end, but a driving force for heritage conservation in modern society.

The biggest concern for cultural managers, scientists and international agencies is how we will act to conserve heritages recognized by UNESCO and the state.

NGO DUC THINH, the National Cultural Heritage Council

Heritage conservation will succeed only when it is carried out by common folk

UNESCO is very interested in commitments to heritage conservation by countries applying for recognition.

The fact that we push for having more heritages being honored partly reflects our achievement disease, which has spread to all walks of life and has to be treated.

However, the honor conferred on our heritage will be canceled out if we do nothing to conserve it.

What is the conservation status of our heritage sites after being recognized by UNESCO?

The conservation of many heritage sites has not improved even after being recognized by the organization. Ca tru (a complex form of sung poetry found in the north of Vietnam using lyrics written in traditional Vietnamese poetic forms) is an example. Despite our efforts, we have not yet been able to take it out of the list of heritages needing urgent protection. The conservation of the cultural space of the gong in the Central Highlands is not good either.

The community is very happy when heritage sites are honored, but it is not yet fully aware of the [need for] cultural heritage protection. The most important thing is that the public lacks knowledge about heritage protection. Heritage conservation is a science, and we should learn it. Sometimes we make great efforts in heritage protection, but cannot get good results as hoped for, and even destroy their value because of poor knowledge in the field.

We have enthusiasm for heritage conservation, but our knowledge is still poor. We need to improve awareness and knowledge of heritage protection. It is very important.

There is an opinion that we should not rank intangible cultural heritages because it will create a hierarchy of high- and low-ranking heritages. What do you think about this?

The Ministry of Culture, Sports and Tourism has identified national intangible cultural heritages since 2012. To date over 40 heritages have been recognized as national intangible cultural heritages, of which those meeting UNESCO criteria are chosen and applied for recognition as intangible cultural heritages of humanity. The honor should not be the ultimate end, but an encouragement to protect and foster them.

If the government or the world does not honor certain heritages, we should still protect them. It is most important.

We see few youths participating in heritage protection. What should the government and experts do to make the public more aware of the country's heritage?

The future of a country belongs to youths, so the future of the nation's culture also belongs to them. Youths play a decisive role in heritage conservation. Without the participation of young people in conservation, heritage will not exist.

What is the most important aspect in heritage conservation?

We should encourage people to participate in heritage conservation with government support. We have not succeeded in conserving our cultural heritage because the government has not yet involved common people in the task. The government has done the people's work in heritage protection. Other governments never do that. They only support people in protecting the heritage. Heritage conservation will succeed only when it is carried out by common folk.

Trang 85

Analysts call for further increase in bank foreign ownership limit

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Foreign investors like Vietnam: Malaysian securities firm

Vietnam's foreign ownership cap for non-banking firms set to rise to 60 pct

Investors not satisfied with higher foreign ownership at Vietnam banks

Investors are unhappy with Vietnam for taking too small a step to open its banking system by lifting the foreign ownership for “single strategic investors” at local banks but keeping the total foreign cap, analysts said at a conference Tuesday.

The central bank February 20 allowed foreign single investors to own up to 20 percent of a local bank, up from the previous 15 percent.

But the total foreign ownership in a bank is still limited to 30 percent compared to 49 percent in other sectors.

At the conference held to discuss the Vietnamese business environment, news website Saigon Times quoted Nicolas Audier, executive board member of the European Chamber of Commerce in Vietnam, as saying that he saw no significant change as the total maximum rate stayed unchanged.

This has upset most foreign investors who have their eyes on Vietnamese banks, he said.

Investors cannot run effective banking businesses in Vietnam due to their subordinate role in management, he said, pointing out that UK-based lender Standard Chartered and the World Bank’s International Finance Corp were surprised by the news that local bank ACB, in which they had stakes, had been found a few years ago to be manipulated by a group of Vietnamese shareholders for illegal business purposes.

Audier suggested legislators consider further increasing the cap, especially given the current problems of bad debts, cross ownership, and mismanagement at banks.

He also said that ongoing mergers of weak banks without the help of foreign strategic partners would not do much to clean up bad debts in the system at all.

Non-performing loans are stymieing the banking system, which is projected to achieve a credit growth of 12-14 percent this year but has seen loans drop 1.66 percent in February end from late last year.

Remco Gaanderse from leading Dutch bank ING said Vietnam should have raised the ownership by strategic investors to up to 50-51 percent.

The economy is not really opening its doors to foreigners with the ceiling rate of 20 percent, he said, adding that local banks stand no chance of catching up with the modern administrations adopted by foreign banks.

Mac Quang Huy, managing director of local stock firm Maritime Bank Securities suggested Vietnam not be hesitant to lift the ownership limits in order to lure international investors into the local banking sector and get them to help rectify the high bad-debt ratios.

But Nguyen Manh Hung from the central bank’s Banking Strategy Institute said in fact there is still a lot of room for foreign investors since only a few banks like ABBank and state-run VietinBank have used up their ownership limit for strategic investors.

By increasing the cap by 5 percent to 20 percent, the central bank has sent the message that the system genuinely needs foreign investors, but it also needs plans to gradually open the door to them over consumption concerns, he said.

News has been circulated since late last year that the government would also raise the foreign ownership limit, currently at 49 percent, in other sectors soon.

Trang 86

TPP trade pact misses deadline as more talks planned for January

Ministers negotiating the 12-nation Trans-Pacific Partnership trade pact said today they would miss a year-end deadline to complete the deal.

"We identified potential landing zones for the majority of key outstanding issues in the text," U.S. Trade Representative Michael Froman told reporters after four days of talks in Singapore, reading a joint statement from ministers and delegation heads. "We intend to meet again next month," he said, with market access issues yet to be resolved.

The TPP, which would link an area with about $28 trillion in annual economic output, has been bogged down by differences over issues from agricultural tariffs to intellectual property. Leaders from the U.S. to Malaysia and Japan face opposition to the deal from lawmakers at home, an obstacle that will have to be overcome once the agreement itself is finalized.

No new timeline has been set to reach an agreement on the TPP, a pact goes beyond usual trade deals that focus on tariffs and traditional goods such as agriculture. It would establish rules for digital commerce and include environmental standards and protection for companies that compete against government-backed businesses.

"We had various bilateral talks and of course everybody understands that there are sensitivities for each country," said Yasutoshi Nishimura, Japan's Deputy Economy Minister, speaking through a translator. Economy chief Akira Amari missed the talks after being diagnosed with early stage tongue cancer.

"We have been making necessary adjustments and coordination and deepened our discussion," Nishimura said. The U.S. made progress with Japan in talks on automobiles and insurance, and still has more work to do on cars and agriculture, Froman told reporters.

U.S. agenda

The delay in concluding the TPP complicates the Obama administration's so-called pivot to Asia, already dogged by tensions with China over the East and South China Seas. President Barack Obama sent Secretary of State John Kerry in his place on a four-nation trip to Asia in October as he dealt with a partial government shutdown at home. He plans a trip to the region in April.

The countries in the pact are the U.S., Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico,New Zealand, Peru, Singapore and Vietnam. China, which has been excluded from TPP, is separately moving on trade talks with countries such as South Korea, Japan and Australia.

WTO deal

The TPP talks follow an accord struck by the World Trade Organization, the first multilateral agreement negotiated by the WTO's 159 member nations in its 18-year history. The pact, unveiled in Bali Dec. 7, is designed to smooth commerce at borders and safeguard food security in developing nations. A successful WTO deal may add $1 trillion to the world economy, supporters among business groups have said.

"There is a line on which Japan can absolutely not compromise," Japan's Chief Cabinet Secretary Yoshihide Suga told reporters earlier today in Tokyo of the TPP. Still, Japan's team "will continue to put all their energies into the negotiations until the end for the sake of the national interest."

Japan's defense of its farming and automobile industries and reluctance to allow access for U.S. automobiles have been among issues impeding progress on the deal. Prime Minister Shinzo Abe seeks to increase agricultural efficiency in the nation's 1.2 million rice farms and remove hurdles to his pursuit of free-trade pacts including the TPP.

Fast track

In the U.S., Obama faces opposition to the deal from Congress, consumer advocates, automakers and labor unions over a range of issues. Last month 151 House Democrats sent a letter to Obama stating their opposition to granting him fast-track authority to negotiate trade agreements, citing a lack of congressional consultation in the TPP negotiations.

U.S. Vice President Joseph Biden's trip to Asia last week, intended to pin down the TPP and renew the U.S. emphasis on Asia, was overshadowed by China's Nov. 23 announcement of an air defense zone over a large swathe of the East China Sea, including islands at the center of a territorial dispute with Japan.

South Korea late last month expressed interest in joining the talks, and said it could start preliminary bilateral discussions with TPP parties. That would not amount to a formal decision to join the TPP process, the trade and finance ministries said in a joint statement Nov. 29.

Investor-state

"The Australian government has said that it would be able to consider, on a case-by-case basis, the possible support for an ISDS -- investor-state dispute settlement -- pursuit," Trade Minister Andrew Robb told reporters in Singapore. "We've said that we're prepared to consider that in the context of TPP provided there is a substantial market-access result."

The anti-secrecy group WikiLeaks on Nov. 13 released a document said to be a draft of the intellectual-property chapter of the accord, a move which Malaysia's international trade minister Mustapa Mohamed said in an interview Nov. 20 "is not helping the process."

Some TPP provisions would "trample over individual rights," according to WikiLeaks, which this week also released two documents it said were prepared by a TPP negotiating country and showed strong disagreement between the U.S. and its partners on issues including investor-state dispute settlement, intellectual property and the treatment of medicines.

Vietnam's online recruitment market has a lot of potential for growth, he said.

"With a population of over 90 million, the third largest ASEAN country, and an average age of 28, Vietnam offers an exciting future with enormous potential for economic growth."

"Job search websites are expected to be an important tool along with the economic growth of Vietnam, where the working population is increasing," he said.

While the Internet penetration rate in the country is 36.6 percent, job search sites are likely to play a yet more significant role as the penetration rate rises from now on, Pringle added.

"The driving force behind Vietnam's rapid development is its developing workforce," he said.

"VietnamWorks and Navigos Search have, in the past 11 years, come to be the pre-eminent recruitment partners to companies of all shapes and sizes in fast-growing Vietnam.  And we are thrilled to be partnering with En-Japan and En-World for the next phase of our development, confident of the ongoing potential of this very exciting market."

IT, electronics, consulting and retail and wholesale are expected to be promising for online recruitment, he said.

Based on VietnamWorks first quarter of 2013 online employment report, the best industries for job seekers remain in IT. Most notably, job growth in software development in Da Nang has tripled. Electronics (up 28 percent), consulting (up 32 percent), textile and footwear (up 38 percent), pharmaceuticals and bio-tech (up 66 percent), and retail and wholesale (up 105 percent) all proved themselves recession-proof.

Competition

Vietnam now houses some 50 online job websites, but vietnamworks.com and kiemviec.com account for 90 percent of the marketshare, according to the DFJ VinaCapital. Thus, the two M&A deals means that the real competition will be between En-Japan and CareerBuilder.

Pringle said his team is ready.

"For example, we are preparing the launch of our nation-wide jobseeker campaign which promises to be extremely useful for new graduates in this June."

Hunter Arnold, president of CareerBuilder Asia-Pacific, said the fact that CareerBuilder has become VON's strategic partner will help accelerate its penetration into the domestic market.

Paul Nguyen, general director of kiemviec.com and HR Vietnam, said his firm needs to accept global competition but that it is very hard for it to survive and compete with global economic giants. To some extent, it had no other choice but to merge with larger partners, he said.

Trang 88 : Vietnam Airlines staff can only carry small bags to prevent smuggling

Ngoc said she is well aware that some crew members have been able to earn a lot of money smuggling on international flights.

“The salary the company pays is good enough for a living but some employees may have thought about earning more through smuggling,” the Vietnam Airlines (VNA) stewardess told Vietweek, refusing to reveal her real name in fear of losing her job.

“It depends on the willingness of each person to follow regulations.”

In an effort to cope with rampant smuggling by flight crews, the national carrier VNA has made a controversial move – banning them from carrying large suitcases.

According to an instruction from the airline’s general director Pham Ngoc Minh, flight crews on all short and middle-range flights are only allowed to bring small suitcases.

Any handbags for coats have to be put inside the suitcase for scanning purposes, according to the new rule.

Flight crew’s illegal carrying of commodities across borders on international flights has adversly affected the image and reputation of VNA, said the instruction.

Minh instructed flight crew to strictly follow the laws and regulations of destination countries about the purchase and transport of commodities, especially on flights to Japan, Russia and Europe.

Le Truong Giang, VNA spokesman, said the company issued the new regulation after many flight attendants were caught smuggling products into Vietnam.

Earlier, a flight crew member was allowed to carry a handbag and a checked bag of up to 32 kilograms. They conduct migration procedures in a separate area but their baggage is scanned like regular passengers.

Company regulations also require each flight attendant to sign a commitment to not smuggle or collude with smugglers.

However, according to news website VietNamNet, all flight attendants’ checked baggage is screened but customs officials only randomly inspect their hand baggage.

A flight attendant who wanted to remain anonymous told Tuoi Tre (Youth) newspaper that the ban will be ineffective because a dishonest flight attendant can still smuggle with smaller baggage.

Commonplace

Ngoc, the VNA stewardess, said the most commonly smuggled items were small and easy to get away with.

“Flight attendants can earn good profits reselling smuggled cellphones... they smuggle cosmetics, alcohols and cell phones. Cellphones are the most common products.”

She said that while she herself brought back two cellphones twice a year, for personal use, “others” in her crew brought them back to sell.

“Each cellphone brings profit of around VND2 million (US$95) and some expensive phones can bring profit of up to VND4 million. Normally, I buy only for my brothers and sisters in my family one or two. But if I was detected, I would be rebuked.”

Nguyen Phi Hung, director of the Anti-smuggling Investigation Department at Vietnam Customs, said commodities with high values but small sizes like medicine, clothes, cellphones and other luxury products are often found smuggled by air.

“Smugglers often hide products in their pockets or hand baggage without declaring them with customs when entering Vietnam,” he told the media at a recent conference on anti-smuggling.

“Smugglers are mostly pilots, flight attendants and passengers who often take the same flight many times,” he said.

A VNA representative told Thanh Nien that smuggling among flight crews still happens despite the company’s enforcement of several regulations and the dismissal or transfer of several staff members caught in the act.

In a recent case, a VNA crew member is currently under suspicion of buying goods stolen by a Vietnamese ring in Tokyo.

The case was reported by the Japanese-owned Sankei Shimbun newspaper on February 27, but Le Truong Giang, the VNA spokesman, said the company has yet to receive any official request for an investigation from Japanese law enforcement agencies.

According to Sankei Shimbun, local police arrested four Vietnamese people for allegedly stealing cosmetics and clothes at supermarkets in December last year.

They then sent the goods, most of which were popular brands like Uniqlo and Shiseido, to a 30-year-old Vietnamese woman by post.

The goods would then be forwarded, also by post, to a hotel near Narita International Airport, where a member of VNA’s flight crew would buy them and transfer money to the woman via banks.

In 2009, Japanese police arrested Dang Xuan Hop, a VNA pilot, on suspicion of smuggling.

He was kept in custody for a few months in Japan before local police dropped charges against him. But VNA still suspended him from flying for one year.

In another case, VNA steward Bui Ngoc Tuan was arrested after he was suspected of smuggling 50 iPhone 5s on a flight from Paris to Hanoi on September 22, 2013, two days after the product was launched.

He had just gotten off the plane at Noi Bai International Airport at 6:25 a.m. when custom officers found the 50 brand new phones in his suitcase.

The officers said Tuan had not declared the batch with customs. They handed over the phones and Tuan to Hanoi police for investigation.

Trang 89 : Vietnam height initiative fails to stand tall

More than most people, Dang Thanh Trang, who used to work as a trainer at a fitness center in Ho Chi Minh City for several years, knows well that children like her 13-year-old daughter need physical exercise for optimal growth.

"But I cannot arrange any time for it because of her school and study schedule," she said.

The 40-year-old housewife is not very enthused about the announcement of a multimillion dollar project that aims to improve the physical strength and stature of Vietnamese people. Trang says she cannot see her daughter benefiting from such lofty ambitions and is not really interested in them.

At a  teleconference last week, the Ministry of Culture, Sports and Tourism revealed ambitious plans to increase the average height of Vietnamese men at 18 years to 1.67 meters by 2020 and 1.685 meters by 2030. The target heights for women are 1.56 meters and 1.575 meters respectively.

The project, approved by Prime Minister Nguyen Tan Dung in 2011 and estimated to cost around US$287 million, covers studies and action programs that will increase awareness and encourage exercise and other healthy habits.

Vietnam's gross domestic product was around $136 billion last year.

Figures released at a conference in HCMC  in March said Vietnamese men and women have grown only four centimeters in the past 35 years, to 164.4 centimeters (5 feet 4 inches) and 153 centimeters (roughly 5 feet) respectively.

Experts had then blamed poor nutrition and lack of physical activity for Vietnamese people being shorter than many of their neighbors.

The new project will target pregnant women and children from birth till 18 years of age, ensuring nutrition supplies, physical activities and greater awareness of health and physique among the general public.

Doctors said at the teleconference that children need deep sleep and should go to bed before 10 p.m. and exercise at least 30 minutes a day.

A statement on the project website says a child's height depends 31 percent on nutrition, 23 percent on genes, 20 percent on physical exercise, 16 percent on the environment and the rest on other factors.

However, experts say project planners have not taken into account sufficient scientific studies and that it is basically misdirected. The huge costs envisaged should instead be spent on improving living standards of the people, they add.

Nguyen Van Tuan, a Vietnamese senior researcher on bone genetics at the Garvan Institute of Medical Research in Australia, said relevant agencies should reconsider the project's feasibility and possible effects on the residents.

"I think it is unnecessary to spend the money on research that has no sound scientific foundation and will not benefit the residents," he said.

Tuan said it was wrong to say that the height of Vietnamese people has been developing at a low pace.

He said a survey by the Fels Research Institute in the US found the average height of a group of people in Ohio increased by 4.8 centimeters among men and 3.1 centimeters among women after nearly half a century.

Meanwhile, the average height of Vietnamese people has increased by 4.7 centimeters in nearly 40 years, he said.

"Thus, the height of Vietnamese youths has actually increased rapidly."

Tuan also said it is impossible to increase the average height of Vietnamese people by up to four or five centimeters in less than 20 years by improving nutrition and physical exercises.

He said there is no study showing that genes account for just 23 percent of a person's height as stated by the project.

"Hundreds of genetic studies over the past 50 years, including my own, show that human height depends 65-87 percent on genes," he said.

Tuan said Vietnam should prioritize improving living standards instead of focusing on increasing the height.

"I suggest the project's investment be used to improve the public healthcare system in rural areas," he said.

Nemat Hajeebhoy, Vietnam country director for Alive & Thrive, a Washington-based non-profit organization that seeks to improve health and nutrition and reduce stunting, said it is critical that Ministry of Culture, Sports and Tourism works closely with Ministry of Health and the National Institute of Nutrition to ensure that "this money is invested wisely and is invested in evidence based interventions."

She said the project should focus on the first 1,000 days of a child's life - from pregnancy (nine months) to the time the child is two years old. 

"This means that the Ministry of Culture, Sports and Tourism must invest in"¦exclusive breastfeeding up to six months"¦and good quality complementary feeding i.e. ensure that the quality of foods given to infants from the time they are six months old is nutritionally appropriate," she said.

"This is the most critical window of opportunity if we want to impact height through nutrition interventions. If this critical window is ignored then we will not see the change that we want to see."

Only 17 percent of mothers exclusively breastfeed in Vietnam, the lowest rate in Southeast Asia.

Tran Thanh, another HCMC resident, is not dismissive of the project's aims, but is very skeptical about its implementation.

She said a major part of the project of improving the nutrition intake of Vietnamese children will be difficult to carry out because of high milk prices.

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"Most people think about milk when talking about nutrition. Doctors say it improves height. But mothers like us are really concerned about frequent milk price hikes," she said. "For children of poorer family, milk is just a dream.

"There should be practical actions rather than just discussing the plan and propagandizing without any real impact."

Trang 90 : Foreigners invest in recruitment despite Vietnam's slow economy

Although a stagnant economy has many businesses scaling down and even shutting down, leading global recruitment agencies continue to open up shop in Vietnam.

Japan-based En-Japan Inc announced last month that it is buying stakes in Vietnam's leading recruitment company Navigos Group, which runs the two biggest jobs websites in Vietnam,vietnamworks.com and navigossearch.com.

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Navigos has declined to reveal the deal's value, but En-Japan said it bought 89.8 percent of the Ho Chi Minh City-based company, or around 9.98 million shares worth US$22.11 million.

Reuters earlier quoted En-Japan, which has operations in China, Singapore, Hong Kong, Australia, and Korea, as saying that it would acquire the remaining 10.2 percent by March 2016.

En-Japan has entered Vietnam just after US online employment giant CareerBuilder opened an office here in February. The US company announced its investment in Vietnam with a deal to buy out DFJ VinaCapital, the main shareholder of Vietnam Online Network (VON), which owns job sitesHRVietnam.com and kiemviec.com. The value of the deal has not been revealed.

At the same time, Jobstreet.com, the Southeast Asia's largest online employment company - founded in Malaysia - has launched recruitment consultancy programs in Vietnam.

Potential

Nguyen Thanh Nam, director of the strategy consulting firm Win-Win, said many foreign investors have been interested in recruitment services here for the past few years.

Revenues from online job service providers will continue increasing because local companies have gotten used to recruiting employees online, he said.

"Now is a good time for foreign firms to buy stakes in local jobs firms. They can negotiate good prices as the economy has not yet rebounded," Nam said.

Like many other companies, job service providers have also faced difficulties sparked by the economic slowdown, he said. Labor demand has decreased as businesses continue shutting down. According to a recent survey conducted by Vietnamworks, 55 out of 58 surveyed industries saw negative growth in online recruitment demand in 2012.

According to a recent report by the Vietnam Chamber of Commerce and Industry (VCCI), the number of businesses that shut down or suspended operations increased by 6.29 percent last year to over 54,200. Most of them were in the finance, banking, and real estate sectors.

However, Nam said this is a temporary difficulty as the demand for labor will increase when the economy rebounds, he said. "There will be many opportunities for online recruitment firms in the coming time."

Talking about the opportunities, Navigos Group's Chief Executive Officer Carlton Pringle said: "2013 commenced with the hangover of late-2012, and general economic malaise, so to return an almost identical quarter year-on-year for the first quarter of 2013 compared with the first quarter of 2012 in terms of online labor demand is quite a solid foundation for a strong 2013."

Vietnam's online recruitment market has a lot of potential for growth, he said.

"With a population of over 90 million, the third largest ASEAN country, and an average age of 28, Vietnam offers an exciting future with enormous potential for economic growth."

"Job search websites are expected to be an important tool along with the economic growth of Vietnam, where the working population is increasing," he said.

While the Internet penetration rate in the country is 36.6 percent, job search sites are likely to play a yet more significant role as the penetration rate rises from now on, Pringle added.

"The driving force behind Vietnam's rapid development is its developing workforce," he said.

"VietnamWorks and Navigos Search have, in the past 11 years, come to be the pre-eminent recruitment partners to companies of all shapes and sizes in fast-growing Vietnam.  And we are thrilled to be partnering with En-Japan and En-World for the next phase of our development, confident of the ongoing potential of this very exciting market."

IT, electronics, consulting and retail and wholesale are expected to be promising for online recruitment, he said.

Based on VietnamWorks first quarter of 2013 online employment report, the best industries for job seekers remain in IT. Most notably, job growth in software development in Da Nang has tripled. Electronics (up 28 percent), consulting (up 32 percent), textile and footwear (up 38 percent), pharmaceuticals and bio-tech (up 66 percent), and retail and wholesale (up 105 percent) all proved themselves recession-proof.

Competition

Vietnam now houses some 50 online job websites, but vietnamworks.com and kiemviec.com account for 90 percent of the marketshare, according to the DFJ VinaCapital. Thus, the two M&A deals means that the real competition will be between En-Japan and CareerBuilder.

Pringle said his team is ready.

"For example, we are preparing the launch of our nation-wide jobseeker campaign which promises to be extremely useful for new graduates in this June."

Hunter Arnold, president of CareerBuilder Asia-Pacific, said the fact that CareerBuilder has become VON's strategic partner will help accelerate its penetration into the domestic market.

Paul Nguyen, general director of kiemviec.com and HR Vietnam, said his firm needs to accept global competition but that it is very hard for it to survive and compete with global economic giants. To some extent, it had no other choice but to merge with larger partners, he said.

Trang 91

The big visa scam

US consular officer allegedly made millions selling visas by the village-load

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 Applicants lined up outside the US Consulate General in Ho Chi Minh City on May 28

Every day, scores of hopeful Vietnamese line up under the spiked iron fence that encircles the US Consulate in Ho Chi Minh City.

They clutch plastic folders containing all the details of their lives and await the chance to be searched, stripped of their telephones and interrogated.

The huddled masses are unlikely to enjoy the privilege of this interview, which costs at least $160 and hours in paperwork.

Many will be rejected in minutes because they do not own property or haven't traveled enough.

For years, I've heard vague rumors that visas could be bought or simply granted if you knew the right people.

According to investigators from the US State Department's Diplomatic Security Service (DSS), those rumors were true.

On May 13, Michael T. Sestak, the man who ran the Non-Immigrant Visa division of the US Consulate in Ho Chi Minh City, was arrested in Los Angeles for his alleged role in a conspiracy to sell non-immigrant visas.

No one at the Consulate, State Department or Embassy has agreed to comment.

Sestak could not be reached for comment. Emails and phone calls sent to the federal public defender that represented him at his initial hearing were not returned. As of press time, Sestak was still being held, without bail, in a California detention center awaiting transfer to Washington DC.

Compliance issues

Long before Sestak's arrest, there were problems with consulate's visa process.

A report published by the State Department's Office of the Inspector General in February of 2012 noted a number of irregularities.

The contents were labeled "sensitive but unclassified."

Inspectors reported that members of the consulate's executive office "frequently" passed on information about certain visa applicants to consular staff in violation of State Department protocol.

The report found that the Consulate General had created "inappropriate" categories for expedited visa appointments, "including a category for cases of special interest generated by the executive office and a category for immediate family members of local employees."

The inspectors urged the Ambassador to keep an eye on any and all visa recommendations.

"Because compliance has been an issue," they wrote in the report, "it will be important for the Ambassador to review a monthly report on all referral cases, including information on any email or other contacts that circumvent the policy."

Tuoi Tre quoted an anonymous source inside the consulate as saying that three Vietnamese members of the Consulate staff members had been fired following Sestak's departure.

An Embassy spokesman declined to comment "on personnel matters."

One of the 'richest people in town'

In October 2012, Sestak was called to a Washington DC office to sit for an interview of his own.

Agents from the Diplomatic Security Service asked him if he'd noticed anyone getting unusually rich on his watch.

He said he hadn't. He and his American staff were more than happy with their generous salaries and benefits.

At that time, Sestak drew over $7,500 a month from his job as a consular officer and an Intelligence Officer in the Navy Reserve.

"[We're] already [some] of the richest people in the country," he told investigators.

When they asked if anyone had been helping friends obtain visas, he said no.

"Most of us didn't have any contacts with the Vietnamese community outside local staff," he said.

Secrets to a US visa

The 42 year-old, former cop, Naval Intelligence Officer and bureaucrat arrived in HCMC in August of 2010 to run the non-immigrant visa section, which frequently ranks as one of the five busiest in the world.

Sestak became well-known around town for his informal chats at the American Center on Le Duan Street.

"Secrets of the Visa Application Process Revealed!!!" read a flyer for one such event emblazoned with clip art of the flag and the statue of liberty.

The flyer promised to reveal the secrets of the luckiest days to schedule visa interviews and the best answers to the interview questions.

According to a 28-page affidavit filed by DSS Special Agent Simon Dinits, Sestak kept a few secrets to himself.

For six months or so, according to chats and emails mined by US investigators, a Vietnamese-American family seized on Sestak's desire to meet women and leveraged it into a lucrative visa scheme.

A Cinderella story

"Last night we went out with this guy who works at the consulate - he's the one who approves visas... and he's this single guy who wants to find someone to be with," wrote Hong Vo, his alleged 27 year old co-conspirators on June 1, 2011. "My brother knows that so he's been trying to get this guy out to introduce him to someone so that he could do favors for us later."

In the ensuing months, sources close to Sestak say the Vo's took him out on the town and introduced him to models at high-end coffee shops.

In exchange, investigators say he rubber stamped the visa applications they sent him.

At first, the scheme benefited the family's relatives by marriage and blood. But before long, investigators say Hong and her family members were soliciting photos and personal information from paying clients and sending them directly to Sestak through shell email accounts.

In exchange, Sestak rigged the interview system to ensure the applications were approved or (at the very least) given a "soft refusal - ” which gave them a chance to come back and get things squared away without re-applying.

His co-conspirators were soon promoting the scheme to other Viet Kieu. In the emails excerpted in the affidavit, the co-conspirators said they targeted Vietnamese Americans because they had money and were "desperate" to get family members into the United States on tourist visas, frequently so they could either "disappear (get married)" or "get the green light to go the next time [they applied]."

This whole process could cost between $20-70,000 per tourist visa. Investigators say they used encoded IP addresses, fake names and wired money through Chinese bank accounts.

But it was all pretty stupid in the end.

Eventually, State Department investigators received a letter from a confidential source that alleged between 50 and 70 people from a single village had illegally secured visas in a two-month period.

The Hotel California

According to sources who knew him, Sestak believed he would return to naval service and took a leave of absence from his post, starting last September.

During the last few months at the consulate, he refused between three and six percent of the applications that came across his desk while the rest of his staff turned down an average of 35 percent of applicants.

After Sestak left the consulate, however, the Navy no longer wanted him.

Sources close to Sestak say he was told his ongoing relationship with a Vietnamese waitress in Ho Chi Minh City had somehow compromised his clearance for the Navy mission.

So Sestak left Vietnam for Thailand with more than $3 million squirreled away in a Thai bank account. When he arrived, he set to work buying over $2 million worth of real estate.

Then he just sort of sat around Bangkok.

Sources involved in his apprehension say that law enforcement agents from the State Department and the US Marshall's Office caught up to him in the Thai capital and put him on a plane to Los Angeles.

He was arrested in Los Angeles and remains in a detention center in Riverside awaiting a flight to DC, where he has been charged with conspiracy to commit fraud and bribery.

On May 8, Hong Vo was arrested in Denver, Colorado and released to her parents' custody. Her co-conspirators, described in the complaint as her brother, her brother's wife, her significant other and her cousin have yet to be named.

Trang 92

Keeping foreign buyers off farms a good idea: coffee association

A worker spreads coffee bean to dry at a coffee processing factory in the Central Highlands of Vietnam

The Ministry of Industry and Trade has issued a circular prohibiting foreign firms from directly buying produce from farmers. There is concern that the regulation, to take effect June 7, will reduce competition and force farmers to sell to local firms at lower prices.

Vietweek asked Nguyen Xuan Thai, an executive of the Vietnam Coffee and Cocoa Association, which also represents farmers, about it.

Vietweek: There is a fear that the new regulation will seriously affect farmers' coffee sales since they will have fewer customers. What do you think?

Nguyen Xuan Thai: Only foreign firms not investing in coffee production will be prohibited from buying coffee directly from farmers, but they can buy from Vietnamese dealers. So the regulation will not have a strong impact on coffee sales.  

In fact, coffee demand is always higher than supply, so we do not have to worry that our exports will be hit. The issue is whether Vietnamese firms have enough money to buy coffee from farmers and wait for higher export prices. However, only a few wealthy farmers can keep their coffee harvest and wait for higher prices.

The regulation will enable local firms to have a more stable supply.

But will the regulation force foreign firms to leave the Vietnamese market?

They would never leave the market. Their profits from the market are very large since the US dollar is appreciating against the dong. Foreign firms can get loans at around 2.5 percent interest from banks in their home countries, much lower than the 3.5-4 percent paid by Vietnamese firms. Thus, their profits are always higher than that of Vietnamese firms.

Foreign firms can also directly sell coffee beans purchased in Vietnam to international processing firms, so their profits are higher. Local firms often purchase coffee from farmers and then sell it to international intermediaries, who resell the product to global processing firms. Thus, Vietnamese firms' profits are often lower than those of foreign invested ones.

But farmers face losses since foreign firms always pay them higher prices than local ones for coffee?

Selling to foreign firms can bring immediate benefit as foreign firms pay our farmers higher prices for coffee than local ones. Now, Vietnamese firms cannot pay higher prices to farmers because their other costs such as bank interest are higher than that of foreign firms.

But foreign firms, if allowed to buy coffee from farmers at high prices for a while, will push Vietnamese firms out of the market. Then they will be able to force farmers to sell their produce at lower prices. Thus, farmers will not enjoy any profits in the long term.

What's the reason for the bankruptcy of many local coffee firms in the past few years?

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Low competitiveness is also one reason for many local coffee firms' bankruptcy. Due to the large number of coffee firms closing down, banks have recently become reluctant to lend, so some firms find it hard to raise funds for production. Besides, interest rates are too high for them to make profits. Also, Vietnamese firms have to export their coffee via financial intermediates, so their profits are smaller.

Will the new regulation help the coffee industry develop?

The participation of foreign firms in the market could force Vietnamese companies to improve their competitiveness. Some firms, which could not compete, have gone bankrupt. In the current context of serious difficulties for local firms and the robust participation by foreign firms in buying produce from farmers, more local firms will go bankrupt if the Ministry of Industry and Trade does not prohibit foreign firms from buying raw coffee for export.

How do other coffee exporting countries deal with the issue?

In Brazil, for instance, coffee is produced by co-operatives. Farmers work in the co-operatives. They have concrete business plans, so they can often sell their products at good prices. But in Vietnam, farmers cultivate coffee on small land lots of less than 1,000 square meters to a few hectares. They farm by themselves and find customers for their produce by themselves.

In Brazil, foreign firms cannot buy coffee directly from farmers, only from the co-operatives. Foreign firms cannot directly invest in farming either, only via co-operatives, which then use the money to reinvest in farming. Foreign investors investing in the co-operatives have priority in buying raw coffee from the co-operatives.

In Vietnam, foreign firms investing in farming can directly buy raw coffee from the farmers.

We should reorganize our coffee production. Farmers should work in co-operatives to produce coffee of higher quality. For this, authorities should help them. For example, provincial people's committees should make plans and provide directions for this.

It is not difficult to find customers for our coffee. However, we can make high profits only when our products have high quality.

 'UNFAIR'

The general secretary of the Vietnam Coffee and Cocoa Association, Nguyen Viet Vinh, says only a few foreign firms buy raw coffee from farmers for processing in Vietnam. Many others buy and export for earning profits. The Ministry of Industry and Trade said foreign-invested firms have made up 60-65 percent of Vietnam's annual export of coffee bean in the past couple of years.

Many local companies in fact complain of unfair competition, saying they invest a lot of money to provide farmers with materials and equipment only to see them sell their crops to foreign firms because they offer higher prices.

The new regulation is expected to tackle that problem, Vinh says. It would also encourage greater focus on coffee processing since both foreign and local firms now mainly focus on exporting raw coffee, he adds.

Trang 93 : Rethinking aid and corruption in Vietnam

Analysts say major graft allegations stemming from a Japanese aid project warrant a reconsideration of aid’s role in international relations and a deeper rooting-out of corruption

The Bai Chay Bridge in the northern province of Quang Ninh, built with Japanese official development assistance (ODA). Analysts say Vietnam should stop regarding ODA as an achievement in foreign policy because at the end of the day it is a financial burden that Vietnamese younger generations will have to shoulder. File photo

In a show of assuring the public about its resolve to tackle rampant graft, Vietnam suspended several officials and ordered scores of others to clarify their involvement in allegations that a Japanese firm had paid bribes to secure a deal for a rail project in Hanoi.

A deputy transport minister almost immediately led a delegation to Japan last month only to learn that agencies concerned there would not be able to reveal any further information other than what the Japanese media had already reported: The president of Japan Transportation Consultants (JTC) admitted that his company had paid bribes of 130 million yen (US$1.3 million) to civil servants in Vietnam, Indonesia and Uzbekistan between February 2008 and February this year to win work tied to projects funded by Japanese official development assistance (ODA).

An official or officials at Vietnam Railways, the state-owned operator of the railway system in the country, allegedly received 80 million yen ($782,000) for a Japan-funded ODA project totaling 4.2 billion-yen.

Apparently, the specter of a similar scandal in 2008 that galvanized Japan into suspending aid to Vietnam still looms large, sowing worries that Tokyo, Hanoi's largest ODA donor, may do so again this time.

While analysts have sought to assuage such fears, they also say the bottom line is that in a country where corruption is rife in public infrastructure projects, Vietnam has to jettison its entrenched mindset about ODA to prevent similar cases from occurring.

“Vietnam should stop regarding ODA as an achievement in international relations so it can tread more carefully before deciding on asking for more international aid,” said Nguyen Duc Thanh, a Vietnamese economist who advises the prime minister on economic policies.

Since 1993, international donors have pledged an estimated amount of $58.4 billion worth of ODA to Vietnam, government figures show, helping develop thousands of projects ranging from building infrastructure to alleviating poverty and improving the environment.

But a very small part of it is non-refundable. Most of it are loans with interest rates which are not as preferential as assumed. Interest rates and loan fees increase if disbursement is delayed and the use of loans is ineffective.

Two thirds of the international aid has been earmarked for infrastructure projects where the bidding process and equipment purchase has long been considered fertile ground for graft and corruption.

Vietnam has made little headway in the latest corruption rankings by the Berlin-based watchdog Transparency International.

The 2013 Corruption Perceptions Index, which measures the perceived levels of public sector corruption, sees Vietnam up just seven spots to 116th out of 177 countries and territories with a score of 31/100. In Southeast Asia, it ranks seventh behind Singapore, Brunei, Malaysia, the Philippines, Thailand, and Indonesia.

Given the status quo, analysts say at the end of the day ODA is a financial burden that Vietnamese younger generations will have to shoulder.

“It is the bane of their future,” Thanh said.

‘Important aid partner’

Japan churned out around $20 billion worth of ODA to Vietnam between 1993 and 2012. Japan said last month its aid to Vietnam this year would not be less than the 200 billion yen (US$1.94 billion) it gave in 2013.

As a country seeking to be a good international citizen and be recognized as a major power, Japan follows the United Nations advice in providing aid to developing countries as part of its international obligations.

2015 will mark the target date for the UN’s Millennium Development Goals (MDGs) – a set of targets for education, poverty, health and other areas – and all donors have tried to claim their economic aid has been effective toward accomplishing the MDGs.

In the context of Vietnam achieving the first of its MDG on poverty reduction well ahead of the 2015 deadline, Japan will want to show the world that its aid is playing a role in this accomplishment, analysts say.

With corruption, such as the most recent bribery case, risking prompting skepticism among the Japanese people of the benefits of economic assistance to Vietnam, the Japanese government may have to respond by scaling back ODA to regain the trust of its people.

But “it is unlikely Japan will suspend aid in any serious form or length of time given that Vietnam is one of its most important aid partners and models of success,” Edward Feasel, an expert at Soka University of America who has studied Japanese ODA to Vietnam, told Vietweek.

In 2008, Huynh Ngoc Si, former deputy director of the Ho Chi Minh City's transport department and head of a major Japanese ODA-backed highway project, was convicted of taking bribes in 2003 by receiving $262,000 from executives of Pacific Consultants International, which was hired as the project consultant. The case forced Japan to suspend hundreds of millions of dollars in development loans in December 2008. But Tokyo resumed the aid four months later.

Many of Japan’s main aid recipients in Asia are also main markets for its exports. This is important in Japan’s own economic progress, which has been stagnant for two decades, analysts say. Thus, economic assistance does bring benefits to Japan directly through exports and indirectly through increasing its recognition as a major economic donor, they say.

“Japan's aid program is about enhancing commercial opportunities for their business sector,” said Zach Abuza, a Washington-based Asia analyst.

“They support port construction for trade, they often link ODA to contracts to Japanese firms or consultancies, or the purchase of Japanese machinery and equipment,” he said. “It’s not that this is unusual, but no one does it to the degree that the Japanese do.”

Who benefits who?

During a meeting on the sidelines of the Nuclear Security Summit in the Netherlands last month, Vietnamese Prime Minister Nguyen Tan Dung told his Japanese counterpart Shinzo Abe that the two countries would closely work each other to thoroughly investigate the most recent graft allegations that involve the Vietnamese railway officials.

“If the allegations are true, [the two sides] need to immediately draw lessons from that,” Nguyen Van Nen, Minister and Chairman of the Government Office, told the media this week.

But analysts say the bottom line is that instead of focusing on the actors, Vietnam needs to get to the bottom of systemic conditions that make bribery endemic such as the lack of transparency and lax government oversight.

The issue is to implement practices that reduce corruption in all government projects. The next step – but one that only works after corruption is minimized – is to evaluate very carefully whether a project, ODA or not, is the best deal for the country.

The analysts raise an important question: Would Vietnam be better off without foreign aid and Japanese ODA in particular?

“Whatever the inequities in Japan's ODA, it is clear that Vietnam benefits,” said Carl Thayer, a Vietnam expert with the University of New South Wales.

“But it should be noted that when I use the term ‘Japan’ and ‘Vietnam’ I’m mainly including not only the people who benefit from the aid, but the groups of elites who provide and monitor the delivery of aid.”

Trang 94

Efficient use of public borrowing key to staving off debt crisis

A farmer waters his Malabar nightshade field outside Hanoi. Public investment

should be increased in agricultural research to boost productivity, economist Tran Hoang Ngan said.

Vietnam's public debt is considered to be at a safe level, but things could deteriorate

if the economy enters a recession. The country should closely monitor the use of loans from now to avoid a public debt crisis like in Europe, Tran Hoang Ngan, a

member of the National Financial and Monetary Policy Advisory Council, tells

Vietweek.

Vietweek: The Ministry of Finance said public debt reached US$68.8 billion in

2011, or nearly 55 percent of GDP that year. But it was 106 percent of GDP if

calculated based on international norms. Why is there this difference?

Tran Hoang Ngan: Organizations had included the debts of state-owned enterprises

in the public debt figures, so it was so high. Their way of calculating Vietnam's

public debt is not quite right. According to our calculation, public debt comprises

[only] central and local government debts and government-guaranteed loans.

But the government, which is the owner of state-owned firms, would have to repay their debts if the firms become insolvent"¦

Both private and state-owned firms should take responsibility for their debts. The

government should take responsibility only for loans it guarantees. Thus, Vietnam's current public debt estimation is logical. Some international organizations, including the IMF, even estimated Vietnam's public debts to be lower than the figure reported by us.

Should Vietnam, with its budget deficit and an inefficient use of loans, worry about

a debt crisis?

The debt is still at safe levels, but I do not say it is safe. The safety is unstable. Your

loan may be small, but it could also become a burden if you are jobless. The debt is

at a safe level. If the economy sees growth, we do not have to worry about the debt.

However, it would become a big concern if our economy faces a recession.

We should closely monitor the use of loans from now on to avoid a public debt crisis

like the one in Europe.

Vietnam's goal is to keep the public debt at 65 percent of GDP by 2015. Now, the

debt is estimated at 55 percent of GDP. So we can borrow more. The important thing

is not whether the debt is big or small, but whether the use of loans is efficient. We

still need to increase public spending to boost economic growth. That is impossible

without public debts. The issue is that we have to improve investment effectiveness.

For this, we should improve assessment of public projects. It is the most important task.

The waste that takes place when works like hospitals, roads, and bridges are not

finished due to shortage of funds is more serious than the impact of increased debt.

So we need to continue to increase public spending, which would increase public

debt. But, we have to strengthen oversight to ensure it is used effectively. If we stop

public spending now, the economy cannot recover.

However, we see budget deficits every year. Do we use new loans to invest in new

projects or merely to repay old debts?

We have debts maturing every year. For example, we had to repay debts of some

VND100 trillion ($4.8 billion) in 2012. We continue to borrow to either repay old

debts or for new projects. The interest rates on public debts are low. So it would be

very good if [they can] serve economic development.

It will not be a problem if the public debt is large but the economy sees high growth

rates. The important thing is that the loan is used efficiently, not how much the debt is.

But since the efficiency of public spending is not high, isn't continued borrowing a concern?

Before 2011 the use of loans was very wasteful because [the use] was inefficient and

spread too thin. The government and the Party realized the mistake.

The use of loans has been more closely monitored since the government's resolution

No. 11 on economic restructure and the prime minister's instruction No. 1792 on restructure of public investment were issued in 2011.

What are the sectors in which we should invest more?

We should be more careful in project assessment. Projects that have long-term and

broad-based benefits should be prioritized for public investment. The projects should

have national impact. For example, we should prioritize construction of a road if it

boosts economic development of a locality and its neighboring areas.

We should also increase public investment in agricultural research to boost

productivity, and in food warehouses and processing firms.

It is also necessary to increase public investment in tourism. The sector has not yet

realized its potential. Higher public investment in the sector could help attract more

foreign visitors to Vietnam.

How are we preparing to service public debt?

We have drafted plans for servicing the debts. Every year we have to pay around

VND100 trillion. Since we have made plans to use government funds to service the

debts, we need not worry about the repayment in the near future. We should be

concerned only about what we should do to ensure loans are used efficiently. If they

are, our debt repayment capability will improve.

The National Assembly should closely monitor the government's use of credit.

Trang 95

Credit quality more important than growth: economists

Vietnam central bank urged to ease loans to save economy

Vietnam’s first-quarter GDP growth slows as lending hobbled

Vietnam cuts key interest rates in bid to spur fastest growth

High liquidity likely to pull down loan interest rates in Vietnam

Bank tellers count money for a customer at a bank branch in Hanoi

The government has ordered the central bank to cut interest rates to increase sluggish credit rates and reduce business closures, but economists say the country should not seek to increase credit growth at any cost since credit quality is more inportant than just numbers.

At a Cabinet meeting last month, Prime Minister Nguyen Tan Dung instructed the central bank to extend loan terms and cut rates, saying that while most new loans enjoy interest rates of around 10 percent or less, old ones are still charged 15-19 percent.

“It is still very difficult for businesses to get bank loans. I suggest the governor should look into it since the business community is waiting,” he said.

However, according to a former governor of the central bank, Cao Sy Kiem, interest rates are not the main reason for the current stagnant credit; but “the health of firms.”

“Amid weak domestic demand, enterprises dare not borrow to expand business and production. Interest rates have recently decreased. Many banks have launched preferential loans, but failed to attract more customers,” he said.

As of March 31 credit growth for the year was a mere 0.01 percent, according to the central bank. Many banks now face pressure to improve credit flows. They have been emulating each other to lure customers and they are assigning their employees the task of seeking customers to borrowing their capital.

The central bank last month cut the refinancing rate to 6.5 percent from 7 percent and lowered the VND deposit cap to 6 percent from 7 percent. HSBC said in a recent report: “This signals the central bank's intention to spur credit growth, we do not think it will substantially alter credit conditions.”

“Interest rates are not the issue, as rates are already accommodative and there is excess VND funding. The elephant in the room is Vietnam's bad debts, which remains largely unaddressed. With inflation rising in the coming months, we do not expect further cuts,” it said.

“Due to the economic slowdown, most firms have kept production and business at a moderate pace. There are not many enterprises doing good business. When the firms have the demand to borrow capital, they will be invited to do so by tens of banks,” an official from a bank in Hanoi said.

Van Duc Muoi, general director of food producer Vissan, said many banks have frequently solicited his firm to borrow capital with preferential interest rates. “There are banks offering us loans with interest rates of only 6 percent each year. Not all firms could be offered the rate, which is even lower than long-term deposit rates.”

Some banks now offer interest rates of 6.5-6.8 percent for 7-11 month deposits, and 5.7-6 percent for 1-6 month terms.

A representative of local bank Eximbank said his bank, since early this year, has offered lending rates of some 6 percent each year to increase credit flows, but few enterprises have the demand to borrowing capital. Some of the enterprises have not met his bank’s requirements to access loans.

Kiem said banks, despite lowering interest rates, find it hard to lure customers, as they still have lending requirements tight for most enterprises due to concerns about the risk of bad debts.

The central bank has recently said some firms, including infrastructure construction

ones, could not access loans due to their weak financial capacity, failure to demonstrate their projects’ feasibility and effectiveness, massive bad debts, and shortages of assets to mortgage at banks.

“Loosening requirements to borrowers to help firms easier access loans will cause credit risks, increase bad debts that will affect banking system security,” said the central bank.

Companies’ dreams of loosened credit requirements will not be met, said Kiem.

Finding it hard to increase loans to enterprises, many banks have sought ways to lure more individual customers to meet their credit growth targets.

Bank staff frequently come to visit, or call potential customers to promote their banks’ loans. Individual customers could receive gifts and preferential interest rates when borrowing at many banks.

General director of Oriental Bank Nguyen Dinh Tung said credit flows are unlikely to sharply increase in the short coming time. “Capital demand can increase only when production and consumption are spurred.”

What’s in a number?

Nguyen Duc Thanh, head of the Vietnam Center for Economic and Policy Research, said: “Credit growth does not depend on the banking’s system’s efforts only.  Credit flows could be improved when we have a better business environment, facilitating firms’ development, and bad debts are solved.”

Economist Vu Dinh Anh said what’s most important is not credit growth, but credit quality. “We must not let new bad debts occur. If banks lower lending requirements, bad debts may increase in the next 3-6 months. ”

Economist Vo Tri Thanh said credit growth depends on bad debt reduction, banking system reform and financial policy. Vietnam targets credit growth of 12-14 percent this year.

However, bad debts now still stand high, hindering banks’ credit growth, said economist Nguyen Tri Hieu.

The World Bank has recently said credit activity in Vietnam remains subdued because banks, with balance sheets saddled by high levels of nonperforming loans, are increasingly risk averse and looking to deleverage.

“Credit demand also remains weak, reflecting low business confidence in the private sector. Important financial sector vulnerabilities remain, creating a drag on overall economic performance. Nonperforming loans in the banking sector continue to be a major concern, although poor quality data and limited disclosure requirements preclude accurate estimations of their magnitude,” it said.

In an effort to deal with nonperforming loans in the banking sector, the government has established the Vietnam Asset Management Company (VAMC), which is responsible for the purchase, recovery, and restructuring of banks’ bad debt. However, there are concerns over the operational capacity of the VAMC, the lack of resources to meet banking sector capitalization needs, and the pace of implementation, among other issues.

The issues of bankruptcy, insolvency, and creditor rights will also need to be addressed to facilitate corporate debt restructuring, according to the World Bank.

Bad debt in Vietnam is expected to account for about 9 percent of total loans, after careful calculations, below the 15 percent ratio estimated by Moody's Investors Service, the central bank said in a recent statement.

Banks in Vietnam managed to cut bad debt to 3.63 percent of loans at the end of 2013, from 4.73 percent last October, said the central bank after a Moody's report on February 18.

Trang 96

Vietnam stuck in middle-income trap, Japanese expert warns

Vietnam’s first-quarter GDP growth slows as lending hobbled

Vietnam’s cheap labor may turn out to be a hard sell

Vietnam workers indifferent to minimum wage hike, employers fret

Asian emerging economies face risk of 'middle-income trap': IMF

Vietnam needs strong action to escape 'middle-income trap'

A Japanese expert on Vietnam has warned that the country is getting mired in a

middle-income trap, which refers to a slowing down of growth from a rapid to sluggish pace after reaching middle-income status.

In 2008 Vietnam's income per capita reached US$1,070, making it a “lower middle-i

ncome” country as the World Bank classifies those with an average income of $1,036-4,085.

At a recent conference in Hanoi to discuss motivation for economic growth, Professor Kenichi Ohno, who has been studying the Vietnamese economy for 20 years, said warnings about the trap have been raised by local analysts since then but

they failed to raise awareness among local businesses and the government who were happy with the growth rate of the economy.

The earlier robust growth was due to the rise in the housing and stock markets, not an increase in labor productivity, he said.

The ongoing slump with the growth rate falling below 6 percent in the past three years indicates that the country has fallen into the trap, he said, noting that it is a crisis for an emerging economy to grow under 6 percent.

Ohno also pointed to the faster pace of wage growth compared to productivity, high input costs, and the lack of capacity to make structural adjustments in the economy

as among indications of the trap.

According to the bank, a typical middle-income trap occurs when a country's GDP

per capita cannot exceed $4,000-6,000 for 42 years after entering the middle-income bracket.

The Organization for Economic Co-operation and Development, or OECD, has

forecast that it would take Vietnam 44 years from now, until 2058 that is, to shift to the upper middle-income level of $4,086-12,615.

Tran Tho Dat, deputy head of the Hanoi-based National Economics University, estimated that the country, still with a per capita income of less than $2,000, would

need to grow at 7.2 percent annually over the next decade to more than double it.

With the economic outlook not improving much, the government targets 6 percent growth this year and next.

Dat said Vietnam has run out of room for growth driven by cheap labor and natural resources.

Last year foreign investment rose by nearly 36 percent to $22.35 billion, still far from its peak of $64 billion in 2008.

Analysts are also concerned over foreign firms' meager contribution to economic growth, and blame it on the lack of "connections" between them and domestic private firms.

These links should be strengthened and the quality of FDI improved to achieve rapid and sustainable growth, enabling the country to avoid the middle-income trap that many nations are getting stuck in, Dat said.

Economist Bui Kien Thanh said despite the government’s attempts to loosen monetary policies and lower credit interest rates, businesses are losing faith due to unstable policies and corruption.

Worse still, cheap labor would no longer be an advantage after the next few years, which would make the business environment less competitive, he said, adding that many foreign investors are already complaining that costs are increasing at a faster pace in Vietnam compared to other countries in the region.

Pham Chi Lan, another economist, said Vietnam is unlikely to escape from the trap if it does not industrialize by 2020.

The government has set this goal for 2020 but is “not specific” about the criteria for industrialization, she said, lamenting that there has been little progress toward achieving the target.

But the country could still avoid the trap if it changes policies to make it a level playing field for all participants in the economy.

Medium-sized and small private businesses receive less support from the government than state-owned, larger private, and foreign firms though they create the most benefit for society, she added.

HIGH-INCOME CLUB MEMBER BY 2058

Economist Nguyen Minh Phong said that of the 113 countries that have reached middle-income status since 1960, only 13 have been able to rise to the high-income

bracket. They include Japan, Singapore, and South Korea.

The OECD has forecast that Indonesia, also a middle-income country, will enter the

high-income club by 2042.

The Philippines will do so in 2051, Vietnam in 2058, and India in 2059.

Malaysia, China, and Thailand are expected to become high-income nations much earlier -- respectively in 2020, 2026, and 2031.

Trang 97

Ministry plans to freeze housing development sparks protests

Vietnam housing recovery hurt as confidence wanes: CBRE

Lower prices, easy payment terms set property market on revival path

Apartment buildings under construction along a street in Ho Chi Minh City

Economists and industry insiders have criticized plans by the Ministry of Construction to stop licensing new commercial and urban housing projects as part of its efforts to simulate the property market, saying it violates the law of demand and supply, and smacks of favoritism.

Minister of Construction Trinh Dinh Dung has made the recommendation to the government even as large housing inventories remain amid a lack of demand. Provinces seeking exemptions for some special cases should clear them with his ministry first, he said.

Pham Sy Liem, deputy chairman of the Vietnam Construction Federation, said: “This is an unreasonable proposal made by those with a poor understanding of the property market.

“In general, the market is in difficulty due to oversupply, but not in all localities.”

In some big cities the property market may be frozen, but it is still robust in other places, he said, pointing to Phu Quoc Island, which has potential for development of resorts and villas for lease, and Binh Duong Province, where there is high demand for housing from workers and others.

“Thus, there is no reason to stop licensing new housing projects in these localities.

“The mechanical implementation of the proposal will undermine the market’s development.”

In Hanoi there is an oversupply of high-end housing but a shortage of low-priced ones, and if the government does not license new projects, middle-income people would have little chance to buy housing, he said.

“We should let the market regulate itself based on supply and demand.”

Nguyen Van Duc, deputy director of property firm Dat Lanh, concurred with Liem, saying a ban on new projects would violate the principle of market competition.

Firms could suspect that the ministry is seeking to protect certain developers with large stockpiles, he said.

“Investors should take responsibility for their wrong investment decision. Banning new products runs counter to the market’s competition principle.”

If the proposal is approved, property firms would have to change their business strategies and plans, which could affect their workers and the construction materials industry, he said.

“The government should not ban new projects just because of low demand. The Ministry of Construction could warn firms not to invest in certain segments, not ban them.

“The ministry said the property market is recovering. Why does it not want to license new projects?”

Liem said banning new projects would not help reduce the inventory by much since most people could only afford apartments costing less than VND1 billion, but those in the market are mainly priced at VND2-3 billion (US$95,200-142,800) upwards.

“So I do not think the measure will help resolve the situation.”

The ministry has also urged the government to instruct localities to review all property projects and order their developers to temporarily use lands for other purposes if they do not comply with local development plans. Those that have acquired and cleared sites could be allowed to use the project sites for business activities, it said.

“It is necessary to temporarily halt projects that are not in line with the development plans and needs of localities,” Dung said.

As of last December there were 4,015 approved property projects with a total investment of VND4.5 quadrillion ($214.3 billion).

Signs of recovery

The stagnant property market is showing signs of bouncing back with the number of transactions and prices increasing after many years.

According to the ministry, housing prices, after years of sharp falls, have increased slightly. Prices at projects in Hanoi’s Tu Liem, Ha Dong, and Co Nhue have increased by 1-2 percent.

In Hanoi there were nearly 1,300 transactions in February, twice the number from a year earlier, said the ministry.

Deputy Minister of Construction Nguyen Tran Nam said the market is beginning to recover and stabilize.

He said inventories in Ho Chi Minh City have fallen by 45 percent this year following a drop in prices.

To help the market recover more strongly and speed up disbursement of the VND30 trillion ($1.43 billion) loan package, the ministry has suggested that conditions for lending should be eased.

The package, unveiled last June, was expected to revive the market, but only VND1.32 trillion had been disbursed as of March 15, the ministry said.

It has called for scrapping the condition on the size of apartments to qualify for a loan.

Borrowers are offered loans at 6 percent interest for 10 years to buy apartments measuring less than 70 square meters and costing no more than VND15 million per square meter.

Low-income earners, government workers, and military personnel who do not own a house or own housing measuring less than 8 sq.m per member of the household are eligible for the loans.

The stipulations on size and price per square meter should be scrapped, the ministry said, and instead the cost of the apartment should be capped at VND1.05 billion.

Liem said the strong demand for low- and mid-priced apartments could drive a market recovery, adding the segments have great potential.

Le Hoang Chau, economist and chairman of the Ho Chi Minh City Real Estate Association, said gold and stock prices, especially of property stocks, have been going up recently, which means people are spending money.

“The property market could warm up.”

Trang 98

Vietnam Bitcoin exchange founder says acceptance inevitable

Vietnam’s first Bitcoin exchange to open in April

Vietnam central bank rules out recognition for Bitcoin

Vietnam firm accepts payment in Bitcoin

The website of Vietnam's first Bitcoin exchange

A proposed

Bitcoin exchange

could be illegal and faces the threat of official sanctions, but its founder says the digital currency is unstoppable like the Internet was two decades ago.

Private company Bitcoin Vietnam said last month it would set up Vietnam’s first exchange in late April with Israeli partner Bit2C.

But the central bank has issued a statement saying Bitcoin is not recognized as a currency.

The company's director, Nguyen Tran Bao Phuong, said the central bank has been

informed and the exchange's website, www.bitcoinvietnam.com.vn, has been registered with the Ministry of Industry and Trade's e-commerce department, though

the latter did not grant approval since Bitcoin is not a currency or a commodity

officially recognized in Vietnam.

But she told Thoi bao Kinh te Saigon Online that the exchange would open for sure.

There are plans to meet with related government authorities to discuss the positive

features of Bitcoin since the happenings are similar to those in 1995 when the

government thought hard about whether the Internet should be allowed.

She said she is willing to cooperate with the authorities to prevent Bitcoin-related crimes.

“Even when the government does not accept Bitcoin, like in China, it is very hard to

have laws to completely ban it.

"Many governments actually want to stop it but they cannot.”

The website has listed Bitcoin buying and selling prices at VND9.6-9.8 million

(US$460-470) and invited people to sign up as members.

But it warns that the market for Bitcoin might never get big in Vietnam and that

investors have to realize there is a risk that they can lose everything.

Tran Huu Linh, head of the e-Commerce and Information Technology Department

at the trade ministry, told the newspaper that Phuong’s exchange would violate the laws since it is not licensed.

But lawyer Tran Phuong Bac said that the establishment of an online exchange only

requires registration with the ministry and not a license, though the ministry has to

confirm the registration.

Failure can entail a penalty of VND20-30 million and a six-12-month suspension, he said.

Phuong said she registered with the ministry but was informed that the ministry had nothing to do with Bitcoin since it is not a recognized commodity.

Financial analyst Phan Dung Khanh said the exchange would not be attractive to investors given that few businesses in Vietnam or anywhere else accept the currency.

There is little safety since there is no central authority or bank to take responsibility

for cryptography errors or provide protection in case of fraud.

Khanh said the collapse in February of the world’s biggest Bitcoin exchange, Mt.

Gox in Tokyo, must cause investors and others to have second thoughts.

It is thought that 850,000 Bitcoins worth US$473 million were lost or stolen in a hacking attack on the exchange.

Other asset classes in Vietnam such as stocks and property are doing well and officially protected, and so there is no reason to choose a risky asset, he said.

Vietnamese prefer to trade and exchange something tangible, he added.

Trang 99

Vietnam metro to tackle floods with ponds, lakes

Children walk on flooded Calmette Street in downtown Ho Chi Minh City. The city

is considering a plan to build underground water tanks and dig lakes to store

rainwater in a controversial effort to tackle inundation. Photo: Diep Duc Minh

Thien, a resident of the Le Thanh Apartments in Ho Chi Minh City, said the streets

surrounding his home flood whenever there is rain or high tides, and the inundations

have become more serious over the years since he settled there in 2011.

“I have to hang my shoes on the motorbike and wade through the floods when going to work. The situation is no better when I come back in the afternoon.”

“Sometimes I fell in the water. But I feel more pity for the children wading in the

water following their parents on the way to school. Some children fell and their

clothes and books all got wet,” he said.

In an effort to tackle the worsening inundation caused by urbanization and rising sea

levels, city authorities are considering a controversial plan to dig ponds, small lakes

and underground water tanks around the city to drain water.

At a recent conference, city mayor Le Hoang Quan warned about worsening flooding in the city due to the impacts of climate change, saying the city can only

mitigate damages.

“The Mekong Delta will suffer the most when up to 30 percent of the area is affected by rising sea levels in 2050. HCMC is no exception and nearly 700 square kilometers (270 square miles) will be affected.”

He said city dwellers will have to “live with floods because it will be impossible to totally solve inundation.”

A 2013 study by the National University Ho Chi Minh City's Geoinformatics Center also found that parts of the southeastern region and the Mekong Delta are sinking, with HCMC suffering the most.

Researchers found the city has been sinking since 1996, with the speed increasing gradually since 2004. Many sections of the city are sinking by up to 20 millimeters

(0.8 inch) a year.

According to the city Department of Natural Resources and Environment, many

neighborhoods will sink a further 12-20 centimeters by 2020.

Besides geological factors, the surface is sinking also due to urbanization and

dwindling groundwater, according to the agency.

Slow to react

In 2009, the central government approved a plan to drain water in HCMC but little

work has been done so far.

According to HCMC People’s Committee, the plan was not carried out fully because

it is a major project while the city has been unable to disburse money for it due to economic difficulties.

Due to the slow process, the plan’s cost has increased from VND11 trillion to VND57.8 trillion.

By late last year, only 31 of 149 km of dikes along the Saigon River have been built and only one of nine large sewer valves envisioned has come into operation.

With the rainy season coming next month, HCMC authorities need to rush to prevent

inundation that will hit an apex when the rainy season meets with high tides.

Last week, the HCMC People’s Committee instructed all districts to facilitate

projects to construct and upgraded dike systems and sewer valves and dredge drainage canals.

Early last month, city authorities asked the Ministry of Planning and Investment to

categorize a VND16 trillion (US$759 million) project to tackle inundation in HCMC

as one that can use the World Bank official development assistance.

The project, expected to be implemented from 2015-2020, includes training the staff

and solving inundation along the Tham Luong and Ben Cat canals and in the city

center.

From 2011-2013, the city spent more than VND8 trillion ($379 million) in battling inundation.

City ponds

According to Do Tan Long, head of the drainage management branch at the HCMC

Center for Flood Control Program, relevant agencies have agreed with the center’s plan to build ponds and underground water tanks.

The plan will be submitted to the HCMC People’s Committee for approval in May,

he said.

“This is an open plan that does not have a fixed number of ponds and tanks. Maybe

dozens or hundreds of them based on the amount of rain water that the current sewer

system cannot drain in a short time.”

Long said the ponds and tanks can be built in parks or empty spaces near apartments

in the city center, where land is very expensive.

“Meanwhile, we can dig small lakes in the outskirts like in Binh Chanh, Thu Duc

and District 12 which can become part of eco-tourism areas,” he said.

The draft plan aims to temporarily store rainwater as dozens of canals in the city

have been filled by urbanization.

According to the Center for Flood Control Program, 47 canals with a total area of

16.4 hectares (40.5 acres) have disappeared over the past decade.

The water storage capacity of the city’s lakes and ponds grew ten times smaller from

2002-2009 and continuing urbanization in outlaying districts are creating new inundated areas, the center said.

If the plan is approved, a large underground tank of 4,000 square meters will be built

at Tan Binh District’s Bau Cat Park as a first step.

Besides small underground tanks in the city center, there will be 30 small lakes in the city’s outskirt. The plan aims to reduce 30 percent of inundation citywide.

Controversies

Ho Long Phi, director of the HCMC Center for Water Management and Climate

Change, said the plan is a good solution for flooding in the city.

“The plan aims to drain rainwater naturally and correct the previous mistake of installing sewers to replace canals,” he said.

However, he said it will be a difficult plan because it may affect many residents’ land.

“Governmental offices should be a good example by setting aside their land for the plan,” he said.

Meanwhile, Pham Sanh, an urban development expert at the HCMC University of

Transport, is suspicious about the effectiveness of the plan.

“There is not enough land in the city center for ponds while digging lakes in the

outskirts will not be effective in reducing inundation in the city center.”

He said the city should install larger sewers to facilitate rainwater drainage.

“Besides, cement sidewalks should be replaced with materials that can absorb water and more trees should be planted for faster water draining.”

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Vietnam needs to pay more to incentivize biomass power

Vietnam’s dirty energy habits hard to kick, getting worse

Experts urge Vietnam to turn garbage into power for double benefit

Power from biomass is both economical and environmentally beneficial, but

Vietnam is using little of its potential in this area since most investors are waiting

for pricing support from the government.

Bagasse, the waste from sugarcane after making sugar, is used to generate 100

million kWh a year, while it could make ten times that since sugar mills produce 4.5

million tons of bagasse a year, enough to produce 1.2-1.4 billion kWh, according to

a Tuoi Tre newspaper report.

But out of 41 plants, only six are using bagasse to generate electricity.

Bourbon Tay Ninh in Tay Ninh Province near Ho Chi Minh City is one.

It receives nearly 10,000 tons of sugarcane a day and churned out more than 3,000

tons of bagasse for a nearby power plant when it ran at full capacity during harvest time in late 2013.

Pham Van Dung, head of the power department at Bourbon, said bagasse can be

used for producing paper, animal feed, fertilizers, and plywood, but the current trend

is to use it for generating electricity, especially in developing countries and those in

need of energy like Vietnam.

The power generation system was built as part of the factory in 1995 and has been

running since 1997 to provide electricity to the factory and sell the excess to

Electricity of Vietnam.

Dung said it sells around 360,000 kWh a day to the power monopoly during peak

time at US 5 cents each.

But other investors said it is not that simple.

Pham Hong Duong, director of the sugar department at Ho Chi Minh City-based

Thanh Thanh Cong Corporation, said a power plant using bagasse costs around $1 million a MW to build, twice the cost of a plant that uses oil or coal.

But the power price is too low, he said.

“Given such cost and pricing, no one dares to invest in it except for sugar mills who

can afford to build their own plant to make use of the waste.”

Nguyen Van Loc, vice chairman of the bagasse power section at the Vietnam Sugar

and Sugarcane Association, said only three of the six sugar plants generating power

plan to expand and only because they are expecting the government to increase the

price of power generated from bagasse.

Loc said the current prices of US3-5 cents are too low to stimulate the factories.

He said the government needs to roll out policies to increase generation from bagasse

and other biomass -- like increasing the price to 7 cents a kWh and offering investors

cheap loans.

The cost of generating power from bagasse is estimated at around 6.25 cents a kWh.

Analysts said power generation from bagasse can fill the gap during the dry season

when supply from hydropower plants dwindles or even replace hydropower given

the damage it causes to the environment.

It can also help reduce sugar prices, like in Thailand, the most efficient country in

the region at biomass power generation.

Power generated from bagasse and other agricultural waste contributed 16 percent

of the power used in that country last year and its government plans to increase that to 25 percent, or 3,630 MW by 2022.

The Vietnamese government targets total power generation of 75,000 MW in 2020, up from the current 28,000 MW, including 4.5 percent from renewable sources.

Renewable sources now account for 3.7 percent.

Nguyen Duc Cuong, director of the Recyclable and Clean Development Mechanism Center at the Ministry of Industry and Trade’s Institute of Energy, told Tuoi Tre that

some financial support is needed to boost enthusiasm for investment in biomass

power, which costs more than hydropower or thermal power.

He said his ministry has recommended that the government should help by paying 7.3 cents for power generated from rice husk and a little lower to bagasse plants.

EVN is buying from wind power plants at 7.8 cents a kWh.

Cuong said using biomass for electricity generation is a pressing matter since water resources for hydropower plants are running out and thermal power plants may have

to import coal from 2015.

He cited studies showing that around 110 million tons of biomass are discarded

every year, including 40 million tons of straw, eight million tons of rice husk, and six million tons of waste from processing coffee seeds, peanuts, and sugar cane, and wood.

“That is enough to build many large power plants.”

But instead, straw and rice husk are burned after every crop, not only causing waste

but also environmental pollution and, possibly, traffic accidents, he said.

He said two plants in the Mekong Delta using rice husk as fuel have proven ineffective, with one now feeding boilers in an industrial zone and the other one

closing after making losses.

No investments have been made in plants fueled by waste from coffee, cashew, or woodwork.

Analysts said that without government support biomass power investors would opt for cheap and poor technology.

Pollution caused by using poor technology would cause a negative perception of

biomass energy, they warned.

How bagasse generates power at Bourbon Tay Ninh sugar factory:

 Trang 101: As Vietnam stretches rubber output, risk of price war grows

After years of massive expansion, tearing up forests and swallowing land in neighboring countries to create rubber plantations, Vietnam is reaping what it sowed: a swelling of output that has made it the third-largest rubber producer.

Later this year rubber farmers will tap maturing trees from new plantations, but with global oversupply and limited storage capacity, Vietnam's burgeoning output could spark a price war in a market already at multi-year lows.

With little prospect of government intervention to support prices, Vietnam's rubber farmers will have little choice but to sell, shrugging off industry pleas to hold back and making other leading suppliers, Thailand, Indonesia and Malaysia, nervous.

"Of course we are worried," said Edy Irwansyah, executive secretary of the North Sumatran branch of the Indonesian Rubber Association, which groups exporters in the world's second-largest producer after Thailand. "If supply and demand don't match, then it will definitely weigh on prices."

In 2001, a rebound in rubber prices from 30-year lows of sub-50 cents a ton inspired Vietnam to diversify key agricultural crops and offer loans at low interest rates to farmers to plant rubber trees.

Vietnam's state-run rubber companies also opened plantations in neighboring Laos and Cambodia. The Vietnam Rubber Group, the top exporter, reported its rubber area last year rose 9 percent to 392,000 hectares (968,000 acres), of which 100,000 hectares were in Laos and Cambodia.

In just seven years, the aggressive state-sponsored rubber campaign has seen output rise by 60 percent from 2007's 606,000 tons, according to data from the Association of Natural Rubber Producing Countries (ANRPC), in which Vietnam is a member.

This year, output is forecast to hit nearly 1 million tons, said the International Rubber Study Group, which includes rubber producing and consuming countries and forecasts supply-demand outlook.

And Vietnam's output could rise a further 50 percent near the end of the decade.

"In the next five years (Vietnam) can move up to 1.5 million tons. Trees are already there waiting to mature. You can't ask farmers not to tap once they become mature," said Stephen Evans, secretary-general of the International Rubber Study Group.

Price war?

Traders well remember 2001 when Vietnam was accused of flooding the coffee market sending global prices to 30-year lows. Coffee farmers now curb sales when prices slip below certain levels, but rubber growers may not have the financial means to hold back.

"I wonder if you could see this kind of discipline in the rubber market. I doubt it. It's still a fairly new industry for them and they still haven't as much money," said Macquarie analyst Kona Haque in London.

Dealers say there could be price war among the main growers as production rises, with farmers possibly scrambling to cash in before any further fall in prices due to oversupply.

"They need cash to feed the family, and they can't afford to hold back because they are smallholders," said an exporter in Indonesia.

Rubber farmer Nguyen Bao in Binh Duong Province, just outside Ho Chi Minh City, has no intention of holding back his rubber, citing farm revenues halving in the last two years to 100 million to 120 million dong ($4,700-$5,700) per hectare.

"We do not have alternatives, no other business, so we will have to stick to rubber. Yield has fallen, but I will not sell my rubber land," said Bao, who has farmed around 3 hectares since the 1980s.

Thailand, Indonesia and Malaysia met in February and recommended they should not sell rubber at the current prices. It has asked Vietnam to sell less this year.

But efforts to revive prices could hit a snag without participation from Vietnam, which is not a member of the International Rubber Consortium. The consortium includes major rubber producers such as Thailand, Indonesia and Malaysia and aims to maintain supply-demand balance.

"We have sent a letter to Vietnam Rubber Association, and they replied, supporting our effort not to sell rubber at low prices," said Irwansyah at the Indonesian rubber exporters group. "But whether Vietnam is actually doing it, we need to check their sales volumes."

Tran Ngoc Thuan, chairman of the Vietnam Rubber Association, said the association had proposed that members and domestic entrepreneurs cut natural rubber production in 2014 and avoid selling at levels lower than international prices.

State media reported last month that many farmers were cutting down rubber trees in the Central Highlands province of Dak Nong due to slow sales and a drop in prices.

Prices under pressure

Although global demand for natural rubber is forecast to grow by 4 percent in 2014, the market will see a surplus of 373,000 tons this year, a fourth year of oversupply, according to Macquarie.

Worries over economic growth and demand from China, which buys 60 percent of Vietnam's rubber, have sent tyre grade prices on the Singapore Commodity Exchange to their weakest since mid-2009, below $2 a kg.

The tyre-making industry makes up about 60 percent of global rubber consumption. Rubber is also used to make gloves, condoms and products in transport, construction, health and mining.

The global rubber price benchmark on the Tokyo Commodity Exchange is also languishing near 18-month lows because of similar fears.

The ANRPC expects Vietnam's exports to fall slightly in 2014 to 1 million tons from 1.08 million tons in 2013, and while it said domestic consumption will rise, Vietnam's closing stocks may hit a four-year high at 54,200 tons this year.

And there is no sign production will ease.

Top exporter the Ho Chi Minh City-based Vietnam Rubber Group said in a March statement it plans to expand rubber planting by nearly 10 percent to 430,000 hectares (1.06 million acres) by 2015, with at least 100,000 hectares in Laos and Cambodia.

Trang 102

Too early to say Vietnam caught in middle-income trap, says economist

By Bao Van, Thanh Nien News (The story can be found in the April 4 issue of our print edition, Vietweek)

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Footwear sellers and repairers sit waiting for customers on the sidewalk of a street in Hanoi

Vietnam has been a middle-income country for only three years and cannot be

considered to have fallen into the middle-income trap until it is stuck there for several decades, economist Nguyen Minh Phong tells Vietweek.

At a recent meeting Japanese economist Kenichi Ohno, who has been studying

Vietnam’s economy for many years, said the middle-income trap is no longer a

distant risk, but has become a reality in Vietnam. What do you think about this?

Nguyen Minh Phong: According to Ohno, there are five pieces of evidence to prove

that Vietnam is stuck in the middle-income trap. First, the country has seen an economic slowdown since 2006. Second, the efficiency in the use of investment is

low. Third, wage rises in the country have outpaced the increase in productivity in recent years, pushing production costs higher. Fourth, the dong’s depreciation

against the dollar at a rate of 5.5 percent fails to offset the 22.7 percent reduction in the economy’s competitiveness each year. Finally, there has been little improvement in competitiveness rankings.

However, there are two points to demonstrate that Vietnam has not yet fallen into the trap. First, Vietnam has been a middle-income country for only three years. A

country would be considered as being in the trap only if it is stuck there for several decades. According to the World Bank, a country is considered to be in the trap if its average annual per capita income remains at US$4,000-6,000 for 42 years.

Second, Vietnam has slowed down its growth only to enable economic restructure

and achieve more rapid economic growth in the medium term.

According to a forecast by the Organization for Economic Cooperation and

Development last December, it may take Indonesia a few more decades until 2042

to develop into a high-income country from a middle-income one. Malaysia might

do it by 2020; China, by 2026; Thailand, by 2031; and Vietnam, by 2058.

What should we do to accelerate economic growth?

No economy can become a high-income one if its industrial sector does not account

for at least 18 percent of GDP. The middle-income trap is a big challenge when

economies increasingly depend on overseas sources, especially for inputs and

exports depend on foreign investors.

Vietnam needs to review its industrial plan, prioritizing development of information

technology and supporting industries and reduction of natural-resources exports.

The government needs to support enterprises with market research and exploration

of niche markets, help small and medium-sized enterprises get bank loans, and

increase value addition.

The country needs to expand negotiations and signing of bilateral trade agreements

to boost trade and reform fields in which it does not have a competitive advantage.

It should also reform education and training to foster high-quality human resources

"[Developed economies like] Japan, Taiwan, Singapore, and South Korea…

consider their private sector firms as being central to economic development and

attach importance to international cooperation. Vietnam… should study their ways."

To avoid being stuck in the middle-income trap, Vietnam should not rely on FDI

and ODA. However, the development of the domestic private sector remains weak

and many firms continue to shut down despite all the measures to support them.

What do you think about the situation?

In theory, Vietnam says that it treats local and foreign firms equally. But the fact is

that foreign and state-owned firms get more incentives from localities in terms of

tax and land. Thus, these firms have better conditions for development than local

private ones, and crush them. Local private firms are not facilitated and so still see

development below their potential.

We should seek and properly use overseas capital sources like FDI, ODA, overseas remittances, and commercial loans. We should also enable the local private sector’s

development. Last year Prime Minister Nguyen Tan Dung issued a circular on

boosting private firms’ development, but it does not contain many specific measures.

To overcome the middle-income trap, local private firms should be the spearhead of

development. Without due attention to the sector, we will be stuck in the middle-

income trap.

What are the experiences of other countries in coping with the middle-income trap

that Vietnam can learn from?

Many economies, including Japan, Taiwan, Singapore, and South Korea have

successfully overcome the trap. All of them consider their private sector firms as

being central to economic development and attach importance to international

cooperation. Their industrial sector contributes more than 18 percent of their GDP.

Vietnam, in future, should study their ways for reference, but need not follow them.

For example, we can focus on developing the services sector instead of industry

since we do not have advantages in the field. It could take Vietnam 15-20 years to

develop a modern industrial sector. That is too long. Besides, the sector’s

development depends on technology transfer from foreign partners.

We should focus on boosting the service sector to overcome the middle-income trap

since the sector could bring benefits quicker than industry.

We should focus on international services to earn big profits. For example, Vietnam

could become an international gastronomy or resort center of the world.

There is an opinion that Vietnam should review its industrial and agricultural

structures, and work out a specific plan to develop them, but the government’s

failure to do so is affecting our economic growth…

I don’t think so. We have developed an overall economic restructure plan which

envisages the marine economy accounting for half of the GDP and prioritizes high

technology and supporting industries for development. The orientation is OK.

However, the plan has not been implemented well. We have not yet achieved an

institutional breakthrough, improved business environment, or created a level

playing field for local and foreign firms.

Trang 103

Vietnam loses on ODA because of high project prices, says former official

Rethinking aid and corruption in Vietnam

2 deputy PMs to lead Vietnam probe into ODA-linked bribery charge

Vietnam railway official suspended after Japanese bribery exposure

Japanese exec names Vietnamese official in ODA bribe: report

Rendering of a bridge on a section of the North-South Highway which links Ben

Luc Town in the Mekong Delta and Long Thanh District, Dong Nai Province. The construction of this highway section, which is slated for beginning this year, is

funded partly by Japanese aids.

Vietnam should hire foreign consultants to assess bids for ODA-funded projects because there is a lack of local capacity and the country is losing by accepting ODA

even when firms in donor countries quote very high prices, former deputy construction minister Pham Sy Liem tells Vietweek.

A Japanese company executive has recently alleged he paid bribes to get ODA project contracts in Vietnam. What are the shortcomings in tender management that

allow these things to happen?

Pham Sy Liem: Some ODA donors, including Japan, stipulate that contractors of ODA projects should be firms from their country or Vietnam. Some other donors require international tenders to choose contractors for the projects.

If only Vietnamese firms and those from a donor country are invited to bid, the former find it hard to win because of they have less construction experience. Many construction works, like the Thu Thiem Tunnel (under the Saigon River in Ho Chi

Minh City), have been done in Vietnam for the first time, meaning we don’t have experience in these fields. Local firms also have low financial capacity and shortage

of specialized machines. Foreign firms often win bids for ODA projects and then hire Vietnamese firms to work as subcontractors.

Some firms from an ODA donor country in Vietnam could tacitly consent to

facilitate a firm to get a contract and another firm to get another contract. All the

firms could participate in a tender, with most of them quoting very high prices. Only one firm, which is supposed to get the contract, quotes a more reasonable price,

easily winning the tender.  

Japanese contractors often quote high prices, saying that they use high-quality construction materials so that the work would meet the high Japanese quality

standards.

A Japanese professor said last year in a Japanese newspaper that Japanese

contractors quoted US$1,000 per cubic meter of construction materials for the Nhat Tan Bridge (in Hanoi). But they pay only $100 per cubic meter when signing subcontracts with Vietnamese partners, attributing the large gap to high management costs.

Does Vietnam have any means to monitor the situation?

It has. If Japan quotes too high prices for ODA projects, Vietnam could refuse to

accept the aids. We should indicate that the rates it offers are too high, and Japan might reconsider. However, Vietnam has not done this. It has taken all the ODA offered without any complaints about the prices for the ODA-funded projects. It is

because of our weak assessment of ODA-funded projects.

We have not turned down ODA since we are in need of capital. The conditions for

getting ODA from Japan are easy. Japan offers ODA loans with a long grace period. During the time, Vietnam is not required to pay principal or interest.

The psychology (of officials) not having to take responsibility for repaying the debts

in the future and hoping they would be forgiven are also reasons for accepting ODA.

Debts are forgiven. The former Soviet Union forgave Vietnam its debts. But donors

only forgive debts when countries are ruined because of repayment of debts. We have grown from being a low-income country to a middle-income one, and so there

is no reason for forgiving our debts. Vietnam not only has to repay its loans but also has to offer ODA to other countries with lesser economic development.

I think we should hire foreign consultants to assess the prices of ODA projects.

"Vietnam has taken all the ODA offered without any complaints about the prices for the ODA-funded project"

PHAM SY LIEM

Japanese firms are often chosen to implement projects with Japanese ODA. But the

prices they quote are often high. Is this a reason for the bribery scandals that have rocked Vietnam in recent years?

Bribery is very common in public construction activities in Vietnam. It happens not

only in ODA projects but also state-funded ones. The case of the Japan Transportation Consultants, Inc. that allegedly paid bribes to get an ODA project

contract is not the first one. Some years ago Huynh Ngoc Si, former deputy director of the Ho Chi Minh City transport department and head of the project, was charged

with taking bribes in 2003 from a Tokyo-based company for a major infrastructure project – a highway linking the east and west of HCMC – also funded by Japanese ODA.

ODA is an important source of funds for Vietnam. However, what we gain from the use of ODA might be less than what we lose…

That argument is not correct. There are many good ODA projects with reasonable

prices. My Thuan Bridge with Australian ODA is of good quality and reasonable price. It was built at a cost of $90 million, including $60 million in ODA from Australia.

In general, projects funded by international organizations like the World Bank and the Asian Development Bank are closely monitored.

What should Vietnam do to improve the capabilities of its firms so that they can win contracts for major construction projects?

We have to rapidly modernize our construction sector. We could learn from China.

From being an underdeveloped country in the field, it now has many of the top 250 leading construction contractors in the world. It requires construction projects with

a value of 5 million yuan (some $833,000) upwards to be managed by project

management professionals. In Vietnam, projects are managed by government officials.

We also do not have human resources companies that can provide qualified

construction workers. China has such firms. We should also have strong companies leasing out specialized construction machines.

Vietnam should also consider negotiating with ODA donors about requirements for

contractors to participate in projects. For example, a Vietnamese firm could get an ODA project contract if a local bank guarantees that it will provide enough funds to

implement the project. Under current regulations, a Vietnamese can only get an ODA project if it can demonstrate it is financially capable by itself.

Trang 104

Expats, tourists, and Western superiority

Keepin' Saigon weird (in the right way)

Last words on the dumbest debate in town

Vietnam: You're so good-lookin'

Many Westerners say they travel to Vietnam to open their minds and broaden their

horizons, but once here, closed minds and narrow horizons seem to prevail...

For centuries, many in the West have considered themselves superior to people in

other parts of the world. This attitude was most blatantly manifested during the (very

long and varied) colonial period, when the European powers occupied vast swathes

of today’s Asia, Africa, Middle-East and Latin America.

They justified this, in their discourse, by talking about a moral obligation that white

people had to civilize the savages in the rest of the world, and teach them modern

and developed ways of living.

The French called this the mission civilisatrice (civilizing mission), while the British

referred to it as the white man’s burden. Such an attitude happened to conveniently

coincide with the building of political and economic structures across the colonized

world which extracted resources from the colonized and delivered them to the

colonizers.

Colonialism is, thankfully, over, at least in its most explicit and direct forms.

However, the attitude of Westerners thinking that they are superior to others

continues to this day, such as with the whitewashing of global history, which claims

that everything good and modern came from Europe.

In Vietnam, the presence of a similar attitude is obvious – all one needs to do is visit

one of Saigon’s expat or backpacker haunts.

Over the past few decades, Vietnam has seen a huge influx of foreigners. Some come

for work – either to run businesses or to sell their labor – while others come to travel

and to holiday.

The latter rarely seem to come in order to try to understand and investigate the

politics, economics, society, and history of the country, but more often for an 18-

30s, lads-on-tour drinking experience.

And because of this, such Westerners expect to be served and waited on. Any

concept of Vietnam being an interesting living, breathing, heterogeneous society is

put on the back burner, if at all. In this way, Vietnam (and Southeast Asia more

generally) becomes reconstituted as a Western playground, set up so foreigners can

get drunk and stoned cheaply.

Vietnamese agency does not play a part in these conceptions of the country, which

is why such tourists think they can shout at service sector workers without feeling

any guilt. Overhearing such phrases as, “I ordered Hawaiian pizza, you idiot!” or

“NO. I WANT THREE BEERS. THREE! THREE! NOT ONE! CAN YOU

UNDERSTAND THAT!?” or “What the hell do you think you’re doing? Stop trying

to rip me off!” is, sadly, not uncommon on Pham Ngu Lao Street.

When backpackers aren’t busy abusing workers, who only exist, in the eyes of these

tourists, to serve Westerners, they are often attempting to “respect” Vietnamese

culture.

This, of course, is always a patronizing reformulation of the idea of “culture” so it

becomes seen as static and simple, rather than being complex, multi-layered, and in

flux, as all “cultures” always are. Such an attitude allows tourists to think that

showing respect equates to refraining from touching people on the head, rather than,

say, seeing the Vietnamese as equals.

Of course, not all foreigners in Vietnam are tourists - there are thousands of expats in the country. A sense of Western superiority is also, sadly, present amongst this

group – many live entirely with other Westerners, and have social circles that consist

almost totally of foreign faces. Vietnamese friends that expats do have are seen as

quirky exceptions rather than the norm.

Despite this, many such expats feel that they are able to make great, ground-breaking

insights into Vietnam and its people, such as “Vietnamese people don’t have a

concept of the future – they just live for the moment,” or “they haven’t developed

modern thought yet,” and “they don’t understand the idea of getting regular

customers, they always try to rip me off even though I go there every day.”

These are just a few examples of the dozens I’ve heard. Such “insights” are made

from what expats consider to be a higher, superior level. “I’ve done much more for

this f***ing country than you have,” said one English teacher who couldn’t get a

shirt for the price he wanted.

These attitudes, from both tourists and expats, are just small examples of a structural

racism that exists across the globe. Such attitudes of Western superiority are, at best,

naïve, ignorant, and orientalist, and, at worst, poisonous and racist.

When people talk about Vietnam as a “developing” country, the hidden

presupposition is that this means Vietnamese people are developing, in their

consciousness and attitudes, from an earlier stage to an advanced stage that

Westerners have already reached.

Anything that is not exactly like it is in the West is seen as inferior, an aberration to

the developed norm (which is always a white, Western European norm).

We must get over this attitude of superiority. Othering the Vietnamese as inferior

will not allow us to fully engage in Vietnam’s society (and indeed, we often see ourselves as outside, judge mental observers), and will not allow us to approach

Vietnam with an open mind.

There are a millions of different people in Vietnam, doing a huge variety of different

activities. We should be humble and open to listening to these varied lived experiences, without judgement, simplification or superiority.

Trang 105 : Cancer a water-borne disease in southern Vietnam

Nguyen Van Minh's parents are among at least 50 people in a commune in Tien Giang Province who have died of cancer over the past five years, and concerns over arsenic-laden groundwater are escalating in the Mekong Delta.

"My father died of stomach cancer and my mother died of blood cancer. Neither smoked nor drank," said the farmer who lives in Thoi Son Commune, which is located in the province's My Tho Town.

Do Tien Hoa, a medical worker in the commune's Thoi Hoa Hamlet and many local residents believe that arsenic, a carcinogenic substance, in their tap water is responsible for the high incidence of cancer in their locality.

It appears that the residents' suspicions are well founded.

Unlike previous studies that linked arsenic contamination to groundwater near the surface, a recent study by a group of California-based scientists found increasing contamination of carcinogens in numerous deep wells in the Mekong Delta.

New poison depths

Chronic arsenic poisoning is said to be a factor in cardiovascular diseases, skin lesions and numerous forms of cancer. These diseases may take years to manifest. While the symptoms of arsenic poisoning are treatable in the short-term, there is no way to reverse its long-term affects.

Faced with arsenic contamination, many people have dug deeper wells for cleaner water, but scientists have recently found increased arsenic contamination in the new depths as well.

Drilling deeper wells has become common in the search for clean water but new research from Stanford University's School of Earth Sciences has found that even deep wells might not remain arsenic-free.

Researchers suggest that the contamination occurs as arsenic is squeezed from ancient clay sediments surrounding the wells.

The scientists reviewed 42,000 well measurements taken throughout the multi-aquifer system of Vietnam's Mekong Delta and in an area spanning more than 1,000 square kilometers (386 square miles), arsenic was found in nearly 900 deep wells.

"Historically, deep wells often tested arsenic-free," said Laura Erban, a doctoral student in environmental Earth system science at Stanford and the lead author of the study.

In some cases, the wells were contaminated when deep-pumping projects inadvertently transported shallow arsenic, or other substances that help mobilize arsenic, to greater depths. But in the Mekong Delta, it appears that there is an entirely different, and previously unsuspected, process contaminating deep wells, the report said.

It said when water is heavily pumped from an aquifer, surrounding clay layers compact, and water is expelled as the land sinks.

"If this expelled water contains substances such as arsenic, the groundwater can become contaminated. Land subsidence the gradual sinking of land due to excessive pumping is common in delta environments and can be measured," the report said.

The impacts of arsenic contamination from deep groundwater extraction may be reduced by quantifying the extent of deep groundwater arsenic, limiting heavy pumping and treating extracted groundwater to meet health standards, it said.

According to Steven Gorelick of the Stanford University, co-author and project investigator on the study, the implication of these findings for the Mekong Delta region, and potentially other arsenic-prone aquifer systems like it is that deep, untreated groundwater is not a safe long-term water source.

"Deep wells that test clean upon installation, as do those bordering the focus area, may not remain arsenic-free over time as pumping promotes compaction and release of arsenic or arsenic-mobilizing solutes from deep clays."

To reduce the impacts of arsenic contamination from deep groundwater extraction, water managers should consider a suite of measures, he said.

"These include first understanding the nature and extent of deep groundwater arsenic, limiting intensive extraction, treating or blending extracted groundwater to meet health standards, and possibly screening pumping wells over intervals of deep aquifers that are distant from confining clays, among other water management strategies aimed at health-risk reduction."

Depleting source

People in Tien Giang's Thoi Son Commune were using tap water supplied by two stations pumping from two deep wells without any treatment for drinking and cooking, the Voice of Vietnam news website quoted Hoa, the medical worker, as saying.

Tran Thanh Thao, deputy director of the Tien Giang Health Department, said relevant agencies had collected tap water samples in the commune and found a high concentration of arsenic.

However, it is unclear if arsenic contamination is responsible for cancer in the commune, local authorities said. Scientists from the Pasteur Institute in Ho Chi Minh City have collected hair and urine samples of 100 local residents for testing but the results are not available, they said.

Increasing pollution as well as salination of surface water have over the years forced many residents to switch to groundwater, leading to overexploitation of the resource and, experts say, rising arsenic threat. 

To Van Truong, former director of the Southern Institute for Water Resources Planning, said increasing demand due to growing population and seawater encroachment has led to a reliance on groundwater.

"This increases the risks of arsenic consumption for local residents in the Mekong Delta," he said.

According to the Center for Water Resources Planning and Investigation, groundwater has been declining both in quality and quantity nationwide.

Results from many monitoring stations show increasing contamination of manganese, arsenic and ammonia, according to a report the agency released in July.

In May, authorities in Tien Giang's Cai Lay District announced that a source of tap water for more than 200 households in Phu Cuong Commune has a high concentration of arsenic.

Many residents, fearful that they have been consuming the carcinogenic substance, are using bottled water as an alternative, while waiting for the commune authorities to drill a new well.

Concerns over arsenic-laden tap water have spread widely in the Mekong Delta.

There are more than 400 well water stations in Dong Thap Province, but not many people have been using their water recently, fearing that it is not safe.

According to the provincial Preventive Health Center, a test of 295 stations in late 2011 found 191 of them supplying unsafe water, including 110 with high concentrations of arsenic.

There are dozens of thousands of household wells in the Mekong Delta, from 100-300 meters deep, the Ministry of Natural Resources and Environment said.

Duong Van Ni, a lecturer at the Can Tho University, said many people in the Mekong Delta provinces of Ca Mau and Bac Lieu have been using groundwater to mix with sea water to breed shrimp.

"It's so wasteful. Many people think groundwater is endless and that they can just drill new wells if the old ones get polluted or go dry," he said.

"Arsenic can leak into groundwater in abandoned wells."

Trang 106 : Samsung shifts plants from China to Vietnam to protect margins

Samsung Electronics Co. built the world's largest smartphone business by tapping China's cheap and abundant workforce. Not for much longer: it's shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows.

By the time a new $2 billion plant reaches full production in 2015, China's communist neighbor will be making more than 40 percent of the phones that generate the majority of Samsung's operating profit. The Suwon, South Korea-based company's second handset factory in Vietnam is due to begin operations in February, according to a Nov. 22 statement on the local government's website.

Samsung surged past Apple Inc. to the top of the mobile-phone industry by offering cutting-edge devices for more than $900 to basic models costing less than $150. With demand sagging in the most-profitable top end and Chinese rivals driving prices lower, Samsung is joining technology companies such as Nokia Oyj and Intel Corp. to be drawn to Vietnamese wages that are about a third those in China.

"The trend of companies shifting to Vietnam from China will likely accelerate for at least two to three years, largely because of China's higher labor costs," said Lee Jung Soon, who leads a business-incubation team of the Korea Trade-Investment Promotion Agency in Ho Chi Minh City. "Vietnam is really aggressive in fostering industries now."

It seems to be working.

The government has approved $13.8 billion of new foreign projects this year through Nov. 20, a 73 percent increase on a year earlier, according to the General Statistics Office in Hanoi. South Korea led with $3.66 billion.

China's $8.4 trillion economy, 59 times the size of Vietnam's, received $97 billion of foreign direct investment -- although this was actually utilized -- in the first 10 months, 6 percent up on a year earlier.

Intel, the world's largest chipmaker, opened a $1 billion assembly and testing plant in Ho Chi Minh City in 2010. Nokia said its facility near Hanoi producing Asha smartphones and feature handsets became fully operational in the third quarter. LG Electronics Inc. (066570), Samsung's smaller South Korean rival, is building a new 400,000 square meter complex to make TVs and appliances as part of a $1.5 billion investment plan.

Young workers

"The country is politically stable and has a young, increasingly well-educated workforce," LG said in an e-mailed statement. "Like Korea, Vietnam understands what it takes to rebuild an economy after a devastating war."

Samsung's new plant is expected to make 120 million handsets a year by 2015, said two people familiar with the company's plans, who asked not to be identified because the matter is private. That would double the current output from the country and compares with the 400 million global total Samsung shipped last year. In an e-mailed response to questions, the company declined to comment.

With about one-third of the global smartphone market, Samsung may eventually produce as many as 80 percent of its handsets in Vietnam, said Lee Seung Woo, an analyst at IBK Securities Co. in Seoul who has been tracking the company for more than a decade.

"The handset business is all about assembling well-sourced components," Lee said. "The most important thing is manpower."

Record growth

After setting up in China in 1992, Samsung now has 13 manufacturing sites and seven research laboratories there, according to its June sustainability report. The 45,660 employees in China make up more than 19 percent of Samsung Electronics' global workforce, the largest source of labor outside South Korea, it said.

Record economic growth that made China the second-biggest economy has fueled wage inflation, pricing many workers out of low-end jobs. The base monthly salary for a factory worker in Beijing was $466, compared with $145 in Hanoi, according to a 2012 survey of pay by the Japan External Trade Organization.

While this growth has created an emerging class of potential Chinese buyers of Samsung products, consumers wants more for less. Features once reserved for top-end devices, such as high-definition screens and faster processors, are being added to cheaper handsets.

China last year surged past the U.S. as the biggest smartphone market, and sales there will reach 350 million units this year -- more than double U.S. demand, according to estimates by industry analysis firm IDC. In China, though, three-quarters of devices sold for less than $250, compared with a fifth in America, IDC said.

Sales double

Globally, smartphone sales will more than double to 1.7 billion units by 2017 at the same time average prices will drop to $265 from $337, IDC said in a Nov. 26 report.

"The rule of the game is now changing to how much market share you can win over rivals," said Hong Sung Ho, an analyst at LIG Investment & Securities Co. in Seoul. "Many companies are now scratching their heads to figure out how to cut manufacturing costs."

Samsung's complex in the Yen Binh Industrial Zone of Thai Nguyen province, north of Hanoi, will pay no tax for the first four years, and half the full rate the following 12 years, the local government's website shows.

A $1.2 billion Samsung Electro-Mechanics Co. (009150) factory announced making camera modules and circuit boards, along with other Samsung plants, will get half their infrastructure rent subsidized. Under a so-called strategic partnership, Samsung said it will also help Vietnam build social infrastructure, and nurture key industries such as petrochemicals and shipbuilding, according to the South Korean conglomerate.

Close to home

Shares of Samsung have fallen 7.4 percent this year, compared with a 1.5 percent drop in the benchmark Kospi index, and the stock is headed for its first annual decline since 2008.

While tax breaks and cheap workers are lures that other countries such as India and Indonesiacould offer, Vietnam's location closer to existing Samsung production bases in China and South Korea is an extra incentive, according to Than Trong Phuc, managing director of technology-focused investment fund DFJ VinaCapital LP in Ho Chi Minh City.

"Other countries can match or even beat the incentives that Vietnam is offering, but Vietnam is very close to Samsung's supply chain," said Phuc. "You see Korean companies everywhere you look in Vietnam, right and left."

Trang 107 : Vietnam executive search market has grown at snail's pace: headhunter

In Vietnam it is very difficult for firms to find candidates for CEO jobs because of the shortage of managerial experience.

Many have to hire expats even if they prefer Vietnamese, who would have a better understanding of the country's culture, business environment, and legal system, managing director of recruitment firm Navigos Search Nguyen Thi Van Anh tells Vietweek.

Vietweek: How do you assess the executive recruitment market?

Nguyen Thi Van Anh: The economic slowdown has affected demand for mid-level and senior staff, which include those in the position of deputy director upwards, and experienced engineers. Amid the high production costs, high inventories of goods, and lower demand, firms cannot expand their business. They have to find ways to cut costs, including on personnel.

The pressure to cut costs is higher in some fields with high personnel costs like services. A wave of personnel cuts has occurred since 2011. But the middle- and senior-level markets have not seen a mass reduction because there are only a few positions for mid-level and senior employees in each company, and it is very difficult for companies to find talent.

Some other firms even take advantage of the current dull recruitment market to scour for talents for top positions though it is costly. It is easier for them to recruit employees now as they can have more options and time to assess candidates. It will be too late if firms leave executive search and recruitment until the economy recovers and their production and business bounce back.

It is very difficult to find executive talent, especially CEOs, in Vietnam. FPT has not been able to find a CEO for a long time.

In the field of information and technology, many Vietnamese and foreign firms wish to set up software development centers in the country, but they cannot find enough engineers to meet their demand because of the supply shortage. The qualifications of local engineers are not enough to meet the requirements of employers.

Many of our engineers do not know foreign languages, and are not updated on the developments in their fields.

Candidates for CEO jobs lack managerial experience and strategic vision. So many firms still have to recruit expats for the position though they prefer Vietnamese, who have better understanding of the country's culture, business environment, and legal system.

FDI flows have increased this year. Have they impacted the executive recruitment market?

Registered capital is not important, only disbursed capital. Investors have demand for executive talent only when they execute their projects in Vietnam. We see an increase in demand for senior employees in some Japanese invested enterprises, but it is not a sharp rise.

In what sectors do firms face the most difficulty in executive search and recruitment?

It is difficult find CEOs in all sectors. Vietnamese can meet the requirements for middle-level positions. Most deputy directors and directors in firms are local people.

It used to be difficult 5-7 years ago for employers to find local people for even the director's position in their companies, so they used to employ expats.

Now Vietnamese people have learned managerial skills, so directors in most companies are locals. I hope Vietnamese people's qualifications improve in the next few years, and CEO recruitment will become easier.

Many multinational companies rotate employees between countries for staff training. They could move their employees in Thailand, Singapore, or Indonesia to Vietnam and vice versa. This way they are also training Vietnamese employees, helping improve the qualifications of local workers.

How do you assess the attractiveness of the Vietnamese market to foreign employees?

Many candidates from Japan, Hong Kong, Singapore have applied for jobs we advertise on our website. Some expats are willing to work in Vietnam because of political stability, high development potential, and acceptable income.

But senior candidates will not want to work in Vietnam because they want to develop their capacity in developed and competitive markets like the US and Japan. The Vietnamese market is very small, so the size of firms is also small.

Does Vietnam have a true executive recruitment market?

Not yet. Vietnam opened up for foreign direct investment over 20 years ago, and workers need more time to meet the requirements of firms. Firms' needs in terms of both quantity and qualification have not been met yet.

The shortage of senior employees will be even more serious when the economy recovers and labor demand bounces back. The number of university graduates is very large, but their capabilities cannot meet firms' requirements.

Hasn't it been too long? After all Vietnam opened its doors more than 20 years ago?

Yes, it has been too slow. The changes in our educational system have not caught up with economic development, failing to meet the requirements of employers. FPT has even had to start a university to serve need for employees. Vietnam will become less competitive in attracting FDI unless the government carefully reconsiders the issue.  

We would have to compete with other countries in attracting FDI by increasing workers' productivity, not by offering low wages. The productivity of Vietnamese workers is low compared to that of those from China, Thailand, and Malaysia.

How are the salaries offered to executives?

The highest salaries are often seen in the financial and banking sector. CEO of banks could get hundreds of thousands of dollars a year, or even $1 million. CEOs in the manufacturing sector could get $200,000-300,000 a year.

Expats often get higher salaries than local employees in the same positions, maybe because of employers' higher expectations.

REVIVED DEMAND

In the first half of 2013 moderate growth was reported across a broad array of sectors including industry and services, showing positive signs for business revival. The demand for executive staff has remained steady through the economic downturn, according to job website vietnamworks.com. The increase in FDI flows into Vietnam in the first six months of 2013 could also help boost demand for executive talent, as new investors look for senior managerial talent to head their enterprises. VietnamWorks' report says that demand for director/CEO positions increased by 20 percent in the first half of this year compared to a year earlier. The industries with the biggest increase in demand included manufacturing with 66 percent, retail/wholesale trading with 64 percent, technology/engineering with 39 percent, and medical services/healthcare with 36 percent.

Trang 108 : Labor market to rebound in 2014

The labor market is expected to see a rebound this year, especially with a huge increase in investment from Japan and South Korea. IT, marketing, and customer service continue to lead the demand for labor, Jonah Levey, founder and CEO of job company VietnamWorks tells Vietweek.

What is your expectation for the labor market in 2014?

Jonah Levey: 2013 witnessed an amazing recovery in the labor market. Q1 saw no change in labor demand, but from Q2 on, demand kept rising at a steady pace of more than 10 percent each quarter compared to the same period of 2012. Overall, labor demand in 2013 increased 9 percent compared to the previous year. This upward trend is expected to continue into 2014, especially with a large amount of investment coming from Japan and South Korea.

Major cities like Hanoi and Ho Chi Minh City will be the hubs of job supply due to their strategic positions as centers of commercial activities. However, places like Bac Ninh and Binh Duong will also post a lot of jobs thanks to the flourishing industrial parks.

Which sectors will have the biggest demand and offer the best salaries this year?

IT, marketing, and customer service continue to lead the labor market’s demand side. However, we do see great growth in other industries like import-export, which increased its labor demand a whopping 38 percent in Q4 of 2013, compared to the same period of 2012.

As for salary level, popular sectors tend to be those that offer the most competitive compensation package for employees. In this economic climate, applicants flock to jobs that promise financial stability. Japanese and Korean companies are among the most popular employers. According to VietnamWorks’ survey, seven out of the 10 most desired companies belong to Japanese and Korean groups.

The economic slowdown has changed society’s perception of jobs, with some sectors becoming less attractive to workers and others more attractive. What do you think about this?

There is always a fair reason for any change, especially in the labor market. As I mentioned above, in the current economy, people prioritize financial stability in choosing their employers. Highly qualified individuals look for a decent compensation package that will allow them to not only survive but also live comfortably in a time associated with rising costs of living.

Industries that promise good financial compensation like banking and finance, as usual, attract a lot of job seekers. Technology companies have also become great potential employers in Vietnam, similar to what has happened in the world in the last few years. By contrast, the production sector has become less attractive to highly qualified individuals who prefer to work in central downtown districts instead of industrial parks.

The change has profound ramifications for the labor market. On the part of job seekers, signing themselves up for trendy and highly-compensated careers like banking and finance can be a promising decision, but there is a great deal of competition just to get an entry-level position in these industries. On the other hand, the less attractive sectors can be unexpectedly rewarding and much easier to enter.

On the employers’ side, companies in popular sectors will have a hard time choosing the right talents in a crowded pool of applicants, some of whom are only in it for a generous compensation. At the same time, companies in less popular sectors will struggle with the task of finding qualified talents with such a limited supply of labor.

Experts have warned about the oversupply of workers in some sectors like banking, finance, and property, and the shortage of skilled workers in manufacturing. How can these be balanced?

One possible measure is to push for a more serious career guidance program. A lot of college students in Vietnam do not know what they have to do to become appealing to employers.

In addition to getting high scores at school, college students should participate more in activities like volunteering or internships. The experience gained through these activities will help them become familiar with professional work environments as well as prepare them for the reality of working in certain sectors. As a result, students will have a better sense of who they really are as a professional and which industry is best suited to their interests and abilities.

What should Vietnam do to improve the quality of its workforce?

Rather than focusing on the weaknesses of Vietnamese workers, I would like to talk about a more pressing problem: how to improve Vietnamese the labor force’s quality. It is a big question for policymakers and educators. However, employers themselves can also help.

Recruiting skilled workers is a major challenge in Vietnam, and the situation is very likely to worsen in the coming years as demand for skilled talents continues to grow faster than supply. Universities and vocational schools are not generating enough graduates to meet the demand. More importantly, many graduates from Vietnamese universities and trade schools do not possess the skills and ability required of foreign enterprises or top local businesses. That is why companies like Intel, FPT Software, and others are spending billions of dong on training. VietnamWorks.com delivered over 2.8 million job applications to over 8,000 employers in 2013. Employers come to us because they want more and better candidates to apply for their jobs. In addition, companies with the means will continue to invest heavily in training to bridge the gap between the talent they require and the talent available in Vietnam.

Are firms willing to pay higher salaries for workers with better qualifications when many of them only seek low-cost workers?

The problem is that a lot of times it is not about the costs; it is about the overall benefits that a company can get from an employee. If an employee contributes greatly to the growth of a company, he/she should be rewarded with a decent compensation package that reflects his/her value to the company.

Many companies already have effective human resource policies to retain and reward their most valuable talents. For example, Japanese company Evolable Asia uses the “probation bonus” approach to rewarding talents in Vietnam: any employee who passes the probation period will receive a one-time bonus of half a month’s salary. Companies are willing to invest in their most valuable employees. The most pressing question right now is not whether firms want to pay high salaries, but whether there are good enough employees who deserve competitive compensation packages.

Trang 109 : Vietnam remains firm on controversial airport project

Central government wants to go ahead with a multi-billion dollar plan to build the Long Thanh Airport in Dong Nai Province, as the project is set to be voted by lawmakers in June

The Ministry of Transport has rejected proposals by a group of constituents who want to expand the current Tan Son Nhat airport instead of building a new one in Dong Nai Province.

Plans for the new airport also envisage building a new golf course at Tan Son Nhat on land that critics say could be used for airport expansion instead.

In response to constituents in Tan Binh District – where Tan Son Nhat is located – who say they have no need for a golf course, the ministry has argued that the construction of the Long Thanh airport will satisfy demands that Tan Son Nhat cannot because the number of passengers is increasing.

In a petition last month, the constituents said Vietnam should not build Long Thanh airport, which is expected to cost at least US$7 billion in the first stage because the country is still poor.

Vietnam should not use official development assistance to build the airport while the Tan Son Nhat airport has not even been fully exploited yet, they said.

They also demanded a revocation of plans to turn the airport’s buffer zone into a golf course instead of using it to expand the current airport.

In its response, the transport ministry said Tan Son Nhat airport served 20 million passengers in 2013 and it would be overloaded soon.

Expanding Tan Son Nhat to serve 40-45 million passengers a year will be costly and unfeasible because it is located in the residential area only seven kilometers from the city center, Tuoi Tre (Youth) quoted a ministry document as saying.

The transport ministry said Ho Chi Minh City, Dong Nai, Binh Duong and Ba Ria - Vung Tau provinces are major airline transport markets that link to bustling air transport routes in Southeast Asia.

A major international airport is necessary to meet domestic and regional demand and Long Thanh is a better place than other airports in the area, it said.

Regarding the golf course project at Tan Son Nhat, the ministry said it was approved under proposals from the ministries of defense, construction and planning and investment after being reviewed by other relevant ministries.

New airport

At a meeting to discuss the construction of Long Thanh airport on March 27, transport minister Dinh La Thang reaffirmed that the project is necessary for the country’s development.

He instructed relevant agencies to clarify the necessity of the project and the choice to build it in Long Thanh instead of Bien Hoa, Can Tho or Da Lat and why Tan Son Nhat should not be expanded instead.

According to the Airports Corporation of Vietnam, the Long Thanh airport is expected to serve up to 100 million passengers and five million tons of goods a year by 2030, becoming a major airport in Southeast Asia.

The first stage is scheduled for completion in 2020 to serve 25 million passengers and 1.2 million tons of goods a year, with an investment of $7 billion.

In January, Dong Nai authorities met with relevant agencies to discuss the resettlement of local residents for the Long Thanh airport project.

A total of 5,381 households of more than 17,000 residents will be affected by the project, including 3,321 households that will have all their land revoked.

Compensation for affected residents is expected to be more than VND20.77 trillion.

The project is set to be built on an area of 5,000 hectares (12,400 acres) overlapping six communes in Dong Nai’s Long Thanh District.

At a government teleconference last December, authorities in HCMC and Dong Nai both supported the construction of Long Thanh airport.

“Without a new airport, Tan Son Nhat will be overloaded in two or three years,” said HCMC mayor Le Hoang Quan.

Dinh Quoc Thai, chairman of the Dong Nai People’s Committee, said the government should facilitate the Long Thanh airport project so the province will develop stronger and more quickly soon.

However, Nguyen Xuan Thanh, director of the Public Policy Program at the HCMC-based Fulbright Economics Teaching Program, told Dat Viet newspaper that his team had assessed the project and found it to be financially-ineffective.

"No investor is interested in investing in the airport under a BOT [build-operate-transfer] project. It will need to use ODA [official development assistant]. The problem then is that the whole country has to pay the debt.”