Date : 05/03/2009
Vietnam, the world’s second-largest coffee producer, may harvest 16 million bags this year, about 6 percent less than initially forecast after poor weather trimmed the size of beans, according to a producers’ group.
“Bad weather at the start of the crop has considerably raised the proportion of small beans,” Luong Van Tu, chairman of the Vietnam Coffee and Cocoa Association, said today. The association in December had forecast a crop of 17 million bags in the year to Sept. 30. A bag weighs 60 kilograms (132 pounds).
A smaller-than-expected 2008/09 crop may help to arrest a drop in robusta prices, which have declined by about 45 percent over the past year. The nation’s crop was estimated at 20 million bags in January, according to a forecast from Belgian bank Fortis.
“Bad weather did have an impact on the beans but probably not that much, at least in our growing area,” said Nguyen Xuan Thai, a director of Dak Lak-based Thang Loi Coffee Co., the country’s largest grower. Dak Lak is Vietnam’s main region for cultivating the crop.
Robusta coffee for May delivery gained as much as 0.5 percent to $1,512 a metric ton today, snapping a five-day losing streak that had left the 10-ton contract at its lowest since it started trade on London’s Liffe exchange in January 2008.
‘Black Beans’
“We’ve also had to reject more black beans that were caused by rains during the picking and drying period,” Tu said in a telephone interview from Hanoi, Vietnam’s capital. Black beans are of low quality and don’t meet standards for international shipment; most are discarded.
Two weeks of prolonged rains last year interrupted the harvest, according to traders including Nguyen Ngoc Thu in Ho Chi Minh City for Madrid-based Icona Cafe, which is among the 10 biggest importers of Vietnamese produce. The rains delayed the picking of berries and hampered drying, they said.
Vietnam’s 2008/09 crop might have been lower than 19.5 million bags due to the heavy rains, smaller beans and an increase in the quantity of black beans, Hong Kong-based SW Commodities said in a March 2 note. F.O. Licht has estimated the crop at 20 million bags, up from 18 million a year earlier.
“About 50 percent of the crop has been sold so far,” said Hua Thanh Hong, the business manager at the Sept. 2nd Import- Export Co.
Source: Bloomberg - By Nguyen Dieu Tu Uyen
Tuesday, March 10, 2009
Vietnam rice export orders suggest H2 pace may slow
Date : 04/03/2009
Vietnamese exporters have already contracted to sell 3.65 million tonnes of rice, 73 percent of the annual target for 2009, which suggested the pace of exports would slow in the second half.
Exporters would load 3.4 million tonnes in the first half, while the remaining grain would be sourced from the next summer-autumn crop, according to the Nong Nghiep Vietnam (Vietnam Agriculture) newspaper, which is run by the Agriculture Ministry.
The loading plan was agreed at a meeting on Tuesday between the Agriculture Ministry in charge of rice production and the Industry and Trade Ministry, which oversees rice exports, it said.
The volume of rice contracted so far represents two-thirds of Vietnam's export target of up to 5 million tonnes this year, meaning exporters would slow transactions in the second half of the year. Vietnam exported 4.68 million tonnes of rice in 2008.
The Vietnam Food Association has already put a curb on rice exports, rejecting the registration of any new contracts with shipments through June, but it still allows deals with loading in the third quarter ending September.
Harvesting of the summer-autumn rice crop, Vietnam's second biggest after the current winter-spring crop, peaks in August.
Rice loading in March was projected to rise to 800,000 tonnes, which would be a record, beating the 650,000 tonnes loaded last month, the highest ever.
Exports of the grain in the first two months doubled from the same period last year to 919,000 tonnes, the government has said.
Source: Reuters
Vietnamese exporters have already contracted to sell 3.65 million tonnes of rice, 73 percent of the annual target for 2009, which suggested the pace of exports would slow in the second half.
Exporters would load 3.4 million tonnes in the first half, while the remaining grain would be sourced from the next summer-autumn crop, according to the Nong Nghiep Vietnam (Vietnam Agriculture) newspaper, which is run by the Agriculture Ministry.
The loading plan was agreed at a meeting on Tuesday between the Agriculture Ministry in charge of rice production and the Industry and Trade Ministry, which oversees rice exports, it said.
The volume of rice contracted so far represents two-thirds of Vietnam's export target of up to 5 million tonnes this year, meaning exporters would slow transactions in the second half of the year. Vietnam exported 4.68 million tonnes of rice in 2008.
The Vietnam Food Association has already put a curb on rice exports, rejecting the registration of any new contracts with shipments through June, but it still allows deals with loading in the third quarter ending September.
Harvesting of the summer-autumn rice crop, Vietnam's second biggest after the current winter-spring crop, peaks in August.
Rice loading in March was projected to rise to 800,000 tonnes, which would be a record, beating the 650,000 tonnes loaded last month, the highest ever.
Exports of the grain in the first two months doubled from the same period last year to 919,000 tonnes, the government has said.
Source: Reuters
PROSPECTIVE INVESTORS: LABOR REGIME IN VIETNAM
Vietnamese people and foreigners working in Vietnam are subject to the Labor Code. The Labor Code has created a legal framework which sets out the rights and obligations of employers and employees, working hours, labor contracts, payment of social insurance, overtime work, strikes, and termination of employment contracts, etc.
1. Working Age
The minimum working age in Vietnam is 15. An apprentice at a job training centre must be at least thirteen (13) years of age, except in the case of certain jobs in respect of which the Ministry of Labour, War Invalids and Social Affairs determines otherwise, and must be sufficiently healthy to satisfy the requirements of the job.
2. Recruiting Procedure
Foreign invested enterprises (FIEs) may recruit Vietnamese employees directly or may contract with an employment service agency to do so. The FIEs are required to notify the list of recruited employees to the local authority in charge of the State administration of labor.
3. Labor Contract
The labor contract must be in writing and in accordance with the model labor contract issued by the Ministry of Labor, War Invalids and Social Affairs. Verbal agreements may be entered into with domestic servants or the temporary workers working for less than three months. A labor contract can be one of the following types:
• An indefinite term labor contract is a contract in which the two parties do not determine the term and the time for termination of the validity of the contract;
• A definite term labor contract is a contract in which the two parties determine the term and the time for termination of the validity of the contract as a period from twelve (12) months to thirty six (36) months; and
• A labor contract for a specific or seasonal job with duration of less than twelve (12) months.
For contracts lasting less than three months, a written contract is not required. The probation period can last up to a maximum of 60 days for jobs demanding a special skill but is 30 days for other jobs. The salary of a worker during the probation period cannot be less than 70% of the agreed salary.
During the probation period, contracts can be terminated by either party without a notice period and payment of indemnities.
4. Termination of Labor Contract
An employer can terminate a labor contract early under any of the following circumstances:
(i) The employee repeatedly fails to perform his or her work in accordance with the labor contract;
(ii) An employee is disciplined or dismissed in accordance with the Labor Code;
(iii) Where the employee is ill or suffers injury and remains unable to work after receiving treatment for a period of one year for an indefinite term contract, six months in the case of a definite term of contract and half the contract term in the case of a specific or seasonal job;
(iv) The employer is forced to reduce its production and employment while trying to recover from a natural disaster, a fire or an event of force majeure; and
(v) The employer ceases operations.
Except unilateral termination in item (ii) above, an advance notice of 45 days is required for an indefinite term contract, 30 days for a definite term contract with duration of one year to three years and three days for a specific or seasonal job less than one year.
An employer has no right to terminate a labor contract:
• of an employee who is suffering from an illness or injury caused by a work-related accident or occupational disease and is under medical care; or
• of an employee who is on annual leave, personal leave of absence or any type of leave permitted by the employer; or
• of a female employee for reason of marriage, pregnancy, taking maternity leave, or raising a child under the age of twelve (12) months, except where the enterprise ceases its operation.
5. Illegal Termination of Labor Contract
If an employer unlawfully terminates the employment of an employee, the employee must be re-employed and the employee must pay compensation equal to the amount of lost wages. Where the employee refuses to return to work, the employee must be paid lost wages plus an allowance equal to half a month’s salary for each year of employment plus allowances (if any).
6. Working Hours
The law provides for an 8-hour working day or a 48-hour working week. The employee may work overtime but the overtime should not exceed 4 hours per day and 200 hours per year. In certain special cases stipulated by the Government, overtime hours can be increased to a maximum of 300 hours per year.
Businesses in all economic sectors, including businesses with foreign invested capital, are encouraged to adopt a 40 hour working week.
7. Annual Leaves
The employee with 12 months service is entitled to an annual leave with full pay. The annual leave will be classified as follows:
• 12 days for a person working under normal conditions;
• 14 days for a person involved with heavy, noxious or dangerous job activity or working in places with harsh living conditions or for persons under 18 years of age; and
• 16 days for persons involved with especially heavy, noxious and dangerous jobs activity or working in places with especially harsh living conditions.
The number of days of annual leave shall be increased proportionally to the period of employment in an enterprise or with an employer by one additional day for every five years of employment.
8. Compulsory Insurances
There are 3 compulsory insurances (including health, social and unemployment insurances) applicable to every employer (including FIE) and employee (excluding foreign employee) who is working at least 3 months.
8.1. Health Insurance
Both the employer and the employee must make health insurance contribution to the Social Insurance Fund. The employer will have to pay 2% of the total wage fund and the employee is required to pay 1% of his/her salary provided in the labor contract.
8.2. Social Insurance
a. Employer
The monthly contribution of employers is made as follows:
• 15% of total salary fund from Jan. 2007 to Dec. 2009.
• 16% of total salary fund from Jan. 2010 to Dec. 2011.
• 17% of total salary fund from Jan. 2012 to Dec. 2013.
• 18% of total salary fund from Jan. 2014 onwards.
b. Employees
The monthly contribution of employees is made as follows:
• 5% of her/his salary from Jan. 2007 to Dec. 2009.
• 6% of her/his salary from Jan. 2010 to Dec. 2011.
• 7% of her/his salary from Jan. 2012 to Dec. 2013.
• 8% of her/his salary from Jan. 2014 onwards.
8.3. Unemployment Insurance
Unemployment insurance shall apply to (i) employees who are working in an enterprise with an indefinite term or a term lasting between 12 and 36 months, and (ii) employer who recruits 10 employees or more. The contribution is made as follows:
• Employee: 1% of his/her monthly salary provided in the labor contract;
• Employer: 1% of monthly salary fund.
9. Employment of Foreigners
Generally, foreign employees should be recruited for work positions intensively requiring technical or management skills. The employer is required to design a plan or program to train Vietnamese employees to replace such foreign employees.
In order to work in Vietnam, foreigners must obtain a work permit from labor authorities (i.e. the Department of Labor, War Invalids and Social Affairs of the province/city where their employer is located) prior to signing a labor contracts with their employers.
Regarding expatriates transferred within their enterprises which are operational in Vietnam, at least 20% of the total number of managers, managing directors and experts must be Vietnamese citizens.
However, a foreign-invested enterprise is allowed to employ at least 03 foreign managers, managing directors and experts.
Foreigners working for businesses, agencies, and organizations in Vietnam for 3 months or more must get work permits, except the following cases:
• Foreigners entering Vietnam to work for less than 3 months;
• Foreigners are members of a limited liability company with 2 members or more;
• A foreigner is the owner of a one-member limited liability company;
• A foreigner is the member of a joint stock company’s management board;
• Foreigners entering Vietnam to offer their services;
• Foreigners entering Vietnam to handle emergency cases; foreign lawyers have been granted job practice permits by the Vietnamese Ministry of Justice as regulated by the law.
In cases where a work permit is not required, the employer has to submit to the Province’s Department of Labor, War Invalids and Social Affairs a list of foreign workers comprising their name, age, nationality, passport number, and the starting and ending date of the job assumed by the worker. This list shall be submitted 7 days prior to the starting work date.
The employer must apply for a work permit for its foreigner employees at the Province’s Department of Labor, War Invalids and Social Affairs or any of the authorized EPs and IZs Authority.
After obtaining a work permit, the employer must sign a labor contract in writing with the employee (not including foreign workers assigned by the foreign party to work in Vietnam) and send a copy thereof to the authority that has issued the work permit.
The work permit has the same duration as that of the labor contract to be signed or of job assignment from the parent company but in any case, the period should not exceed 36 months and may be renewed.
10. Minimum Salary
Vietnamese law regulates a minimum salary of Vietnamese employees who are working for FIEs. Therefore, the minimum salary for an employee working in such enterprises must not be less than:
• VN$1,200,000 per month (equivalent to US$70) is applicable to businesses operating in inner districts of Ho Chi Minh City and Hanoi.
• VN$1,080,000 per month (equivalent to US$63) is applicable to businesses operating in suburban districts of Hanoi and Ho Chi Minh City; inner districts of Hai Phong City, Ha Long City of Quang Ninh Province, Bien Hoa City of Dong Nai Province; Vung Tau City of Ba Ria-Vung Tau Province; Thu Dau Mot Town and district of Thuan An, Di An, Ben Cat and Tan Uyen of Binh Duong Province.
• VN$950,000 per month (equivalent to US$56) is applicable to businesses operating in remain suburban districts of Hanoi; Bac Ninh, Bac Giang, Hung Yen, Hai Duong, Vinh Phuc, Hai Phong, Quang Ninh; Da Lat city, Bao Loc town of Lam Dong province; Nha Trang city , Cam Ranh town of Khanh Hoa province; Trang Bang town of Tay Ninh province; remain towns of Binh Duong province, Dong Nai; Tan An, Duc Hoa, Ben Luc, Can Duoc of Long An province; remaining towns of Can Tho city; Ba Ria, Chau Duc, Long Dien, Dat Do, Xuyen Moc of Ba Ria - Vung Tau.
• VN$920,000 (equivalent to US$54) is applicable to businesses operating in the remaining areas.
In addition, the minimum salary for skilled employees (including employees are trained by enterprises) must be 7% or more higher than the minimum salary as provided in 3 items above.
-ITPC
1. Working Age
The minimum working age in Vietnam is 15. An apprentice at a job training centre must be at least thirteen (13) years of age, except in the case of certain jobs in respect of which the Ministry of Labour, War Invalids and Social Affairs determines otherwise, and must be sufficiently healthy to satisfy the requirements of the job.
2. Recruiting Procedure
Foreign invested enterprises (FIEs) may recruit Vietnamese employees directly or may contract with an employment service agency to do so. The FIEs are required to notify the list of recruited employees to the local authority in charge of the State administration of labor.
3. Labor Contract
The labor contract must be in writing and in accordance with the model labor contract issued by the Ministry of Labor, War Invalids and Social Affairs. Verbal agreements may be entered into with domestic servants or the temporary workers working for less than three months. A labor contract can be one of the following types:
• An indefinite term labor contract is a contract in which the two parties do not determine the term and the time for termination of the validity of the contract;
• A definite term labor contract is a contract in which the two parties determine the term and the time for termination of the validity of the contract as a period from twelve (12) months to thirty six (36) months; and
• A labor contract for a specific or seasonal job with duration of less than twelve (12) months.
For contracts lasting less than three months, a written contract is not required. The probation period can last up to a maximum of 60 days for jobs demanding a special skill but is 30 days for other jobs. The salary of a worker during the probation period cannot be less than 70% of the agreed salary.
During the probation period, contracts can be terminated by either party without a notice period and payment of indemnities.
4. Termination of Labor Contract
An employer can terminate a labor contract early under any of the following circumstances:
(i) The employee repeatedly fails to perform his or her work in accordance with the labor contract;
(ii) An employee is disciplined or dismissed in accordance with the Labor Code;
(iii) Where the employee is ill or suffers injury and remains unable to work after receiving treatment for a period of one year for an indefinite term contract, six months in the case of a definite term of contract and half the contract term in the case of a specific or seasonal job;
(iv) The employer is forced to reduce its production and employment while trying to recover from a natural disaster, a fire or an event of force majeure; and
(v) The employer ceases operations.
Except unilateral termination in item (ii) above, an advance notice of 45 days is required for an indefinite term contract, 30 days for a definite term contract with duration of one year to three years and three days for a specific or seasonal job less than one year.
An employer has no right to terminate a labor contract:
• of an employee who is suffering from an illness or injury caused by a work-related accident or occupational disease and is under medical care; or
• of an employee who is on annual leave, personal leave of absence or any type of leave permitted by the employer; or
• of a female employee for reason of marriage, pregnancy, taking maternity leave, or raising a child under the age of twelve (12) months, except where the enterprise ceases its operation.
5. Illegal Termination of Labor Contract
If an employer unlawfully terminates the employment of an employee, the employee must be re-employed and the employee must pay compensation equal to the amount of lost wages. Where the employee refuses to return to work, the employee must be paid lost wages plus an allowance equal to half a month’s salary for each year of employment plus allowances (if any).
6. Working Hours
The law provides for an 8-hour working day or a 48-hour working week. The employee may work overtime but the overtime should not exceed 4 hours per day and 200 hours per year. In certain special cases stipulated by the Government, overtime hours can be increased to a maximum of 300 hours per year.
Businesses in all economic sectors, including businesses with foreign invested capital, are encouraged to adopt a 40 hour working week.
7. Annual Leaves
The employee with 12 months service is entitled to an annual leave with full pay. The annual leave will be classified as follows:
• 12 days for a person working under normal conditions;
• 14 days for a person involved with heavy, noxious or dangerous job activity or working in places with harsh living conditions or for persons under 18 years of age; and
• 16 days for persons involved with especially heavy, noxious and dangerous jobs activity or working in places with especially harsh living conditions.
The number of days of annual leave shall be increased proportionally to the period of employment in an enterprise or with an employer by one additional day for every five years of employment.
8. Compulsory Insurances
There are 3 compulsory insurances (including health, social and unemployment insurances) applicable to every employer (including FIE) and employee (excluding foreign employee) who is working at least 3 months.
8.1. Health Insurance
Both the employer and the employee must make health insurance contribution to the Social Insurance Fund. The employer will have to pay 2% of the total wage fund and the employee is required to pay 1% of his/her salary provided in the labor contract.
8.2. Social Insurance
a. Employer
The monthly contribution of employers is made as follows:
• 15% of total salary fund from Jan. 2007 to Dec. 2009.
• 16% of total salary fund from Jan. 2010 to Dec. 2011.
• 17% of total salary fund from Jan. 2012 to Dec. 2013.
• 18% of total salary fund from Jan. 2014 onwards.
b. Employees
The monthly contribution of employees is made as follows:
• 5% of her/his salary from Jan. 2007 to Dec. 2009.
• 6% of her/his salary from Jan. 2010 to Dec. 2011.
• 7% of her/his salary from Jan. 2012 to Dec. 2013.
• 8% of her/his salary from Jan. 2014 onwards.
8.3. Unemployment Insurance
Unemployment insurance shall apply to (i) employees who are working in an enterprise with an indefinite term or a term lasting between 12 and 36 months, and (ii) employer who recruits 10 employees or more. The contribution is made as follows:
• Employee: 1% of his/her monthly salary provided in the labor contract;
• Employer: 1% of monthly salary fund.
9. Employment of Foreigners
Generally, foreign employees should be recruited for work positions intensively requiring technical or management skills. The employer is required to design a plan or program to train Vietnamese employees to replace such foreign employees.
In order to work in Vietnam, foreigners must obtain a work permit from labor authorities (i.e. the Department of Labor, War Invalids and Social Affairs of the province/city where their employer is located) prior to signing a labor contracts with their employers.
Regarding expatriates transferred within their enterprises which are operational in Vietnam, at least 20% of the total number of managers, managing directors and experts must be Vietnamese citizens.
However, a foreign-invested enterprise is allowed to employ at least 03 foreign managers, managing directors and experts.
Foreigners working for businesses, agencies, and organizations in Vietnam for 3 months or more must get work permits, except the following cases:
• Foreigners entering Vietnam to work for less than 3 months;
• Foreigners are members of a limited liability company with 2 members or more;
• A foreigner is the owner of a one-member limited liability company;
• A foreigner is the member of a joint stock company’s management board;
• Foreigners entering Vietnam to offer their services;
• Foreigners entering Vietnam to handle emergency cases; foreign lawyers have been granted job practice permits by the Vietnamese Ministry of Justice as regulated by the law.
In cases where a work permit is not required, the employer has to submit to the Province’s Department of Labor, War Invalids and Social Affairs a list of foreign workers comprising their name, age, nationality, passport number, and the starting and ending date of the job assumed by the worker. This list shall be submitted 7 days prior to the starting work date.
The employer must apply for a work permit for its foreigner employees at the Province’s Department of Labor, War Invalids and Social Affairs or any of the authorized EPs and IZs Authority.
After obtaining a work permit, the employer must sign a labor contract in writing with the employee (not including foreign workers assigned by the foreign party to work in Vietnam) and send a copy thereof to the authority that has issued the work permit.
The work permit has the same duration as that of the labor contract to be signed or of job assignment from the parent company but in any case, the period should not exceed 36 months and may be renewed.
10. Minimum Salary
Vietnamese law regulates a minimum salary of Vietnamese employees who are working for FIEs. Therefore, the minimum salary for an employee working in such enterprises must not be less than:
• VN$1,200,000 per month (equivalent to US$70) is applicable to businesses operating in inner districts of Ho Chi Minh City and Hanoi.
• VN$1,080,000 per month (equivalent to US$63) is applicable to businesses operating in suburban districts of Hanoi and Ho Chi Minh City; inner districts of Hai Phong City, Ha Long City of Quang Ninh Province, Bien Hoa City of Dong Nai Province; Vung Tau City of Ba Ria-Vung Tau Province; Thu Dau Mot Town and district of Thuan An, Di An, Ben Cat and Tan Uyen of Binh Duong Province.
• VN$950,000 per month (equivalent to US$56) is applicable to businesses operating in remain suburban districts of Hanoi; Bac Ninh, Bac Giang, Hung Yen, Hai Duong, Vinh Phuc, Hai Phong, Quang Ninh; Da Lat city, Bao Loc town of Lam Dong province; Nha Trang city , Cam Ranh town of Khanh Hoa province; Trang Bang town of Tay Ninh province; remain towns of Binh Duong province, Dong Nai; Tan An, Duc Hoa, Ben Luc, Can Duoc of Long An province; remaining towns of Can Tho city; Ba Ria, Chau Duc, Long Dien, Dat Do, Xuyen Moc of Ba Ria - Vung Tau.
• VN$920,000 (equivalent to US$54) is applicable to businesses operating in the remaining areas.
In addition, the minimum salary for skilled employees (including employees are trained by enterprises) must be 7% or more higher than the minimum salary as provided in 3 items above.
-ITPC
PROCEDURES FOR SETTING UP A FOREIGN-INVESTED ENTERPRISE IN VIETNAM
1. Investment Certificate
For first time foreign investors must have an investment project before being granted an investment certificate. The investment certificate also serves as the business registration certificate. The investment certificate shall be issued as part of the investment registration and/or evaluation processes based on (i) the type of project, (ii) the scale of invested capital and (iii) whether such project is in a conditional investment sectors as mentioned in Section 1.1 of Part "Overview of investment in Vietnam".
The investment certificate for foreign invested project will have a fixed term not longer than 50 years, which by law may be extended up to 70 years with the approval of the Government.
The investment certificate will set out the specific scope of business activities that a foreign investor is permitted to undertake in Vietnam, the amount of investment capital, the location and the land area to be used, and the relevant incentives (if any). The investment certificate must also indicate the project implementation schedule for the investment.
2. Procedures
The licensing authority shall issue an investment certificate within a time limit of 15 working days (for cases of a foreign project subject to the registration process) or 30 working days (for cases of a foreign project subject to the evaluation process) from the date of receipt of a complete and valid application.
The registration process applies to a foreign-invested project with invested capital of less than VND300 billion and is not included in the list of conditional business sector. The evaluation process applies to the two following cases:
• Foreign projects with capital of at least VND300 billion: the evaluation process will in substance focus on the project’s compliance with the applicable infrastructure master plan, land use master plan and the master plan for raw materials and other natural resources. Other factors to be considered include land use requirements, project implementation schedule and environmental impact.
• Foreign projects included in the list of conditional business sectors as mentioned in Section 1.2 of Part "Overview of investment in Vietnam" regardless of the scale of the invested capital: The evaluation process will focus on compliance with applicable sector conditions. If the project has capital exceeding VND 300 billion other factors as discussed above shall also be considered.
3. Licensing Authority
The licensing authority is further decentralized to provincial people’s committees and provincial boards of management of industrial zones, export processing zones and hi-tech zones (“Board of Management”). With respect to certain important or sensitive business sectors, the grant of investment certificate by a provincial people’s committee or a Board of Management must be based on an investment policy or economic plan that has already been approved by the Prime Minister.
a. Prime Minister’s Approval
The following projects are required to be obtained the approval on the investment policy from the Prime Minister:
(i) Construction and commercial operation of airports; air transportation;
(ii) Construction and commercial operation of national sea ports;
(iii) Exploration, production and processing of petroleum; exploration and mining of minerals;
(iv) Radio and television broadcasting;
(v) Commercial operation of casinos;
(vi) Production of cigarettes;
(vii) Establishment of university training establishments;
(viii) Establishment of industrial zones, export processing zones, high-tech zones and economic zones.
If any of these projects listed above are already included in an economic plan approved by the Prime Minister and are consistent with the conditions in an international treaty to which Vietnam is a signatory, the provincial people’s committee or the Board of Management can proceed to grant the investment certificate without obtaining a separate approval from the Prime Minister. If any of these projects are not included in an economic plan approved by the Prime Minister or does not meet conditions of an international treaty to which Vietnam is a signatory, the provincial people’s committee or the Board of Management must obtain approval from the Prime Minister prior to the grant of the investment certificate and concurrently coordinate with the MPI and other ministries to propose to the Prime Minister to decide on any supplement or adjustment to the economic plan.
b. Provincial People’s Committee
The provincial people’s committee has the authority to consider and grant an investment certificate to any investment project within its provincial territory regardless of the amount of investment capital or intended investment activities. In particular, a provincial people’s committee is authorized to license:
• Investment projects located outside industrial zones, export processing zones and high-tech zones; and
• Investment projects to develop infrastructure for industrial zones, export processing zones and high-tech zones where the Board of Management in that province has not been established.
The provincial Department of Planning and Investment is responsible for receiving application documents for investment certificates for and on behalf of the relevant people’s committees.
c. Board of Management
The Board of Management will consider and grant investment certificates to investment projects made in an industrial zone, export processing zone and high-tech zone.
- ITPC
For first time foreign investors must have an investment project before being granted an investment certificate. The investment certificate also serves as the business registration certificate. The investment certificate shall be issued as part of the investment registration and/or evaluation processes based on (i) the type of project, (ii) the scale of invested capital and (iii) whether such project is in a conditional investment sectors as mentioned in Section 1.1 of Part "Overview of investment in Vietnam".
The investment certificate for foreign invested project will have a fixed term not longer than 50 years, which by law may be extended up to 70 years with the approval of the Government.
The investment certificate will set out the specific scope of business activities that a foreign investor is permitted to undertake in Vietnam, the amount of investment capital, the location and the land area to be used, and the relevant incentives (if any). The investment certificate must also indicate the project implementation schedule for the investment.
2. Procedures
The licensing authority shall issue an investment certificate within a time limit of 15 working days (for cases of a foreign project subject to the registration process) or 30 working days (for cases of a foreign project subject to the evaluation process) from the date of receipt of a complete and valid application.
The registration process applies to a foreign-invested project with invested capital of less than VND300 billion and is not included in the list of conditional business sector. The evaluation process applies to the two following cases:
• Foreign projects with capital of at least VND300 billion: the evaluation process will in substance focus on the project’s compliance with the applicable infrastructure master plan, land use master plan and the master plan for raw materials and other natural resources. Other factors to be considered include land use requirements, project implementation schedule and environmental impact.
• Foreign projects included in the list of conditional business sectors as mentioned in Section 1.2 of Part "Overview of investment in Vietnam" regardless of the scale of the invested capital: The evaluation process will focus on compliance with applicable sector conditions. If the project has capital exceeding VND 300 billion other factors as discussed above shall also be considered.
3. Licensing Authority
The licensing authority is further decentralized to provincial people’s committees and provincial boards of management of industrial zones, export processing zones and hi-tech zones (“Board of Management”). With respect to certain important or sensitive business sectors, the grant of investment certificate by a provincial people’s committee or a Board of Management must be based on an investment policy or economic plan that has already been approved by the Prime Minister.
a. Prime Minister’s Approval
The following projects are required to be obtained the approval on the investment policy from the Prime Minister:
(i) Construction and commercial operation of airports; air transportation;
(ii) Construction and commercial operation of national sea ports;
(iii) Exploration, production and processing of petroleum; exploration and mining of minerals;
(iv) Radio and television broadcasting;
(v) Commercial operation of casinos;
(vi) Production of cigarettes;
(vii) Establishment of university training establishments;
(viii) Establishment of industrial zones, export processing zones, high-tech zones and economic zones.
If any of these projects listed above are already included in an economic plan approved by the Prime Minister and are consistent with the conditions in an international treaty to which Vietnam is a signatory, the provincial people’s committee or the Board of Management can proceed to grant the investment certificate without obtaining a separate approval from the Prime Minister. If any of these projects are not included in an economic plan approved by the Prime Minister or does not meet conditions of an international treaty to which Vietnam is a signatory, the provincial people’s committee or the Board of Management must obtain approval from the Prime Minister prior to the grant of the investment certificate and concurrently coordinate with the MPI and other ministries to propose to the Prime Minister to decide on any supplement or adjustment to the economic plan.
b. Provincial People’s Committee
The provincial people’s committee has the authority to consider and grant an investment certificate to any investment project within its provincial territory regardless of the amount of investment capital or intended investment activities. In particular, a provincial people’s committee is authorized to license:
• Investment projects located outside industrial zones, export processing zones and high-tech zones; and
• Investment projects to develop infrastructure for industrial zones, export processing zones and high-tech zones where the Board of Management in that province has not been established.
The provincial Department of Planning and Investment is responsible for receiving application documents for investment certificates for and on behalf of the relevant people’s committees.
c. Board of Management
The Board of Management will consider and grant investment certificates to investment projects made in an industrial zone, export processing zone and high-tech zone.
- ITPC
Wednesday, March 4, 2009
VN exchanges continue to slide with no end in sight
(21-02-2009)
HA NOI — The HCM City Stock Exchange turned in its sixth consecutive day of declines yesterday, with the VN-Index closing off another 0.89 per cent to 252.57 points.
Trading volume topped 7.6 million shares, with a total value of VND138 billion (US$7.8 million). Losers outnumbered advancers by 86 to 58.
Of active shares, Phu My Fertilisers (DPM), PetroVietnam Drilling (PVD) and Vinpearl Tourism and Trading Co (VPL) all managed gains on the day, while others tended to decline. Vincom hit its floor price.
Cable and Telecommunications Materials Co (SAM) was the most active share on the day, with 620,000, nearly matched by Sacombank (STB).
Penny stocks such as Bien Hoa Sugar (BHS), Binh Trieu Construction and Engineering (BTC), Viet-Han Corporation (VHG) and Sai Gon Beverages (Tri) picked up value, keeping the VN-Index from declining further.
Hoang Thach Lan of SME Securities Co said VN-Index could continue to decline to as low as 220 points, depending on the state of the economy.
Long-term investors needed to be patient, choose safe shares and keep a close eye on market changes before making any decision to buy, Lan said.
In Ha Noi, the HASTC-Index hit a new all-time law, as it dropped 1.07 points to close at 84.2. About 4.3 million shares were traded with a total value of VND62.8 billion ($3.5 million), up in volume but down in value from Wednesday’s session.
— VNS
HA NOI — The HCM City Stock Exchange turned in its sixth consecutive day of declines yesterday, with the VN-Index closing off another 0.89 per cent to 252.57 points.
Trading volume topped 7.6 million shares, with a total value of VND138 billion (US$7.8 million). Losers outnumbered advancers by 86 to 58.
Of active shares, Phu My Fertilisers (DPM), PetroVietnam Drilling (PVD) and Vinpearl Tourism and Trading Co (VPL) all managed gains on the day, while others tended to decline. Vincom hit its floor price.
Cable and Telecommunications Materials Co (SAM) was the most active share on the day, with 620,000, nearly matched by Sacombank (STB).
Penny stocks such as Bien Hoa Sugar (BHS), Binh Trieu Construction and Engineering (BTC), Viet-Han Corporation (VHG) and Sai Gon Beverages (Tri) picked up value, keeping the VN-Index from declining further.
Hoang Thach Lan of SME Securities Co said VN-Index could continue to decline to as low as 220 points, depending on the state of the economy.
Long-term investors needed to be patient, choose safe shares and keep a close eye on market changes before making any decision to buy, Lan said.
In Ha Noi, the HASTC-Index hit a new all-time law, as it dropped 1.07 points to close at 84.2. About 4.3 million shares were traded with a total value of VND62.8 billion ($3.5 million), up in volume but down in value from Wednesday’s session.
— VNS
Vietnam's Garment And Textile Industry: Abundance Of Opportunities!
Vietnam is one of the top 10 garment exporters in the world and the garment and textile industry is the country’s second largest in terms of foreign exchange earnings.
The rise in exports has been quite dramatic since the turn of the century. The export value has increased from $1.9 billion in 2000 to $7.8 billion in 2007. The early figures for 2008 show increasing volumes and values, particularly to the United States which is Vietnam’s largest single export market for garments and textiles, accounting for approximately 54 per cent of Vietnam’s garment exports.
Total industry exports for the year are expected to be greater than $9 billion. Some industry experts predict that exports in this sector will reach $25 billion by 2020.
In addition to being a highly significant contributor to export earnings, the garment and textile sector employs around two million people, of whom 80 per cent are female, many are migrants from the poorer rural provinces. As migrant workers are often responsible for supporting extended families in the countryside, there are potentially millions of lives dependent on the sector’s performance. Significant changes in the sector can have major social impact.
Recent data (2006) from the Ho Chi Minh City Association of Garments, Textiles, Embroidery and Knitting (Agtek) and the Vietnam Textile and Apparel Association (Vitas) indicate that there are around 2,000 garment and textile enterprises in Vietnam, including 50 state-owned enterprises (SOEs), 1,400 private enterprises and 450 foreign direct-investment (FDI) enterprises.
Of these, approximately 1,100 companies, including some 200 foreign-invested companies, are based in and around Ho Chi Minh City. Out of 2,000 companies, 1,280 are garment enterprises, 120 are spinning companies, 340 are textile ventures, and the remaining 260 are commerce and service businesses.
The state still plays an important role in the textile sector through its share in the Vinatex group and other SOEs whilst the garment sector has become an increasingly private sector-based industry as SOEs equitise and foreign companies increase their investments.
However, whilst the sector may be large and significant in many ways, the ‘value added’ of the garment industry is low as most raw materials such as fibres, yarns, fabrics and garment accessories are imported. In 2006, fabric imports were worth $2,954 million. Most of the imported textiles have been re-exported as garments.
Buyers from a number of the world’s leading textile and apparel companies have sourced apparel from Vietnam including Express, Hucke, Itochu, JC Penney, Jupitar, Kmart, Kowa, Lee Cooper, Li & Fung, Mast Industries, Nichimen, Nissho Iwai, Otto, Sara Lee, Seidensticker, Sumitomo, Tomen, Tommy Hilfiger, Victoria’s Secret, and Wal-Mart. However, the proportion of domestic inputs in final products is still low. In the textile industry, domestic inputs make up only 10 to 15 per cent of total inputs, while the ratio is around 30 per cent in the garment industry.
The government has a clear strategy of increasing the supply of domestically produced inputs such as raw cotton, yarns, fabrics and garment accessories. Its overall aim is to reduce import content to less than 25 per cent by 2010. Investment in modern machinery has soared in recent years, demonstrating convincingly the move towards modern textile manufacturing technology.
The majority of textile and garment exports are destined for the US, followed by the EU and Japan. The increase in export revenue is the result of Vietnam’s integration into the global supply chain in line with the shift in sourcing by retailers from high labour cost centres to low labour cost centres. According to research by PricewaterhouseCoopers, Vietnam ranks amongst the most attractive manufacturing locations, not only in Asia but in the whole world.
Export markets for Vietnam’s textiles and garments
In 2007, the US represented 58 per cent of Vietnam’s textile and garment exports, growing at a Compound Annual Growth Rate (CAGR) of 23 per cent during the 2003-2007 period. The European Union and Japan represented 19 per cent and 9 per cent of the exports, growing at a CAGR of 27 per cent and 8 per cent respectively. Germany and the UK are two largest markets in the EU.
The markets are different. The US buyers often require large orders (over 100,000 pieces per order), the EU buyers are looking for small or medium orders (thousands to ten thousands of pieces per order). China is the biggest exporter to the US as it has many large-scale manufacturing facilities capable of producing large orders with significant economies of scale. The US was the toughest in terms of applying quotas and anti-dumping tariffs to exporters, and implemented a monitoring system when the quotas were abolished. The economic recession in the US may result in slowing the growth of exports to the US and, hence, total exports this year.
In the EU market, Vietnam faces increased competition from Eastern Europe, which, although wages are higher than in Asian countries, has no import tax within the EU, has strong design capabilities, allows for fast delivery and has much lower transportation costs.
How much value is added by Vietnamese garment exporters?
Of the $7.8 billion export value in 2007, $6 billion was spent on raw materials. Most exports by the biggest Vietnamese exporters (Vinatex, Viettien, Thanh Cong, 10 Garment and Nha Be) are CMT (Cut-Made-Trim) products, with insignificant contribution by Vietnamese-branded products.
CMT (Cut-Made-Trim) refers to a production practice whereby the buyers, buying agents and buying offices provide Vietnamese firms with all inputs for design, materials and transportation arrangements, while Vietnamese garment manufacturers only cut, make and trim. CMT is the simplest production practice for export and only requires manufacturing capacity and a little designing capacity in making counter-samples.
The CMT production modality allows Vietnamese garment producers to strengthen their operational capacity without committing scarce financial resources or encountering exposure to market risks. Substantial room to improve product quality and delivery conditions exists even under the CMT modality. While Vietnam currently is competitive in the production of garments, productivity of CMT is still low by international standards primarily due to inadequate management practices. Customers for CMT business are usually intermediary agents based in South East Asian countries and territories such as Hong Kong, Taiwan, Korea and Thailand.
Garment exports are a key element of the export strategies of many emerging economies, including Vietnam. In all cases garment exports started with CMT types of business (a model of work often driven by a lack of available working capital) and a plan to move away from CMT to various levels of Freight On Board (FOB) manufacturing within a five-year period. However, most Vietnamese garment manufacturers (93.6 per cent) are still involved in the CMT or other low value-added operating models where fabric suppliers are appointed by multinational retailers or foreign customers, as they want to ensure the use of the right fabric, consistent quality and timely delivery – demands which cannot be met by Vietnam’s manufacturers.
There are only a few companies working at FOB levels which are successfully exporting to developed markets. In general, they are either foreign or foreign-invested companies. Successful FOB companies also tend to be larger organisations or micro-companies driven by owner-designers. In the highest value adding operating model (called FOB 3), companies produce garments based on their own designs and are responsible for all input elements. This model requires skills and experience that are not normally prevalent in Vietnamese garment companies.
Domestic companies find moving to FOB 3 level particularly difficult as they lack design and branding capacity and have little experience in the international sourcing of appropriate materials. There are, of course, some major exceptions which are successful in ‘designing’ and production for the domestic market, including Saigon 2, Nhat Tan and Hanosimex. These brands tend to be targeted at the low to medium-end of the market, although Viet Tien also has higher-end brands, San Sciaro for men and T-T Up for women, some of which are designed by design consultants rather than a fully skilled, full-time, in-house design team employed by the company.
Other key challenges and opportunities for the industry?
Operating margin squeeze and declining profitability are other key issues facing Vietnamese garment manufacturers. The following trends contributed to declining profitability. The increasing costs of labour as a result of repeated increases in the minimum wage in line with continuing GDP growth, increasing costs of raw materials and utilities as a result of increasing oil prices and inflation; increasing costs of financing due to the increased interest rates brought in by the government to fight inflation and revenue reduction due to the depreciation of the US dollar.
According to an official from Agtek, many Vietnamese garment producers are reconsidering the future potential of their industry. An estimated 50 per cent of Agtek members have no plans to expand their operations, while 20 per cent want to slash garment production.
Currently 65 per cent of the domestic production of garments is intended for foreign buyers. Facing increasing competition in the global market, Vietnamese garment companies are now shifting their focus from conquering export markets to the domestic market, realising that they had ignored and thereby missed local opportunities for many years.
Garment imports increased by 30 per cent in 2007 as a result of the tax cuts on clothing imports implemented as part of Vietnam’s WTO commitments. Most competition was from cheap and deluxe garments from China, Thailand, Malaysia, South Korea and Singapore. More competition is expected in 2009, when the retail industry will be deregulated and global retailers are expected to enter the market en masse, importing branded garments manufactured in other Asian countries.
As mentioned earlier, the garment companies in Vietnam rely heavily on imports, reducing the flexibility and competitiveness of Vietnam’s garment industry. It is clear that domestic garment manufacturers would prefer to source fabric locally if it met their specifications. It is this unsatisfied demand from the local garment producers that provides an opportunity for domestic textile companies to upgrade their manufacturing capacity and target the large domestic market.
While Vietnam’s garment technology is not far from international standard, 30 per cent of textile equipment is 20 years behind, according to industry experts, requiring massive capital investment if domestic textile manufacturers want to become internationally competitive. Hence, the majority of future investments are intended for the textile, rather than the garment sector.
While the government plans to invest around $3 billion in developing the textile and garment sector during the run-up to 2010, Vinatex plans to invest an additional $1 billion to develop its production and distribution systems, fashion design and infrastructure. Vinatex, together with the Vietnamese petroleum giant, PetroVietnam, has already commenced building a $200 million synthetic fibre plant in northern Haiphong, a port city. The plant would initially produce 500 tonnes per day, aiming to provide a spectacular 40 per cent of the materials for domestic yarn production by 2011.
Vietnamese government efforts to increase domestic production of fibre have also resulted in an increase in foreign investment in this sector. Taiwan’s Formosa Chemicals and Fibre Corporation, for example, has invested $309 million in expanding its textile base in Vietnam. It is aiming to add nylon fibre and yarn production – which is, in turn, expected to attract Taiwanese downstream textile manufacturers to form a production cluster.
Phong Phu and International Textile Group (Burlington Worldwide) have also entered into a $80 million joint venture to build a state-of-the-art cotton manufacturing complex in Danang. A local textile manufacturer that can produce high-quality fabric acceptable to foreign buyers of Vietnamese-produced garments will have a huge domestic customer base to serve.
Such companies need to have a strategy to identify their target markets and to initiate and develop long term co-operative relations with domestic customers. They should also cultivate importers’ confidence in their products by upgrading quality, improving client contact, reducing delivery times and becoming more transparent in terms of labour and environmental practices.
- Zoya Vassilieva is a director at PricewaterhouseCoopers, leading its strategy practice in Thailand and Vietnam. She welcomes your comments and questions at zoya.vassilieva@th.pwc.com
Source: Vietnam Investment Review
The rise in exports has been quite dramatic since the turn of the century. The export value has increased from $1.9 billion in 2000 to $7.8 billion in 2007. The early figures for 2008 show increasing volumes and values, particularly to the United States which is Vietnam’s largest single export market for garments and textiles, accounting for approximately 54 per cent of Vietnam’s garment exports.
Total industry exports for the year are expected to be greater than $9 billion. Some industry experts predict that exports in this sector will reach $25 billion by 2020.
In addition to being a highly significant contributor to export earnings, the garment and textile sector employs around two million people, of whom 80 per cent are female, many are migrants from the poorer rural provinces. As migrant workers are often responsible for supporting extended families in the countryside, there are potentially millions of lives dependent on the sector’s performance. Significant changes in the sector can have major social impact.
Recent data (2006) from the Ho Chi Minh City Association of Garments, Textiles, Embroidery and Knitting (Agtek) and the Vietnam Textile and Apparel Association (Vitas) indicate that there are around 2,000 garment and textile enterprises in Vietnam, including 50 state-owned enterprises (SOEs), 1,400 private enterprises and 450 foreign direct-investment (FDI) enterprises.
Of these, approximately 1,100 companies, including some 200 foreign-invested companies, are based in and around Ho Chi Minh City. Out of 2,000 companies, 1,280 are garment enterprises, 120 are spinning companies, 340 are textile ventures, and the remaining 260 are commerce and service businesses.
The state still plays an important role in the textile sector through its share in the Vinatex group and other SOEs whilst the garment sector has become an increasingly private sector-based industry as SOEs equitise and foreign companies increase their investments.
However, whilst the sector may be large and significant in many ways, the ‘value added’ of the garment industry is low as most raw materials such as fibres, yarns, fabrics and garment accessories are imported. In 2006, fabric imports were worth $2,954 million. Most of the imported textiles have been re-exported as garments.
Buyers from a number of the world’s leading textile and apparel companies have sourced apparel from Vietnam including Express, Hucke, Itochu, JC Penney, Jupitar, Kmart, Kowa, Lee Cooper, Li & Fung, Mast Industries, Nichimen, Nissho Iwai, Otto, Sara Lee, Seidensticker, Sumitomo, Tomen, Tommy Hilfiger, Victoria’s Secret, and Wal-Mart. However, the proportion of domestic inputs in final products is still low. In the textile industry, domestic inputs make up only 10 to 15 per cent of total inputs, while the ratio is around 30 per cent in the garment industry.
The government has a clear strategy of increasing the supply of domestically produced inputs such as raw cotton, yarns, fabrics and garment accessories. Its overall aim is to reduce import content to less than 25 per cent by 2010. Investment in modern machinery has soared in recent years, demonstrating convincingly the move towards modern textile manufacturing technology.
The majority of textile and garment exports are destined for the US, followed by the EU and Japan. The increase in export revenue is the result of Vietnam’s integration into the global supply chain in line with the shift in sourcing by retailers from high labour cost centres to low labour cost centres. According to research by PricewaterhouseCoopers, Vietnam ranks amongst the most attractive manufacturing locations, not only in Asia but in the whole world.
Export markets for Vietnam’s textiles and garments
In 2007, the US represented 58 per cent of Vietnam’s textile and garment exports, growing at a Compound Annual Growth Rate (CAGR) of 23 per cent during the 2003-2007 period. The European Union and Japan represented 19 per cent and 9 per cent of the exports, growing at a CAGR of 27 per cent and 8 per cent respectively. Germany and the UK are two largest markets in the EU.
The markets are different. The US buyers often require large orders (over 100,000 pieces per order), the EU buyers are looking for small or medium orders (thousands to ten thousands of pieces per order). China is the biggest exporter to the US as it has many large-scale manufacturing facilities capable of producing large orders with significant economies of scale. The US was the toughest in terms of applying quotas and anti-dumping tariffs to exporters, and implemented a monitoring system when the quotas were abolished. The economic recession in the US may result in slowing the growth of exports to the US and, hence, total exports this year.
In the EU market, Vietnam faces increased competition from Eastern Europe, which, although wages are higher than in Asian countries, has no import tax within the EU, has strong design capabilities, allows for fast delivery and has much lower transportation costs.
How much value is added by Vietnamese garment exporters?
Of the $7.8 billion export value in 2007, $6 billion was spent on raw materials. Most exports by the biggest Vietnamese exporters (Vinatex, Viettien, Thanh Cong, 10 Garment and Nha Be) are CMT (Cut-Made-Trim) products, with insignificant contribution by Vietnamese-branded products.
CMT (Cut-Made-Trim) refers to a production practice whereby the buyers, buying agents and buying offices provide Vietnamese firms with all inputs for design, materials and transportation arrangements, while Vietnamese garment manufacturers only cut, make and trim. CMT is the simplest production practice for export and only requires manufacturing capacity and a little designing capacity in making counter-samples.
The CMT production modality allows Vietnamese garment producers to strengthen their operational capacity without committing scarce financial resources or encountering exposure to market risks. Substantial room to improve product quality and delivery conditions exists even under the CMT modality. While Vietnam currently is competitive in the production of garments, productivity of CMT is still low by international standards primarily due to inadequate management practices. Customers for CMT business are usually intermediary agents based in South East Asian countries and territories such as Hong Kong, Taiwan, Korea and Thailand.
Garment exports are a key element of the export strategies of many emerging economies, including Vietnam. In all cases garment exports started with CMT types of business (a model of work often driven by a lack of available working capital) and a plan to move away from CMT to various levels of Freight On Board (FOB) manufacturing within a five-year period. However, most Vietnamese garment manufacturers (93.6 per cent) are still involved in the CMT or other low value-added operating models where fabric suppliers are appointed by multinational retailers or foreign customers, as they want to ensure the use of the right fabric, consistent quality and timely delivery – demands which cannot be met by Vietnam’s manufacturers.
There are only a few companies working at FOB levels which are successfully exporting to developed markets. In general, they are either foreign or foreign-invested companies. Successful FOB companies also tend to be larger organisations or micro-companies driven by owner-designers. In the highest value adding operating model (called FOB 3), companies produce garments based on their own designs and are responsible for all input elements. This model requires skills and experience that are not normally prevalent in Vietnamese garment companies.
Domestic companies find moving to FOB 3 level particularly difficult as they lack design and branding capacity and have little experience in the international sourcing of appropriate materials. There are, of course, some major exceptions which are successful in ‘designing’ and production for the domestic market, including Saigon 2, Nhat Tan and Hanosimex. These brands tend to be targeted at the low to medium-end of the market, although Viet Tien also has higher-end brands, San Sciaro for men and T-T Up for women, some of which are designed by design consultants rather than a fully skilled, full-time, in-house design team employed by the company.
Other key challenges and opportunities for the industry?
Operating margin squeeze and declining profitability are other key issues facing Vietnamese garment manufacturers. The following trends contributed to declining profitability. The increasing costs of labour as a result of repeated increases in the minimum wage in line with continuing GDP growth, increasing costs of raw materials and utilities as a result of increasing oil prices and inflation; increasing costs of financing due to the increased interest rates brought in by the government to fight inflation and revenue reduction due to the depreciation of the US dollar.
According to an official from Agtek, many Vietnamese garment producers are reconsidering the future potential of their industry. An estimated 50 per cent of Agtek members have no plans to expand their operations, while 20 per cent want to slash garment production.
Currently 65 per cent of the domestic production of garments is intended for foreign buyers. Facing increasing competition in the global market, Vietnamese garment companies are now shifting their focus from conquering export markets to the domestic market, realising that they had ignored and thereby missed local opportunities for many years.
Garment imports increased by 30 per cent in 2007 as a result of the tax cuts on clothing imports implemented as part of Vietnam’s WTO commitments. Most competition was from cheap and deluxe garments from China, Thailand, Malaysia, South Korea and Singapore. More competition is expected in 2009, when the retail industry will be deregulated and global retailers are expected to enter the market en masse, importing branded garments manufactured in other Asian countries.
As mentioned earlier, the garment companies in Vietnam rely heavily on imports, reducing the flexibility and competitiveness of Vietnam’s garment industry. It is clear that domestic garment manufacturers would prefer to source fabric locally if it met their specifications. It is this unsatisfied demand from the local garment producers that provides an opportunity for domestic textile companies to upgrade their manufacturing capacity and target the large domestic market.
While Vietnam’s garment technology is not far from international standard, 30 per cent of textile equipment is 20 years behind, according to industry experts, requiring massive capital investment if domestic textile manufacturers want to become internationally competitive. Hence, the majority of future investments are intended for the textile, rather than the garment sector.
While the government plans to invest around $3 billion in developing the textile and garment sector during the run-up to 2010, Vinatex plans to invest an additional $1 billion to develop its production and distribution systems, fashion design and infrastructure. Vinatex, together with the Vietnamese petroleum giant, PetroVietnam, has already commenced building a $200 million synthetic fibre plant in northern Haiphong, a port city. The plant would initially produce 500 tonnes per day, aiming to provide a spectacular 40 per cent of the materials for domestic yarn production by 2011.
Vietnamese government efforts to increase domestic production of fibre have also resulted in an increase in foreign investment in this sector. Taiwan’s Formosa Chemicals and Fibre Corporation, for example, has invested $309 million in expanding its textile base in Vietnam. It is aiming to add nylon fibre and yarn production – which is, in turn, expected to attract Taiwanese downstream textile manufacturers to form a production cluster.
Phong Phu and International Textile Group (Burlington Worldwide) have also entered into a $80 million joint venture to build a state-of-the-art cotton manufacturing complex in Danang. A local textile manufacturer that can produce high-quality fabric acceptable to foreign buyers of Vietnamese-produced garments will have a huge domestic customer base to serve.
Such companies need to have a strategy to identify their target markets and to initiate and develop long term co-operative relations with domestic customers. They should also cultivate importers’ confidence in their products by upgrading quality, improving client contact, reducing delivery times and becoming more transparent in terms of labour and environmental practices.
- Zoya Vassilieva is a director at PricewaterhouseCoopers, leading its strategy practice in Thailand and Vietnam. She welcomes your comments and questions at zoya.vassilieva@th.pwc.com
Source: Vietnam Investment Review
Importers: Procedures For Effective Importation From Vietnam (2)
LOGISTICSImport Logistics
1. Banking and Finance
Credit institutions operating and existing in Vietnam include state owned banks, commercial, investment and development banks, joint-stock or share holding banks, branches or representative offices of overseas banks, and finance companies. All transactions in foreign currency (trading, lending and transferring) must be carried out through credit institutions licensed to operate in Vietnam.
2. Transport and shipping
A number of highway, bridge and tunnel infrastructure developments have been planned to start and be completed between 2007 and 2010. International ports and related infrastructure projects will allow the cost efficient and timely export of containerized cargo.
2.1. Waterway
Vietnam has 3,260km coastline has 126 ports; of which 24 handle ocean cargo.
Vietnam has no deep water port facilities in the country; currently we only offer smaller feeder ships of less than 25,000 deadweight tones (approximately 1,600TEU Twenty-Foot Equivalent Unit for container ships). Ho Chi Minh City, Hai Phong, Cai Lan, Qui Nhon and Da Nang ports have regular weekly container services by all leading shipping companies.
Ho Chi Minh City, through which more than 70 percent of Vietnam’s container throughput passes, is a critical gateway for both imports and exports.
Mekong Delta area has many potential to develop container transportation with good conditions of the river system. Inland Water transportation is constantly growing and expands from HCMC to other areas in Mekong Delta, Dong Nai and Cambodia in coming years.
2.2. Roads and Railway
Vietnam has 3,260 km railway and 177,300 km road. Vietnam shares borders with Laos, Cambodia and China, making it easier to establish a multimodal logistics chain.
2.3. Airway
Vietnam has 3 international airports & 18 domestic airports
The country’s 21 airports are operated by the Civil Aviation Administration of Vietnam (CAVV). To meet growing needs, the Government plans to develop a total of 18 domestic and six international airports by 2015, at an estimated cost of US$7.2 billion.
The earlier development of the new international airport at Long Thanh in the province of Dong Nai next to Ho Chi Minh City will bring about much needed additional capacity.
2.4. Freight services
Statistics from the Vietnam Freight Forwarders Association showed there were about 900 goods transport businesses in the country with an average registered capital of VND1.5 billion (US$90,500) each. About 80 percent of those businesses were private companies, some of which have limited capital of VND300 million to VND500 million ($18,100-30,166).
Most of the Vietnamese businesses in the logistics sector do not have yet representative offices in foreign countries and thus they cannot link into the worldwide logistics network. The services they are able to provide include completing customs paperwork or renting warehouses for international logistics providers
3. Trade support Services
There are many organizations to provide considerable general services to those doing business in the country, both Vietnamese and foreigners. To find a local partner, foreign enterprises can gain information about business network through local Chambers of Commerce and Industry associations.
The major Chamber of Commerce for Vietnamese enterprises is the Vietnam Chamber of Commerce and Industry (VCCI), which is headquartered in Hanoi and has branches throughout Vietnam. VCCI members include state-owned enterprises (SOE’s), joint stock companies, and private firms in a variety of sectors.
In Ho Chi Minh City, the Investment & Trade Promotion Center (ITPC) can also make introductions to prospective partners. Another channel for finding a local partner is through local industry associations, since most key industries in Vietnam have formed associations. A number of private consultant companies have also developed matching services.
3.1. Dealing with trade problems
For trade dispute cases, the Vietnam International Arbitration Centre at the Vietnam Chamber of Commerce and Industry (VIAC) is the resource when foreign and Vietnamese partners seek arbitration in settling disputes.
3.2. Quality Testing
Certificates of Control, i.e. attesting to the fact that products meet necessary quality standards, are issued by the Vietnam Superintendence and Inspection Company or Vinacontrol.
Vietnam’s standards system consists of over 5,800 standards. Specific information about product specific standards may be provided by Vietnamese importers or customers. Otherwise this information can be sought from the relevant ministry or government management body responsible for the country’s standards, such as the Directorate for Standards and Quality (STAMEQ) of Ministry of Science and Technology. Vietnam’s weights and measure standards are based on the metric system. The electric current is AC 50 cycles, 220/380. The electric utility system of Vietnam is being standardized at three phases, 220/380 volts, four wires.
3.3. Intellectual Property
Patents and trademark can be protected in Vietnam since the country is a signatory of the Paris Convention and is a member of the World Intellectual Property Organisation It has acceded to the Patent Cooperation Treaty and the Madrid Agreement Concerning the International Registration of Marks, and in 2004 joined the Berne Convention
- ITPC
1. Banking and Finance
Credit institutions operating and existing in Vietnam include state owned banks, commercial, investment and development banks, joint-stock or share holding banks, branches or representative offices of overseas banks, and finance companies. All transactions in foreign currency (trading, lending and transferring) must be carried out through credit institutions licensed to operate in Vietnam.
2. Transport and shipping
A number of highway, bridge and tunnel infrastructure developments have been planned to start and be completed between 2007 and 2010. International ports and related infrastructure projects will allow the cost efficient and timely export of containerized cargo.
2.1. Waterway
Vietnam has 3,260km coastline has 126 ports; of which 24 handle ocean cargo.
Vietnam has no deep water port facilities in the country; currently we only offer smaller feeder ships of less than 25,000 deadweight tones (approximately 1,600TEU Twenty-Foot Equivalent Unit for container ships). Ho Chi Minh City, Hai Phong, Cai Lan, Qui Nhon and Da Nang ports have regular weekly container services by all leading shipping companies.
Ho Chi Minh City, through which more than 70 percent of Vietnam’s container throughput passes, is a critical gateway for both imports and exports.
Mekong Delta area has many potential to develop container transportation with good conditions of the river system. Inland Water transportation is constantly growing and expands from HCMC to other areas in Mekong Delta, Dong Nai and Cambodia in coming years.
2.2. Roads and Railway
Vietnam has 3,260 km railway and 177,300 km road. Vietnam shares borders with Laos, Cambodia and China, making it easier to establish a multimodal logistics chain.
2.3. Airway
Vietnam has 3 international airports & 18 domestic airports
The country’s 21 airports are operated by the Civil Aviation Administration of Vietnam (CAVV). To meet growing needs, the Government plans to develop a total of 18 domestic and six international airports by 2015, at an estimated cost of US$7.2 billion.
The earlier development of the new international airport at Long Thanh in the province of Dong Nai next to Ho Chi Minh City will bring about much needed additional capacity.
2.4. Freight services
Statistics from the Vietnam Freight Forwarders Association showed there were about 900 goods transport businesses in the country with an average registered capital of VND1.5 billion (US$90,500) each. About 80 percent of those businesses were private companies, some of which have limited capital of VND300 million to VND500 million ($18,100-30,166).
Most of the Vietnamese businesses in the logistics sector do not have yet representative offices in foreign countries and thus they cannot link into the worldwide logistics network. The services they are able to provide include completing customs paperwork or renting warehouses for international logistics providers
3. Trade support Services
There are many organizations to provide considerable general services to those doing business in the country, both Vietnamese and foreigners. To find a local partner, foreign enterprises can gain information about business network through local Chambers of Commerce and Industry associations.
The major Chamber of Commerce for Vietnamese enterprises is the Vietnam Chamber of Commerce and Industry (VCCI), which is headquartered in Hanoi and has branches throughout Vietnam. VCCI members include state-owned enterprises (SOE’s), joint stock companies, and private firms in a variety of sectors.
In Ho Chi Minh City, the Investment & Trade Promotion Center (ITPC) can also make introductions to prospective partners. Another channel for finding a local partner is through local industry associations, since most key industries in Vietnam have formed associations. A number of private consultant companies have also developed matching services.
3.1. Dealing with trade problems
For trade dispute cases, the Vietnam International Arbitration Centre at the Vietnam Chamber of Commerce and Industry (VIAC) is the resource when foreign and Vietnamese partners seek arbitration in settling disputes.
3.2. Quality Testing
Certificates of Control, i.e. attesting to the fact that products meet necessary quality standards, are issued by the Vietnam Superintendence and Inspection Company or Vinacontrol.
Vietnam’s standards system consists of over 5,800 standards. Specific information about product specific standards may be provided by Vietnamese importers or customers. Otherwise this information can be sought from the relevant ministry or government management body responsible for the country’s standards, such as the Directorate for Standards and Quality (STAMEQ) of Ministry of Science and Technology. Vietnam’s weights and measure standards are based on the metric system. The electric current is AC 50 cycles, 220/380. The electric utility system of Vietnam is being standardized at three phases, 220/380 volts, four wires.
3.3. Intellectual Property
Patents and trademark can be protected in Vietnam since the country is a signatory of the Paris Convention and is a member of the World Intellectual Property Organisation It has acceded to the Patent Cooperation Treaty and the Madrid Agreement Concerning the International Registration of Marks, and in 2004 joined the Berne Convention
- ITPC
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Mr Pham Van Cong,The Head of Mission and Commercial Counsellor of Vietnam Trade Office in Nigeria,Mr Okoye O. Pius - Ceo, Piskoye Nig. Ltd, Mr Kingsley Chikezie,Sec. Gen., Importers Association of Nigeria And other members at a One day Importers Forum In Lagos.
Cross Section of Attendees Including Mr Pham Van Cong, Mr Okoye O. Pius at a One day Importers Forum organized by CBN's, Technical Committee on the Comprehensive Import supervision Scheme (CISS) in Lagos Nigeria