RECENT BUSINESS NEWS CONT.
Massive gas pipeline reaches Long
BA RIA-VUNG TAU - The pulling of the Nam Con Son gas pipeline onto
Long Hai Beach in Ba Ria-Vung Tau Province have been completed.
Upon arrival in mid June, the pipelay vessel Semac,
accompanied by a flotilla of support vessels, deployed its twelve
anchors to hold it in position while the pipeline was pulled ashore by
a 350-tonne linear winch situated on the beach.
The complete pull of the 26-inch diameter pipeline took about two
days. For the last section of the pull, the pipeline emerged from the
water through a 200m long cofferdam (a sheet piled excavation) onto
Over the last three months, construction activities on Long Hai
Beach have been aimed at bringing the pipeline ashore so it can be
connected to the onshore section of pipeline that leads to BP’s new
gas terminal at Dinh Co in Ba Ria-Vung Tau.
Before its arrival at Long Hai, the Semac had completed
283km of pipelay in 80 days, consisting of 23,708 pipe joins, each 12m
long, commencing at the Lan Tay Field in March of this year.
"Pipelay will be completed in mid-July and the first gas will
be delivered to Dinh Co Terminal in November," Will Banks,
project engineer pipeline of Nam Con Son Gas Project told Viet Nam
News during an interview at the site on Long Hai Beach last
When commissioned, the pipeline will deliver gas from BP’s Lan
Tay Field in the Nam Con Son Basin, approximately 361km from Long Hai.
Viet Nam Oil and Gas Corp. (PetroVietnam) and BP turned ground for
the Nam Con Son Pipeline Project at Dinh Co Terminal on May 31 of last
year after a prolonged period of discussions and negotiations.
The US$565 million Nam Con Son Pipeline Project will create a
pipeline for transporting gas from fields in Nam Con Son Basin, on the
continental shelf off southeastern Viet Nam, to Phu My power complex
in Ba Ria-Vung Tau Province’s Tan Thanh District.
The 399km pipeline will have a capacity of 2.7 billion cu.m per
year in the first stage of the project.
This is a joint venture between PetroVietnam (51 per cent stake),
the UK’s BP (32.67 per cent), and Norwegian Statoil (16.33 per
cent). BP is now operating the entire Nam Con Son Pipeline Project.
The pipeline is part of the larger Nam Con Son Gas Project, which
encompasses gas production, transportation and power generation.
The $1.3 billion gas project’s upstream section will produce 3
billion cu.m of gas per year from the reserves of 58 billion cubic
meters. The midstream section will produce 11.3 million cu.m of gas
per day through the terminal.
BP will invest in the 715MW Phu My Combined Cycle Plant No. 3,
known as Nam Con Son’s Power Project.
The thermal power plant will be a BOT (build-operate-transfer)
project wholly owned by BP.
A fertilizer plant will also be located near the Phu My Industrial
Complex. The gas project will enable the generation of some 12 billion
kWh of electricity per year, equivalent to 40 per cent of the current
national demand, thus reducing power shortages.
"Forecasted gas prices and the economics of the plan seem
agreeable to Vietnamese authorities, and will offer BP a fair rate of
return on its investment," said President and Director General of
BP Viet Nam Steve Walker.
"It will be several years before BP sees a return on its
investment, but we plan to provide offshore gas to Viet Nam for 30 or
40 years," Walker told Viet Nam News during the ground
breaking ceremony at Dinh Co. - VNS
US Poised to Become Top Buyer of Vietnamese Seafood
HCM CITY - The US will, before long, be the biggest market for
Vietnamese seafood, American Vice Consul General Sharon White told a
seminar in Ho Chi Minh City at the weekend.
Therefore "Vietnamese partners should pay attention to
conditions in the US," she added.
"Last year, Viet Nam exported US$85 million worth seafood to
the US, and I believe that the number will continue to increase every
year," Sharon told delegates at the third annual seminar on
exporting seafood to America.
Seafood proved the nation’s third largest revenue earner in 2001,
at $1.8 billion, an increase of 20 per cent over the previous year.
Viet Nam has set its sights on revenue of $4.5-5 billion in 2010
from seafood exports and hopes to sell 335,000 tonnes of shrimp,
300,000 tonnes of fish and 500,000 tonnes of shellfish. - VNS
Plans for Power
Electricity of Vietnam signed a contract to build the 450 MW
Phu My 4 gas-fired power plant with a consortium of Alstom (France),
Marubeni (Japan) and Lilama (Vietnam). The US$ 216-million project, to
be commissioned in 2004, will receive gas from the Nam Con Son Basin.
The tender helped reduce its cost by US$ 44 million from the original
estimate of US$ 260 million.
Between now and 2010, thirty-seven (37) power plants will be built
and expanded with a total capacity of 12,400 MW. According to
Electricity of Vietnam Corp., the number includes 22 hydropower plants
with a total capacity of 4,000 MW, 8 gas-thermal power plants with of
5,200 MW, and 7 coal fueled power plants with 3,200 MW. The new
projects will raise total generation capacity of Vietnam's power
plants to 20,500 MW by 2010, of which hydropower makes up 40%,
gas-diesel thermal power 38.5% and coal thermal power 21.4%.
US Textile Import Quotas
Deputy Minister of Trade Luong Van Tu, upon returning from a recent
market study tour of the U.S. reportedly said the U.S. seeks to
protect its textile industry while garments would face no restriction.
Tu also attended a meeting to forge a textile agreement between the
two countries last week. According to a trade official, the meeting
did not conclude a bilateral textile and garment agreement but only
discussed protective measures for the U.S. textile industry.
It was earlier reported in Vietnam that during previous trade talks
American negotiators agreed upon a quota-free period for Vietnamese
textiles and garments so that Vietnam could import relevant materials
and accessories from the U.S.
Vietnam's Bank Ratings
Fitch Ratings has given several banks in Vietnam low ratings
following a Fitch team's visit to Vietnam in April at the Government's
The company gave an E rating, the lowest ranking, to the Bank for
Investment and Development of Vietnam (BIDV) and the Industrial and
Commercial Bank. The Bank for Foreign Trade of Vietnam (Vietcombank)
was given a D rating, which is slightly higher than the other two
banks, in recognition of its superior finances and operations. The D
rating also went to Saigon Thuong Tin Bank (Sacombank), Asia
Commercial Bank (ACB) and VID Public Bank, a JV between BIDV and
Malaysia's Public Bank. Bank for Agriculture and Rural Development was
not rated because it has not been completely separated from the Bank
for the Poor.
Fitch Ratings offers A for very strong banks, B for strong banks, C
for average banks, D for banks which have weaknesses of internal
and/or external origin and E for banks with very serious problems that
According to banking experts, banks should not worry about the low
ratings as they are undergoing restructuring under the Government
plans. They can receive higher ratings after the restructuring plan is
The Finance Ministry has invited Fitch Ratings, Moody's and
Standard & Poor's to rate banks in Vietnam. Standard & Poor's
has given Vietnam a BB rating.
NOTE: The above dispatch can present a misleading impression of
strength from a BB rating absent an explanation of the Standard and
Poor’s Ratings Schedule:
AAA : The operations provide extremely strong protection against
losses from credit defaults. ‘AAA’ is the highest rating assigned
by Standard & Poor’s.
AA : The operations provide very strong protection against losses from
credit defaults. It differs from the highest-rated insurers only in
A : The operations provide strong protection against losses from
credit defaults. It is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
BBB : The operations provide adequate protection against losses from
credit defaults. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the
institution to meet its financial commitments.
Institutions rated ‘BB’, 'B', 'CCC', and 'CC' are regarded as
having significant speculative characteristics. ‘BB’ indicates the
least degree of speculation and ‘CC’ the highest. While such
institutions will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or
major exposures to adverse conditions.
BB : The operations provide uncertain protection against losses
from credit defaults. However, it faces major ongoing uncertainties
and exposure to adverse business, financial, or economic conditions
that could lead to the institution’s inadequate capacity to meet its
B : The operations exhibit vulnerability to losses from credit
defaults, but the institution currently has the capacity to meet its
financial commitments. Adverse business, financial, or economic
conditions will likely impair the institution’s capacity or
willingness to meet its financial commitments.
CCC : The operations make it extremely vulnerable to losses from
credit defaults. and is dependent upon favorable business, financial,
and economic conditions to meet its financial commitments.
CC : An institution rated 'CC' is CURRENTLY HIGHLY VULNERABLE
Plus (+) or minus (-) The ratings from ‘Aa’ to ‘CCC’ may be
modified by the addition of a plus (+) or minus (-) sign to show
relative standing within the major rating categories.
Vietnam’s Legal System - A Failure But In Good Company
Hong Kong’s Political and Economic Risk Consultancy surveyed
leading expatriates throughout the region. Their conclusion is that is
that corruption and political interference is common throughout police
and judicial systems of Asia.
"Nations with roots in the British legal system (but for the
Philippines and India) ranked high, while those graded the most
harshly are either relatively poor, under Communist control, or
both." The survey took the United States and Australia as a
Above this line Passed -- Below this line Failed
Thailand - “The failure to raise the ethics of the police force
has become a national scandal. They are undereducated, underpaid, and
a major engine of corruption. They drive around in expensive European
cars for routine work but have almost no forensic experts.”
China - “That many citizens in the public and private sectors are
willing to risk draconian penalties for crimes indicates that they do
not feel threatened about being caught or prosecuted. The judicial
system is unreliable, vulnerable to corruption, difficult to deal
with, and the ultimate authority is the Communist Party and not the
law. It is not a question of simply of changing laws, but of training
lawyers, judges, and police, and then making systematic changes to
remove the present system’s idiosyncrasies. This will take years, if
India - “The legal system has been seriously hurt by corruption
brought on by low levels of pay for the judiciary and police.”
Indonesia - “The bottom line is that Indonesia’s whole legal
system is in desperate need of an overhaul, but it is doubtful that
the present government has the will or the ability to conduct such an
Malaysia - “Of all the developing countries, throughout the
relatively controversial period [during the trial of former deputy
prime minister Anwar Ibrahim], a lot of debate over the integrity and
independence of the legal system was carried out by lawyers and judges
as an example of the checks and balances that exist in Malaysia.”
The Philippines - “Police are involved in kidnappings and
murders. People feel so insecure that some areas are said to have
established their own militias.”
Vietnam - Our source did not disclose specific comments to us, so
that must be left to our respective imaginations.
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Second Oil Refinery in the Pipeline
PetroVietnam has submitted to the Government the pre-feasibility
study for Oil Refinery No. 2. The US$2.1-billion project with an
annual capacity of 8.5 million tons of petroleum products will be
built in Thanh Hoa Province, northern Vietnam. Work is due to start in
2004 and to be completed in 2008-2010. PetroVietnam will make up 50%
of the investment capital.
The first refinery, capitalized at US$1.5 billion with annual
capacity of 6.5 million tons, is being developed in Dung Quat, Quang
The petroleum industry will spend nearly US$1.8 billion on services
this year, up US$670 million from last year. However, local service
providers will earn only less than one-third of sum due to lack of
According to PetroVietnam, survey and exploitation will take the
biggest sum, over US$1 billion, pipeline installation will need US$231
million, and construction US$510 million.
The company estimates that the industry will need US$2 billion a
year for services over the next three years. Its service enterprises
only hold a 30% share of the local oil and gas service market while
foreign suppliers control the rest. It hopes to increase the share to
45% by 2005.
Apartment Rentals in Vietnam
Are They Worth the Price? VIR reports (No. 551, p.14) that a 145
sq.m Hanoi apartment renting now for US$ 3,300 per month was able to
rent for from $6,000 to $8,000 per month before the 1997 regional
crisis (that finally hit Vietnam in 1998). While some Hanoi apartments
report occupancy rates of 80 to 90 per cent, real estate interests
complain the rates are too low.
Cited in example is the Oriental Park that rents a 40 sq. m.
apartment (actually a large closet with a window and bath) for $ 990
per month, while the Golden Lodge charges $1,000 for less space (38
sq. m). This is gross space and includes the width of the interior and
exterior walls, and public hall way access as well.
The regional slump emptied Hanoi and HCMC of foreign residents, as
the ridiculously high rents and tax on rents coupled with the absence
of international standard amenities should have years before. Add to
the picture exploitive landlord's who asked for and received 6 to 12
months advance rent, and it is a wonder there are any foreigners left
in Vietnam but for the most wealthy - who notoriously spend the least
but for rent.
Further listings in Vietnam show rents at top end Golden Lodge
running from $1,000 for a 38 sq. m "studio" to $4,000 for a
183 sq. m 4-bedroom unit. Pan Horizon offers its 40 sq. m studio at
$900 topped by it 130 sq. m 3-bedroom apartment for $2,600.
For all this the renter also suffers from (i) no international
standard public transportation, (ii) no potable water, (iii) no
live-in housekeeper's room, (iv) no free access cable TV, (v) no high
speed internet access, (vi) severe restrictions on the number of
telephone lines, (vi) no international standard movie houses and
severely restricted entertainment of other forms; (vii) and an
individual and corporate tax rate that is among the highest in the
world. Of course, there are no international standard hospitals
either, but who counts on being ill?
Contrast neighboring Bangkok where most if not all the missing
services are found at almost every high end apartment for domestic and
foreigners alike. At toney Sukhumvit 16, a Lake Avenue residence
offers a fully furnished, 82 sq. m apartment for $640 per month. The
much more posh Regent Royal overlooking the Royal Raceway offers a 128
sq. m two bedroom unit for $1,259 per month. And to beat the band, at
the upper level of the high end, in the heart of the banking district
near Satthorn and Silom, a 450 sq. m 4 bedroom 5 bathroom apartment
rents for $3,432. Are we supposed to compare or contrast spending
$3,400 in Bangkok for 450 sq. m vs. $3,300 in Hanoi for 145 sq.m?
There is no need to ask about who gains from the still
non-convertibility of the VN dong, as it is most assuredly not the
foreign resident. The question that should be asked of the business
and political leaders in Vietnam is: who beside yourselves really
believes the cost of doing business in Vietnam is worth the price you
put on foreigners?
The foreigners have clearly voted their response with their feet.
While some still in Vietnam tell us that is not being loyal, we know
that we are being both loyal (to those who have our interest as well
as their own in mind), and smart (for our and our company's account).
The State's response is less than well considered. A commission for
the Ministries of Construction (setting prices) and Finance (setting
taxes) concludes that greater central management of prices is needed
to combat inflation by allowing set prices at a limit of no
more than 20 per cent lower than current market prices.
We've not noticed that inflation is the problem, or that setting a
floor to the high existing prices will solve the present problem. One
would think that if there was to be rent control, it should be at the
upper end to prevent inflation rather than prohibiting prices to fall
to meet actual market conditions.
New Motorbike Helmets For Vietnam
It looks very much like a bicycle helmet but was conceived to meet
the needs for vanity and safety along Vietnam's major highways and
congested city streets. Endorsed by capital contribution from the
American Insurance Group, American President (shipping) Lines, British
Petroleum - Amoco, two foundations (Freeman and Starr), and two
others, following a test run of 30,000 helmets donated to pupils in
Hanoi, we hope for the best yet wonder....
The US$ 1.5 million project was spearheaded by Greg Craft, an
American entrepreneur in Vietnam for ten years who reportedly has
invested $250,000 of his own funds into the total capital. Readers may
recall that in June 2000 we reported a DRI project of his (DRI is a
feedstock used in steel mills), like so many other key projects in
Vietnam at the time, did not make it to commissioning due to
government policy changes along the long road from inception.
The new helmet does not obscure the ability of riders to chat-up
each other while driving or stopped for traffic, but will not favor
hair dos, particularly the current trend towards gels. These are
important concerns in fashion conscious Vietnam where the loss of
peripheral vision or covering the ears by other helmets have spelled
the death knell for earlier attempts to protect Vietnam's 3.5 million
Projected sales of from $2 million to $3 million ( 200,000 to
300,000 units at an average price of $10) would make this one of
Vietnam's most successful enterprises. What company would not want to
recoup twice its total investment capital in the first year of
If the company charter does in fact call for this to be a not-for
profit organization, no one said such companies can't pay out good
salaries, even to advisors.
As concerns acceptability, we will take a more cautious look at
this project from time to time and report when this project is a bit
Success Breeds Success
Successful investors in Vietnam invest more in their own units and
as well help lure more investment into HCMC, Dong Nai, Binh Duong and
Ba Ria-Vung Tau provinces. Japanese owned Nidec Tosok Vietnam,
initially capitalized at US$ 1 million in Tan Thuan Export Processing
Zone (EPZ) in the past eight years raised its investment to US$ 20
million, and now produces computer fans and other hi-tech equipment
besides the original automotive wire.
Nidec Tosok is now adding US$ 40 million more to build a factory
making automotive gears and has invited six Japanese companies to join
it in Vietnam. Three of them-DID Electronics, Okayx and Meinan with
total registered capital of US$ 4 million-have since built factories
in Linh Trung and Tan Thuan EPZs.
Japanese industrial sewing machine producer Juki Vietnam, also in
Tan Thuan, is another example, having doubled its investment capital
from the initial US$ 4 million. It has lured Towa and Organ Nidle to
invest in Vietnam.
Dong Nai's industrial parks (IP) are seeing the same effect. Taiwan
Vina Industrial of Korea, which makes sport shoes for export, has
extended its investment capital to US$ 41 million from the US$ 23
million in 1994. It has persuaded another Korean manufacturer to
invest here and supply accessories to shoe manufacturers in Dong Nai.
Ho Nai IP in Dong Nai Province is home to 15 Taiwanese
motorcycle-part manufacturers with total investment capital of nearly
US$ 45 million, selling screws, batteries, piper, frames and bulls to
Taiwan's VMEP and Japanese bike makers. All are preparing to invest
more in equipment to raise production capacity. Hepza, the agency
overseeing the IPs and EPZs in HCMC, states, "No one can be as
persuasive as investors who have been successful in Vietnam."
Land Leases for Foreign House
The Ministry of Planning and Investment (MPI) will issue legal
documents to make official the sale of houses by foreign house
developers to Vietnamese residents and overseas Vietnamese (Viet Kieu).
It will also allow foreign-invested enterprises and foreign investors
investing for long-term in Vietnam to buy houses. Vietnam has licensed
five foreign-invested projects on building houses for sale on a pilot
basis. Upcoming legal documents will detail guidance on the business
and house prices.
Vietnam’s GDP To Top All In Region
Viet Nam is set to register the highest economic growth rate in
Asia this year, according to official government forecasts from each
country. The Vietnamese Government is forecasting growth in gross
domestic product (GDP) of up to 7.3 per cent for 2002, outpacing even
China’s official 7 per cent prediction of its own GDP growth.
India (6 per cent), the Philippines (4.3 per cent) and the Republic
of Korea (3.9 per cent) make up the remainder of the top five, well
below the pace of the leading pair.
Phu My Steel Mill Gets Green Light
The Government has approved the construction of a US$ 135 million
Phu My steel mill in Ba Ria-Vung Tau. The mill will be built over 25
ha in the province’s Phu My Industrial Zone No.1 and will have three
main components - a port with a loading capacity of one million tonnes
per year, an arch-furnace steel refinery with an annual capacity of
500,000 tonnes and a hot-rolling steel workshop with a design capacity
of 400,000 tonnes a year.
Its main products will include square steel ingot, bar steel, coil
steel and angle steel.
The mill, which is being built by the Southern Steel Company (SSC),
will be granted a sum of $57 million in preferential loans from the
State budget funds reserved for metallurgy. Meanwhile an additional
soft loan with an annual interest rate of 5.4 per cent has been
earmarked for the building of the port.
The project owner reportedly intends to launch a two-phase limited
international bidding process in the coming months for the
construction of the Dung Quat refinery and other supplementary works.