COMMENTARY

Opportunity Review - Now starting our sixth year on-line and well into our ninth year in country, we really don't have the time to reflect.  We've not ever been more busy doing the work we came to Vietnam to do: to create jobs for the people and promote their true economic independence.

As we both work and live in Vietnam, and travel out and about widely, we are able to and make a point of both seeing and noting changes as they occur.   Here are a few worth mentioning:

1.  Customs and Immigration at the HCMC Tan Son Nhat Airport not only don't seek bribes, we've seen some visitors with extra bills hidden in their passports hauled off and strip searched.  Surely they must have been seeking to bring something in illegally, said one of the officers who has seen us so often he now asks about our growing family.

Officers at some southern provincial and central offices of police authorities recently gave one person we know well reproving stares, one even wagged his finger "no" when gift envelopes were passed their way.  Even better, our friend's legitimate requests were met with a forthright and even eager effort to please, and the tasks were in fact accomplished in near record time.

The same was not the case at the district level where delays would have taken their toll until the toll was paid. 

2.  Projects that seem to take forever, do.  But that is not always bad.  Concepts need to be explored and changes are called for. This requires education; both of the investor and the licensing authority.  

One major project that's been in the developing stage for nearly six years has been vetted by provincial and central authorities..., several times.  While the provincial authorities seem perplexed, that can be explained because their administration has changed three times in the past six years. Some of the prior occupants of plush offices are now wearing stripes and sharing a cell with up to 20 others in a common jail.

Just as the project seemed dead, foreign investors began to knock on our door, we relayed this to the authorities, and lo, the project quickly found its way into the draft Provincial Master plan that will eventually receive approval from the PM.

3.  No sooner had we reported on these pages about the terrible traffic snarls due to the container port traffic leading to the premier Saigon South Project then lo, the State announced its plans to relocate the inner City ports outside the City.

We doubt there was any cause and effect. But it is a good indication that great minds think alike, and many of the great minds are with domestic Vietnamese in positions of authority.

4. Investors and buyers are ever watchful, watching even more closely, and in greater numbers.  121, 200 people visited our web site in the past 12 months, 11,111 in September alone.  The average visitor looked at two pages for more than 15 minutes; some spent more than one hour on our web site.

No one looks at VVG's web site for fun and games.  More than 75% of our web site readership comes from USA and Canada business interests.   In September alone we were able to account for: 

• 620 people who sought information about our own Cua Lap Resort Project. 

• 525 people who looked in at Economic Indicators to feel the pulse of the nation. 

• 454 people who stopped by to read some of our articles. 

• 385 people who showed enough interest in property development to read that page.  

• 301 people who dropped in to read this same page that you are now on.

We never send unsolicited mail to any of our readers or share any readership information. But we have good reason to believe these numbers are an understatement of the interest seen to be growing in Vietnam.  

Spring does seem to be in the air.

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DISPATCHES

New and Revival Hotel Projects -  Bidding is expected to start on the Park Hyatt Saigon, a 10 story hotel behind the Continental and next to the HCMC Opera House.  Licensed as a $44 million five-star venture, the skeleton has remained an eye-sore since mid 1995 when all work stopped.  The original design of the building remains unchanged to complete the 259 room hotel using a US$ 22.5 million syndicated loan for that purpose. About 95% of the building's shell is completed, leading knowledgeable sources to anticipate a mid 2003 opening if all now goes right.

A US backed consortium, American Indochina Resort,  has been granted a license to build a 100% foreign invested US$ 30 million project near Da Nang with over 100 villas and bungalows on 32 ha of Ha My Beach. The consortium is led by Indochina Capital Corporation and joined by DeMatteis International Group.  French Architect Reda Amalou has been awarded the contract to design and supervise construction, that is expected to start early in 2003.

Overall, tourism in Vietnam is growing at a 10% rate, which is expected to continue.

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Moving Saigon’s Ports? More than three million trucks go through central HCM City annually. They transport goods to and from an intricate network of ports along the Saigon River. The relocation of these ports to outlying areas is now badly needed to ease the pressure from growing traffic congestion.

The volume of goods handled by city ports in 2001 doubled to 22.5 million tons compared to the figure recorded five years earlier. Saigon Port alone saw its annual volume jump from seven million tons in 1997 to 11 million tons late last year.

According to the Maritime Department, annual volume of ports nationwide will rise 15% to 20% in the 2003-2010 period after the country integrates in the regional economy. HCM City ports will see a 14-15% increase. Given such rapid growth, roads in the city cannot insure a smooth flow of traffic to and from ports.

At a meeting with city leaders in early September, the Politburo gave the green light to a city proposal for moving ports out of inner-city areas. However the ports in question include those belonging to different ministries, thus setting the stage for potentially fierce territorial political skirmishes to follow.  

The Politburo set a rough schedule for port relocations at the meeting. Minister of Communications and Transport Dao Dinh Binh said three ports - Tan Cang Saigon, Bason and Nha Rong (part of Saigon Port) - should be relocated before 2010.

The facilities at Tan Cang Saigon and Bason Ship Yard are at the helm of the Ministry of Defense, not Binh's ministry.  However, Defense Minister Pham Van Tra agreed with this, but said time will be needed for preparatory work and that Bason cannot be relocated before 2005. 

Bason lies at the entrance to the new routes to Vung Tau and blocks relocation of the container ports now in District 4 to the port at BaRia-VungTau.  Reasons of economy and logic are often balanced off sometimes more important internal politics, even in Vietnam!

Regarding the timetable for relocation, Cuong, Chief HCMC architect, said ports that lie deep in the inner city should be relocated first. "It's best if the Tan Cang Saigon and Bason ports will be relocated over the next five years," Cuong said. If these two ports are relocated, the city will build two bridges linking the downtown with Thu Thiem, one at the Thi Nghe Canal and the other on Ton Duc Thang Street.

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Vietnam's Oldest Hotel - The Continental Hotel under Saigontourist Holding Company celebrated its 122nd anniversary on September 27, 2002, becoming Vietnam's oldest hotel.

While contrasted to Bangkok there are still few cars in downtown Saigon (thank goodness), in the late 19^th century the highest form of travel in the city was by horse-drawn carriages, particularly down the popular Catinat (now Dong Khoi), the main street in Saigon at the time.

In 1880, French architects started work on a luxury hotel there, which was to be seen as a landmark in the city's social and economic life and a milestone of the hospitality business in Saigon. The majority of the Continental Hotel's customers were French officials, high-ranking civil servants, ladies and luxury travelers who stopped by Saigon on their tours from Hong Kong to Japan or on their trips to the Angkor Temples, the world's seventh wonder.

The 1930s were the heyday of the Continental Hotel which was renovated to French standards. Only wealthy people could afford to stay at the most luxurious hotel in Saigon at that time where they could sit in the terrace enjoying the fresh air from the Saigon River, drinking wine or tea and watching traffic on Catinat Street.

The Continental is now a three-star hotel with 83 rooms, two western restaurants, a 200-plus seat conference hall, a bar and other facilities like sauna and massage. Apart from the reputation as Vietnam's oldest hotel, the Continental enjoys a prime location in downtown Saigon near the Municipal Theater and is considered a cultural landmark of the city.  See complete story at http://www.saigontimesweekly.saigonnet.vn/saigontimesweekly/data/tourism.htm

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Investment Fund Likely To Leave Vietnam - The Beta Vietnam Fund may pull all investment out of Vietnam after Indochina Asset Management Ltd. (ICAM) terminated its contract to manage the fund's assets last month and closed its rep office in HCM City.

According to a source close to the fund, the institution is putting up all of its assets in Vietnam for sale to recover capital to pay back for its shareholders before leaving the country next year.

Beta Vietnam Fund has invested US$35 million in 13 companies in Vietnam since it began operations in 1993. The portfolio includes Vinataxi, Saigon Water Park, the International Grammar School, RIM Technologies, Vietnam-Australia Steel and Dalat Golf Course, among others. The fund is marketing to offer its portfolio to another investment fund and may sell them at discount prices to recover capital soon.

It has employed Vietnam Fund Management to manage its assets when it has not been able to sell the property. Vietnam Fund Management, set up in Hong Kong in 1991, was the first foreign investment fund to set foot in Vietnam. It managed assets totaling more than US$10 million as of August this year.

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Per capita purchasing power - The purchasing power of Vietnamese people this year is expected to reach VND3.43 million ($224) per person, or VND290,000 ($18.9) per month, up 12% compared with the previous year, according to the Ministry of Trade.

The big cities take up most of this purchasing power, however. Ho Chi Minh City alone accounts for 26% of the country’s total purchasing power.

The eight biggest cities and provinces account for more than 50% while the remaining 53 provinces, where most farmers live, have less than 50% of purchasing power, or less than VND100,000 ($6.5) per month per person.

In remote mountainous areas, people spend even less at around VND50,000 ($3.26) per month. Vietnam's per capita GDP is around $440, or $2,030 per capita determined by the parity purchasing power (PPP) method.

The consumer price index has risen 0.2 per cent in September, according to the General Statistics Office (GSO), taking inflation so far this year to 3.1 percent.

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Leadership Changes At the Top (updated) - The re-election of Prime Minister Pham Van Khai is now complemented by the publication of his cabinet.  Major changes include creating a new Ministry of Internal Affairs, splitting the former Ministry of Science, Technology, and Environment into two by creating a new Ministry of Natural Resources and Environment, and upgrading the Department of Post and Telecommunications to the Ministry of the same name but with an emphasis on Information Technology and of course the Internet.

Matters worth taking note of include the substantial expansion of the authority of Deputy PM Dung, the reduction of the number of Deputy Prime Ministers from 5 to 3, and the ranking order in the list of Ministries. Seeking to find transparency where there is little or none, the order of listing often tells more than the name of their duties implies.

Prime Minister

Pham Van Khai - MPI, Finance, Justice, Internal Affairs, and State Bank report directly to him.

Deputy Prime Ministers

1. Nguyen Tan Dung - Permanent Deputy Premier + Defense, Public Security (police), State Inspections, Construction, Industry, Post & Tel, Transport, Agriculture, Natural Resources, and Environment report directly to him, in addition to SOE reform and improvements to the economic sector. Immediately before joining the Politburo and the Cabinet as their youngest member, Dung was Deputy Minister of Public Security, formerly called Interior. This is the first time we know of that so much direct authority has been placed outside of the PM's direct control and may be a further indication of Dung's growing authority.

2. Vu Khoan - Foreign Affairs, Trade, Ethnic Minorities, ODA, NGOs, and the use of foreign funds for economic development.

3. Pham Gia Khiem - Labor, Education, Health, Science & Technology, Families & Population

Ministries

1.   Defense - Minister Pham Van Tra

2.   Police (Public Security - formerly called Interior) - Minister Le Hong Anh

3.   Foreign Affairs - Minister Nguyen Dy Nien

4.  Justice - Minister Uong Chu Luu

5.   Finance - Minister Nguyen Sinh Hung

6.   Trade - Minister Truong Dinh Tuyen

7.   Labor, War Invalids, and Social Affairs - Minister Nguyen Tri Hang (Ms)

8.   Transport - Minister Dao Dinh Binh

9.   Construction - Minister Nguyen Hong Quan

10.  Fisheries - Minister Ta Quang Ngoc

11. Culture and Information - Pham Quang Nghi

12. Education and Training - Minister Nguyen Minh Hien

13. Agriculture and Rural Development - Minister Le Huy Ngo

14. Industry (includes Electricity of Vietnam) - Minister Hoang Trung Hai

15. Planning and Investment - Minister Vo Hong Phuc

16. Health - Minister Tran Thi Thung Chien (Ms)

17. State Bank - Governor Le Duc Thuy

18. Government Office - Minister Doan Manh Giao

19. Internal Affairs (new, and also called "Interior") - Minister Do Quang Trung

20. Science and Technology - Minister Hoang Van Phong

21. Ethnic Peoples - Minister Mai Ai Truc

22. Natural Resources and Environment - Minister Mai Ai Truc

23. Post and Telecommunications - Minister Do Trung Ta

24. Sports and Gymnastics - Chairman Nguyen Danh Thai

25. State Inspectorate - Chairman Quach Le Thanh

26. Population, Family, and Children -Chairman Le Thi Thu (Ms)

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Northern Resort for US$ 265 Million.  Perhaps planned and financed better than before, the era of large resort building may be coming back to Vietnam.

Singapore's  Goldsilk Investment and Vietnam's Thien Hai Company have joined and filed a license to develop the Gold Shield Entertainment City in Lao Cai, the border town near Sapa and the frontier with China. Located 340 km north from Hanoi, the project would serve both locals and tourists to the province.

Part of the challenge is the investors' plan to incorporate gaming industry aspects and operate casinos.  There are already slot machines in the province, and the presence of a second facility seems to be a growing concern.

Plans include three-star hotels, parks, a theater, an 18-hole golf course, and casinos. With the foreign investor taking a 70% interest and leaving the local company with a 30% share, we wonder about the ability of the local partner to provide more to the project than the value of "land use rights" that in the past were overstated and led to the demise of many earlier large projects.

[Our own Cua Lap Resort in Vung Tau, a five-star project in every detail, includes apartments, offices, villas, hotels, parks, as well as a marina, triple-A  golf course, and other high-end entertainment and sports facilities.  We have, to date, steered clear of a non-performing partner who provides nothing more than overvalued "rights" that are in fact only an obligation to pay rent. We will follow events up north very closely on these pages.]

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AIG sub's investment reaches $ 25 million.  Nearly two years after arriving, American International Assurance (AIA) has increased its investment capital to US$25 million.  Its priority is not just to build market share but also to build up the company to its parent company (AIG) standards:  with a strong management and a sound financial status.

AIA's premium income reached VND90 billion (about US$6 million) in the first six months of 2002, a 150% gain over the same period last year.

AIA has just established a division for developing the local Chinese market. The division will take care of potential Chinese Vietnamese policyholders through a network of Chinese agents.

AIA has so far secured 100,000 policies using 5,000 agents nationwide. The company is seeking to diversify distribution channels by selling its products through the Hongkong and Shanghai Banking Corporation (HSBC), Vietnam's Asia Commercial Joint-Stock Bank (ACB), and Vietnam Data Communications Co. (VDC).

In May, AIA Vietnam bought VND20 billion (US$1.3 million) worth of Government bonds on the country's nascent stock exchange following a necessary long-term investment plan to generate profits from its premium income.

The Association of Vietnamese Insurers (AVI) in June released a report indicating that, for the first time, AIA was catching up with foreign rivals on the domestic market. According to the report, the company's market share is growing quickly although it remains relatively small.

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Saigon South New City - After nine years of construction, the details of the Saigon South New City as a satellite of HCM City are being seen with steel in the ground. Planned to provide accommodations for Saigonese and expatriates, the Saigon South New City still has a ways to go, but definite progress is being made.

urban area. However, up to 70% of the customers have chosen the one-off payment method. Estate prices in Phu My Hung are rather high compared with average rates of land in Vietnam, but this new residential area has attracted the interest of many.

The city has been carefully zoned and designed with sound infrastructure. Customers are provided with legal documents for land-use rights and house ownership. A possible increase in estate prices is also a factor that helped early buyers to sign up with units in Phu My Hung.

An early, innovative marketing scheme allowed the first buyers to receive guaranteed buy-backs for a period of time that will return virtually all of the purchase price, less a fair rental for the time actually occupied.

  Public services and works in the Saigon South New City are attractive to customers. The Saigon South semi-public school is located on a 2-hectare plot of land in the heart of the city. Currently, 428 pupils and students there are attending classes of kindergarten, elementary and junior high school. The school was officially transferred to the management of the HCM City Service of Education and Training.

Some 100 foreign students of different nationalities are attending the Saigon South International School, which has been operational since 1997. Other schools for some foreign communities are also available in the Saigon South New City such as the Korean and Japanese schools.  

Besides new infrastructure, existing amenities include a nine-hole golf course, driving range, tennis courts, swimming pools, and a football stadium.  Other service facilities in the Saigon South New City are under construction.

The 4,647-square meter Saigon South Coop Mart will come into operation by the end of this year. The construction of the Franco-Vietnamese Hospital with 200 beds was started in September last year and will be serviceable by 2003.  

The Saigon South New City is the first large-scale urban project to be realized by Central Trading & Development Corporation of Taiwan in partnership with the Tan Thuan Industrial Promotion Corporation (IPC).

[NOTE: A challenge yet to be met by all property developers in Vietnam is to encourage the State to update its laws to allow long term visas for older retirees (those over 55 as in neighboring Thailand) who can establish their ability to support themselves from foreign income sources at foreign levels of spending. The threshold level there is US$ 4,000 a month. This must include both Vietkieu and foreigners born in other lands who wish to live here but who no longer work.  Under current laws, they are not permitted to stay beyond 90 days.

Additional challenges to be overcome  are (i) the formation of world class foreign hospitals that operate in a world class manner. These are needed to provide medical services to the over 55 foreign and VK population who will invest their retirement here; (ii) complete ending of the two-tiered price structure; and (iii) removal of import-export duty placed upon personal possessions owned by foreigner and VK long-term residents, thus permitting them the comfort of bringing their foreign-bought antiques and other high-end possession into and removing them from Vietnam when needed.]

Projects in the Saigon South New City include:

§     Apartments: (i) My Canh (200 apartments), (ii) My An (200 apartments), and (iii) Hung Vuong I (354 apartments)

§     Detached and terraced houses: My Hung (65) and My Hoang (47)

§     Plots of land (for customers to build houses): Nam Thien I, Nam Long, Hung Gia I, Hung Phuoc, My Toan and My Phuoc.

§     Works under construction:

o       My Hao: 46 detached and semi-detached houses (area ranging from 279 to 369 square meters).

o       My Phuoc Apartment Bloc: 94 apartments (98-204 square meters).

o       My Khanh I High-rise: two 13-story towers with 76 apartments.

o       My Toan I & II terraced houses: 3 or 4 story-houses.

(c) STW 2002

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Economic Outlook - The vagaries of the global economy haven't knocked Vietnam off its feet. Consumer spending and local private investment are leading a reassuring 6% GDP growth this year and perhaps 6.6% next year, although more conservative economists revise that figure downward to roughly 5.2% for 2002.

Signs of the dynamic domestic climate include a busy construction industry. Cement sales through 2002 are estimated at 19.5 million tonnes, a 50% hike over 2000, while ceramic tiles have shot up even more. Print and TV ad expenditures are growing in tandem with urban purchasing power. 

Meanwhile, new domestic companies are popping up at the rate of 2,000 a month. They're mostly small fry, but some are exploiting Vietnam's increasing tourism potential, marked by a 10% boost in foreign travelers in the first seven months of the year.

Still, this is no time for Vietnam's leadership to take a vacation. The new cabinet must contend with a troubling export picture including a sharp decline in crude-oil revenues, which dropped nearly 18% year on year in the first seven months of 2002.

Dismal prices for rice, coffee and pepper are still causing grief among the country's majority rural dwellers. The seafood sector shows promise but spirits are sinking because of a row with the United States over low-priced catfish and concerns voiced by the European Union and the U.S. in enforcing quality control of shrimp.

The bilateral trade agreement with the U.S. (which came into effect in December 2001) has encouraged a little more Korean and Taiwanese investment in garments, textiles and footwear--with footwear exports flourishing from January to July, growing 16% year on year. But the pact hasn't unleashed much new activity overall, both because of the wobbly fortunes of the U.S. and Asia, and because the constraints on foreign investment remain essentially the same.

Witness Vietnam's towering income taxes, poor or non-existent component industries and steep electricity and transport costs. Telecoms prices are only gradually declining.

With its stable politics and cheap labor, the nation could become a post-September 11 favorite for companies looking to hedge their bets and avoid investing solely in China. If Vietnam's top-ranking cadres really got down to addressing investor complaints, the construction workers wouldn't be the only ones breaking out in sweat. 

(FEER http://www.feer.com/articles/2002/0208_29/p046money.html)  

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FDI Performance Behind Target - Fresh foreign direct investment (FDI) capital in Vietnam may fall short of the year's target as the first eight months saw a 40% year-on-year fall in FDI capital.

According to the Ministry of Planning and Investment (MPI), Vietnam has so far this year licensed 413 FDI projects with a total capital of US$771.4 million, much smaller than the volume a year ago despite signs of improvement. The new capital went to mostly medium and small projects in industry, export production and services. Industry and construction attracted the most FDI capital with 334 projects worth US$655.4 million. Specifically, light industry had 174 projects worth US$347 million and heavy industry 118 projects worth US$194.7 million.

Asian investors still took the lead in investment in Vietnam. Taiwan was the top investor with 105 licensed projects totaling US$159.2 million, followed by South Korea with 78 projects worth US$151.2 million. Meanwhile, European investors had just 34 projects and the U.S. merely 20 projects valued at US$48.9 million.

Localities that attracted most FDI capital are Binh Duong, Dong Nai, HCM City and Hanoi.
The foreign investment sector earned US$2.7 billion from export in the first eight months of this year, up 8% year-on-year. Some 120 foreign-invested enterprises (excluding Vietsovpetro), had export sales of over US$5 million each, of which seven had over US$50 million. Pou Yuen Vietnam and Fujitsu Vietnam posted export sales of over US$100 million.

This year Vietnam earlier planned to attract US$2.3-2.35 billion from fresh FDI projects and US$600-650 million in increased investment of operational projects. STW

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