VN Business News 31/07/97

[Dam Son <son@u.washington.edu>]

Vietnam: State Bank Limits Commercial Bank Investments 
Indian official talks with Vietnam on trade 
Government economist says Vietnam's economy faltering: report 
Vietnam's Trade Deficit down in First Seven Months of 1997 
Vietnam '97 Summer-Autumn Rice Crop Seen Dn On Yr - Report 
Japanese Firms' Ardor For Vietnam Is Cooling As Profits Prove Coy 
Vietnam's toy industry needs a push 
Vietnam's aquaculture performs below its full potential 
Telephone coverage extends to 70 pct of Vietnam's communes 
Peacock Japan to obtain octopuses from Vietnam 
Tsukishima Kikai opens Vietnam office 
France Telecom Wins Contract to Install 540,000 Telephone Lines in

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Vietnam: State Bank Limits Commercial Bank Investments 

Hanoi (AP-Dow Jones)--New central bank rules to limit investments by
troubled domestic commercial banks took effect Thursday.

Under the State Bank of Vietnam guidelines, which strengthen existing
government laws, state-owned commercial banks can't invest more than
50% of their money in joint ventures or other companies. Joint-stock
banks have a 20% cap.

The banks are also prohibited from using client deposits to buy shares
or participate in joint ventures.

Vietnam's banking sector is wracked by bad loans and alleged fraud.
The central bank is now working on a comprehensive banking law
expected to be voted on by the National Assembly next year.

A State Bank of Vietnam official wouldn't give details of money-losing
investments made by local commercial banks but said some of these
investments aren't 'effective.'

'Some of the banks didn't calculate carefully and so their investments
didn't prove effective,' the official said.

The new rules are 'to help banks operate more effectively,' he added.

A Western banking lawyer said the rules are a step in the right
direction but may have come too late.

'I don't know what it will do to clear up the mess,' he said, adding
that the central bank is trying to ensure the sector is more regulated
in the future.

  _________________________________________________________________


Indian official talks with Vietnam on trade 

Hanoi (dpa) - India's Minister of State for External Affairs, Saleem
Iqbal Shervani, arrived in the Vietnamese capital Thursday for two
days of meetings to boost bilateral ties, especially economic
relations, officials said.

Together with his Vietnamese counterpart, Nguyen Manh Cam, Shervani
will preside over the eigth session of the Vietnam-India Joint
Committee for Economic, Science and Technology Copperation.

The annual meeting is not expected to yield new agreements, said an
Indian embassy official, but will serve to review the progress of past
agreements and to set new cooperation targets, especially in business
relations.

Bilateral trade amounted to about 175 million dollars last year with
India enjoying about a two-thirds trade surplus, mostly in exported
machinery and vehicles.

Vietnam's biggest export to India is rice, with a new Hanoi export
tariff on cashew nuts cutting into India's purchases of that
commodity.

"We will be trying our best to upgrade our economic relations," said
the official who asked not to be identified.

He said there were no major bottlenecks in relations but that there is
a lot more potential.

India businessmen have invested in sugar plants and are also
interested in fertilizer facilities.

Total Indian investment here amounts to 12 million dollars in two
projects, according to Vietnamese officials.

Businessmen accompanying Shervani are reported to be interested in
exploring other fields, including petroleum and nuclear power, said a
local report.

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Government economist says Vietnam's economy faltering: report 

Hanoi, July 31 (AFP) - A Vietnamese government economist has warned
that the economy is slipping into decline, a report said here
Thursday.

Nguyen Sinh Cuc, a senior economist with the General Department of
Statistics said slack industrial sales, and sluggish foreign
investment were dragging growth down.

Cuc's comments, which did not appear in the official
Vietnamese-language press, surprised foreign observers used to a
steady diet of upbeat reports on the economy.

Domestic and foreign economists have said privately for several months
that the Vietnamese economy appears to be losing steam, but Cuc's
published remarks are unusual given strict state control of the press.

The official English language Vietnam News daily quoted him as
describing the first seven months of the year as exhibiting a
"phenomenon of minus growth", as evidence by stockpiling of key
industrial products and weak consumer demand.

Earlier this month, Finance Minister Nguyen Sinh Hung acknowledged a
slight slowing of growth, but repeated the government forecast of nine
percent growth for 1997.

Foreign and Vietnamese economists say a figure of seven or eight
percent growth in gross domestic product for 1997 is more likely.

Official statistics released by Cuc's department earlier this week
showed a slowdown in industrial production, especially in the state
sector.

~Overall industrial growth during the seven months ended July 25 was up
13.2 percent compared with the year-earlier period, but some sectors
showed actual declines.

In Hanoi, industrial production contracted 8.9 percent during the
seven month period, with bellwether industries such as consumer
electronics showing the sharpest declines.

The five largest state-owned electronics companies saw sales plummet
50 percent, and production was just 25 percent of capacity, Cuc's
department reported.

He blamed the slowdown on competition from foreign invested joint
ventures and imports which caused the growth in output within the
state sector to inch up just 0.1 percent during July.

The article also pointed to the decline in consumer demand caused by
soft rice prices, on which roughly 80 percent of the population depend
for its livelihood.

The government report noted that while the state sector grew by only
10.2 percent nationwide, foreign invested enterprises experienced 23.2
percent industrial growth.

  _________________________________________________________________


Vietnam's Trade Deficit down in First Seven Months of 1997 

HANOI (July 31) XINHUA - Vietnam's trade deficit in the first seven
months of 1997 fell 37.5 percent to 1.77 billion U.S.dollars over the
same period last year, the Ministry of Trade reported.

Just over half the deficit, 939 million dollars, was attributed to
imports by domestic enterprises exceeding exports. The rest was caused
by imports of equipment by foreign-invested enterprises in the
country.

While the value of exports in the period increased 25.2 percent to
4.863 billion dollars, imports fell 1.3 percent to 6.633 billion
dollars, with a remarkable reduction in imports of consumer goods.

Foreign-invested and domestic enterprises accounted for 476 million
and 4.384 billion dollars of exports respectively, with most major
export lines recording increases of between 13.8 percent and 84.2
percent.

  _________________________________________________________________


Vietnam '97 Summer-Autumn Rice Crop Seen Dn On Yr - Report 

Hanoi (AP-Dow Jones)-- Vietnam's summer-autumn 1997 rice crop is
likely to be smaller than last year's due to a decline in rice
acreage, the Vietnam News reported Thursday.

An official at Ministry of Agriculture contacted by Dow Jones said
exact figures on the possible production shortfall weren't yet
available.

The paper, quoting an economist at the government's General Department
of Statistics, said a drought in the Mekong Delta in June and July was
partly to blame for 10% of potential rice acreage in that rice-growing
area not being utilized. This same area is now being threatened by the
early arrival of the monsoon season, the Vietnam news reported.

In the Red River Delta, rice acreage is only 78% of this year's
target. Also, much of the newly transplanted rice in the Delta has
been submerged by recent heavy rains.

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Japanese Firms' Ardor For Vietnam Is Cooling As Profits Prove Coy 

By Samantha Marshall

07/31/97
The Asian Wall Street Journal

MISAKO KAJI, an economics counselor at the Japanese embassy in Hanoi,
gets frustrated when Vietnamese officials remind her of the decline in
Japan's direct investment in Vietnam. Japan dropped to sixth place in
investment last year; as recently as 1995, Japan was the nation's
second-largest investor.

"They tell me we should be No. 1," she says. But the Vietnamese
government doesn't seem to understand that "in a free market, it's
about making a profit."

Japanese investors are discovering that's not so easy in Vietnam's
business climate. So they are investing dramatically less capital, and
focusing on more-conservative, smaller-scale projects. According to
figures from Vietnam's Ministry of Planning and Investment, direct
investment has dropped by almost half, to $591 million in 1996 from
$1.13 billion in 1995. Japanese trade officials say investment is
likely to continue to shrink in 1997. Only $82 million in Japanese
investment was pledged during the first quarter of this year.

Part of the reason for the sharp decline in investment over the past
two years is a drop in the value of the yen, Ms. Kaji notes. That,
combined with investment obstacles in Vietnam and Japan's own economic
woes, has led to a more cautious investment strategy, she says.

Meanwhile, the first wave of big-spending, heavy-industry investment
-- steel plants and the like -- appears to have spent itself, says
Toshio Asakura, chief representative of the Japan External Trade
Organization in Hanoi. Today, most of the action is in the likes of
instant-noodle joint ventures, soap makers and manufacturers of
women's undergarments.

Sumitomo Corp.'s joint venture to build heavy trucks, Hino Motor
Vietnam, started construction last year and should begin production in
October. But that may be the company's last direct investment in heavy
industry in the country for a while, says Yoshifumi Tsujio, general
manager for Vietnam. "Very big industry has already established its
factories, and needs support industries now," he says. Sumy Hanel
Electronics Co., a maker of electronic components, is more typical of
Sumitomo's latest joint-venture projects.

INVESTMENT IS ALSO shifting to support industries such as parts and
machinery manufacturing, food processing and commercial-property
development, Mr. Asakura says. Japanese businesses are also beginning
to stress export-oriented and high-tech manufacturing, areas of
investment Vietnam has encouraged, he says.

Japan's Marubeni Corp. still intends eventually to invest in bigger
projects, but not for another three or four years, "When the political
situation is cleared up," says Masaki Nishimura, chief representative
in Vietnam. He predicts an economic slump that could span the next
decade, until the leadership introduces more trade and investment
reform and cuts red tape and taxes. "The environment for business now
is very difficult," he says.

The trading house's sales in Vietnam last year grew 40%, to more than
$600 million, and Mr. Nishimura would be "happy" if Marubeni sales
matched that growth this year. But "we can't keep up that rate of
growth forever," he says.

Japanese companies continue to seek cheaper locations for production
in general, says Mr. Asakura, but competition from other Asian
countries is diverting business away from Vietnam. India and the
Philippines are becoming more attractive, says Ms. Kaji, while Vietnam
introduces economic reform at a glacial pace. The first generation of
Japanese investors found they faced red tape, difficulties in land
acquisition, ever-changing investment rules and high taxes, Ms. Kaji
says, so their initial flush of enthusiasm has given way to "more
realistic investment decisions based on knowledge and profit."

In response to one of the biggest complaints about building factories
in Vietnam -- the lack of basic infrastructure -- several Japanese
trading houses have begun building industrial parks. In a country
where land-use rights, as well as basics such as electricity and
water, are often hard to come by, industrial parks make sense, Ms.
Kaji says. But so far, such developments have been plagued with
problems, such as land-clearance delays, competition and low
occupancy. "In the short term, they won't make money," Ms. Kaji says.

Six months after completion, the Haiphong industrial park of
Nomura-Haiphong Industrial Zone Development Corp., for example, has
achieved only 15% occupancy. Nomura-Haiphong, a venture of Nomura
Securities Co., doesn't expect to fill its 150-hectare property with
tenants until 2000.

Sumitomo, meanwhile, is bullish about its recently licensed industrial
park north of Hanoi, and insists its location gives it an advantage
over other parks. The property's proximity to Hanoi's city center, not
to mention the Noi Boi airport and a road, sea and rail terminal, will
attract overseas manufacturers more easily, predicts Hajime Yamaguchi,
deputy general director of the joint-venture park, known as Thang Long
Industrial Park Corp. But Sumitomo will need these added attractions.
There are already two parks near Hanoi, and three more have been
licensed, including Thang Long. Considering the size of the market,
"The number of industrial parks is just too much at this moment," says
Shinichiro Hatakeyama, vice president of the Nomura-Haiphong park.

Of course, Thang Long will have to clear the land first. It's taken
some land developers years to negotiate relocation terms with
residents. "No one manages land clearance on time in Vietnam," says
Mr. Yamaguchi. If the residents of 30 buildings on the Thang Long site
can be relocated successfully, Mr. Yamaguchi is hopeful that
construction can begin early next year and that the project will be
completed by the summer of 1999.

Land clearance wasn't a problem for EXE Design Co., developers for the
Nikko Hotel in Hanoi, which is due to open in May. But red tape was,
says Hayama Kazuyuki, EXE's chief representative in Hanoi. The project
was licensed four years ago, but it took more than three years to get
a land-use certificate and construction permit. EXE's only other
investment in Vietnam is a serviced-apartment building in Hanoi, which
was licensed two years ago. The project is facing similar delays.

EXE won't be starting any new projects in Vietnam, Mr. Hayama says:
"We're looking for more-competitive countries to invest in." That's
why EXE has shifted investment to Burma, he says -- and "even back to
Tokyo."

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Vietnam's toy industry needs a push 

Hanoi, July 30 (VNA) - Only 20 percent of pre-school classes have
enough toys for children, Vietnam Courier weekly quoted the
Kindergarten Department of the Education and Training Ministry as
reporting.

Mr Nguyen Cao Ly, Director of Hanoi Books and School Equipment
Company, agrees that the absence of domestic toys is a pressing issue.

At one of the company's frequently packed pre-school shops in downtown
Hanoi, domestically made toys make up 20 percent with the rest from
Thailand and China.

The company's toy turnover only reaches VND 20-30 million a year,
insignificant compared to the VND 20 billion a year that it pulls in
from textbooks and school equipment.

Also 53 books and school equipment companies under the education and
training branch, which provide kindergartens with toys nationwide,
face the same situation.

There was a time when Tien Phong Pioneer Plastics factory was the main
toy producer for kindergartens, but it has turned to plastic pipes to
make more profits.

Mr Pham Ngoc Phuong, in charge of the Education Equipment Company 1
which makes toys and equipment for kindergartens said his shops
facilities and equipment are so poor and backward they can only meet
10 percent of the market need.

He mentioned a particular inexpensive commodity - play dough - as an
example. The company's six colour package has been able to compete on
the market at VND 4,000 since 1992 compared to VND 10,000-18,000 for
imports, thanks to better machinery and cheap labour.

Most toys on sale are imported. Chinese made electronic toys dominate
the market because of their cheap price, sounds and flickering lights
that attract children.

A number of high quality US, Taiwanese, Japanese, Korean made toys are
also preferred. In Ho Chi Minh City's toy markets, domestic toys are
displayed but they lack variety and colours.

Mr Nguyen Phung Minh, Director of Back Viet Toy Company, who exports
80 percent of his wooden toys, agrees that Vietnamese toys lack
quality because of backward technology and lack of professional toy
makers.

He says the State should invest in toy production to orient children
into useful, interesting entertainment and help them develop
creativity.

Pre-school department statistics show some 3,000 kinds of toys are
needed in kindergartens, but domestic producers can only make about
500. It is expected that by 2000, Vietnam will have a population of 80
million, 10 million of school age, and that means a lot of toys.

School officials hope the toys industry will get assistance to respond
to the needs of the nation's future leaders.

(VNA) 30-07 1521

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Vietnam's aquaculture performs below its full potential 

Hanoi, July 30 (VNA) - Although the marine product industry grossed
US$670 million (VN$ 7,400 billion) from exports in 1996, the figure
remains far below the country's rich potential, says the Ministry of
Marine Products.

Exports last year were a 60-fold increase compared to a decade ago,
but still sell below industry catch estimates.

Vietnam has a more than 1,000 km coastline with a reserve of 1.4
million tonnes a year, although the national catch only stands at
about 96,000 tonnes, mostly from inshore fishing.

The ministry blames the low catch on outdated equipment and small
capacity fishing vessels.

Explosives and chemicals used to catch fish have exhausted some
in-shore marine resources along with devastation of mangroves and
swamps by illegal logging which has destroyed the breeding habitat for
shrimp and fish.

Another disadvantage the industry faces is a lack of modern technology
for shrimp farming, with only 10 percent of Vietnam's shrimp farms
using modern breeding and harvesting methods.

Obsolete processing lines also mean marine exports have lower volume
and prices, with Vietnamese products averaging US$4.50 per kilo in
foreign markets, or about half the price of Thai products.

The Ministry of Marine Products is devising measures to boost overseas
sales, zoning off suitable areas for shrimp and fish farming in
coastal provinces and promoting advanced farming techniques.

The Ministry will also strictly control import of breeding shrimp,
only allowing highest-yield hybrids.

The Ministry has also helped villages in Long An province successfully
test a combination of rice planting and shrimp rearing in low-level
ricefields.

Another project involves the development of shrimp raising in
submerged saline forests, and cleaner water resources.

(VNA) 30-07 1526

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Telephone coverage extends to 70 pct of Vietnam's communes 

Hanoi, July 30 (VNA) - More than 200,000 new telephones were installed
in the first half of 1997, an increase of 19 percent over the same
period last year, according to the General Department of Post and
Telecommunications.

The latest subscribers have brought the country's total to some 1.4
million, or an average of just under two telephones per 100 people,
with Hanoi and Ho Chi Minh City recording the highest total of 20-25
phones per 100 people.

Sixty-one new switchboards, with combined lines of 24,000 lines, were
also installed in the first six months, which helped extend phone
coverage to seventy percent of the country's 9,031 communes by
mid-June.

More than 5,200 international telecommunication channels, including
2,900 via the TVH submarine optical fibre cable line linking Hong
Kong, Vietnam and Thailand and over 2,300 satellite channels, are
currently in operation. They represent an increase of 1,000 channels
compared to 1996.

In addition, the post and telecommunications sector has put into
operation 10 VSAT (Very Small Aperture Terminal) stations in
mountainous districts and islands.

Meanwhile, the national mobile telephone network VINAPHONE has built
and put into use more relay stations to extend its service to 51 of
the country's 61 cities and provinces.

All telecommunications networks in the country began to use digital
technology as of December 1993, with that year also seeing a sharp
increase in telephone users equivalent to the combined number of
subscribers over the past 40 years.

(VNA) 30-07 1530

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Peacock Japan to obtain octopuses from Vietnam 

NIKKEI English News
07/30/97

Frozen food producer Peacock Japan has tied up with a major Vietnamese
marine product firm to fish for octopuses. The Niigata
Prefecture-based firm will shift such activity from the west coast of
Africa to Vietnam to reduce transport costs and eliminate the need to
freeze octopuses, a company official said.

Peacock Japan will lend the Haiphong firm a fishing boat, teach it how
to catch octopuses using pots and initially purchase all of the catch
for import to Japan.

The firm has set up a subsidiary in Vietnam jointly with three other
Japanese companies including Mitsubishi Corp. (8058). The subsidiary
will build a frozen food plant in Haiphong by next May.

  _________________________________________________________________


Tsukishima Kikai opens Vietnam office 

NIKKEI English News
07/30/97

Tsukishima Kikai Co., a leading environmental safety plant
manufacturer, opened a new representative office in Hanoi in June. The
company has been handling numerous business inquiries from Vietnam,
and last month won a contract to build a sugar refining plant there.

Tsukishima is shifting its emphasis toward engineering, and wants to
develop the company's liquid-waste treatment and food-processing
facilities in Southeast Asian countries. It recently transferred a
number of employees from its Chiba factory to the Tsukishima operation
in Thailand.

The company hopes for overseas orders totaling 20 billion yen (about
169.9 million dollars) by the year 2000, targeting Southeast Asia for
over 90%.

  _________________________________________________________________


France Telecom Wins Contract to Install 540,000 Telephone Lines in
Vietnam 

PARIS, July 30 /PRNewswire/ -- France Telecom has signed a Business
Cooperation Contract (BCC) with the Vietnamese Post and
Telecommunications carrier VNPT, as part of Vietnam's program to
develop its telecommunications networks. The contract, which amounts
to approximately $470 million, covers the installation of 540,000
telephone lines over a period of five years in the Ho Chi Minh
province and includes revenue sharing for 15 years.

In addition to France Telecom's technical expertise and financial
investment, its subsidiary France Cables et Radio (FCR) will provide
organizational assistance and training that will enable VNPT to
quickly meet its ambitious equipment installation and service quality
goals. The license required to start operations should be signed
shortly by the Vietnamese government.

The Business Cooperation Contract focuses on two key areas:
  * Financing and installation (switching, transmission, cabling) of
 540,000 new lines, doubling the current number
  * Management assistance for the carrier, comprising on-site experts
 in all areas, as well as sustained training programs.
 
This contract consolidates France Telecom's position in Asia,
considered a key market for the group's international development. It
also strengthens ties with Vietnam, with which France Telecom has
enjoyed a relationship since installing an earth station in Da Nang in
1990.

France Telecom offers extensive experience in the development,
operation and modernization of telecommunications networks in Latin
America, Asia and Africa. Already present in Argentina and Mexico
since late 1990, FCR won a major contract for France Telecom in
September 1995, covering the installation of 516,000 telephone lines
in the Indonesian island of Sumatra, over a period of three years.
Last February, FCR acquired a 51 percent stake in CI-Telcom, the
carrier for the Ivory Coast. On July 21, 1997, France Telecom, via
FCR, acquired one-third of the Senegalese national operator, Sonatel,
becoming a strategic partner to the government.

France Telecom is the world's fourth-largest telecommunications
carrier, with 1996 consolidated operating revenues of FF 151.3 billion
and 32.9 million telephone lines in service. In addition to local and
long-distance telephony, France Telecom provides businesses and
consumers with data, wireless, online, Internet, cable-TV and
value-added services.

Operating in more than 50 countries and with more than 160,000
employees worldwide, France Telecom exports its expertise in
accelerated network modernization, wireless services, engineering and
consulting. The company's international development reached a major
milestone in January 1996, when France Telecom teamed up with Deutsche
Telekom and Sprint to create the joint venture "Global One," which
offers seamless voice and data services to businesses, carriers and
consumers around the world.

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