VN Business News 01/08/97

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

Price Index in Vietnam Stable in July 
Japanese Are Investing Less in Vietnam, Finding That Profit Is Hard to
Asian Cash Rice Flat; Talk Of Floods' Effect On Vietnam Crop 

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Price Index in Vietnam Stable in July 

HANOI (Aug. 1) XINHUA - The price index of commodities and services
throughout Vietnam remained almost unchanged in July with a slight
rise of 0.2 percent over the previous month, according to the General
Department of Statistics.

This resulted in a 1.3 percent inflation for the past seven months, a
level desirable for the country's economic development.

Among the ten essential items, only the prices for household utensils
and transport services increased. But prices for fuel and construction
materials declined.

The price of gold and the rate of the U.S. dollar in July remained
stable.

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Japanese Are Investing Less in Vietnam, Finding That Profit Is Hard to
Achieve 

The Wall Street Journal
08/01/97
By Samantha Marshall

Misako Kaji, an economics counselor at the Japanese Embassy in Hanoi,
Vietnam, 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 far less capital, and focusing
on more-conservative, smaller-scale projects. Figures from Vietnam's
Ministry of Planning and Investment show 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 this year's first quarter.

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 women's undergarment
manufacturers.

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., an electronic-components maker, is more typical of
Sumitomo's latest joint-venture projects.

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 about 371-acre 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.

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Asian Cash Rice Flat; Talk Of Floods' Effect On Vietnam Crop 

SINGAPORE (Dow Jones)--Asian physical rice offers are largely
unchanged late Friday, with talk in Vietnam largely centering around
the looming floods, market sources said.

Ho Chi Minh City traders said they expect floods to come in one to two
weeks, damaging the summer-autumn crop and raising export prices as a
result.

Harvest of the rice crop in the Mekong River Delta has just started
and will peak in mid- or late August, said a senior trader with a
major exporter in Ho Chi Minh City.

'Some people in the industry say maybe 10% of the crop will be
damaged,' he said.

No crop estimates are yet available from the government. It's too
early to assess the crop because floods could affect production, he
said. Also, the peak of the harvest has yet to come.

Vietnamese 25% broken rice offers are flat at $222-$223/ton while the
5% broken rice is offered steady around $255/ton.

Offers for Thai 100%B rice are stable around $320/ton while the 25%
broken rice is priced around $265-$270/ton.

Although domestic prices for the 100%B rice have fallen somewhat, they
are still considered high by the trade, said a source with a major
exporter in Bangkok.

'The problem is that speculators still believe there is more demand
and people have to cover,' he said. 'So actually, for the 100-kilogram
bags, the (local) price can be 100 baht lower.'

Meanwhile, there is good, regular demand for the Thai 100% broken
rice, currently offered at $217-$220/ton, he said.

Trades for the grade are being done on a weekly basis and small
orders, some of 1,000 tons, could be contracted at lower prices of
$215/ton, he said, adding foreign trade houses are buying the grade
for African countries such as Ghana and Gambia.

In India, rice offers are largely unchanged, at $245/ton for the
short-grain 25% broken rice, $265/ton for the long-grain 25% broken
rice, and $280-$285/ton for the 10% broken rice.

Regular trades with countries in the Commonwealth of Independent
States for Indian 10% broken rice are still going on, said a trader in
New Delhi.

-By Joyce Teo +65-421-4825

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