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VN business news (July 15)
Japan proposes multi billion dollar Vietnamese steel plan
Asian Cash Rice Flat-Up; Offers Up In Vietnam
U.S. Firm to Build Center in Hanoi
Vietnam-economy : Government to take "drastic measures" to rein
Refinery given go-ahead despite viability worries
Vietnam Explains Slowdown in Foreign Investment
Ifc Invests $41 Million in Saigon Hilton Hotel
Vietnam in Muddle over Oil Refinery Goal
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Japan proposes multi billion dollar Vietnamese steel plan
Hanoi, July 15 (AFP) - The Japanese International Cooperation Agency (JICA) has
proposed a 5.4 billion dollar masterplan to build a massive steel works in
Vietnam, an official report said Tuesday.
The project involves more than four billion dollars in proposed investment for
steel tempering support processes and another 1.1 billion dollars for a
laminated steel plant. Roughly 300 million dollars would be spent on building a
production line for shaped steel bars, the , the Vietnam News Agency reported.
It did not indicate where the facilities would be built.
Vietnam's domestic steel industry consists mainly of producing steel reinforced
bars and rods from imported steel with a total design capacity of 1.7 million
tonnes per year.However, locally produced steel has suffered from competitive
imports,despite protective barriers.
Vietnam Steel Corp. suffered losses of more than one million dollars in the
first six months of this year, producing only 195,000 tonnes.
Earlier this year Hanoi slapped strict import restrictions on several kinds of
steel resulting in a nearly 50 percent drop to 450,000 tonnes in processed steel
products.
South Korea's Pohang Iron and Steel Corp. of Korea is contemplating building
a fully-integrated steel works with a capacity of two million tonnes in the
north of Vietnam.
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Asian Cash Rice Flat-Up; Offers Up In Vietnam
SINGAPORE (Dow Jones)--Asian cash rice offers are flat to higher Tuesday,
as two foreign trade houses plan to buy 225,000 metric tons each of Vietnamese
rice through the Vietnam Southern Food Corp.
The two trading houses - one from the U.K. and one from the U.S. - are expected
to sign contracts soon, and will take delivery between August and October, said
a Ho Chi Minh City-based rice trader.The rice, comprising 25% broken, 5% broken,
10% broken and 100% broken,is likely headed for Africa.
Offers for Vietnamese 25% broken rice are heard at $225-$230/ton, up from
$225/ton Monday, and offers for Vietnamese 5% broken are heard at $255-$260/ton,
up from $255/ton Monday.
In Thailand, offers for Thai 100%B rice are heard stable at $338/ton,and offers
for Thai 25% broken rice are heard at $270/ton, up from Monday's $265/ton.
Thai rice supplies are expected to remain tight until the next harvest,due in
November, said a Bangkok-based rice trader.
Offers for Indian 25% broken rice are stable at $240/ton, and offers for
Pakistani 25% broken rice are offered at $225-$250/ton, from $230/ton Friday,
amid dwindling stocks.
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U.S. Firm to Build Center in Hanoi
Hanoi -- Privately held, U.S.-based telecommunications company Far East
Telecom said it signed an agreement with Vietnam's Ministry of Culture
and Information for the construction of a multimedia center in Hanoi.
The building is expected to take 18 months to build, said Larry Herdrick,
president of Far East Telecom. Work will begin as soon as the investment
license is issued, the company said. The center will include five movie
theaters that will show current U.S. and foreign films, an auditorium for the
presentation of traditional Vietnamese theater and music and a food court.
Far East Telecom has offices in Hanoi and Edmonds, Washington and works in
telecommunications in Indonesia.
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Vietnam-economy : Government to take "drastic measures" to rein in spending.
Hanoi, July 15 (AFP) - Vietnames government offices must "deploy drastic
measures" to rein in public spending, Deputy Prime Minister Phan Van Khai was
quoted as saying Tuesday.
In an effort to curb spending, the government has put a freeze on all
construction of government offices and will slash entertainment expenses by 30
percent. Less money will also be spent for government vehicles, the Vietnam News
reported.
The cuts are prompted by pressure on the public purse caused by a revenue
shortfall in the first six months of this year which achieved only 40 percent of
the annual target in the budget.
Khai blamed low collections on fall in foreign direct investment, slow
disbursements of official development assistance and sluggishness in the
industrial sector.
Contributions from state-owned enterprises which provide the bulk of government
revenues have been less than expected due to a slump in sales.
Phan made his remarks at a conference with senior finance ministry officials
at a conference which ended Monday.
Vietnam does not release details of the government budget, but foreign
economists estimate that the public deficit last year was between three
and five percent of gross domestic product.
While current expenditures must be trimmed, the government meanwhile plans to go
ahead with massive investment outlays.
On Monday the Vietnam News said that Prime Minister Vo Van Kiet had given the
green light for Vietnam to build a 1.5 billion dollar oil refinery in the
central coastal town of Dung Quat.
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Refinery given go-ahead despite viability worries
Work on Vietnam's first oil refinery could start within months despite
international concern about the viability of the US$1.5 billion project.
Prime Minister Vo Van Kiet signed off construction plans last week, paving
the way for work to start before the end of the year.
His decision calls for Vietnam to push ahead without foreign partners and for
funds to be raised by the government - a near necessity after the failure of
three years of talks with a string of foreign oil concerns.
Hanoi is insisting on building the refinery at Dung Quat on Vietnam's
desperately poor central coast and far from southern oil fields.
The requirement has driven off two consortiums headed by Total of France and LG
International of South Korea and has led to claims that Vietnam's rulers are
ignoring economic reality for strategic "dreams".
Officials at the state-owned oil monopoly PetroVietnam have said they were
eyeing domestic and international bonds to help fund the project, along with its
own profits.The central government could fund up to $600 million, state press
reports said yesterday.The refinery is the biggest infrastructure project to be
undertaken in 10 years of reforms.
Vietnam World Bank representative Bradley Babson said key economic questions
remained, with the project coming as Vietnam struggled to implement much
smaller overseas aid deals.
"The basic question is simply one of financing. This is a huge project and
somewhere down the line it is going to have to be budgeted for," Mr Babson said.
" Vietnam also needs to create jobs and maybe a huge project like this is not
the best way forward."
Other foreign analysts said a glut of refineries in the region meant the
project's benefits could be far off.
Some foreign analysts are alarmed that neither the refinery deal or a new
north-south highway project - together worth an estimated $7 billion - were
mentioned in $45 billion worth of infrastructure plans revealed last year.
"It seems that some much more viable, well planned and important smaller
projects will get crowded out as the lust for big-ticket goals take over,"
a foreign economist said.
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Vietnam Explains Slowdown in Foreign Investment
HANOI, July 15 (Reuter) - Vietnam said on Tuesday that dwindling opportunities
for good, quick profits and declining labour-cost advantages were among
several explanations for a slowdown in foreign direct investment.
The official Vietnam News Agency (VNA) said in a despatch that foreign
investment projects worth $1.459 billion were licensed in the first six
months of this year, 20 percent less than the same period of 1996.The tone of
the report was unusually frank for an official government commentary.
Last year, the government was critical of reports, especially by foreign media,
highlighting a decline in investment from abroad and investors'complaints about
red tape, corruption and the country's shaky regulatory and legal frameworks.
As it turned out, approval for two mega-projects right at the end of December
took the total value of projects licensed last year to a record $8.54 billion.
"The Ministry of Industry attributed (the) declining rate of foreign investment
into the country to less opportunities to invest in sectors with high and rapid
profit," VNA said.
It also pointed to "fewer priorities" given to foreign investment projects and a
decline in consumer purchasing power, which has contributed to slowing economic
growth.
It added that cheap labour compared with other countries in the region was "no
longer a fundamental advantage" for Vietnam.
Foreign investors complain about the hidden costs of employing local labour,
which include high taxes and social insurance.
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Ifc Invests $41 Million in Saigon Hilton Hotel
HANOI, July 15 (Reuter) - The World Bank's private sector financing arm said on
Tuesday it would make loans totalling $41 million to partially finance
construction of a new international-standard hotel in Ho Chi Minh City, the
Saigon Hilton.
The International Finance Corporation (IFC) said in a statement that its
financing would help meet demand created by increased business travel and
tourism to Vietnam and be a model for similar projects.
"IFC has been devoting significant resources to the tourism sector in Vietnam
because it is a major growth industry as well as a significant foreign exchange
earner and employment generator," said Javed Hamid, director of the IFC's Asia I
Department.
The same thinking was behind the IFC's investment in Hanoi's five-star Sofitel
Metropole Hotel in 1994.
That investment has drawn criticism because the hugely successful hotel is a
joint venture between French partners and a Vietnamese state-owned firm. Critics
say the IFC should be backing projects considered too risky for other investors
and which also encourage private sector development.
The Ho Chi Minh City hotel -- which will cost a total of $81.5 million -- will
be owned by Societe d'Economie Mixte Hotel Pointe des Blagueurs, a joint venture
between state-owned SaigonTourist and two foreign investors.
The foreign partners are Feal International SA, a French firm specialising in
hotel construction and renovation, and Hilton International Co.
Although the latest venture includes a state-owned partner, it could be said
that the IFC is investing where others would hesitate.
A hotel glut in Ho Chi Minh City has pushed occupancy rates lower every year
since 1993, hitting industry profits. According to the official daily Vietnam
News, the average occupancy rate was 41 percent in the first five months of this
year.
The IFC said its financing would consist of a $9.5-million loan for its own
account, a subordinated loan of $3.55 million and a syndicated loan of $28
million for the project participants.
Credit Agricole Indosuez acted as co-arranger of the financing with IFC and as
lead manager of the syndicated loan.
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Vietnam in Muddle over Oil Refinery Goal
HANOI, July 15 (Reuter) - Vietnam back-pedalled on Tuesday from its vow to build
a huge oil refinery without foreign help and conceded that financing for the
controversial plant was far from wrapped up.
With a front-page flourish, official media announced on Monday that Hanoi had
dropped plans to work with foreign partners and would start building the
130,000-barrel per day plant on its own before the end of this year for a 2001
start-up.
But state oil firm Petrovietnam said on Tuesday that the door was still open for
foreign firms to help build the $1.5 billion plant at Dung Quat,a remote and
undeveloped coastal site.
Western analysts said the Dung Quat refinery ranked along with a clutch of
politically inspired mega-projects which are high on prestige for the nation,
but low on economic viability.
Dung Quat has been mired in controversy since 1995, when France's Total SA
walked away from the project, claiming it made no sense to put a refinery in a
poverty-hit area hundreds of kilometres north of the country's oilfields and
chief consumption base.
A consortium of foreign firms stepped in to replace Total, but the group broke
up earlier this year after Petrovietnam rejected its demand for greater
commercial and financial incentives.
Vietnam kept talks going with two members of the group, South Korea's LG Croup
and Malaysia's state oil firm Petronas, but Monday's announcement that
Petrovietnam would go it alone appeared to rule out even their participation.
However, Do Van Ha, General Manager for International Cooperation at
Petrovietnam, told Reuters that the company was "ready to talk to anybody,
not just LG and Petronas."
Asked about financing, he declined to give details because the picture was
changing all the time, though said it was clear that foreign funding would be
needed.
The Vietnam News said on Monday that the government would fund up to $600
million, while $400 million would be raised through issuing debenture bonds and
deferred bank loans from abroad.
Bradley Babson, the World Bank Representative in Hanoi, said Vietnam could not
afford a Dung Quat right now -- the limited funds available in state coffers
should be spent on infrastructure projects such as power generation and those
which create jobs.
The Hawaii-based East-West Center, a research group partly funded by the U.S.
government, argues that with major refining capacity planned in Asia for
2000-2005, more brand new refineries would not be justifiable without the right
incentives.
In a report, the think-tank forecast basic refining profit margins of no more
than $2 a barrel between 1995 and 2005 and margins from more sophisticated
hydroskimming operations not exceeding $8 a barrel.
"These margins would be good for expansions or upgrading, but not for standalone
refineries unless they received adequate incentives," it said.
Diplomats said that, viewed from a purely commercial angle, Dung Quat
makes little sense. But the government's unwillingness to put the project
on hold reflected a strong will to develop a poor region of the country
and ensure national economic security.
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